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Willamette Valley Vineyards(WVVI) - 2022 Q1 - Quarterly Report
2022-05-12 20:47
UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2022 o TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT Commission File Number 001-37610 WILLAMETTE VALLEY VINEYARDS, INC. (Exact name of registrant as specified in charter) Oregon 93-0981021 (State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identificati ...
Willamette Valley Vineyards(WVVI) - 2021 Q4 - Annual Report
2022-03-29 20:16
Part I [Business](index=4&type=section&id=Item%201.%20Business) Willamette Valley Vineyards produces and sells premium wines, primarily Pinot Noir, through direct and distributor sales, expanding into ultra-premium markets with new brands and facilities - The company operates through two primary segments: direct sales (retail, wine club, online) and distributor sales (wholesale)[17](index=17&type=chunk) - The company's main brand is Willamette Valley Vineyards, with Pinot Noir as its flagship varietal, also marketing wines under Griffin Creek, Tualatin Estate, Pambrun, and Maison Bleue labels[16](index=16&type=chunk)[18](index=18&type=chunk) - Strategic initiatives include brand expansion into the ultra-premium market with new wineries and labels, and constructing a new sparkling wine facility, Domaine Willamette, to enhance direct-to-consumer sales[46](index=46&type=chunk) Company Vineyard Acreage Summary | Vineyard Type | Total Acres | Producing Acres | Pre-Production Acres | Plantable Acres | Non-Plantable Acres | | :--- | :--- | :--- | :--- | :--- | :--- | | **Owned Vineyards** | 704 | 239 | 37 | 232 | 196 | | **Leased Vineyards** | 314 | 265 | 9 | 19 | 21 | | **Contracted Vineyards** | 381 | 381 | - | - | - | | **Total** | **1,399** | **885** | **46** | **251** | **217** | Annual Grape Harvest and Wine Production | Harvest Year | Tons of Grapes Grown | Tons of Grapes Purchased | Total Tons Harvested | Cases Produced | | :--- | :--- | :--- | :--- | :--- | | **2021** | 1,550 | 1,522 | 3,072 | 206,954 | | **2020** | 1,031 | 1,470 | 2,501 | 175,357 | | **2019** | 1,572 | 1,046 | 2,618 | 172,869 | - In 2021, sales to a single distributor accounted for approximately **18.1% of total company revenue**, a decrease from 24.0% in 2020[91](index=91&type=chunk) [Risk Factors](index=15&type=section&id=Item%201A.%20Risk%20Factors) The company faces agricultural, competitive, and financial risks, including pest and weather impacts, intense market competition, funding needs, and ongoing COVID-19 uncertainties - Agricultural risks include diseases, pests like phylloxera, adverse weather, and potential smoke damage from wildfires[104](index=104&type=chunk)[107](index=107&type=chunk) - The company faces intense competition from larger domestic and foreign wineries with greater financial and marketing resources[113](index=113&type=chunk) - Financial risks include reliance on credit facilities, high compliance costs as a public company, and potential liabilities from its Series A Redeemable Preferred Stock offering[110](index=110&type=chunk)[112](index=112&type=chunk)[126](index=126&type=chunk) - The COVID-19 pandemic continues to pose a risk, potentially impacting direct-to-consumer sales and hospitality demand if restrictive measures are re-imposed[133](index=133&type=chunk)[134](index=134&type=chunk)[135](index=135&type=chunk) [Unresolved Staff Comments](index=21&type=section&id=Item%201B.%20Unresolved%20Staff%20Comments) The company reports no unresolved staff comments - None[137](index=137&type=chunk) [Properties](index=21&type=section&id=Item%202.%20Properties) The company owns or leases 1,018 acres, including 504 productive vineyard acres, with its Estate Winery producing 258,620 cases annually and additional capacity available - The company owns or leases a total of **1,018 acres**, of which 704 are owned and 314 are leased, including **504 productive vineyard acres**[138](index=138&type=chunk) - The Estate Winery has a production capacity of up to **258,620 cases** (615,000 gallons) per year, producing approximately 206,954 cases in 2021[139](index=139&type=chunk) - The Tualatin Estate Winery provides an additional **28,000 cases** (66,000 gallons) of production capacity, currently unused but available for future expansion[140](index=140&type=chunk) [Legal Proceedings](index=21&type=section&id=Item%203.%20Legal%20Proceedings) The company is not a party to any material legal proceedings, nor is management aware of any contemplated actions - There are no material legal proceedings pending against the Company[143](index=143&type=chunk) [Mine Safety Disclosures](index=21&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This section is not applicable to the company - Not applicable[144](index=144&type=chunk) Part II [Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=22&type=section&id=Item%205.%20Market%20for%20Registrant%27s%20Common%20Equity%2C%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) The company's common stock trades on NASDAQ under "WVVI" with 2,146 shareholders, and it does not anticipate paying common stock dividends, reinvesting earnings for expansion - The Company's common stock is traded on the NASDAQ Capital Market under the symbol "**WVVI**"[146](index=146&type=chunk) - As of December 31, 2021, there were approximately **2,146 common stock shareholders** of record[146](index=146&type=chunk) - The Company has not paid dividends on its Common Stock and does not plan to in the foreseeable future, instead reinvesting earnings into expansion[147](index=147&type=chunk) [Selected Financial Data](index=22&type=section&id=Item%206.%20Selected%20Financial%20Data) This section is not required for the company - Not required[151](index=151&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=22&type=section&id=Item%207.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) In 2021, net sales increased by 16.4% to $31.8 million, but net income decreased by 28.0% to $2.4 million due to higher costs and SG&A expenses, with gross margin declining to 58.7% Financial Performance Summary (2021 vs. 2020) | Metric | 2021 | 2020 | Change | % Change | | :--- | :--- | :--- | :--- | :--- | | **Net Sales** | $31,786,864 | $27,314,852 | $4,472,012 | 16.4% | | **Gross Profit** | $18,665,673 | $16,729,776 | $1,935,897 | 11.6% | | **Income from Operations** | $3,690,019 | $5,001,773 | ($1,311,754) | -26.2% | | **Net Income** | $2,445,463 | $3,394,996 | ($949,533) | -28.0% | | **EPS (after preferred dividends)** | $0.20 | $0.46 | ($0.26) | -56.6% | Revenue by Sales Channel (2021 vs. 2020) | Sales Channel | 2021 Revenue | 2020 Revenue | % Change | | :--- | :--- | :--- | :--- | | Retail Sales | $13,306,156 | $10,560,913 | 26.0% | | In-state Sales | $5,824,130 | $6,671,743 | -12.7% | | Out-of-state Sales | $12,937,605 | $10,350,708 | 25.0% | - The gross margin percentage decreased to **58.7% in 2021** from 61.2% in 2020, primarily due to higher product costs from recent vintages[185](index=185&type=chunk) - Selling, general and administrative (SG&A) expenses increased by **27.7% in 2021**, driven by increased selling expenses, shipping, packaging, and administrative costs[186](index=186&type=chunk) EBITDA Reconciliation (2021 vs. 2020) | Metric | 2021 | 2020 | | :--- | :--- | :--- | | Net Income | $2,445,463 | $3,394,996 | | Depreciation and amortization | $1,952,093 | $1,812,394 | | Interest Expense | $391,272 | $414,061 | | Interest Income | ($12,412) | ($21,022) | | Income tax expense | $1,020,879 | $1,379,654 | | **EBITDA** | **$5,797,295** | **$6,980,083** | [Quantitative and Qualitative Disclosures about Market Risk](index=32&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) This section is not required for the company - Not required[225](index=225&type=chunk) [Financial Statements and Supplementary