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, 2025. Such policies were unchanged during the three months ended March 31, 2026.

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, 2025. Such policies were unchanged during the six months ended June 30, 2026.

Previous wording

The Company’s wines are made from grapes grown in vineyards owned, leased or contracted by the Company, and from grapes purchased from other vineyards. The grapes are harvested, fermented and made into wine primarily at the Company’s winery in Turner Oregon (the “Winery”) and the wines are sold principally under the Company’s Willamette Valley Vineyards label, but also under the Griffin Creek, Pambrun, Elton, Maison Bleue, Metis, Natoma, Pere Ami, Elton, Domaine Willamette and Tualatin Estates labels. The Company also owns the Tualatin Estate Vineyards and Winery, located near Forest Grove, Oregon and the Domaine Willamette Winery located near Dundee, Oregon. The Company generates revenues from the sales of wine to wholesalers and direct to consumers.

Current wording

The Company’s wines are made from grapes grown in vineyards owned, leased or contracted by the Company, and from grapes purchased from other vineyards. The grapes are harvested, fermented and made into wine primarily at the Company’s winery in Turner, Oregon (the “Winery”) and the wines are sold principally under the Company’s Willamette Valley Vineyards label, but also under the Griffin Creek, Pambrun, Elton, Maison Bleue, Metis, Natoma, Pere Ami, Domaine Willamette and Tualatin Estates labels. The Company also owns the Tualatin Estate Vineyards and Winery, located near Forest Grove, Oregon and the Domaine Willamette Winery located near Dundee, Oregon. The Company generates revenues from the sales of wine to wholesalers and direct to consumers.

Previous wording

Direct to consumer sales primarily include sales through the Company’s tasting rooms, telephone, internet and wine club. Direct to consumer sales are at a higher unit price than sales through distributors due to prices received being closer to retail than those prices paid by wholesalers. The Company continues to emphasize growth in direct to consumer sales through the Company’s existing tasting rooms and growth in wine club membership. Additionally, the Company’s Preferred Stock sales since August 2015 have resulted in approximately 16,287 current preferred stockholders many of which the Company believes are wine enthusiasts are current and potential customers of the Company.

Current wording

Direct to consumer sales primarily include sales through the Company’s tasting rooms, telephone, internet and wine club. Direct to consumer sales are at a higher unit price than sales through distributors due to prices received being closer to retail than those prices paid by wholesalers. The Company continues to emphasize growth in direct to consumer sales through the Company’s existing tasting rooms and the opening of new locations, and growth in wine club membership. Additionally, the Company’s Preferred Stock sales since August 2015 have resulted in approximately 21,381 new preferred stockholders many of which the Company believes are wine enthusiasts that are current and potential customers of the Company.

Previous wording

The Company sold 38,892 and 31,835 cases of produced wine during the three months ended March 31, 2026 and 2025, respectively, an increase of 7,057 cases, or 22.2% in the current year period over the prior year period. The increase in wine case sales was primarily the result of having higher wholesale case sales in the current quarter when compared to the same quarter last year.

Current wording

The Company sold 87,655 and 80,489 cases of produced wine during the six months ended June 30, 2026 and 2025, respectively, an increase of 7,166 cases, or 8.9% in the current year period over the prior year period. The increase in wine case sales was the result of increased case sales through distributors.

Previous wording

At March 31, 2026, wine inventory included 152,337 cases of bottled wine and 681,857 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 2,587 cases during the three months ended March 31, 2026.

Current wording

At June 30, 2026, wine inventory included 165,930 cases of bottled wine and 523,103 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 67,212 cases during the six months ended June 30, 2026.

Previous wording

Owen Bargreen rated the 2022 Elton Pinot Noir 93 points and 2024 Estate Pinot Gris 92 points.

Current wording

Paul Gregutt rated the Company’s 2023 Bernau Estate Pinot Noir and 2022 Elton Pinot Noir 92 points, and 91 points to the 2024 Estate Pinot Gris.

Previous wording

The 2017 Domaine Willamette Extended Tirage Brut scored 94 points from Owen Bargreen.

Current wording

Wine Enthusiast Magazine rated the 2017 Domaine Willamette Extended Tirage Brut 94 points and Editor’s Choice, the 2022 Loeza Pinot Noir 93 points and Cellar Selection, the 2022 Domaine Willamette Blanc de Noirs 93 points, the 2024 Dijon Clone Chardonnay 92 points, 2022 Domaine Willamette Brut and 2023 Pambrun Malbec both received 90 points.

