Core Insights - Willamette Valley Vineyards, Inc. reported a net loss of $1,092,450 for Q3 2025, a significant increase of 286.1% compared to a net loss of $282,945 in Q3 2024 [4] - The company's sales revenue decreased by 10.9% year-over-year, from $9,370,713 in Q3 2024 to $8,353,200 in Q3 2025, attributed to declines in both direct sales and distributor sales [1] - Gross profit also fell by 13.8%, from $5,808,114 in Q3 2024 to $5,003,972 in Q3 2025 [2] Financial Performance - Loss per common share after preferred dividends was $0.33 for Q3 2025, compared to $0.17 for Q3 2024, marking an increase of $0.16 [1][8] - Selling, general and administrative expenses rose by 4.6%, from $5,944,620 in Q3 2024 to $6,217,499 in Q3 2025, driven by higher selling and marketing expenses and increased general and administrative costs [3] - The total operating expenses for Q3 2025 were $6,217,499, compared to $5,944,620 in Q3 2024 [7] Management Commentary - Jim Bernau, Founder and President, emphasized the need for innovative solutions in response to changing market conditions, highlighting the leadership of new CEO Mike Osborn [5]

Financial Performance - For the three months ended September 30, 2025, net sales decreased to $8,353,200, down 10.8% from $9,370,713 in the same period of 2024[13] - Gross profit for the nine months ended September 30, 2025, was $15,979,698, a decline of 9% compared to $17,552,526 for the same period in 2024[13] - The company reported a net loss of $1,092,450 for the three months ended September 30, 2025, compared to a net loss of $282,945 in the same period of 2024, representing an increase in loss of 286%[13] - For the nine months ended September 30, 2025, the company reported a net loss of $1,728,636 compared to a net loss of $608,772 for the same period in 2024[18] - The company reported a basic loss per share of $0.69 for the nine months ended September 30, 2025, compared to $0.46 for the same period in 2024[22] - Loss from operations for the three months ended September 30, 2025, was $(1,213,527), compared to a loss of $(136,506) in the same period of 2024[36] Assets and Liabilities - Total current assets increased to $37,979,155 as of September 30, 2025, compared to $36,919,057 at December 31, 2024, reflecting a growth of 2.86%[8] - Total liabilities rose to $40,003,821 as of September 30, 2025, compared to $39,783,410 at December 31, 2024, indicating an increase of 0.55%[10] - Shareholders' equity decreased to $67,594,226 as of September 30, 2025, down from $69,233,730 at December 31, 2024, a decline of 2.37%[11] - The company’s total assets decreased to $107,598,047 as of September 30, 2025, from $109,017,140 at December 31, 2024, a decline of 1.3%[8] - The current portion of long-term debt increased to $993,875 as of September 30, 2025, compared to $952,171 at December 31, 2024, reflecting a rise of 4.4%[10] - The company’s long-term debt increased to $15,428,093 as of September 30, 2025, compared to $14,042,910 as of December 31, 2024[28] Cash Flow and Expenses - The company had a net cash outflow from operating activities of $1,445,702 for the nine months ended September 30, 2025, an improvement from a net cash outflow of $2,159,828 in the same period of 2024[18] - The company paid $723,311 in interest on debt and the line of credit for the nine months ended September 30, 2025, compared to $391,962 for the same period in 2024[32] - Operating expenses for the three months ended September 30, 2025, totaled $6,217,499, an increase of 4.6% from $5,944,620 in the same period of 2024[13] - The company recognized $89,132 in stock-based compensation expense during the three months ended September 30, 2025, related to the 2025 Omnibus Equity Incentive Plan[45] Inventory and Assets Management - The company's total inventories increased to $34,267,179 as of September 30, 2025, up from $32,907,489 as of December 31, 2024, reflecting a rise in finished goods and work-in-process[23] - The company’s property and equipment, net, was valued at $50,098,097 as of September 30, 2025, down from $52,012,151 as of December 31, 2024[24] - The company has unamortized debt issuance costs of $163,586 as of September 30, 2025, down from $178,908 as of December 31, 2024[29] Lease Agreements - The company extended its lease for the Peter Michael Vineyard until January 2030, with options to extend through January 2035[49] - The Meadowview Vineyard lease has been extended through November 2033, with a maximum increase of 4% every three years[50] - The company entered into a new lease for a retail wine facility in Bend, Oregon, for 10 years with three five-year renewal options[59] - The weighted-average remaining lease term for operating leases was 14.25 years as of September 30, 2025, down from 15.19 years in 2024[60] - Total lease liabilities as of September 30, 2025, amounted to $11,485,723, compared to $11,354,746 at the end of 2024, showing a marginal increase of 1.15%[61] Stock and Equity - The company has received net proceeds of $3,558,807 from the issuance of Preferred Stock as of September 30, 2025[38] - The company filed a shelf Registration Statement on Form S-3 with the SEC for potential future issuance of securities, with a maximum aggregate offering amount of $20,000,000[40] - The company granted 285,000 restricted shares and share units under the 2025 Plan during the three months ended September 30, 2025[44] - The company has identified two operating segments: Direct Sales and Distributor Sales, with performance evaluated based on gross profit[33][34]

Core Viewpoint - Willamette Valley Vineyards, Inc. reported a loss per common share of $0.09 for the three months ended June 30, 2025, which is an increase of $0.02 compared to the same period in 2024, reflecting ongoing challenges in national distribution and sales [1][5]. Financial Performance - Sales revenue for the three months ended June 30, 2025, was $10,195,763, a decrease of $136,595 or 1.3% from $10,332,358 in the same period of 2024, attributed to a decline in direct sales [2]. - Gross profit for the same period was $6,216,618, down by $255,072 or 3.9% from $6,471,690 in 2024 [3]. - Net income decreased significantly to $92,795 in the second quarter of 2025, a drop of $103,183 or 52.7% from $195,978 in the prior year [5]. Expenses - Selling, general and administrative expenses were $5,818,454 for the three months ended June 30, 2025, a decrease of $116,330 or 2.0% compared to $5,934,784 in 2024, primarily due to reduced selling and marketing expenses [4]. - The company reported a decrease in selling and marketing expenses of $144,536 or 3.3%, partially offset by an increase in general and administrative expenses of $28,206 or 1.8% [4]. Management Commentary - The company's management, led by new CEO Mike Osborn, is focused on improving wholesale distribution and sales, emphasizing the brand's strong market reputation and high wine reviews [6].

