WILLAMETTE VALLEY VINEYARDS INC

1)BASIS OF PRESENTATION

The accompanying unaudited interim condensed financial statements as of March 31, 2026 and for the three months ended March 31, 2026 and 2025 have been prepared in conformity with accounting principles generally accepted in the United States (“U.S. GAAP”) for interim financial statements. The financial information as of December 31, 2025 is derived from the audited financial statements presented in the Willamette Valley Vineyards, Inc. (the “Company”) Annual Report on Form 10-K for the year ended December 31, 2025 (the “2025 Report”). Certain information or footnote disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission. In the opinion of management, the accompanying financial statements include all adjustments necessary (which are of a normal recurring nature) for the fair statement of the results of the interim periods presented. The accompanying unaudited interim condensed financial statements should be read in conjunction with the Company’s audited financial statements for the year ended December 31, 2025, as presented in the Company’s Annual Report on Form 10-K.

Operating results for the three months ended March 31, 2026 are not necessarily indicative of the results that may be expected for the entire year ending December 31, 2026, or any portion thereof.

The Company’s revenues include direct to consumer sales and national sales to distributors. These sales channels utilize shared resources for production, selling, and distribution.

Basic loss per share after preferred stock dividends are computed based on the weighted-average number of common shares outstanding each period.

The following table presents the earnings per share after preferred stock dividends calculation for the periods shown:

Subsequent to the filing of the 2025 Report there were no accounting pronouncements issued by the Financial Accounting Standards Board (“FASB”) that would have a material effect on the Company’s unaudited interim condensed financial statements.

2)INVENTORIES

The Company’s inventories, by major classification, are summarized as follows, as of the dates shown:

3)PROPERTY AND EQUIPMENT, NET

The Company’s property and equipment consists of the following, as of the dates shown:

Depreciation expense for the three months ended March 31, 2026 and 2025 was $749,825 and $770,370, respectively.

4)DEBT

Line of Credit Facility – 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 Credit 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 $2,359,437 at March 31, 2026, at an interest rate of 7.0%, and an outstanding line of credit balance of $3,140,140 at December 31, 2025, at an interest rate of 7.0%. The 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, 2025, the Company was out of compliance with a debt covenant. The Company has received a waiver from Columbia Bank waiving this violation until the next measurement date of December 31, 2026.

Notes Payable – In February 2017, the Company purchased property, including vineyard land, bare land, and structures in the Dundee Hills American Viticultural Area (AVA) under terms that included a 15 year note payable with quarterly payments of $42,534, bearing interest at 6%. The note may be called by the owner, up to the outstanding balance, with 180 days written notice. As of March 31, 2026, the Company had a balance of $854,907 due on this note. As of December 31, 2025, the Company had a balance of $884,221 due on this note.

Long-Term Debt – The Company has four long term debt agreements with AgWest with an aggregate outstanding balance of $14,935,020 and $15,184,395 as of March 31, 2026 and December 31, 2025 respectively. The first two outstanding loans require monthly principal and interest payments of $62,067 for the life of the loans, at annual fixed interest rates of 4.75% and 5.21%, and with maturity dates of 2028 and 2032, respectively. These loans are collateralized against the property on the main estate in Salem. The third loan requires monthly principal and interest payments of $87,989 at an annual interest rate of 6.66%, and with a maturity date of 2039. The fourth loan allows borrowings up to $4,350,000 against property defined in the agreement. The line of credit bears interest at 6.35% and has a maturity date of April, 2027. The general purposes of these loans were to make capital improvements to the winery and vineyard facilities.

Future minimum principal payments of long-term debt are as follows for the years ending December 31:

As of March 31, 2026, the Company had unamortized debt issuance costs of $154,090. As of December 31, 2025, the Company had unamortized debt issuance costs of $158,837.

5)INTEREST AND TAXES PAID

Income taxes – The Company paid zero in income taxes for the three months ended March 31, 2026, and 2025.

Interest– The Company paid $248,682 and $228,105 for the three months ended March 31, 2026 and 2025, respectively, in interest on long-term debt and the line of credit.