Previous wording

Sales revenue for the three months ended March 31, 2026 and 2025 was $8,256,153 and $7,541,583, respectively, an increase of $714,570, or 9.5%, in the current year period over the prior year period. This increase was caused by an increase in revenues from distributor sales of $797,678, being partly offset by a decrease in direct sales to consumers of $83,108 in the current year’s three-month period over the same period in the prior year. The increase in revenue from distributors was primarily attributed to higher case sales in the current year three-month period over the same period in the prior year. The decrease in direct sales to consumers was primarily the result of lower wine club and internet revenues.

Current wording

Sales revenue for the three months ended June 30, 2026 and 2025 were $10,036,275 and $10,195,763, respectively, a decrease of $159,488, or 1.6%, in the current year period over the prior year period. This decrease was caused bya decrease in direct sales of $262,493, partly offset by an increase in sales through distributors of $103,005 in the current year three-month period over the prior year period. The decrease in revenue from direct sales was primarily related to lower outpost sales. Sales revenue for the six months ended June 30, 2026 and 2025 were $18,292,428 and $17,737,346, respectively, an increase of $555,082, or 3.1%, in the current year period over the prior year period. This increase was caused byan increase in revenues from distributor sales of $900,684 and a decrease in revenues from direct sales of $345,602 in the current year period over the prior year period. The decrease in revenues from direct sales was primarily the result of lower outpost sales in the current year.

Previous wording

Cost of sales for the three months ended March 31, 2026 and 2025 was $3,227,089 and $2,782,475, respectively, an increase of $444,614, or 16.0%, in the current period over the prior year period. This change was primarily the result of the higher number of cases sold in the first quarter of 2026 when compared to the same quarter in 2025.

Current wording

Cost of Sales for the three months ended June 30, 2026 and 2025 were $4,262,550 and $3,979,145, respectively, an increase of $283,405, or 7.1%, 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, 2026 and 2025 were $7,489,639 and $6,761,620, respectively, an increase of $728,019 or 10.8%, in the current period over the prior year period. This change was primarily the result of higher cost products sold in the first six months of 2026 when compared to the same period in 2025.

Previous wording

Gross profit as a percentage of net sales for the three months ended March 31, 2026 and 2025 was 60.9% and 63.1%, respectively, a decrease of 2.2 percentage points in the current quarter over the same quarter in the prior year. The decrease was primarily the result of a higher percentage of sales coming from distribution which has a lower gross margin combined with the mix of vintages sold in the first quarter of 2026 when compared to the same quarter in 2025.

Current wording

Gross profit as a percentage of net sales for the three months ended June 30, 2026 and 2025 was 57.5% and 61.0%, respectively, a decrease of 3.5 percentage points in the current year period over the prior year period, mostly as a result of higher costs of products compared to the same quarter of 2025. Gross profit as a percentage of net sales for the six months ended June 30, 2026 and 2025 was 59.1% and 61.9%, respectively, a decrease of 2.8 percentage points in the current year period over the prior year period. The decrease was primarily the result of higher costs of products in direct and distributor sales in the first six months of 2026 compared to the same period in the prior year.

Previous wording

The income tax benefit for the three months ended March 31, 2026 and 2025 was $193,414 and $296,742, respectively, a decrease of $103,328 or 34.8%, in the first quarter of 2026 over the same quarter in the prior year, primarily as a result of a lower pre-tax loss in the first quarter of 2026, compared to the same quarter in 2025. The Company’s estimated federal and state combined income tax rate for the three months ended March 31, 2026 and 2025 was 25.5% and 28.9% respectively.

Current wording

The income tax impact for the three months ended June 30, 2026 and 2025 was a benefit of $229,537 and expense of $37,774. The Company’s estimated federal and state combined income tax rate was 25.5% and 28.9% for the three months ended June 30, 2026 and 2025. The income tax benefit for the six months ended June 30, 2026 and 2025 was $422,952 and $258,968, respectively, an increase of $163,984 or 63.3% 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 2026, compared to the same period in 2025. The Company’s estimated federal and state combined income tax rate was 25.5% and 28.9% for the six months ended June 30, 2026 and 2025.

Previous wording

Net loss for the three months ended March 31, 2026 and 2025 was $565,073 and $728,981, respectively, a decrease of $163,908 or 22.5%, in the first quarter of 2026 over the same quarter in the prior year. The decrease in net loss for the first quarter of 2026, compared to the comparable period in 2025, was primarily the result of higher case sales to distributors in 2026.