PART I: FINANCIAL INFORMATION [Item 1 – Financial Statements (Unaudited)](index=4&type=section&id=Item%201%20-%20Financial%20Statements%20(unaudited)) This section presents the unaudited condensed financial statements, including Balance Sheets, Statements of Operations, Shareholders' Equity, and Cash Flows, with detailed notes [Condensed Balance Sheets](index=4&type=section&id=Condensed%20Balance%20Sheets) Condensed Balance Sheet Highlights | Metric | June 30, 2025 | December 31, 2024 | | :-------------------------------- | :------------ | :------------------ | | **Total Assets** | $106,600,616 | $109,017,140 | | **Total Liabilities** | $38,003,072 | $39,783,410 | | **Total Shareholders' Equity** | $68,597,544 | $69,233,730 | - Total assets decreased by approximately **$2.4 million** from December 31, 2024, to June 30, 2025, primarily due to decreases in accounts receivable, inventories, and property and equipment, net[8](index=8&type=chunk) - Total current liabilities decreased significantly by approximately **$4.0 million**, mainly driven by reductions in grapes payable, line of credit, and bank overdraft[8](index=8&type=chunk) [Condensed Statements of Operations](index=5&type=section&id=Condensed%20Statements%20of%20Operations) Condensed Statements of Operations Highlights | Metric | Three months ended June 30, 2025 | Three months ended June 30, 2024 | Six months ended June 30, 2025 | Six months ended June 30, 2024 | | :------------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | **SALES, NET** | $10,195,763 | $10,332,358 | $17,737,346 | $19,135,438 | | **GROSS PROFIT** | $6,216,618 | $6,471,690 | $10,975,726 | $11,744,412 | | **INCOME (LOSS) FROM OPERATIONS** | $398,164 | $536,906 | $(471,814) | $(65,671) | | **NET INCOME (LOSS)** | $92,795 | $195,978 | $(636,186) | $(325,827) | | **LOSS APPLICABLE TO COMMON SHAREHOLDERS** | $(470,381) | $(367,271) | $(1,762,539) | $(1,452,253) | | **Loss per common share, basic and diluted** | $(0.09) | $(0.07) | $(0.36) | $(0.29) | - Net sales decreased by **1.3%** for the three months ended June 30, 2025, and by **7.3%** for the six months ended June 30, 2025, compared to the prior year periods[11](index=11&type=chunk) - The company reported a net income of **$92,795** for the three months ended June 30, 2025, a **52.7% decrease** from the prior year, and a net loss of **$636,186** for the six months ended June 30, 2025, a **95.3% increase in loss** from the prior year[11](index=11&type=chunk) [Condensed Statements of Shareholders' Equity](index=6&type=section&id=Condensed%20Statements%20of%20Shareholders'%20Equity) Condensed Statements of Shareholders' Equity Highlights | Metric | December 31, 2024 | June 30, 2025 | | :------------------------------------ | :------------------ | :------------ | | **Redeemable Preferred Stock (Dollars)** | $43,357,396 | $44,483,749 | | **Common Stock (Dollars)** | $8,512,489 | $8,512,489 | | **Retained Earnings** | $17,363,845 | $15,601,306 | | **Total Shareholders' Equity** | $69,233,730 | $68,597,544 | - Total shareholders' equity decreased from **$69,233,730** at December 31, 2024, to **$68,597,544** at June 30, 2025, primarily due to net losses and accrued preferred stock dividends[14](index=14&type=chunk) - Accrued preferred stock dividends for the six months ended June 30, 2025, totaled **$1,126,353**, impacting retained earnings[14](index=14&type=chunk) [Condensed Statements of Cash Flows](index=7&type=section&id=Condensed%20Statements%20of%20Cash%20Flows) Condensed Statements of Cash Flows Highlights (Six months ended June 30) | Cash Flow Activity | 2025 | 2024 | | :-------------------------------- | :----------- | :----------- | | **Net cash from operating activities** | $(27,768) | $(2,212,072) | | **Net cash from investing activities** | $(209,533) | $(1,188,276) | | **Net cash from financing activities** | $267,061 | $3,441,673 | | **NET CHANGE IN CASH AND CASH EQUIVALENTS** | $29,760 | $41,325 | | **CASH AND CASH EQUIVALENTS, end of period** | $350,643 | $279,807 | - Net cash used in operating activities significantly decreased from **$(2,212,072)** in 2024 to **$(27,768)** in 2025, primarily due to changes in accounts receivable, inventories, and grapes payable[17](index=17&type=chunk) - Net cash from financing activities decreased substantially from **$3,441,673** in 2024 to **$267,061** in 2025, mainly due to lower proceeds from preferred stock issuance and changes in line of credit payments[17](index=17&type=chunk) [Notes to Unaudited Interim Financial Statements](index=8&type=section&id=Notes%20to%20Unaudited%20Interim%20Financial%20Statements) These notes provide additional detail for the unaudited interim financial statements, covering accounting policies, asset/liability breakdowns, debt, segment performance, and commitments [1) Basis of Presentation](index=8&type=section&id=1)%20BASIS%20OF%20PRESENTATION) - The interim financial statements are prepared in conformity with U.S. GAAP, condensed or omitted certain disclosures per SEC regulations, and include normal recurring adjustments[18](index=18&type=chunk) - Operating results for the three and six months ended June 30, 2025, are not necessarily indicative of the full year's results[19](index=19&type=chunk) Loss Per Common Share After Preferred Dividends | Period | 2025 | 2024 | | :------------------------------------------------ | :----- | :----- | | **Three months ended June 30** | $(0.09) | $(0.07) | | **Six months ended June 30** | $(0.36) | $(0.29) | [2) Inventories](index=8&type=section&id=2)%20INVENTORIES) Inventory Breakdown | Inventory Classification | June 30, 2025 | December 31, 2024 | | :------------------------------------------------ | :------------ | :------------------ | | **Winemaking and packaging materials** | $1,536,558 | $1,303,152 | | **Work-in-process** | $13,941,550 | $14,990,375 | | **Finished goods** | $17,468,487 | $16,613,962 | | **Total inventories** | $32,946,595 | $32,907,489 | - Total inventories remained relatively stable, increasing slightly from **$32,907,489** at December 31, 2024, to **$32,946,595** at June 30, 2025[22](index=22&type=chunk) - Finished goods inventory increased by approximately **$0.85 million**, while work-in-process decreased by about **$1.05 million**[22](index=22&type=chunk) [3) Property and Equipment, Net](index=9&type=section&id=3)%20PROPERTY%20AND%20EQUIPMENT,%20NET) Property and Equipment, Net | Asset Category | June 30, 2025 | December 31, 2024 | | :-------------------------------- | :------------ | :------------------ | | **Total Property and Equipment (Gross)** | $81,120,738 | $80,957,902 | | **Accumulated depreciation** | $(30,477,616) | $(28,945,751) | | **Property and equipment, net** | $50,643,122 | $52,012,151 | - Net property and equipment decreased by approximately **$1.37 million** from December 31, 2024, to June 30, 2025, primarily due to increased accumulated depreciation[23](index=23&type=chunk) - Depreciation expense for the six months ended June 30, 2025, was **$1,531,865**, a slight decrease from **$1,582,956** in the prior year period[23](index=23&type=chunk) [4) Debt](index=9&type=section&id=4)%20DEBT) This section details the Company's various debt instruments, including a revolving line of credit, a note payable, and multiple long-term debt agreements [Line of Credit Facility](index=9&type=section&id=Line%20of%20Credit%20Facility) - The Company's revolving line of credit with Umpqua Bank allows borrowing up to **$5,000,000**, bearing interest at prime less 0.5% (**7.0%** at June 30, 2025)[24](index=24&type=chunk) Line of Credit Balance | Date | Balance | | :---------------- | :------------ | | **June 30, 2025** | $446,882 | | **December 31, 2024** | $2,405,815 | - The line of credit was renewed in July 2025 until July 31, 2026, and the Company was in compliance with financial covenants as of December 31, 2024[25](index=25&type=chunk) [Notes Payable](index=9&type=section&id=Notes%20Payable) - A 15-year note payable for a property purchase in Dundee Hills AVA had a balance of **$940,314** at June 30, 2025, with quarterly payments of **$42,534** at **6%** interest[26](index=26&type=chunk) [Long-Term Debt](index=9&type=section&id=Long-Term%20Debt) Long-Term Debt Aggregate Balance (AgWest) | Date | Aggregate Outstanding Balance | | :---------------- | :---------------------------- | | **June 