6)SEGMENT REPORTING

The Company has identified two operating segments, Direct Sales and Distributor Sales, based upon their different distribution channels, margins and selling strategies. Direct Sales include retail sales in the tasting rooms, wine club sales, internet sales, on-site events, kitchen and catering sales and other sales made directly to the consumer without the use of an intermediary, including sales of bulk wine or grapes. Distributor Sales include all sales through a third party where prices are given at a wholesale rate.

The two segments reflect how the Company’s operations are evaluated by senior management and the structure of its internal financial reporting. The Company evaluates performance based on the gross profit of the respective business segments. Selling expenses that can be directly attributable to the segment, including depreciation of segment specific assets, are included, however, centralized selling expenses and general and administrative expenses are not allocated between operating segments. Therefore, net income (loss) information for the respective segments is not available. Discrete financial information related to segment assets, other than segment specific depreciation associated with selling, is not available and that information continues to be aggregated.

The following table outlines the sales, cost of sales, gross margin, directly attributable selling expenses, and contribution margin of the segments for the three months ended March 31, 2026 and 2025. Sales figures are net of related excise taxes.

7)SALE OF PREFERRED STOCK

On July 1, 2022, the Company filed a shelf Registration Statement on Form S-3 (the “July 2022 Form S-3”) with the United States Securities and Exchange Commission (the “SEC”) pertaining to the potential future issuance of one or more classes or series of debt, equity, or derivative securities. The maximum aggregate offering amount of securities sold pursuant to the June 2022 Form S-3 is not to exceed $20,000,000. From August 1, 2022 to November 1, 2022 the Company filed with the SEC four Prospectus Supplements to the July 2022 Form S-3, pursuant to which the Company proposed to offer and sell, on a delayed or continuous basis, up to an aggregate of 1,076,578 shares of Series A Redeemable Preferred Stock having proceeds not to exceed an aggregate of $5,636,714. Each of these Prospectus Supplements established that our shares of preferred stock were to be sold in one to three offering periods offering prices including $5.15 per share, $5.25 per share and $5.35 per share. Net proceeds of $3,558,807 have been received under these offerings as of March 31, 2026 for the issuance of Preferred Stock.

On June 30, 2023, the Company filed with the SEC a Prospectus Supplement to the July 2022 Form S-3, pursuant to which the Company proposed to offer and sell, on a delayed or continuous basis, up to 727,835 shares of Series A Redeemable Preferred Stock having proceeds not to exceed $3,530,000. This Prospectus Supplement established that our shares of preferred stock were to be sold in two offering periods with two separate offering prices beginning with an offering price of $4.85 per share and concluding with an offering of $5.35 per share. On October 27, 2023, the Company filed with the SEC a Prospectus Supplement to the July 2022 Form S-3, pursuant to which the Company proposed to offer and sell, on a delayed or continuous basis, up to 288,659 shares of Series A Redeemable Preferred Stock having proceeds not to exceed $1,400,000. This Prospectus Supplement established that our shares of preferred stock were to be sold in one offering period with an offering price of $4.85 per share. Net proceeds of $3,938,066 have been received under these offerings as of March 31, 2026 for the issuance of Preferred Stock.

On June 17, 2025, the Company filed a shelf Registration Statement on Form S-3 (the “June 2025 Form S-3”) with the SEC pertaining to the potential future issuance of one or more classes or series of debt, equity, or derivative securities. The maximum aggregate offering amount of securities sold pursuant to the June 2025 Form S-3 is not to exceed $20,000,000. On July 3, 2025, the Company filed with the SEC a Prospectus Supplement to the June 2025 Form S-3, pursuant to which the Company proposed to offer and sell, on a delayed or continuous basis, up to 1,343,284 shares of Series A Redeemable Preferred Stock having proceeds not to exceed $4,500,000. Net proceeds of $2,142,588 have been received under these offerings as of March 31, 2026 for the issuance of Preferred Stock.