Data](index=32&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) Audited financial statements for 2021 and 2020 are presented with an unqualified opinion from Moss Adams LLP, showing 2021 total assets of $91.4 million and total liabilities of $26.4 million - The independent registered public accounting firm, Moss Adams LLP, provided an **unqualified audit opinion** on the financial statements[231](index=231&type=chunk)[236](index=236&type=chunk) Balance Sheet Summary (as of Dec 31, 2021) | Category | Amount | | :--- | :--- | | **Total Current Assets** | $36,425,857 | | **Total Assets** | $91,375,110 | | **Total Current Liabilities** | $11,931,983 | | **Total Liabilities** | $26,413,116 | | **Total Shareholders' Equity** | $64,961,994 | Statement of Income Summary (Year Ended Dec 31, 2021) | Category | Amount | | :--- | :--- | | **Sales, Net** | $31,786,864 | | **Gross Profit** | $18,665,673 | | **Income from Operations** | $3,690,019 | | **Net Income** | $2,445,463 | | **Income Applicable to Common Shareholders** | $1,001,180 | | **EPS (basic and diluted)** | $0.20 | - In 2021, sales to one distributor represented approximately **18.1% of total revenue**, indicating significant customer concentration[263](index=263&type=chunk) - The company has two primary operating segments: Direct Sales (**41.8% of net sales in 2021**) and Distributor Sales (**58.2% of net sales in 2021**)[337](index=337&type=chunk)[340](index=340&type=chunk) [Changes in and Disagreements with Accountants on Accounting and Financial Disclosure](index=53&type=section&id=Item%209.%20Changes%20in%20and%20Disagreements%20with%20Accountants%20on%20Accounting%20and%20Financial%20Disclosure) The company reports no changes in or disagreements with its accountants on accounting and financial disclosure - None[344](index=344&type=chunk) [Controls and Procedures](index=53&type=section&id=Item%209A.%20Controls%20and%20Procedures) Management concluded that disclosure controls and internal control over financial reporting were effective as of December 31, 2021, with no material changes - Management concluded that the company's disclosure controls and procedures were effective as of the period end[344](index=344&type=chunk) - Based on the COSO framework, management concluded that internal control over financial reporting was effective as of December 31, 2021[347](index=347&type=chunk) [Other Information](index=54&type=section&id=Item%209B.%20Other%20Information) The company reports no other information - None[350](index=350&type=chunk) Part III [Directors, Executive Officers and Corporate Governance](index=54&type=section&id=Item%2010.%20Directors%2C%20Executive%20Officers%20and%20Corporate%20Governance) This section details the company's directors and executive officers, including James W. Bernau (CEO) and John Ferry (CFO), and highlights the independent audit committee with Craig Smith as financial expert Directors and Executive Officers | Name | Position(s) | Age | | :--- | :--- | :--- | | James W. Bernau | Chairperson of the Board, CEO, President and Director | 68 | | Craig Smith | Secretary and Director | 75 | | John Ferry | Chief Financial Officer | 56 | | James L. Ellis | Director | 77 | | Sean M. Cary | Director | 48 | | Stan G. Turel | Director | 73 | | Leslie Copland | Director | 68 | - The company has a standing audit committee comprised of independent directors: Craig Smith, Sean Cary, and Stan G. Turel[366](index=366&type=chunk) - Craig Smith is designated as the Audit Committee's "**financial expert**"[367](index=367&type=chunk) [Executive Compensation](index=56&type=section&id=Item%2011.%20Executive%20Compensation) This section details 2021 executive compensation, with CEO James W. Bernau receiving $573,620 and CFO John Ferry receiving $199,344, alongside director compensation Summary Compensation Table (2021) | Name and Principal Position | Year | Salary | Bonus | Non-equity Incentive Plan Comp. | All Other Comp. | Total | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | **James W. Bernau**, President, CEO | 2021 | $285,474 | $233,757 | - | $54,389 | $573,620 | | **John Ferry**, CFO | 2021 | $170,677 | - | $21,000 | $7,667 | $199,344 | - Mr. Bernau's 2021 bonus is calculated as a percentage of the company's pre-tax net income, not to exceed his base salary[371](index=371&type=chunk) - Directors receive compensation including a yearly stipend, fees for meeting attendance, a per diem, and a yearly wine allowance[374](index=374&type=chunk) [Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters](index=58&type=section&id=Item%2012.%20Security%20Ownership%20of%20Certain%20Beneficial%20Owners%20and%20Management%20and%20Related%20Stockholder%20Matters) This section discloses common stock beneficial ownership as of March 29, 2022, with CEO James W. Bernau owning 7.2% and all directors and executive officers as a group owning 7.9% Security Ownership of Major Holders and Management | Name | Number of Shares Beneficially Owned | Percent of Class | | :--- | :--- | :--- | | James W. Bernau | 355,502 | 7.2% | | Christopher Riccardi | 385,485 | 7.8% | | Carl D. Thoma | 336,189 | 6.8% | | All Directors and Executive Officers as a group (7 persons) | 394,259 | 7.9% | [Certain Relationships and Related Transactions, and Director Independence](index=60&type=section&id=Item%2013.%20Certain%20Relationships%20and%20Related%20Transactions%2C%20and%20Director%20Independence) The company reported no related person transactions exceeding $120,000 in 2021, and most directors are deemed independent by NASDAQ standards - There were no transactions with related persons exceeding **$120,000** in 2021[380](index=380&type=chunk) - All directors are considered "independent" under NASDAQ rules, except for James W. Bernau (CEO) and James L. Ellis (former executive)[382](index=382&type=chunk) [Principal Accounting Fees and Services](index=60&type=section&id=Item%2014.%20Principal%20Accounting%20Fees%20and%20Services) This section details fees paid to Moss Adams LLP for 2021 ($295,918) and 2020 ($250,510), covering audit and tax services Accountant Fees (Moss Adams LLP) | Fee Category | 2021 | 2020 | | :--- | :--- | :--- | | Audit Fees | $241,038 | $198,200 | | Tax Fees | $54,880 | $52,310 | | **Total Fees** | **$295,918** | **$250,510** | [Exhibits, Financial Statement Schedules](index=61&type=section&id=Item%2015.%20Exhibits%2C%20Financial%20Statement%20Schedules) This section provides an index of all financial statements, schedules, and exhibits filed as part of the Form 10-K report - This section provides an index of all financial statements, schedules, and exhibits filed with the Form 10-K[386](index=386&type=chunk)[389](index=389&type=chunk)
Willamette Valley Vineyards(WVVI) - 2021 Q3 - Quarterly Report
2021-11-12 21:16
UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2021 o TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT Commission File Number 001-37610 If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standa ...
Willamette Valley Vineyards(WVVI) - 2021 Q2 - Quarterly Report
2021-08-12 20:31
UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2021 o TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT Commission File Number 001-37610 WILLAMETTE VALLEY VINEYARDS, INC. (Exact name of registrant as specified in charter) | Oregon | 93-0981021 | | --- | --- | | (State or other jurisdiction of incorporation or organization) | (I.R.S ...
Willamette Valley Vineyards(WVVI) - 2021 Q1 - Quarterly Report
2021-05-13 20:31
UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2021 o TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT Commission File Number 000-21522 WILLAMETTE VALLEY VINEYARDS, INC. (Exact name of registrant as specified in charter) | Oregon | 93-0981021 | | --- | --- | | (State or other jurisdiction of incorporation or organization | (I.R.S ...