30, 2025** | $16,584,054 | | **December 31, 2024** | $14,042,910 | - The Company has four long-term debt agreements with AgWest, with interest rates ranging from **4.75% to 7.10%** and maturity dates up to 2039[27](index=27&type=chunk) Future Minimum Principal Payments of Long-Term Debt (as of June 30, 2025) | Year Ending December 31 | Amount | | :---------------------- | :------- | | **2025** | $476,819 | | **2026** | $1,008,215 | | **2027** | $4,079,491 | | **2028** | $1,130,789 | | **2029** | $1,007,284 | | **Thereafter** | $8,881,456 | | **Total** | $16,584,054 | [5) Interest and Taxes Paid](index=10&type=section&id=5)%20INTEREST%20AND%20TAXES%20PAID) Income Taxes Paid | Period | 2025 | 2024 | | :-------------------------------- | :----- | :----- | | **Three months ended June 30** | $45,000 | $0 | | **Six months ended June 30** | $45,000 | $0 | Interest Paid on Debt and Line of Credit | Period | 2025 | 2024 | | :-------------------------------- | :------- | :------- | | **Three months ended June 30** | $267,696 | $129,539 | | **Six months ended June 30** | $495,801 | $264,518 | - Interest paid on debt and the line of credit increased significantly for both the three-month and six-month periods ended June 30, 2025, compared to 2024[30](index=30&type=chunk) [6) Segment Reporting](index=10&type=section&id=6)%20SEGMENT%20REPORTING) The Company operates in two segments, Direct Sales and Distributor Sales, with performance evaluated based on gross profit and contribution margin - The Company identifies two operating segments: Direct Sales (retail, wine club, internet, events) and Distributor Sales (wholesale through third parties)[31](index=31&type=chunk) - Performance is evaluated based on gross profit, with directly attributable selling expenses included, but centralized selling and general & administrative expenses are not allocated[32](index=32&type=chunk) Segment Performance (Three Months Ended June 30) | Metric | Direct Sales 2025 | Direct Sales 2024 | Distributor Sales 2025 | Distributor Sales 2024 | | :------------------ | :---------------- | :---------------- | :--------------------- | :--------------------- | | **Sales, net** | $5,497,973 | $5,721,172 | $4,697,790 | $4,611,186 | | **Gross profit** | $4,046,105 | $4,112,750 | $2,170,513 | $2,358,940 | | **Contribution margin** | $791,055 | $515,826 | $1,516,909 | $1,853,573 | Segment Performance (Six Months Ended June 30) | Metric | Direct Sales 2025 | Direct Sales 2024 | Distributor Sales 2025 | Distributor Sales 2024 | | :------------------ | :---------------- | :---------------- | :--------------------- | :--------------------- | | **Sales, net** | $9,808,448 | $10,007,328 | $7,928,898 | $9,128,110 | | **Gross profit** | $7,170,986 | $7,103,761 | $3,804,740 | $4,640,651 | | **Contribution margin** | $829,680 | $243,456 | $2,511,101 | $3,630,859 | [7) Sale of Preferred Stock](index=12&type=section&id=7)%20SALE%20OF%20PREFERRED%20STOCK) - The Company has filed multiple shelf Registration Statements on Form S-3 to offer and sell Series A Redeemable Preferred Stock, with aggregate offering amounts up to **$20,000,000**[35](index=35&type=chunk)[36](index=36&type=chunk)[37](index=37&type=chunk) Net Proceeds from Preferred Stock Issuance (as of June 30, 2025) | Offering Period | Net Proceeds | | :-------------------------------- | :------------- | | **August 2022 - November 2022** | $3,558,807 | | **June 2023 - October 2023** | $3,938,066 | - Shareholders can receive dividends as cash or gift cards, with unused gift cards recorded as unearned revenue (**$1,457,927** at June 30, 2025)[38](index=38&type=chunk) - The Company has the option to redeem outstanding preferred stock at the original issue price plus accrued dividends and a **3%** premium after June 1, 2021[39](index=39&type=chunk) [8) Leases](index=12&type=section&id=8)%20LEASES) This section outlines the Company's operating lease arrangements for vineyard and non-vineyard properties, detailing terms, options, and financial impact [Operating Leases – Vineyard](index=13&type=section&id=Operating%20leases%20%E2%80%93%20Vineyard) - The Company has several long-term operating leases for vineyards, including Tualatin (extended to Jan 2030, reasonably certain to Jan 2035), Meadowview (extensions exercised, reasonably certain to Nov 2033), Elton (new 11-year lease, reasonably certain to Dec 2031), Ingram (34-year lease, reasonably certain to Dec 2053), and Bernau Estate (25-year lease)[43](index=43&type=chunk)[44](index=44&type=chunk)[45](index=45&type=chunk)[46](index=46&type=chunk)[47](index=47&type=chunk) [Operating Leases – Non-Vineyard](index=13&type=section&id=Operating%20Leases%20%E2%80%93%20Non-Vineyard) - Non-vineyard operating leases include tasting rooms and retail wine facilities in McMinnville, Walla Walla (Maison Bleue), Folsom (Willamette Wineworks), Vancouver, Lake Oswego, and Bend, with various lease terms and renewal options[48](index=48&type=chunk)[49](index=49&type=chunk)[50](index=50&type=chunk)[51](index=51&type=chunk)[52](index=52&type=chunk)[53](index=53&type=chunk) - For Willamette Wineworks, the lease was extended to February 2026, with options reasonably certain to February 2040[50](index=50&type=chunk) - Leases for Vancouver and Lake Oswego retail facilities have renewal options reasonably certain to August 2041 and January 2042, respectively[51](index=51&type=chunk)[52](index=52&type=chunk) [Lease Cost and Other Information](index=14&type=section&id=Lease%20Cost%20and%20Other%20Information) Lease Cost and Other Information (Six Months Ended June 30) | Metric | 2025 | 2024 | | :------------------------------------------------ | :------- | :------- | | **Total lease cost** | $765,390 | $745,071 | | **Operating cash flows from operating leases - Vineyard** | $234,164 | $230,964 | | **Operating cash flows from operating leases - Other** | $441,334 | $388,941 | | **Weighted-average remaining lease term (years)** | 14.37 | 15.39 | | **Weighted-average discount rate** | 7.66% | 7.89% | [Maturities of Lease Liabilities](index=14&type=section&id=Maturities%20of%20Lease%20Liabilities) Maturities of Operating Lease Liabilities (as of June 30, 2025) | Years Ended December 31 | Operating Leases | | :---------------------- | :--------------- | | **2025** | $657,038 | | **2026** | $1,312,758 | | **2027** | $1,373,710 | | **2028** | $1,366,420 | | **2029** | $1,376,565 | | **Thereafter** | $13,861,091 | | **Total minimal lease payments** | $19,947,582 | | **Less present value adjustment** | $(8,357,567) | | **Operating lease liabilities** | $11,590,015 | | **Less current lease liabilities** | $(472,282) | | **Lease liabilities, net of current portion** | $11,117,733 | [9) Commitments and Contingencies](index=14&type=section&id=9)%20COMMITMENTS%20AND%20CONTINGENCIES) This section addresses potential legal proceedings and long-term grape purchase agreements, with no expected material adverse effects from litigation [Litigation](index=14&type=section&id=Litigation) - Management believes that current legal proceedings will not have a material adverse effect on the Company's financial position, results of operations, or cash flows[56](index=56&type=chunk) [Grape Purchases](index=14&type=section&id=Grape%20Purchases) - The Company has long-term grape purchase agreements with pre-determined prices and strict quality standards, but minimum/maximum payments cannot be calculated due to variable factors like fruit quantity and quality[57](index=57&type=chunk) [Item 2: Management's Discussion and Analysis of Financial Condition and Results of Operations](index=15&type=section&id=Item%202%20-%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on financial performance and condition, including forward-looking statements, accounting policies, operations, and liquidity [Forward Looking Statements](index=15&type=section&id=Forward%20Looking%20Statements) - The report contains forward-looking statements based on current expectations, estimates, and projections, which involve risks and uncertainties that could cause actual results to differ materially[59](index=59&type=chunk) - Key risk factors include financing availability, grape supply/quality, competition, distributor relations, weather, consumer spending, and general economic conditions[59](index=59&type=chunk) [Critical Accounting