Shareholders have the option to receive dividends as cash or as a gift card for purchasing Company products. The amount of unused dividend gift cards at March 31, 2026 and December 31, 2025 was $1,800,515 and $2,031,377, respectively, and is recorded as unearned revenue on the balance sheets. Revenue from gift cards is recognized when the gift card is redeemed by a customer. When the likelihood of a gift card being redeemed by a customer is determined to be remote and the Company expects to be entitled to the breakage, then the value of the unredeemed gift card is recognized as revenue. We determine the gift card breakage rate based upon Company-specific historical redemption patterns. To date we have determined that no breakage should be recognized related to our gift cards.

Dividends accrued but not paid will be added to the liquidation preference of the stock until the dividend is declared and paid. At any time after June 1, 2021, the Company has the option, but not the obligation, to redeem all of the outstanding preferred stock in an amount equal to the original issue price plus accrued but unpaid dividends and a redemption premium equal to 3% of the original issue price.

8)STOCK INCENTIVE PLAN

The Willamette Valley Vineyards Inc, 2025 Omnibus Equity Incentive Plan (“2025 Plan”) was adopted by the Company’s board of directors on May 27, 2025, and was approved by the Company’s shareholders on July 12, 2025. The 2025 Plan provides for the grant of incentive stock options, non-statutory stock options, share appreciation rights, restricted shares, restricted share units, other share-based awards or any combination of the foregoing to selected employees, directors and independent contractors of the Company. The Company filed on November 12, 2025 a registration statement Form S-8 to register under the U.S. Securities Act of 1933, as amended, the Company’s shares of common stock to be issued pursuant to awards granted under the 2025 Plan.

During the three months ended March 31, 2026, the Company granted no awards under the 2025 Plan. As of March 31, 2026,15,000 shares of the Company’s common stock had been issued under the 2025 Plan and an additional 270,000 shares of the Company’s common stock were issuable pursuant to outstanding awards granted under the 2025 Plan.

The Company recognized $21,035 in stock-based compensation expense during the three months ended March 31, 2026 related to the 2025 Plan and no stock-based compensation expense during the three months ended March 31, 2025.

9)LEASES

We determine if an arrangement is a lease at inception. On our condensed balance sheets, our operating leases are included in Operating lease right-of-use assets (ROU), Current portion of lease liabilities, and Lease liabilities, net of current portion. The Company does not currently have any finance leases.

ROU assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at the commencement date based on the present value of lease payments over the lease term. For leases that do not provide an implicit rate, we use our incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. We use the implicit rate when readily determinable. Lease expense for operating lease payments is recognized on a straight-line basis over the lease term.

Significant judgment may be required when determining whether a contract contains a lease, the length of the lease term, the allocation of the consideration in a contract between lease and non-lease components, and the determination of the discount rate included in our leases. We review the underlying objective of each contract, the terms of the contract, and consider our current and future business conditions when making these judgments.

Operating leases – Vineyard -In December 1999, under a sale-leaseback agreement, the Company sold approximately 79 acres of the Tualatin Vineyards property with a net book value of approximately $1,000,000 for approximately $1,500,000 cash and entered into a 20 year operating lease agreement, with three five-year extension options, and contains an escalation provision of 2.5% per year. The Company extended the lease in January 2019 until January 2025. The Company extended the lease in July 2024 until January 2030. This property is referred to as the Peter Michael Vineyard and includes approximately 69 acres of producing vineyards. For right of use asset and liability calculations the Company has concluded it is reasonably certain to extend available options through January 2035.

In December 2004, under a sale-leaseback agreement, the Company sold approximately 75 acres of the Tualatin Vineyards property with a net book value of approximately $551,000 for approximately $727,000 cash and entered into a 15 year operating lease agreement, with three five-year extension options, for the vineyard portion of the property. The first two five year extensions have been exercised. The lease contains a formula-based escalation provision with a maximum increase of 4% every three years. This property is referred to as the Meadowview Vineyard and includes approximately 49 acres of producing vineyards. For right of use asset and liability calculations the Company has concluded it is reasonably certain to extend available options through November 2033.

In February 2007, the Company entered into a lease agreement for 59 acres of vineyard land at Elton Vineyard. In June 2021 the Company entered into a new 11 year lease for this property. The lease contains an escalation provision tied to the CPI not to exceed 2% per annum. This property includes 54 acres of producing vineyards and 2 additional plantable acres. For right of use asset and liability calculations the Company has concluded it is reasonably certain to extend available options through December 2031.