Willamette Valley Vineyards(WVVI) - 2020 Q4 - Annual Report
2021-03-15 21:27
PART I [ITEM 1. BUSINESS](index=4&type=section&id=ITEM%201.%20BUSINESS) Willamette Valley Vineyards produces and sells premium wines through direct and distributor channels, focusing on quality, brand, and direct-to-consumer sales in a growing market - The Company was formed in May 1988, headquartered in Turner, Oregon, producing premium varietals[18](index=18&type=chunk) - Operates two operating segments: direct sales (retail, wine club, online, events) and distributor sales (through third parties at wholesale rates)[19](index=19&type=chunk) - Produces wines under various labels including Willamette Valley Vineyards, Griffin Creek, Elton, Pambrun, Maison Bleue, and Made in Oregon Cellars[20](index=20&type=chunk)[21](index=21&type=chunk)[22](index=22&type=chunk)[23](index=23&type=chunk)[24](index=24&type=chunk) - The US wine industry saw an increase in wineries from 6,357 in 2009 to 11,053 in 2020, with total US wine sales revenue reaching **$72 billion in 2019**[26](index=26&type=chunk)[27](index=27&type=chunk) - Oregon's wine industry grew significantly, with the number of wineries increasing from 793 in 2018 to 908 in 2019, and Pinot Noir accounting for **57% of planted acreage** and **59% of production**[33](index=33&type=chunk)[39](index=39&type=chunk) - The Company's strategy focuses on growing/purchasing high-quality grapes, producing premium wines, achieving brand recognition, effective national distribution, and building direct-to-consumer sales[41](index=41&type=chunk) - WVV owns and leases approximately **1,018 acres of land**, with **798 acres planted or suitable for future vineyard planting**, all certified sustainable by LIVE and Salmon Safe[47](index=47&type=chunk) Vineyard Acreage and Harvest Summary (2019-2020) | Category | Total Acres | Producing Acres | Harvest 2020 (Tons) | Harvest 2019 (Tons) | | :------- | :---------- | :-------------- | :------------------ | :------------------ | | Owned Vineyards | 703 | 244 | 515 | 710 | | Leased Vineyards | 315 | 246 | 516 | 862 | | Contracted Vineyards | 368 | 368 | 1,470 | 1,046 | | **Total** | **1,386** | **858** | **2,501** | **2,618** | - The Estate Winery and production facilities have a capacity of up to **220,000 cases (524,000 gallons)** per year; in 2020, the Winery produced approximately **175,357 cases (416,920 gallons)**[70](index=70&type=chunk) Wine Production Summary (2019-2020) | Harvest Year | Grapes Grown (Tons) | Grapes Purchased (Tons) | Total Grapes Harvested (Tons) | Cases Produced | | :----------- | :------------------ | :---------------------- | :----------------------------- | :------------- | | 2019 | 1,572 | 1,046 | 2,618 | 172,869 | | 2020 | 1,031 | 1,470 | 2,501 | 175,357 | - Direct sales contributed approximately **38.6% of net sales in 2020** (38.2% in 2019) with higher profit margins, while distributor sales contributed **61.4% in 2020** (61.8% in 2019)[86](index=86&type=chunk)[87](index=87&type=chunk) - In 2020, sales to one distributor represented approximately **24.0% of total Company revenue**, up from 14.1% in 2019[90](index=90&type=chunk) - The Company is subject to extensive governmental regulation and taxation by federal and state agencies, including the TTB and OLCC, which can impact costs and sales[93](index=93&type=chunk)[94](index=94&type=chunk)[95](index=95&type=chunk)[96](index=96&type=chunk) - As of December 31, 2020, the Company had **144 full-time and 69 part-time/seasonal employees**[98](index=98&type=chunk) [ITEM 1A. RISK FACTORS](index=16&type=section&id=ITEM%201A.%20RISK%20FACTORS) The Company faces agricultural, operational, competitive, and financial risks, including climate change impacts, key personnel dependency, intense market competition, and the ongoing effects of the COVID-19 pandemic - Agricultural risks include diseases (phylloxera, Pierce's Disease), pests, fungi, viruses, drought, frost, and adverse weather conditions, which can decrease grape quantity and quality[101](index=101&type=chunk) - Changing weather patterns and climatic conditions, including wildfires and unpredictable rainfall, pose risks to grape harvest quality and usability[102](index=102&type=chunk)[104](index=104&type=chunk) - The Company's success depends on key employees (James W. Bernau, John Ferry, Christine Clair), and their loss could harm reputation and profitability[106](index=106&type=chunk) - The wine industry is highly competitive and fragmented, with larger California wineries having significantly greater financial, production, distribution, and marketing resources[111](index=111&type=chunk) - The COVID-19 pandemic has disrupted business operations, leading to tasting room closures, capacity restrictions, and potential adverse impacts on sales revenue, liquidity, and supply chain[130](index=130&type=chunk)[131](index=131&type=chunk)[132](index=132&type=chunk)[133](index=133&type=chunk) - The Company's common stock is thinly traded, making it less liquid than other investments[122](index=122&type=chunk) - The Series A Redeemable Preferred Stock has a cumulative **5.3% dividend ($0.22 per share annually)**, but the Company's ability to pay depends on cash generation and debt obligations[124](index=124&type=chunk) [ITEM 1B. UNRESOLVED STAFF COMMENTS](index=22&type=section&id=ITEM%201B.%20UNRESOLVED%20STAFF%20COMMENTS) No unresolved staff comments from the SEC - No unresolved staff comments[135](index=135&type=chunk) [ITEM 2. PROPERTIES](index=22&type=section&id=ITEM%202.%20PROPERTIES) The Company manages 1,018 acres of land, including 490 productive vineyard acres, and operates two wineries with substantial production and hospitality facilities - The Company owns or leases **1,018 acres of land**: 703 acres owned and 315 acres leased; of this, **490 acres are productive vineyards**, and **308 acres are pre-productive or suitable for future planting**[136](index=136&type=chunk) - The Estate Winery and production facilities can produce up to **220,000 cases (524,000 gallons)** of wine per year; in 2020, it produced approximately **175,357 cases**[137](index=137&type=chunk) - The Tualatin Winery adds approximately **28,000 cases (66,000 gallons)** of wine production capacity, currently used for storage but available for future production needs[138](index=138&type=chunk) - The Estate Winery features a **35,642 square foot Hospitality Center** with tasting rooms, dining, event spaces, and overnight accommodations, designed to attract visitors and enhance sales[137](index=137&type=chunk) [ITEM 3. LEGAL PROCEEDINGS](index=23&type=section&id=ITEM%203.%20LEGAL%20PROCEEDINGS) The Company is not currently involved in any material legal proceedings - No material legal proceedings pending or contemplated[141](index=141&type=chunk) [ITEM 4. MINE SAFETY DISCLOSURES](index=23&type=section&id=ITEM%204.%20MINE%20SAFETY%20DISCLOSURES) Mine Safety Disclosures are not applicable to the Company's operations - Not applicable[142](index=142&type=chunk) PART II [ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES](index=23&type=section&id=ITEM%205.