Policies](index=15&type=section&id=Critical%20Accounting%20Policies) - The financial statements are prepared in accordance with U.S. GAAP, requiring management estimates and judgments related to revenue recognition, accounts receivable, inventory valuation, and vineyard development costs[60](index=60&type=chunk) - The Company's critical accounting policies remained unchanged during the six months ended June 30, 2025[60](index=60&type=chunk) [Overview](index=15&type=section&id=Overview) - The Company's success depends on growing/purchasing high-quality grapes, producing premium wines, achieving brand recognition, effective distribution, and building direct-to-consumer sales[61](index=61&type=chunk) - Strategic growth through property purchases, development, and preferred stock issuance is expected to negatively impact near-term financial results due to associated costs[62](index=62&type=chunk) - Direct-to-consumer sales, including tasting rooms, internet, and wine club, are emphasized for growth due to higher unit prices[64](index=64&type=chunk) Produced Wine Case Sales (Six Months Ended June 30) | Year | Cases Sold | | :--- | :--------- | | **2025** | 83,968 | | **2024** | 91,102 | | **Change** | -7,134 (-7.8%) | - The Company's Estate Winery tasting room was awarded 'Best Wine Tasting Room in the country' by USA Today for the second consecutive year, and its wine club was ranked 2 nationally[70](index=70&type=chunk) [Results of Operations](index=16&type=section&id=RESULTS%20OF%20OPERATIONS) This section provides a detailed analysis of the Company's financial performance, highlighting changes in revenue, costs, gross profit, expenses, taxes, and net income/loss [Revenue](index=16&type=section&id=Revenue) Net Sales Revenue | Period | 2025 | 2024 | Change ($) | Change (%) | | :-------------------------------- | :----------- | :----------- | :--------- | :--------- | | **Three months ended June 30** | $10,195,763 | $10,332,358 | $(136,595) | -1.3% | | **Six months ended June 30** | $17,737,346 | $19,135,438 | $(1,398,092) | -7.3% | - The decrease in three-month revenue was due to lower direct sales, partially offset by increased distributor sales. The six-month decrease was driven by declines in both direct and distributor sales[74](index=74&type=chunk) [Cost of Sales](index=17&type=section&id=Cost%20of%20Sales) Cost of Sales | Period | 2025 | 2024 | Change ($) | Change (%) | | :-------------------------------- | :----------- | :----------- | :--------- | :--------- | | **Three months ended June 30** | $3,979,145 | $3,860,668 | $118,477 | 3.1% | | **Six months ended June 30** | $6,761,620 | $7,391,026 | $(629,406) | -8.5% | - The three-month increase in cost of sales was due to higher cost products sold, while the six-month decrease was a result of lower case sales[75](index=75&type=chunk) [Gross Profit](index=17&type=section&id=Gross%20Profit) Gross Profit as a Percentage of Net Sales | Period | 2025 | 2024 | Change (pp) | | :-------------------------------- | :----- | :----- | :---------- | | **Three months ended June 30** | 61.0% | 62.6% | -1.6 pp | | **Six months ended June 30** | 61.9% | 61.4% | +0.5 pp | - The decrease in gross profit percentage for the three-month period was mainly due to more product discounts. The increase for the six-month period was primarily due to higher prices for direct sales products[76](index=76&type=chunk) [Selling, General and Administrative Expenses](index=17&type=section&id=Selling,%20General%20and%20Administrative%20Expenses) Selling, General and Administrative Expenses | Period | 2025 | 2024 | Change ($) | Change (%) | | :-------------------------------- | :----------- | :----------- | :--------- | :--------- | | **Three months ended June 30** | $5,818,454 | $5,934,784 | $(116,330) | -2.0% | | **Six months ended June 30** | $11,447,540 | $11,810,083 | $(362,543) | -3.1% | - The decrease in SG&A for both periods was primarily driven by reduced selling and marketing expenses, and for the six-month period, also by lower general and administrative expenses due to reduced legal costs[77](index=77&type=chunk) [Interest Expense](index=17&type=section&id=Interest%20Expense) Interest Expense, Net | Period | 2025 | 2024 | Change ($) | Change (%) | | :-------------------------------- | :----------- | :----------- | :--------- | :--------- | | **Three months ended June 30** | $270,145 | $263,694 | $6,451 | 2.4% | | **Six months ended June 30** | $568,366 | $493,381 | $74,985 | 15.2% | - The increase in interest expense for both periods was primarily due to increased long-term debt[78](index=78&type=chunk) [Income Taxes](index=17&type=section&id=Income%20Taxes) Income Tax (Expense) Benefit | Period | 2025 | 2024 | Change ($) | Change (%) | | :-------------------------------- | :----------- | :----------- | :--------- | :--------- | | **Three months ended June 30** | $(37,774) | $(79,775) | $42,001 | -52.6% | | **Six months ended June 30** | $258,968 | $132,632 | $126,336 | 95.3% | - The decrease in income tax expense for the three-month period was due to lower pre-tax income. The increase in income tax benefit for the six-month period was due to a higher pre-tax loss[79](index=79&type=chunk) - The estimated federal and state combined income tax rate was **28.9%** for both periods[79](index=79&type=chunk) [Net Income (Loss)](index=17&type=section&id=Net%20Income%20(Loss)) Net Income (Loss) | Period | 2025 | 2024 | Change ($) | Change (%) | | :-------------------------------- | :----------- | :----------- | :--------- | :--------- | | **Three months ended June 30** | $92,795 | $195,978 | $(103,183) | -52.7% | | **Six months ended June 30** | $(636,186) | $(325,827) | $(310,359) | 95.3% | - The decrease in net income for the second quarter and increase in net loss for the first half of 2025 were primarily a result of lower revenue[80](index=80&type=chunk) [Net Loss Applicable to Common Shareholders](index=18&type=section&id=Net%20Loss%20Applicable%20to%20Common%20Shareholders) Net Loss Applicable to Common Shareholders | Period | 2025 | 2024 | Change ($) | Change (%) | | :-------------------------------- | :----------- | :----------- | :--------- | :--------- | | **Three months ended June 30** | $(470,381) | $(367,271) | $103,110 | 28.1% | | **Six months ended June 30** | $(1,762,539) | $(1,452,253) | $310,286 | 21.4% | - The increase in loss applicable to common shareholders for both periods was a direct result of the higher net loss in the current period[81](index=81&type=chunk) [Liquidity and Capital Resources](index=18&type=section&id=Liquidity%20and%20Capital%20Resources) - As of June 30, 2025, the Company had a working capital balance of **$27.3 million** and a current working capital ratio of **4.07:1**[82](index=82&type=chunk) Cash and Cash Equivalents | Date | Balance | | :---------------- | :---------- | | **June 30, 2025** | $350,643 | | **December 31, 2024** | $320,883 | - Cash used in operating activities for the six months ended June 30, 2025, was **$27,768**, primarily due to net loss and changes in grapes payable and accrued expenses[83](index=83&type=chunk) - Cash generated from financing activities for the six months ended June 30, 2025, was **$267,061**, mainly from long-term debt proceeds offset by repayments[85](index=85&type=chunk) - The Company believes that cash flow from operations, existing credit facilities, and preferred stock sales will be sufficient to meet long-term needs[89](index=89&type=chunk) [Item 3: Quantitative and Qualitative Disclosures about Market Risk](index=18&type=section&id=Item%203%20-%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) As a smaller reporting company, the Company is not required to provide quantitative and qualitative disclosures about market risk - The Company is exempt from providing quantitative and qualitative disclosures about market risk as it qualifies as a smaller reporting company[90](index=90&type=chunk) [Item 4: Controls and Procedures](index=19&type=section&id=Item%204%20-%20Controls%20and%20Procedures) This section details the Company's assessment of disclosure controls and procedures and reports on changes in internal control over financial reporting [Disclosure Controls and Procedures](index=19&type=section&id=Disclosure%20Controls%20and%20Procedures) - The Company's management, including the President and CFO, concluded that disclosure