In July 2008, the Company entered into a 34 year lease agreement with a property owner in the Eola Hills for approximately 110 acres adjacent to the existing Elton Vineyards site. These 110 acres are being developed into vineyards. Terms of this agreement contain rent increases, that rise as the vineyard is developed, and contains an escalation provision of CPI plus 0.5% per year capped at 4%. This property is referred to as part of Ingram Vineyard and includes 93 acres of producing vineyards and 17 additional plantable acres. For right of use asset and liability calculations the Company has concluded it is reasonably certain to extend available options through December 2053.

In March 2017, the Company entered into a 25-year lease for approximately 17 acres of agricultural land in Dundee, Oregon. This lease contains an annual payment that remains constant throughout the term of the lease. This property is referred to as part of Bernau Estate Vineyard and includes 9 acres of producing vineyards.

Operating Leases – Non-Vineyard –In September 2018, the Company renewed an existing lease forthree years, with two one-year renewal options, for its McMinnville tasting room. In May 2022 the Company amended the lease to extend the lease to August 2025 with one three year renewal option and defined payments over the term of the lease. For right of use asset and liability calculations the Company has not included the renewal option. The lease was not renewed in 2025.

In January 2018, the Company assumed a lease, through December 2022, for its Maison Bleue tasting room in Walla Walla, Washington. In January 2023, the Company entered into a new lease to December 2027 with one five year renewal option, and defined payments over the term of the lease. For right of use asset and liability calculations the Company has not included the renewal option.

In February 2020, the Company entered into a lease for 5 years, with three five-year renewal options for a retail wine facility in Folsom, California, referred to as Willamette Wineworks. The lease contains an escalation provision tied to the CPI not to exceed 3% per annum with increases not allowed in any year being carried forward to the following years. In January 2025 the Company amended the renewal options and extended the lease until February 2026. For right of use asset and liability calculations the Company has concluded it is reasonably certain to extend available options through February 2040.

In March 2021, the Company entered into a lease for 10 years, with two five-year renewal options for a retail wine facility in Vancouver, Washington. The lease defines the payments over the term of the lease and option periods. For right of use asset and liability calculations the Company has concluded it is reasonably certain to extend available options through August 2041.

In February 2022, the Company entered into a lease for 10 years, with three five-year renewal options for a retail wine facility in Lake Oswego, Oregon. The lease defines the payments over the term of the lease and option periods. For right of use asset and liability calculations the Company has concluded it is reasonably certain to extend available options through January 2042.

In May 2022, the Company entered into a lease for 10 years, with two five-year renewal options for a retail wine facility in Happy Valley, Oregon. The lease defines the payments over the term of the lease and option periods. For right of use asset and liability calculations the Company has concluded it is reasonably certain to extend available options through May 2042.

In January 2023, the Company entered into a lease for 10 years, with three five-year renewal options for a retail wine facility in Bend, Oregon. The lease defines the payments over the term of the lease. For right of use asset and liability calculations the Company has not included the renewal option.

The following tables provide lease cost and other lease information:

Right-of-use assets obtained in exchange for new operating lease obligations were zero for the three months ended March 31, 2026 and 2025.

As of March 31, 2026, maturities of lease liabilities were as follows:

10)COMMITMENTS AND CONTINGENCIES

Litigation– From time to time, in the normal course of business, the Company is a party to legal proceedings. Management believes that these matters will not have a material adverse effect on the Company’s financial position, results of operations, or cash flows, but, due to the nature of litigation, the ultimate outcome of any potential actions cannot presently be determined.

Grape Purchases – The Company has entered into long-term grape purchase agreements with a number of Willamette Valley wine grape growers. With these agreements the Company purchases an annually agreed upon quantity of fruit, at pre-determined prices, within strict quality standards and crop loads. The Company cannot calculate the minimum or maximum payment as such a calculation is dependent in large part on unknowns such as the quantity of fruit needed by the Company and the availability of grapes produced that meet the strict quality standards in any given year. If no grapes are produced that meet the contractual quality levels, the grapes may be refused, and no payment would be due.