%20MARKET%20FOR%20REGISTRANT'S%20COMMON%20EQUITY,%20RELATED%20STOCKHOLDER%20MATTERS%20AND%20ISSUER%20PURCHASES%20OF%20EQUITY%20SECURITIES) Common stock trades on NASDAQ (WVVI) with approximately 2,200 shareholders; no common stock dividends are anticipated, with earnings reinvested for expansion - Common stock is traded on the NASDAQ Capital Market under the symbol **'WVVI'**[144](index=144&type=chunk) - As of December 31, 2020, there were approximately **2,200 common stock shareholders** of record[144](index=144&type=chunk) - The Company has paid dividends on Preferred Stock but has not paid, and does not anticipate paying, dividends on its Common Stock in the foreseeable future, intending to use earnings for expansion[145](index=145&type=chunk) - No equity compensation plan with outstanding options or awards as of December 31, 2020[146](index=146&type=chunk) - No recent sales of unregistered securities or issuer purchases of equity securities[147](index=147&type=chunk)[148](index=148&type=chunk) [ITEM 6. SELECTED FINANCIAL DATA](index=23&type=section&id=ITEM%206.%20SELECTED%20FINANCIAL%20DATA) Selected Financial Data is not required for this report - Selected Financial Data is not required[149](index=149&type=chunk) [ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS](index=23&type=section&id=ITEM%207.%20MANAGEMENT'S%20DISCUSSION%20AND%20ANALYSIS%20OF%20FINANCIAL%20CONDITION%20AND%20RESULTS%20OF%20OPERATIONS) This section analyzes the Company's financial performance, critical accounting policies, COVID-19 impact, liquidity, and capital resources, highlighting 2020 growth in net income and sales [Critical Accounting Policies and Estimates](index=24&type=section&id=Critical%20Accounting%20Policies%20and%20Estimates) Financial statements adhere to GAAP, relying on management estimates for revenue, inventory, vineyard development, and income tax accounting - Revenue is recognized from direct sales and distributor sales at the time of shipment and passage of title or at the time of sale for retail items[152](index=152&type=chunk) - Inventories are valued at the lower of actual cost (FIFO) or net realizable value, with regular reviews for obsolescence[155](index=155&type=chunk)[254](index=254&type=chunk) - Vineyard development costs are capitalized until commercially productive, then amortized straight-line over an estimated **30-year useful life**[157](index=157&type=chunk)[255](index=255&type=chunk) - Income taxes are accounted for using the asset and liability approach, recognizing deferred tax assets and liabilities for temporary differences[158](index=158&type=chunk) [Overview](index=25&type=section&id=Overview) Revenue is generated from wholesale and direct-to-consumer sales, with direct sales offering higher margins, and case sales increasing by **15.3% in 2020** - Direct-to-consumer sales provide a higher gross profit due to closer-to-retail pricing[160](index=160&type=chunk) - The Company had **7,873 wine club memberships in 2020**, a net increase of 308 from 2019[160](index=160&type=chunk) - Preferred stock sales since August 2015 have resulted in approximately **7,750 preferred stockholders**, representing an estimated **12,000 potential customers**[160](index=160&type=chunk) Wine Case Sales (2019-2020) | Year | Cases Sold | | :--- | :--------- | | 2020 | 180,850 | | 2019 | 156,791 | | **Change** | **+24,059 (+15.3%)** | - Increase in case sales primarily resulted from increased shipments to distributors and higher direct sales over the internet in 2020[162](index=162&type=chunk) - As of December 31, 2020, wine inventory included **157,347 cases of bottled wine** and **455,016 gallons of bulk wine**[164](index=164&type=chunk) [Impact of COVID-19 on Operations](index=25&type=section&id=Impact%20of%20COVID-19%20on%20Operations) COVID-19 caused operational disruptions, remote work, and tasting room restrictions, impacting sales to hospitality, with future supply chain and capital expenditure impacts remaining uncertain - COVID-19 pandemic declared a National Public Health Emergency, leading to state of emergency in Oregon and disruptions to business[165](index=165&type=chunk) - Office staff shifted to remote workstations, and UV light filtration was installed in HVAC systems at tasting rooms and offices[166](index=166&type=chunk) - Curbside pick-ups and complimentary shipping specials mitigated declines in direct-to-consumer sales due to tasting room closures/restrictions[167](index=167&type=chunk) - Demand for wine sold to restaurants, bars, and hospitality locations significantly reduced due to restrictions and temporary closures[168](index=168&type=chunk) - Future impacts on supply chain, employee availability, and capital expenditures (e.g., Bernau Estate Tasting Room delay) remain uncertain[133](index=133&type=chunk)[169](index=169&type=chunk) [Results of Operations](index=26&type=section&id=Results%20of%20Operations) The Company achieved substantial financial improvements in 2020, with net income up **35.2%** and net sales revenue up **10.4%**, driven by strong retail and in-state distributor sales Key Financial Performance (2019-2020) | Metric | 2020 | 2019 | Change (YoY) | | :---------------------------------- | :----------- | :----------- | :------------- | | Net Income | $3,394,996 | $2,510,901 | +35.2% | | Net Income Applicable to Common Shareholders | $2,278,618 | $1,484,838 | +53.5% | | Net Sales Revenues | $27,314,852 | $24,749,263 | +10.4% | | Income from Operations | $5,001,773 | $3,727,524 | +34.2% | | Income per Common Share (basic & diluted) | $0.46 | $0.30 | +53.5% | Revenue by Sales Channel (2019-2020) | Sales Channel | 2020 Revenue | 2019 Revenue | Change (YoY) | | :-------------- | :------------- | :------------- | :------------- | | Retail sales | $10,560,913 | $9,382,155 | +12.6% | | In-state sales | $6,671,743 | $5,215,251 | +27.9% | | Out-of-state sales | $10,350,708 | $10,228,132 | +1.2% | | Bulk wine/misc sales | $103,958 | $156,768 | -33.7% | | Total Revenue (before excise taxes) | $27,687,322 | $24,982,306 | +10.8% | Cost of Sales and Gross Profit (2019-2020) | Metric | 2020 | 2019 | Change (YoY) | | :--------- | :----------- | :----------- | :------------- | | Cost of Sales | $10,585,076 | $9,454,681 | +12.0% | | Gross Profit | $16,729,776 | $15,294,582 | +9.4% | | Gross Margin % | 61.2% | 61.8% | -0.6% | | SG&A Expenses | $11,728,003 | $11,567,058 | +1.4% | Interest and Tax Expenses (2019-2020) | Metric | 2020 | 2019 | Change (YoY) | | :---------------- | :----------- | :----------- | :------------- | | Interest Income | $21,022 | $48,066 | -27,044 | | Interest Expense | $414,061 | $440,999 | -6.1% | | Other Income, net | $165,916 | $128,433 | +29.2% | | Provision for Income Taxes | $1,379,654 | $952,123 | +44.9% | [EBITDA](index=28&type=section&id=EBITDA) EBITDA increased by **22.2% to $6.98 million in 2020**, driven by higher net income, serving as a key non-GAAP operating performance benchmark EBITDA Reconciliation (2019-2020) | Metric | 2020 | 2019 | Change (YoY) | | :-------------------------- | :----------- | :----------- | :------------- | | Net Income | $3,394,996 | $2,510,901 | +35.2% | | Depreciation and amortization expense | $1,812,394 | $1,812,463 | -0.0% | | Interest Expense | $414,061 | $440,999 | -6.1% | | Interest Income | ($21,022) | ($48,066) | +56.3% | | Income tax expense | $1,379,654 | $952,123 | +44.9% | | **EBITDA** | **$6,980,083** | **$5,668,420** | **+23.1%** | - EBITDA increased **22.2% to $6,983,662 in 2020** from $5,668,420 in 2019, primarily due to increased net income[190](index=190&type=chunk) [Sales](index=28&type=section&id=Sales) Total wine case sales increased by **15.3% in 2020** to **180,850 cases**, primarily from Pinot Noir, Pinot Gris, and Riesling, with direct sales yielding higher margins Wine Case Sales by Varietal (2019-2020) | Varietal/Product | Cases Sold 2020 | Cases Sold 2019 | Cases On Hand Dec 31, 2020 | | :----------------- | :-------------- | :-------------- | :------------------------- | | Pinot Noir/Estate | 15,801 | 14,696 | 9,739 | | Pinot Noir/Barrel Select | 17,522 | 12,713 | 2,202 | | Pinot Noir/Founders Reserve | 2,613 | 3,934 | 7,324 | | Pinot Noir/Special Designates | 6,603 | 5,217 | 24,470 | | Pinot Noir/Whole Cluster | 51,387 | 43,359 | 14,270 | | Pinot Gris | 33,448 | 28,810 | 9,329 | | Riesling | 22,763 | 19,172 | 18,314 | | Chardonnay | 3,912 | 4,244 | 11,862 | | Table Wine | - | 16,320 | 8,441 | | Other | 26,801 | 8,326 | 51,396 | | **Total** | **180,850** | **156,791** | **157,347** | - Approximately **52% of 2020 case sales were Pinot Noir**, followed by Pinot Gris (**19%**) and Riesling (**13%**)[195](index=195&type=chunk) Net Sales Channel Contribution (2019-2020) | Sales Channel | 2020 % of Net Sales | 2019 % of Net Sales | | :-------------- | :------------------ | :------------------ | | Direct-to-consumer | 38.6% | 38.2% | | In-state distributors | 24.0% | 20.9% | | Out-of-state distributors | 37.4% | 40.9% | - Direct-to-consumer sales generate a higher gross profit margin than national sales to distributors due to differentiated pricing[197](index=197&type=chunk) [Wine Inventory](index=29&type=section&id=Wine%20Inventory) At year-end 2020, the Company held **157,347 cases of bottled wine** and sufficient bulk wine to bottle **191,350 cases**, ensuring demand coverage - Approximately **157,347 cases of bottled wine** were on-hand at the end of 2020[198](index=198&type=chunk) - Sufficient bulk wine inventory is on-hand to bottle approximately **191,350 cases of wine in 2020**, meeting current demand until the 2020 vintage is available[198](index=198&type=chunk) [Production Capacity](index=29&type=section&id=Production%20Capacity) The Estate Winery produced **175,357 cases in 2020**, operating within its **220,000-case capacity**, with an additional **28,000-case capacity** at Tualatin Winery for future expansion - Current production volumes are within the Estate Winery's capacity of about **220,000 cases per year**[199](index=199&type=chunk) - In 2020, approximately **175,357 cases were produced**[199](index=199&type=chunk) - The Tualatin Winery offers an additional **28,000 cases of wine production capacity**, currently used for storage, and will be utilized after the Estate Winery reaches full capacity[199](index=199&type=chunk) [Grape Supply](index=30&type=section&id=Grape%20Supply) In 2020, the Company grew **41%** of its grapes and purchased **59%** via contracts, with plans to develop **56 pre-productive acres** and plant **22 additional acres in 2021** to enhance self-sufficiency Grape Supply Sources (2019-2020) | Source | 2020 % of Grapes Harvested | 2019 % of Grapes Harvested | | :---------------- | :------------------------- | :------------------------- | | Grown by Company | 41% | 60% | | Purchased (Short-term) | 50% | 37% | | Purchased (Long-term) | 9% | 3% | Value of Purchased Grapes (2019-2020) | Contract Type | 2020 Value | 2019 Value | | :-------------- | :----------- | :----------- | | Long-term | $220,650 | $222,419 | | Short-term | $3,339,460 | $1,426,867 | | **Total Grapes Payable** | **$1,307,165** | **$792,595** | - The Company has **56 acres of vineyards in the pre-productive stage**, expected to produce grapes within 1-3 years, and plans to plant approximately **22 additional acres in 2021**[203](index=203&type=chunk) [Wine Quality](index=30&type=section&id=Wine%20Quality) The Company's wines received numerous high ratings and awards in 2020 from prominent publications, enhancing brand awareness and quality perception - Wine Enthusiast awarded multiple wines with **90-93 points**, including Cellar Selection and Editors' Choice recognitions[205](index=205&type=chunk) - Wine Spectator awarded the 2018 Estate Pinot Noir **90 points**[206](index=206&type=chunk) - James Suckling and Vinous' Josh Raynolds awarded Elton wines with **92-93 points**[206](index=206&type=chunk)[207](index=207&type=chunk) - Wine Advocate awarded Maison Bleue Syrahs with **90-95 points**[208](index=208&type=chunk) - Pambrun wines received **90-93 points** from Jeb Dunnuck[209](index=209&type=chunk) - The 2019 Whole Cluster Rosé of Pinot Noir received a **Double Gold medal and 96 points** at The Sunset International Wine Competition[209](index=209&type=chunk) [Seasonality](index=31&type=section&id=Seasonality) The Company experiences seasonal revenue and net income fluctuations, with sales typically lowest in Q1 and increasing through Q4 due to consumer buying habits - First quarter sales are typically the lowest, with sales volumes increasing progressively through the fourth quarter due to consumer buying habits[211](index=211&type=chunk) [Liquidity and Capital Resources](index=31&type=section&id=Liquidity%20and%20Capital%20Resources) As of December 31, 2020, the Company maintained strong liquidity with **$27.5 million in working capital** and **$14.0 million in cash**, supported by operating cash flow and preferred stock issuance, while investing in the Bernau Estate Tasting Room Liquidity and Cash Flow Summary (2020) | Metric | Amount (2020) | | :-------------------------------- | :-------------- | | Working Capital | $27.5 million | | Current Ratio | 4.80:1 | | Cash and Cash Equivalents | $13,999,755 | | Net Cash from Operating Activities | $5,420,998 | | Net Cash Used in Investing Activities | $4,771,978 | | Net Cash from Financing Activities | $6,300,559 | - The Company obtained a **$5 million commercial loan commitment** from Farm Credit Services in July 2020 for additional liquidity, with no funds drawn down as of the filing date[215](index=215&type=chunk) - Construction of the Bernau Estate Tasting Room, approved in 2019, is expected to cost **$14.4 million**, with approximately **$5.3 million spent by December 31, 2020**[216](index=216&type=chunk) - Long-term debt balance was **$5,984,272 at December 31, 2020**, primarily with NW Farm Credit Services for winery and vineyard capital improvements[218](index=218&type=chunk)[290](index=290&type=chunk) Contractual Obligations as of December 31, 2020 | Obligation Type | Total | Less than 1 Year | 2 – 3 Years | 4 – 5 Years | After 5 Years | | :---------------------- | :------------ | :--------------- | :---------- | :---------- | :------------ | | Long-term debt | $5,985,228 | $450,040 | $969,380 | $1,072,758 | $3,493,050 | | Notes payable | $1,384,581 | $89,040 | $194,806 | $219,447 | $881,288 | | Grape payables | $1,307,165 | $1,307,165 | - | - | - | | Operating leases | $8,169,721 | $578,438 | $1,088,731 | $1,012,737 | $5,489,815 | | **Total** | **$16,846,695** | **$2,424,683** | **$2,252,917** | **$2,304,942** | **$9,864,153** | [Inflation](index=32&type=section&id=Inflation) Inflation did not materially impact the Company's revenues or income in 2020 or 2019 - Inflation did not have a material impact on revenues or income in 2020 or 2019[221](index=221&type=chunk) [Off Balance Sheet Arrangements](index=32&type=section&id=Off%20Balance%20Sheet%20Arrangements) The Company had no off-balance sheet arrangements as of December 31, 2020, or 2019 - No off-balance sheet arrangements as of December 31, 2020, and 2019[222](index=222&type=chunk) [ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK](index=32&type=section&id=ITEM%207A.%20QUANTITATIVE%20AND%20QUALITATIVE%20DISCLOSURES%20ABOUT%20MARKET%20RISK) Quantitative and Qualitative Disclosures about Market Risk are not required - Not required[223](index=223&type=chunk) [ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA](index=33&type=section&id=ITEM%208.