controls and procedures were effective as of June 30, 2025[91](index=91&type=chunk) [Changes in Internal Control over Financial Reporting](index=19&type=section&id=Changes%20in%20Internal%20Control%20over%20Financial%20Reporting) - There have been no changes in internal control over financial reporting during the quarter ended June 30, 2025, that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting[92](index=92&type=chunk) PART II: OTHER INFORMATION [Item 1 - Legal Proceedings](index=19&type=section&id=Item%201%20-%20Legal%20Proceedings) This section addresses legal proceedings, concluding no material adverse effect on financial position, results of operations, or cash flows is expected - The Company is a party to various legal proceedings in the ordinary course of business, but management believes these will not have a material adverse effect on the Company's financial position, results of operations, or cash flows[93](index=93&type=chunk) [Item 1A - Risk Factors](index=19&type=section&id=Item%201A%20-%20Risk%20Factors) This section refers readers to the Annual Report on Form 10-K for risk factors and notes the potential for additional, unknown risks - Readers should consider the risk factors discussed in the Company's Annual Report on Form 10-K for the year ended December 31, 2024[94](index=94&type=chunk) - Additional unknown or immaterial risks could eventually prove to materially adversely affect the business, operations, or financial condition[95](index=95&type=chunk) [Item 2 - Unregistered Sales of Equity Securities and Use of Proceeds](index=19&type=section&id=Item%202%20-%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The Company reported no unregistered sales of equity securities or use of proceeds during the period - There were no unregistered sales of equity securities and use of proceeds during the period[96](index=96&type=chunk) [Item 3 - Defaults Upon Senior Securities](index=19&type=section&id=Item%203%20-%20Defaults%20Upon%20Senior%20Securities) The Company reported no defaults upon senior securities during the period - There were no defaults upon senior securities during the period[97](index=97&type=chunk) [Item 4 - Mine Safety Disclosures](index=19&type=section&id=Item%204%20-%20Mine%20Safety%20Disclosures) This item is not applicable to the Company - This item is not applicable to the Company[98](index=98&type=chunk) [Item 5 – Other Information](index=19&type=section&id=Item%205%20%E2%80%93%20Other%20Information) No directors or officers adopted or terminated Rule 10b5-1 or Non-Rule 10b5-1 trading arrangements during the quarter - No director or officer adopted or terminated a Rule 10b5-1 or Non-Rule 10b5-1 trading arrangement during the three months ended June 30, 2025[99](index=99&type=chunk) [Item 6 – Exhibits](index=20&type=section&id=Item%206%20%E2%80%93%20Exhibits) This section lists all exhibits filed with the Form 10-Q, including corporate governance documents, certifications, and iXBRL financial information - Exhibits include Articles of Incorporation, Bylaws, Certifications of Principal Executive and Financial Officers (Rule 13a-14(a) and 18 U.S.C. Section 1350), and financial information formatted in Inline Extensible Business Reporting Language (iXBRL)[100](index=100&type=chunk) SIGNATURES - The report was signed on August 12, 2025, by James W. Bernau, President (Principal Executive Officer), and John Ferry, Chief Financial Officer (Principal Accounting and Financial Officer)[101](index=101&type=chunk)[102](index=102&type=chunk)

Core Insights - Willamette Valley Vineyards has been recognized as the 1 Tasting Room in the Nation for the second consecutive year by USA TODAY's 10Best Readers' Choice Awards, reflecting strong support from shareholders and club members [1][2] - The winery emphasizes a unique culinary program that pairs local ingredients with its wines, enhancing the overall tasting experience [3][4] - Willamette Valley Vineyards' Wine Club has also been ranked 2 in the Nation, offering various membership tiers and exclusive benefits [5] Company Overview - Founded in 1983, Willamette Valley Vineyards has grown to become a leading winery in Oregon, focusing on sustainable practices and producing acclaimed Pinot Noir [7] - The winery operates with a community-ownership model, boasting over 27,000 shareholders, which supports its mission to democratize wine [5][7] - Willamette Valley Vineyards has expanded to include nine tasting rooms across Oregon, Washington, and California, enhancing its reach and accessibility [7] Tasting Room Experience - The Estate Tasting Room offers immersive experiences, including personalized tastings and seasonal pairing menus, designed to be inclusive for all visitors [2][4] - Chef DJ MacIntyre leads the culinary program, focusing on local and sustainable ingredients to create dishes that complement the winery's diverse portfolio [3][6] - The tasting room fosters a warm atmosphere with panoramic vineyard views, promoting a sense of community and passion for wine and culinary arts [2][4] Sustainability and Innovation - Willamette Valley Vineyards is recognized for its sustainable farming practices, with all vineyards certified through LIVE and Salmon-Safe programs [7] - The winery produces over 75 different bottlings, including Pinot Noir and Chardonnay, showcasing its commitment to quality and innovation in the wine industry [6][7]

Core Insights - Willamette Valley Vineyards is offering a Preferred Stock Offering to wine enthusiasts, allowing them to purchase shares and become part of the winery's ownership family [1][2][4] Company Overview - Founded in 1983, Willamette Valley Vineyards is recognized as one of Oregon's leading wineries, particularly known for its Pinot Noir and commitment to sustainability [8][10] - The winery operates under a community-funded business model, being one of the few community-owned, publicly traded wineries in the nation [2][8] Investment Opportunity - The introductory price for shares is set at $3.35, with an annual dividend of 6.5% or wine credit with a 15% bonus for early applications [4][5] - The minimum investment is 150 shares ($502.50), while the maximum is 5,000 shares ($16,750) [4] - Share prices will increase to $3.45 on August 1, 2025, and to $3.95 on November 1, 2025, unless sold out earlier [5] Shareholder Benefits - Shareholders receive exclusive benefits, including an annual dividend, discounts on wine releases, and access to special opportunities [3][9] - The winery emphasizes a loyalty-driven approach, aiming to create a community of wine enthusiasts who support the brand [4][6] Growth and Community Impact - The Preferred Stock Offering aims to support the winery's expansion, including its vineyards, tasting rooms, and production facilities [6] - Willamette Valley Vineyards has expanded to include nine tasting rooms across Oregon, Washington, and California, facilitated by stock ownership [10]

Core Viewpoint - Willamette Valley Vineyards, Inc. reported a net loss for the first quarter of 2025, reflecting challenges in national distribution and a significant decrease in sales revenue compared to the previous year [6][5]. Financial Performance - The company generated a loss per common share after preferred dividends of $0.26 for the three months ended March 31, 2025, compared to $0.22 for the same period in 2024, marking an increase of $0.04 [1]. - Sales revenue decreased to $7,541,583 for the three months ended March 31, 2025, down from $8,803,080 in 2024, representing a decline of $1,261,497 or 14.3% [2]. - Gross profit for the same period was $4,759,108, a decrease of $513,614 or 9.7% from $5,272,722 in 2024, primarily due to lower distributor sales [3]. - Selling, general and administrative expenses decreased to $5,629,086 in the first quarter of 2025, down from $5,875,299 in 2024, a reduction of $246,213 or 4.2% [4]. - The net loss increased to $728,981 in the first quarter of 2025, compared to $521,805 in 2024, an increase of $207,176 or 39.7% [5]. Management Changes - The company has appointed Mike Osborn as the new Chief Executive Officer to address distribution challenges, bringing extensive experience from the wine industry [6]. Company Overview - Willamette Valley Vineyards, Inc. is headquartered near Salem, Oregon, and its common stock is traded on NASDAQ under the ticker WVVI [7].