Current wording

Net income (loss) for the three months ended June 30, 2026 and 2025 was ($1,389,876) and $92,795, respectively, a decrease of $1,482,671, in the second quarter of 2026 over the same quarter in the prior year. Net loss for the six months ended June 30, 2026 and 2025 was $1,954,948 and $636,186, respectively, an increase of $1,318,763, or 207.3%, 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 2026, compared to the comparable periods in 2025, was primarily the result of lower gross profit and higher selling expenses and increased allowance for credit losses in 2026.

Previous wording

Net loss applicable to common shareholders for the three months ended March 31, 2026 and 2025 was $1,171,144 and $1,292,158, respectively, a decrease of $121,014, or 9.4%, in the first quarter of 2026 over the same quarter in the prior year. The decrease in loss applicable to common shareholders in the first quarter of 2026, compared to the same period of 2025, was the result of a lower net loss in the current period.

Current wording

Net loss applicable to common shareholders for the three months ended June 30, 2026 and 2025 was $1,995,947 and $470,381, respectively, an increase of $1,525,566, or 324.3%, in the second quarter of 2026 over the same quarter in the prior year. Net loss applicable to common shareholders for the six months ended June 30, 2026 and 2025 was $3,167,091 and $1,762,539, respectively, an increase in net loss of $1,404,552, or 79.7%, 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 2026, compared to the same period of 2025, was the result of a higher net loss in the current period.

Previous wording

At March 31, 2026, the Company had a working capital balance of $26.6 million and a current working capital ratio of 3.45:1.

Current wording

At June 30, 2026, the Company had a working capital balance of $23.7 million and a current working capital ratio of 2.92:1.

Previous wording

At March 31, 2026, the Company had a cash balance of $404,712. At December 31, 2025, the Company had a cash balance of $410,886.

Current wording

At June 30, 2026, the Company had a cash balance of $589,502. At December 31, 2025, the Company had a cash balance of $410,886.

Previous wording

Total cash generated from operating activities in the three months ended March 31, 2026 was $794,947. Cash generated from operating activities for the three months ended March 31, 2026 was primarily associated with lower accounts receivables and lower inventories, being partially offset by reduced grapes payable.

Current wording

Total cash generated from operating activities in the six months ended June 30, 2026 was $2,745,399. Cash generated from operating activities for the six months ended June 30, 2026 was primarily associated with lower accounts receivables, lower inventories and higher accounts payable, being partially offset by reduced grapes payable.

Previous wording

Total cash used in investing activities in the three months ended March 31, 2026 was $70,750. Cash used in investing activities for the three months ended March 31, 2026 consisted of cash used for computer equipment and vineyard development costs.

Current wording

Total cash used in investing activities in the six months ended June 30, 2026 was $124,248. Cash used in investing activities for the six months ended June 30, 2026 consisted of cash used on equipment and vineyard development costs.

Previous wording

Total cash used in financing activities in the three months ended March 31, 2026 was $730,371. Cash used in financing activities for the three months ended March 31, 2026 primarily consisted of payments on the line of credit and payments on long term debt, being partially offset by an increase in bank overdraft proceeds.

Current wording

Total cash used in financing activities in the six months ended June 30, 2026 was $2,442,535. Cash used in financing activities for the six months ended June 30, 2026 primarily consisted of payments on the line of credit and payments on long term debt, being partially offset by an increase in bank overdraft proceeds.

Previous 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 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%.

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 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 7.0%, is payable monthly, and is subject to renewal. In July 2026 the line of credit was renewed for $4,000,000. The Company had an outstanding line of credit balance of $634,842 at June 30, 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%.

Previous wording

As of March 31, 2026, the Company had a 15-year installment note payable of $854,907, due in quarterly payments of $42,534, associated with the purchase of property in the Dundee Hills AVA.

Current wording

As of June 30, 2026, the Company had a 15-year installment note payable of $825,152, due in quarterly payments of $42,534, associated with the purchase of property in the Dundee Hills AVA.

Previous wording

As of March 31, 2026, the Company had a total long-term debt balance of $14,935,020, including the portion due in the next year, owed to AgWest, exclusive of debt issuance costs of $154,090. As of December 31, 2025, the Company had a total long-term debt balance of $15,184,395, exclusive of debt issuance costs of $158,837.

Current wording

As of June 30, 2026, the Company had a total long-term debt balance of $14,686,418, including the portion due in the next year, owed to AgWest, exclusive of debt issuance costs of $149,342. As of December 31, 2025, the Company had a total long-term debt balance of $15,184,395, exclusive of debt issuance costs of $158,837.