%20FINANCIAL%20STATEMENTS%20AND%20SUPPLEMENTARY%20DATA) This section presents the audited financial statements for 2020 and 2019, including balance sheets, income statements, equity, and cash flows, with notes and an unqualified auditor's opinion [Report of Independent Registered Public Accounting Firm](index=34&type=section&id=Report%20of%20Independent%20Registered%20Public%20Accounting%20Firm) Moss Adams LLP issued an unqualified opinion on the Company's 2020 and 2019 financial statements, confirming fair presentation in conformity with GAAP, with no critical audit matters - Moss Adams LLP issued an unqualified opinion on the financial statements for 2020 and 2019[229](index=229&type=chunk) - No critical audit matters were determined[233](index=233&type=chunk) [Balance Sheets](index=35&type=section&id=Balance%20Sheets) Balance sheets show significant increases in total assets and shareholders' equity from 2019 to 2020, driven by growth in current assets and redeemable preferred stock Balance Sheet Summary (2019-2020) | Asset/Liability/Equity | December 31, 2020 | December 31, 2019 | | :-------------------------------- | :------------------ | :------------------ | | **Total Current Assets** | **$35,026,130** | **$26,765,809** | | Cash and cash equivalents | $13,999,755 | $7,050,176 | | Accounts receivable, net | $2,671,576 | $1,814,004 | | Inventories | $17,687,973 | $17,075,080 | | **Total Assets** | **$79,490,347** | **$67,915,487** | | **Total Current Liabilities** | **$7,303,520** | **$5,371,201** | | Investor deposits for preferred stock | $510,636 | - | | Grapes payable | $1,307,165 | $792,595 | | Long-term debt, net | $5,389,457 | $5,826,161 | | **Total Liabilities** | **$20,668,420** | **$18,870,381** | | Redeemable preferred stock | $25,817,305 | $18,319,102 | | Retained earnings | $24,492,133 | $22,213,515 | | **Total Shareholders' Equity** | **$58,821,927** | **$49,045,106** | [Statements of Income](index=36&type=section&id=Statements%20of%20Income) Income statements reflect strong 2020 performance, with net sales up **10.4%**, gross profit up **9.4%**, operating income up **34.2%**, and net income up **35.2%** Statements of Income Summary (2019-2020) | Metric | 2020 | 2019 | | :-------------------------------- | :----------- | :----------- | | Sales, net | $27,314,852 | $24,749,263 | | Cost of Sales | $10,585,076 | $9,454,681 | | Gross Profit | $16,729,776 | $15,294,582 | | Total Operating Expenses | $11,728,003 | $11,567,058 | | Income from Operations | $5,001,773 | $3,727,524 | | Income Before Income Taxes | $4,774,650 | $3,463,024 | | Net Income | $3,394,996 | $2,510,901 | | Preferred stock dividends | ($1,116,378) | ($1,026,063) | | Income Applicable to Common Shareholders | $2,278,618 | $1,484,838 | | Earnings per common share (basic & diluted) | $0.46 | $0.30 | [Statements of Shareholders' Equity](index=37&type=section&id=Statements%20of%20Shareholders'%20Equity) Shareholders' equity significantly increased from **$49.0 million in 2019 to $58.8 million in 2020**, primarily due to **$7.5 million in preferred stock issuance** and **$3.4 million in net income** Statements of Shareholders' Equity Summary (2019-2020) | Metric | December 31, 2020 | December 31, 2019 | | :-------------------------------- | :------------------ | :------------------ | | Redeemable Preferred Stock (Dollars) | $25,817,305 | $18,319,102 | | Common Stock (Dollars) | $8,512,489 | $8,512,489 | | Retained Earnings | $24,492,133 | $22,213,515 | | Common Stock Held in Treasury | ($1,378,303) | ($897,587) | | **Total Shareholders' Equity** | **$58,821,927** | **$49,045,106** | | Issuance of preferred stock, net | $7,498,203 | - | | Preferred stock dividends declared | ($1,116,378) | ($1,026,063) | | Net income | $3,394,996 | $2,510,901 | [Statements of Cash Flows](index=38&type=section&id=Statements%20of%20Cash%20Flows) In 2020, operating activities generated **$5.4 million in cash**, investing activities used **$4.8 million**, and financing activities provided **$6.3 million**, resulting in a year-end cash balance of **$14.0 million** Statements of Cash Flows Summary (2019-2020) | Cash Flow Activity | 2020 | 2019 | | :-------------------------------- | :----------- | :----------- | | Net cash from operating activities | $5,420,998 | $4,291,446 | | Net cash from investing activities | ($4,771,978) | ($5,318,648) | | Net cash from financing activities | $6,300,559 | ($1,660,089) | | Net change in cash and cash equivalents | $6,949,579 | ($2,687,291) | | Cash and cash equivalents, end of year | $13,999,755 | $7,050,176 | - Proceeds from issuance of preferred stock, net, contributed **$7,498,203 to financing activities in 2020**[241](index=241&type=chunk) - Additions to property and equipment and vineyard development were significant uses of cash in investing activities[241](index=241&type=chunk) [NOTE 1 – SUMMARY OF OPERATIONS, BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES](index=39&type=section&id=NOTE%201%20%E2%80%93%20SUMMARY%20OF%20OPERATIONS,%20BASIS%20OF%20PRESENTATION%20AND%20SIGNIFICANT%20ACCOUNTING%20POLICIES) This note details the Company's operations, GAAP basis of financial statement presentation, COVID-19 impact, and significant accounting policies for various financial elements and recent accounting standards - The Company owns and operates vineyards and a winery in Oregon, producing and distributing premium wines, primarily Pinot Noir, Pinot Gris, Chardonnay, and Riesling[242](index=242&type=chunk) - Financial statements are prepared in accordance with GAAP, requiring management estimates and assumptions[244](index=244&type=chunk) - The COVID-19 pandemic has disrupted business, leading to remote work, tasting room closures, and potential impacts on sales, liquidity, and supply chain[245](index=245&type=chunk)[246](index=246&type=chunk)[247](index=247&type=chunk) - Revenue is recognized when performance obligations are completed and control transfers to the customer, net of excise taxes and price promotions[264](index=264&type=chunk) - Cost of goods sold includes grape growing, external grape costs, packaging, winemaking, production, and allocated overhead[271](index=271&type=chunk) - Selling, general and administrative expenses include non-manufacturing overhead, advertising, and distributor sample allowances[273](index=273&type=chunk)[274](index=274&type=chunk) - The Company accounts for leases by recognizing ROU assets and lease liabilities based on the present value of lease payments[280](index=280&type=chunk)[281](index=281&type=chunk) [NOTE 2 – ACCOUNTS RECEIVABLE, NET](index=43&type=section&id=NOTE%202%20%E2%80%93%20ACCOUNTS%20RECEIVABLE,%20NET) Accounts receivable are presented net of a **$10,000 allowance for doubtful accounts**, which remained unchanged in 2020 and 2019 with no write-offs Allowance for Doubtful Accounts (2019-2020) | Metric | 2020 | 2019 | | :------------------------ | :--------- | :--------- | | Balance at Beginning of Period | $10,000 | $10,000 | | Charged to costs and expenses | - | - | | Write-offs, net of recoveries | - | - | | Balance at End of Period | $10,000 | $10,000 | [NOTE 3 – INVENTORIES](index=44&type=section&id=NOTE%203%20%E2%80%93%20INVENTORIES) Total inventories increased to **$17.7 million in 2020** from **$17.1 million in 2019**, primarily due to higher work-in-process inventory Inventory Breakdown (2019-2020) | Inventory Category | December 31, 2020 | December 31, 2019 | | :-------------------------------- | :------------------ | :------------------ | | Winemaking and packaging materials | $690,114 | $704,736 | | Work-in-process | $9,066,782 | $8,313,313 | | Finished goods | $7,931,077 | $8,057,031 | | **Total Inventories** | **$17,687,973** | **$17,075,080** | [NOTE 4 – PROPERTY AND EQUIPMENT](index=44&type=section&id=NOTE%204%20%E2%80%93%20PROPERTY%20AND%20EQUIPMENT) Net property and equipment increased to **$31.5 million in 2020** from **$28.6 million in 2019**, driven by increased construction in progress, with consistent depreciation expense Property and Equipment (2019-2020) | Category | December 31, 2020 | December 31, 2019 | | :-------------------------- | :------------------ | :------------------ | | Construction in progress | $6,553,803 | $4,193,467 | | Land, improvements and other buildings | $11,787,334 | $11,764,811 | | Winery buildings and hospitality center | $17,694,466 | $16,319,704 | | Equipment | $14,392,923 | $13,751,324 | | Less accumulated depreciation | ($18,941,670) | ($17,381,005) | | **Total Property and Equipment, net** | **$31,486,856** | **$28,648,301** | | Depreciation expense | $1,614,665 | $1,597,076 | [NOTE 5 – LINE OF CREDIT FACILITY](index=44&type=section&id=NOTE%205%20%E2%80%93%20LINE%20OF%20CREDIT%20FACILITY) The Company maintains a **$2.0 million revolving line of credit** with Umpqua Bank, with no outstanding balance and full compliance with covenants as of December 31, 2020 - Revolving line of credit with Umpqua Bank allows borrowings up to **$2,000,000**[287](index=287&type=chunk) - No outstanding balance on the line of credit at December 31, 2020, or 2019[287](index=287&type=chunk) - The Company was in compliance with all financial covenants as of December 31, 2020[288](index=288&type=chunk) [NOTE 6 – NOTES PAYABLE](index=45&type=section&id=NOTE%206%20%E2%80%93%20NOTES%20PAYABLE) As of December 31, 2020, an outstanding note payable of **$1,384,581** for a property purchase in Dundee Hills AVA has quarterly payments at **6% interest** through February 2032 - Outstanding note payable of **$1,384,581** as of December 31, 2020, for a property purchase in the Dundee Hills AVA[289](index=289&type=chunk) - The note has quarterly payments of **$42,534 at 6% interest** and matures in February 2032[289](index=289&type=chunk) [NOTE 7 – LONG-TERM DEBT](index=45&type=section&id=NOTE%207%20%E2%80%93%20LONG-TERM%20DEBT) Long-term debt, primarily with Northwest Farm Credit Services, totaled **$5.98 million in 2020**, down from **$6.42 million in 2019**, with fixed interest rates and compliance with all debt covenants Long-Term Debt Breakdown (2019-2020) | Lender | December 31, 2020 | December 31, 2019 | | :-------------------------- | :------------------ | :------------------ | | Northwest Farm Credit Services Loan 4 | $1,240,453 | $1,364,964 | | Northwest Farm Credit Services Loan 5 | $4,743,819 | $5,046,122 | | Toyota Credit Corporation | $956 | $12,431 | | **Total Long-Term Debt** | **$5,985,228** | **$6,423,517** | | Debt issuance costs | ($145,731) | ($158,978) | | Current portion of long-term debt | ($450,040) | ($438,378) | | **Long-Term Debt, net** | **$5,389,457** | **$5,826,161** | - Loans with Farm Credit Services have fixed interest rates of **4.75% and 5.21%**, with maturity dates of 2028 and 2032[290](index=290&type=chunk) - The Company was in compliance with all debt covenants as of December 31, 2020[291](index=291&type=chunk) Future Minimum Principal Payments of Long-Term Debt | Year | Amount | | :--- | :--------- | | 2021 | $450,040 | | 2022 | $472,415 | | 2023 | $496,965 | | 2024 | $522,793 | | 2025 | $549,965 | | Thereafter | $3,493,050 | | **Total** | **$5,985,228** | [NOTE 8 – SHAREHOLDERS' EQUITY](index=45&type=section&id=NOTE%208%20%E2%80%93%20SHAREHOLDERS'%20EQUITY) The Company is authorized to issue **10 million common and 10 million preferred shares**; common stock has voting rights but no dividends, while preferred stock is non-voting with a **$0.22 annual dividend** and optional redemption after June 1, 2021 - Authorized to issue **10,000,000 shares of common stock** (one vote per share) and **10,000,000 shares of redeemable preferred stock** (non-voting)[294](index=294&type=chunk)[295](index=295&type=chunk) - Series A Redeemable Preferred Stock has an annual dividend of **$0.22 per share**, a liquidation preference, and is optionally redeemable after June 1, 2021[295](index=295&type=chunk) - The Company does not anticipate paying dividends on common stock in the foreseeable future, intending to use earnings for expansion[294](index=294&type=chunk) - The Company is current on its preferred stock dividend obligations[295](index=295&type=chunk) [NOTE 9 – STOCK INCENTIVE PLAN](index=46&type=section&id=NOTE%209%20%E2%80%93%20STOCK%20INCENTIVE%20PLAN) The Company's stock incentive plan has no additional grants or outstanding options, resulting in no stock compensation expense recognized in 2020 or 2019 - No additional grants can be made under the stock incentive plan[296](index=296&type=chunk) - No stock options were outstanding or exercisable at December 31, 2020, and 2019[296](index=296&type=chunk) - No stock compensation expense was recognized for the years ended December 31, 2020, and 2019[297](index=297&type=chunk) [NOTE 10 – INCOME TAXES](index=46&type=section&id=NOTE%2010%20%E2%80%93%20INCOME%20TAXES) Income tax provision increased to **$1.38 million in 2020** from **$0.95 million in 2019**, with an effective tax rate of **28.90%**, reflecting higher income and a **$3.25 million net noncurrent deferred tax liability** Provision for Income Taxes (2019-2020) | Tax Component | 2020 | 2019 | | :-------------------- | :----------- | :----------- | | Current tax expense: | | | | Federal | $719,341 | $130,248 | | State | $367,819 | $63,496 | | Deferred tax expense (benefit): | | | | Federal | $227,248 | $591,493 | | State | $65,247 | $166,886 | | **Total** | **$1,379,655** | **$952,123** | Effective Income Tax Rate Reconciliation (2019-2020) | Factor | 2020 | 2019 | | :-------------------------- | :----- | :----- | | Federal statutory rate | 21.00% | 21.00% | | State taxes, net of federal benefit | 6.79% | 5.93% | | Permanent differences | 0.26% | 0.47% | | Prior year adjustments | 0.76% | -0.01% | | Changes in tax rates and other | 0.09% | 0.11% | | **Effective Tax Rate** | **28.90%** | **27.50%** | Net Deferred Tax Assets and (Liabilities) (2019-2020) | Item | 2020 | 2019 | | :-------------------------------- | :------------- | :------------- | | Various Accruals and Deferred Timing Differences | $145,195 | $61,319 | | Prepaids | ($29,404) | ($52,309) | | Depreciation | ($2,744,921) | ($2,493,973) | | Inventory | ($621,969) | ($473,643) | | **Net noncurrent deferred tax liability** | **($3,251,099)** | **($2,958,606)** | [NOTE 11 – RELATED PARTY TRANSACTIONS](index=47&type=section&id=NOTE%2011%20%E2%80%93%20RELATED%20PARTY%20TRANSACTIONS) The Company provides living accommodations for its CEO as an employment condition, with annual housing expenses, excluding depreciation, less than **$12,000** - The Company provides living accommodations for its CEO, James W. Bernau, on its premises as a condition of employment for security and lock-up services[301](index=301&type=chunk) - Annual expenses related to the CEO's housing are less than **$12,000**, exclusive of depreciation[301](index=301&type=chunk) [NOTE 12 – COMMITMENTS AND CONTINGENCIES](index=47&type=section&id=NOTE%2012%20%E2%80%93%20COMMITMENTS%20AND%20CONTINGENCIES) The Company has no material litigation, holds various operating leases, and has significant