```markdown [PART I: FINANCIAL INFORMATION](index=3&type=section&id=Part%20I%20-%20Financial%20Information) [Item 1 - Financial Statements (Unaudited)](index=3&type=section&id=Item%201%20-%20Financial%20Statements%20(unaudited)) Unaudited condensed financial statements for Q1 2025 and 2024, including balance sheets, statements of operations, shareholders' equity, cash flows, and related notes [Condensed Balance Sheets](index=3&type=section&id=Condensed%20Balance%20Sheets) | ASSETS (March 31, 2025) | Amount ($) | | :------------------------ | :----------- | | Cash and cash equivalents | 332,889 | | Accounts receivable, net | 2,323,815 | | Inventories | 33,598,355 | | Total current assets | 37,024,609 | | Total Assets | 108,244,573 | | LIABILITIES & EQUITY (March 31, 2025) | Amount ($) | | :------------------------------------ | :----------- | | Accounts payable | 2,125,472 | | Line of credit | 1,203,983 | | Total current liabilities | 10,285,959 | | Total Liabilities | 39,739,824 | | Total Shareholders' Equity | 68,504,749 | | Total Liabilities and Shareholders' Equity | 108,244,573 | - Total assets decreased from **$109,017,140** at December 31, 2024, to **$108,244,573** at March 31, 2025[8](index=8&type=chunk) - Total current liabilities decreased significantly from **$12,980,185** at December 31, 2024, to **$10,285,959** at March 31, 2025, primarily due to a reduction in grapes payable and line of credit[8](index=8&type=chunk) [Condensed Statements of Operations](index=4&type=section&id=Condensed%20Statements%20of%20Operations) | Metric (Three months ended March 31) | 2025 ($) | 2024 ($) | Change ($) | Change (%) | | :----------------------------------- | :------- | :------- | :--------- | :--------- | | SALES, NET | 7,541,583 | 8,803,080 | (1,261,497) | -14.3% | | COST OF SALES | 2,782,475 | 3,530,358 | (747,883) | -21.2% | | GROSS PROFIT | 4,759,108 | 5,272,722 | (513,614) | -9.7% | | Total operating expenses | 5,629,086 | 5,875,299 | (246,213) | -4.2% | | LOSS FROM OPERATIONS | (869,978) | (602,577) | (267,401) | 44.4% | | NET LOSS | (728,981) | (521,805) | (207,176) | 39.7% | | LOSS APPLICABLE TO COMMON SHAREHOLDERS | (1,292,158) | (1,084,982) | (207,176) | 19.1% | | Loss per common share (basic and diluted) | (0.26) | (0.22) | (0.04) | 18.2% | - Net sales decreased by **14.3%** year-over-year, primarily due to a decline in distributor sales, partially offset by an increase in direct-to-consumer sales[10](index=10&type=chunk)[67](index=67&type=chunk) - Gross profit margin improved from **59.9%** in Q1 2024 to **63.1%** in Q1 2025, driven by higher prices for products sold through retail locations[10](index=10&type=chunk)[70](index=70&type=chunk) [Condensed Statements of Shareholders' Equity](index=5&type=section&id=Condensed%20Statements%20of%20Shareholders'%20Equity) | Shareholder Equity Component | Dec 31, 2024 ($) | March 31, 2025 ($) | Change ($) | | :--------------------------- | :--------------- | :----------------- | :--------- | | Redeemable Preferred Stock | 43,357,396 | 43,920,573 | 563,177 | | Common Stock | 8,512,489 | 8,512,489 | 0 | | Retained Earnings | 17,363,845 | 16,071,687 | (1,292,158) | | Total Shareholders' Equity | 69,233,730 | 68,504,749 | (728,981) | - Total shareholders' equity decreased by **$728,981** from December 31, 2024, to March 31, 2025, primarily due to the net loss of **$728,981** and accrued preferred stock dividends of **$563,177**[12](index=12&type=chunk) [Condensed Statements of Cash Flows](index=6&type=section&id=Condensed%20Statements%20of%20Cash%20Flows) | Cash Flow Activity (Three months ended March 31) | 2025 ($) | 2024 ($) | Change ($) | | :----------------------------------------------- | :------- | :------- | :--------- | | Net cash from operating activities | (1,337,263) | (3,012,769) | 1,675,506 | | Net cash from investing activities | (115,344) | (330,298) | 214,954 | | Net cash from financing activities | 1,464,613 | 3,361,057 | (1,896,444) | | NET CHANGE IN CASH AND CASH EQUIVALENTS | 12,006 | 17,990 | (5,984) | | CASH AND CASH EQUIVALENTS, end of period | 332,889 | 256,472 | 76,417 | - Net cash used in operating activities significantly decreased from **$3,012,769** in Q1 2024 to **$1,337,263** in Q1 2025, primarily due to reduced grapes payable and lower receivables, partially offset by increased inventories[14](index=14&type=chunk)[77](index=77&type=chunk) - Cash generated from financing activities decreased from **$3,361,057** in Q1 2024 to **$1,464,613** in Q1 2025, mainly due to lower proceeds from preferred stock issuance and payments on the line of credit[14](index=14&type=chunk)[79](index=79&type=chunk) [Notes to Unaudited Interim Financial Statements](index=7&type=section&id=Notes%20to%20Unaudited%20Interim%20Financial%20Statements) [1) BASIS OF PRESENTATION](index=8&type=section&id=1)%20BASIS%20OF%20PRESENTATION) - The interim financial statements are prepared in conformity with U.S. GAAP and should be read in conjunction with the 2024 Annual Report on Form 10-K[15](index=15&type=chunk) - Operating results for the three months ended March 31, 2025, are not necessarily indicative of the full year's results[16](index=16&type=chunk) - The Company's revenues include direct-to-consumer sales and national sales to distributors, utilizing shared resources[16](index=16&type=chunk) [2) INVENTORIES](index=9&type=section&id=2)%20INVENTORIES) | Inventory Classification | March 31, 2025 ($) | December 31, 2024 ($) | | :----------------------- | :----------------- | :-------------------- | | Winemaking and packaging materials | 1,587,348 | 1,303,152 | | Work-in-process | 14,147,911 | 14,990,375 | | Finished goods | 17,863,096 | 16,613,962 | | Total inventories | 33,598,355 | 32,907,489 | - Total inventories increased by **$690,866** from December 31, 2024, to March 31, 2025, primarily driven by an increase in finished goods[19](index=19&type=chunk) [3) PROPERTY AND EQUIPMENT, NET](index=9&type=section&id=3)%20PROPERTY%20AND%20EQUIPMENT,%20NET) | Property and Equipment Component | March 31, 2025 ($) | December 31, 2024 ($) | | :------------------------------- | :----------------- | :-------------------- | | Construction in progress | 652,726 | 633,179 | | Land, improvements, and other buildings | 15,342,674 | 15,342,674 | | Winery buildings and tasting rooms | 44,187,393 | 44,146,543 | | Equipment | 20,875,346 | 20,835,506 | | Accumulated depreciation | (29,716,121) | (28,945,751) | | Property and equipment, net | 51,342,018 | 52,012,151 | - Net property and equipment decreased from **$52,012,151** at December 31, 2024, to **$51,342,018** at March 31, 2025[20](index=20&type=chunk) - Depreciation expense for the three months ended March 31, 2025, was **$770,370**, down from **$791,986** in the prior year period[20](index=20&type=chunk) [4) DEBT](index=9&type=section&id=4)%20DEBT) - The Company's line of credit balance decreased from **$2,405,815** at December 31, 2024, to **$1,203,983** at March 31, 2025, with an interest rate of **7.0%**[21](index=21&type=chunk) - Notes payable for property purchase decreased from **$995,968** at December 31, 2024, to **$968,348** at March 31, 2025[23](index=23&type=chunk) - Long-term debt with AgWest increased from **$14,042,910** at December 31, 2024, to **$16,818,597** at March 31, 2025, with various fixed and variable interest rates and maturity dates up to 2039[24](index=24&type=chunk) [5) INTEREST AND TAXES PAID](index=10&type=section&id=5)%20INTEREST%20AND%20TAXES%20PAID) - The Company paid **$228,105** in interest on long-term debt and the line of credit for the three months ended March 31, 2025, an increase from **$134,979** in the prior year[26](index=26&type=chunk) - No income taxes were paid for the three months ended March 31, 2025, or 2024[26](index=26&type=chunk) [6) SEGMENT REPORTING](index=10&type=section&id=6)%20SEGMENT%20REPORTING) - The Company operates in two segments: Direct Sales (retail, wine club, internet, events) and Distributor Sales (wholesale)[27](index=27&type=chunk) - Performance is evaluated based on gross profit of respective segments; centralized selling and G&A expenses are not allocated[28](index=28&type=chunk) | Segment (Three months ended March 31) | Direct Sales 2025 ($) | Direct Sales 2024 ($) | Distributor Sales 2025 ($) | Distributor Sales 2024 ($) | | :------------------------------------ | :-------------------- | :-------------------- | :------------------------- | :------------------------- | | Sales, net | 4,310,474 | 4,286,156 | 3,231,109 | 4,516,924 | | Cost of Sales | 1,185,593 | 1,295,145 | 1,596,882 | 2,235,213 | | Gross Profit | 3,124,881 | 2,991,011 | 1,634,227 | 2,281,711 | | Selling and Marketing Expenses | 3,086,255 | 3,263,381 | 640,035 | 504,424 | | Contribution Margin | 38,626 | (272,370) | 994,192 | 1,777,287 | [7) SALE OF PREFERRED STOCK](index=11&type=section&id=7)%20SALE%20OF%20PREFERRED%20STOCK) - The Company has issued Series A Redeemable Preferred Stock through various offerings, with net proceeds of **$3,558,807** and **$3,938,066** received as of March 31, 2025, from offerings filed in 2022 and 2023, respectively[31](index=31&type=chunk)[32](index=32&type=chunk) - Shareholders can receive dividends as cash or gift cards; unused dividend gift cards totaled **$1,637,861** at March 31, 2025, recorded as unearned revenue[33](index=33&type=chunk) - The Company has the option to redeem outstanding preferred stock at the original issue price plus accrued unpaid dividends and a **3%** redemption premium after June 1, 2021[34](index=34&type=chunk) [8) LEASES](index=11&type=section&id=8)%20LEASES) - The Company has operating leases for vineyards and non-vineyard properties (tasting rooms), with ROU assets and lease liabilities recognized on the balance sheet[35](index=35&type=chunk)[38](index=38&type=chunk)[43](index=43&type=chunk) | Lease Cost (Three months ended March 31) | 2025 ($) | 2024 ($) | | :--------------------------------------- | :------- | :------- | | Operating lease cost - Vineyards | 125,181 | 114,782 | | Operating lease cost - Other | 246,341 | 250,640 | | Short-term lease cost | 10,166 | 8,427 | | Total lease cost | 381,688 | 373,849 | - As of March 31, 2025, total minimal lease payments for operating leases amount to **$20,287,511**, with operating lease liabilities (net of current portion) of **$11,237,369**[51](index=51&type=chunk) [9) COMMITMENTS AND CONTINGENCIES](index=13&type=section&id=9)%20COMMITMENTS%20AND%20CONTINGENCIES) - The Company is involved in legal proceedings in the normal course of business, but management believes these will not have a material adverse effect on financial position, results of operations, or cash flows[52](index=52&type=chunk) - Long-term grape purchase agreements are in place, but minimum/maximum payments cannot be calculated due to unknowns like fruit quantity needed and quality standards[53](index=53&type=chunk) [Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations](index=13&type=section&id=Item%202%20-%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management's discussion and analysis of financial condition and results of operations for Q1 2025, covering business strategy, revenue, expenses, net loss, liquidity, and capital resources [Forward Looking Statements](index=14&type=section&id=Forward%20Looking%20Statements) - The report contains forward-looking statements subject to risks and uncertainties, including financing availability, grape supply, competition, weather, consumer spending, and economic conditions[55](index=55&type=chunk) - The Company disclaims any obligation to update or revise forward-looking statements, except as required by law[55](index=55&type=chunk) [Critical Accounting Policies](index=14&type=section&id=Critical%20Accounting%20Policies) - The Company's critical accounting policies, including revenue recognition, accounts receivable, inventory valuation, and vineyard development costs amortization, remained unchanged during the three months ended March 31, 2025[56](index=56&type=chunk) - Management's estimates are based on historical experience and reasonable assumptions, with actual results potentially differing under various conditions[56](index=56&type=chunk) [Overview](index=14&type=section&id=Overview) - The Company's success relies on growing/purchasing high-quality grapes, vinifying premium wines, achieving brand recognition, effective distribution, and building direct-to-consumer sales[57](index=57&type=chunk) - Strategic growth through property purchases, development, and preferred stock issuance is expected to negatively impact near-term financial results due to associated costs[58](index=58&type=chunk) - Wine case sales decreased by **23.5%** (**10,128** cases) in Q1 2025 compared to Q1 2024, primarily due to lower wholesale case sales[62](index=62&type=chunk) [Results of Operations](index=15&type=section&id=RESULTS%20OF%20OPERATIONS) Key Financial Performance Indicators (Three months ended March 31) | Metric | 2025 ($) | 2024 ($) | Change ($) | Change (%) | | :----------------------------------- | :------- | :------- | :--------- | :--------- | | Sales, Net | 7,541,583 | 8,803,080 | (1,261,497) | -14.3% | | Cost of Sales | 2,782,475 | 3,530,358 | (747,883) | -21.2% | | Gross Profit | 4,759,108 | 5,272,722 | (513,614) | -9.7% | | Gross Profit as % of Net Sales | 63.1% | 59.9% | 3.2 pp | 5.3% | | Selling, General and Administrative Expenses | 5,629,086 | 5,875,299 | (246,213) | -4.2% | | Interest Expense, net | 298,221 | 229,678 | 68,543 | 29.8% | | Income Tax Benefit | 296,742 | 212,407 | 84,335 | 39.7% | | Net Loss | (728,981) | (521,805) | (207,176) | 39.7% | | Net Loss Applicable to Common Shareholders | (1,292,158) | (1,084,982) | (207,176) | 19.1% | - The decrease in net sales was primarily due to a **$1,285,815** decrease in distributor sales, partially offset by a **$24,318** increase in direct-to-consumer sales, mainly from higher wine club revenues[67](index=67&type=chunk) - The increase in net loss was primarily driven by lower case sales to distributors in 2025[74](index=74&type=chunk) [Liquidity and Capital Resources](index=16&type=section&id=Liquidity%20and%20Capital%20Resources) - As of March 31, 2025, the Company had a working capital balance of **$26.7 million** and a current working capital ratio of **3.60:1**[76](index=76&type=chunk) - Cash and cash equivalents increased slightly to **$332,889** at March 31, 2025, from **$320,883** at December 31, 2024[76](index=76&type=chunk) - The Company believes that cash flow from operations, existing credit facilities, and preferred stock sales will be sufficient to meet long-term needs[84](index=84&type=chunk) [Item 3 - Quantitative and Qualitative Disclosures about Market Risk](index=17&type=section&id=Item%203%20-%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) As a smaller reporting company, the Company is exempt from providing quantitative and qualitative disclosures about market risk - The Company is exempt from providing market risk disclosures as it qualifies as a smaller reporting company[85](index=85&type=chunk) [Item 4 - Controls and Procedures](index=17&type=section&id=Item%204%20-%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were effective as of March 31, 2025, with no material changes in internal control over financial reporting - The CEO and CFO concluded that the Company's disclosure controls and procedures were effective as of March 31, 2025[86](index=86&type=chunk) - No material changes in internal control over financial reporting occurred during the quarter ended March 31, 2025[87](index=87&type=chunk) [PART II: OTHER INFORMATION](index=17&type=section&id=Part%20II%20-%20Other%20Information) [Item 1 - Legal Proceedings](index=17&type=section&id=Item%201%20-%20Legal%20Proceedings) Legal proceedings in the ordinary course of business are not expected to materially adversely affect the Company's financial condition or results - Management believes that current legal proceedings will not materially adversely affect the Company's financial position, results of operations, or cash flows[88](index=88&type=chunk) [Item 1A - Risk Factors](index=17&type=section&id=Item%201A%20-%20Risk%20Factors) Readers are referred to the Annual Report on Form 10-K for risk factors, acknowledging potential impact from unknown risks - Readers should consider risk factors outlined in the Company's Annual Report on Form 10-K for the year ended December 31, 2024[89](index=89&type=chunk) - Additional unknown or currently immaterial risks may eventually prove to materially adversely affect the business[90](index=90&type=chunk) [Item 2 - Unregistered Sales of Equity Securities and Use of Proceeds](index=17&type=section&id=Item%202%20-%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) No unregistered sales of equity securities or use of proceeds occurred during the reporting period - No unregistered sales of equity securities or use of proceeds occurred[91](index=91&type=chunk) [Item 3 - Defaults Upon Senior Securities](index=18&type=section&id=Item%203%20-%20Defaults%20Upon%20Senior%20Securities) No defaults upon senior securities were reported during the period - There were no defaults upon senior securities[92](index=92&type=chunk) [Item 4 - Mine Safety Disclosures](index=18&type=section&id=Item%204%20-%20Mine%20Safety%20Disclosures) This item is not applicable to the Company's operations - Mine Safety Disclosures are not applicable to the Company[93](index=93&type=chunk) [Item 5 - Other Information](index=18&type=section&id=Item%205%20-%20Other%20Information) No directors or officers adopted or terminated Rule 10b5-1 or Non-Rule 10b5-1 trading arrangements in Q1 2025 - No director or officer adopted or terminated a Rule 10b5-1 or Non-Rule 10b5-1 trading arrangement during the three months ended March 31, 2025[94](index=94&type=chunk) [Item 6 - Exhibits](index=19&type=section&id=Item%206%20-%20Exhibits) This section lists all exhibits filed with the Form 10-Q, including corporate documents and iXBRL-formatted financial information - The exhibits include various corporate documents such as Articles of Incorporation, Bylaws, and certifications from the CEO and CFO[96](index=96&type=chunk) - Financial information for the quarter ended March 31, 2025, is provided in Inline Extensible Business Reporting Language (iXBRL) format[96](index=96&type=chunk) [SIGNATURES](index=20&type=section&id=SIGNATURES) - The report was signed by James W. Bernau, Chief Executive Officer, and John Ferry, Chief Financial Officer, on May 13, 2025[98](index=98&type=chunk) ```

Core Insights - Willamette Valley Vineyards has appointed Mike Osborn as the new CEO, succeeding founder Jim Bernau, who will remain as President and Chairperson as part of a long-term succession plan [1][2][5] - The leadership change is aimed at accelerating the company's growth and enhancing its market presence, particularly in the evolving wine market [2][5] Company Overview - Willamette Valley Vineyards was founded in 1983 by Jim Bernau, who has built it into a respected winery known for its commitment to community ownership and environmental stewardship [2][5] - The winery has been recognized for its high-quality Pinot Noir and has received accolades such as "One of America's Great Pinot Noir Producers" from Wine Enthusiast Magazine [5] - The company operates under a unique shareholder model, with thousands of wine enthusiasts as co-owners, and has expanded to include 10 tasting rooms across Oregon, Washington, and California [4][5] Leadership Background - Mike Osborn, the new CEO, is known for founding Wine.com and has extensive experience in wine retail, having built it into the leading online wine retailer in the U.S. over the past 27 years [3] - Osborn's leadership is expected to bring a fresh perspective to the winery, focusing on enhancing its national and global presence while maintaining its core values of integrity, community, and quality [4][5]

Core Viewpoint - Willamette Valley Vineyards, Inc. reported a reduced net loss per common share for the year ended December 31, 2024, indicating improved financial performance compared to the previous year, despite ongoing challenges in the wine industry [1][6]. Financial Performance - The company generated net sales revenues of $39,782,442 for 2024, reflecting a 1.7% increase from $39,136,114 in 2023, primarily due to a rise in direct sales revenue [2]. - Gross profit increased to $24,195,456 in 2024, up 7.3% from $22,557,128 in 2023, attributed to higher product prices and a greater proportion of sales from direct channels [3]. - Selling, general and administrative expenses decreased slightly to $23,623,598 in 2024 from $23,764,330 in 2023, mainly due to lower labor selling costs [4]. - The company reported income from operations of $571,858 in 2024, a significant improvement from a loss of $1,207,202 in 2023, marking an increase of 147.4% [5]. Operational Insights - The CEO highlighted the company's strategy to leverage newly established retail locations to counteract declining sales trends in the industry, emphasizing the potential for long-term shareholder value through a unique ownership model [6]. - The company’s operational results indicate a focus on enhancing direct sales and managing costs effectively to navigate the changing wine market [6].