commitments including a long-term grape purchase agreement and the **$14.4 million Bernau Estate Tasting Room construction** - No material legal proceedings are pending[302](index=302&type=chunk) - Operating leases include vineyard properties (Peter Michael, Meadowview, Elton, Ingram, Bernau Estate) and non-vineyard properties (McMinnville, Maison Bleue, Willamette Wineworks)[303](index=303&type=chunk)[304](index=304&type=chunk)[305](index=305&type=chunk)[306](index=306&type=chunk)[307](index=307&type=chunk)[308](index=308&type=chunk)[309](index=309&type=chunk) Lease Cost and Information (2020) | Metric | 2020 | | :-------------------------------- | :--------- | | Operating Lease cost - Vineyards | $454,740 | | Operating Lease cost - Other | $139,133 | | Short-term lease cost | $33,492 | | **Total Lease Cost** | **$627,365** | | Weighted-average remaining lease term | 16.55 years | | Weighted-average discount rate | 6.22% | - The Company has a long-term grape purchase agreement through the 2023 harvest year, with an outstanding balance of **$1,307,165 as of December 31, 2020**[310](index=310&type=chunk)[311](index=311&type=chunk) - Construction of the Bernau Estate Tasting Room is expected to cost approximately **$14.4 million**, with **$5.3 million spent by December 31, 2020**[312](index=312&type=chunk) [NOTE 13 – EMPLOYEE BENEFIT PLAN](index=50&type=section&id=NOTE%2013%20%E2%80%93%20EMPLOYEE%20BENEFIT%20PLAN) The Company operates a 401(k) profit sharing plan, making discretionary contributions of **$138,588 in 2020** and **$129,017 in 2019** - The Company has a 401(k) profit sharing plan for eligible employees[313](index=313&type=chunk) Company 401(k) Contributions (2019-2020) | Year | Contribution Amount | | :--- | :------------------ | | 2020 | $138,588 | | 2019 | $129,017 | [NOTE 14 - SALE OF PREFERRED STOCK](index=50&type=section&id=NOTE%2014%20-%20SALE%20OF%20PREFERRED%20STOCK) Since 2015, the Company has offered Series A Redeemable Preferred Stock, which is non-voting, senior to common stock, pays a **$0.22 annual dividend**, and is optionally redeemable after June 1, 2021 - Public offering of Series A Redeemable Preferred Stock commenced in August 2015, listed on NASDAQ (**WVVIP**)[314](index=314&type=chunk) - Series A Preferred Stock is non-voting, ranks senior to common stock, and pays an annual dividend of **$0.22 per share**[314](index=314&type=chunk)[295](index=295&type=chunk) - In 2020, the Company concluded **$8,008,839 in stock sales** (net of acquisition costs) under a new Form S-3 registration statement[318](index=318&type=chunk) - Proceeds from 2020 sales recorded as **$7,498,203 for Preferred Stock Issued** and **$510,636 as 'Investor deposits for preferred stock'**[318](index=318&type=chunk) - The Company has the option to redeem outstanding preferred stock after June 1, 2021[319](index=319&type=chunk) [NOTE 15 – SEGMENT REPORTING](index=51&type=section&id=NOTE%2015%20%E2%80%93%20SEGMENT%20REPORTING) The Company operates two segments, Direct Sales and Distributor Sales, with performance evaluated by gross profit; in 2020, Direct Sales contributed **38.6% of net sales** and Distributor Sales **61.4%** - Two operating segments: Direct Sales (retail, wine club, internet, events, bulk wine/grapes) and Distributor Sales (through third parties at wholesale rates)[320](index=320&type=chunk) - Performance is evaluated based on gross profit, with segment-specific selling expenses included[321](index=321&type=chunk) Segment Performance (2019-2020) | Metric | Direct Sales 2020 | Direct Sales 2019 | Distributor Sales 2020 | Distributor Sales 2019 | Total 2020 | Total 2019 | | :------------------ | :---------------- | :---------------- | :--------------------- | :--------------------- | :--------- | :--------- | | Sales, net | $10,533,070 | $9,463,481 | $16,781,782 | $15,285,782 | $27,314,852 | $24,749,263 | | Cost of Sales | $2,646,706 | $2,521,094 | $7,938,370 | $6,933,587 | $10,585,076 | $9,454,681 | | Gross Margin | $7,886,364 | $6,942,387 | $8,843,412 | $8,352,195 | $16,729,776 | $15,294,582 | | Selling Expenses | $5,180,431 | $4,659,543 | $1,713,370 | $2,201,091 | $6,893,801 | $6,860,634 | | Contribution Margin | $2,705,933 | $2,282,844 | $7,130,042 | $6,151,104 | $9,835,975 | $8,433,948 | | Percent of Sales, net | 38.6% | 38.2% | 61.4% | 61.8% | 100.0% | 100.0% | [NOTE 16 – SUBSEQUENT EVENTS](index=51&type=section&id=NOTE%2016%20%E2%80%93%20SUBSEQUENT%20EVENTS) No material subsequent events were identified after the balance sheet date but before financial statement issuance - No material subsequent events identified[326](index=326&type=chunk) [ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE](index=52&type=section&id=ITEM%209.%20CHANGES%20IN%20AND%20DISAGREEMENTS%20WITH%20ACCOUNTANTS%20ON%20ACCOUNTING%20AND%20FINANCIAL%20DISCLOSURE) No changes in or disagreements with accountants on accounting and financial disclosure - No changes in or disagreements with accountants on accounting and financial disclosure[327](index=327&type=chunk) [ITEM 9A. CONTROLS AND PROCEDURES](index=52&type=section&id=ITEM%209A.%20CONTROLS%20AND%20PROCEDURES) Management concluded that disclosure controls and internal control over financial reporting were effective as of December 31, 2020, with no material changes in the fourth fiscal quarter - Disclosure controls and procedures were effective as of December 31, 2020[327](index=327&type=chunk) - Internal control over financial reporting was effective as of December 31, 2020, based on the COSO framework[330](index=330&type=chunk) - No material changes in internal control over financial reporting during the fourth fiscal quarter[331](index=331&type=chunk) [ITEM 9B. OTHER INFORMATION](index=53&type=section&id=ITEM%209B.%20OTHER%20INFORMATION) No other information is required to be disclosed in this item - No other information to report[332](index=332&type=chunk) PART III [ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE](index=53&type=section&id=ITEM%2010.%20DIRECTORS,%20EXECUTIVE%20OFFICERS%20AND%20CORPORATE%20GOVERNANCE) This section details the Company's Board of Directors and executive officers, their terms, the staggered board structure, adopted Code of Ethics, and the independent Audit Committee Directors and Executive Officers | Name | Position(s) | Age | Term Ends | | :---------------- | :------------------------------------ | :-- | :-------- | | James W. Bernau | Chairperson of the Board, CEO, President and Director | 67 | 2023 | | Craig Smith | Secretary and Director | 74 | 2021 | | John Ferry | Chief Financial Officer | 55 | NA | | James L. Ellis | Director | 76 | 2022 | | Sean M. Cary | Director | 47 | 2023 | | Stan G. Turel | Director | 72 | 2021 | | Leslie Copland | Director | 65 | 2022 | - The Board of Directors is divided into three classes serving staggered three-year terms[334](index=334&type=chunk) - The Company has adopted a Code of Ethics, available on its website[344](index=344&type=chunk) - The Audit Committee members are Craig Smith, Sean Cary, and Stan G. Turel, all independent, with Craig Smith serving as the Audit Committee's financial expert[345](index=345&type=chunk)[346](index=346&type=chunk) [ITEM 11. EXECUTIVE COMPENSATION](index=55&type=section&id=ITEM%2011.%20EXECUTIVE%20COMPENSATION) This section details the 2019-2020 compensation for the CEO and CFO, including salaries, bonuses, and other benefits, alongside director compensation Summary Compensation Table (2019-2020) | Name, Principal Position | Year | Salary | Bonus | Non-equity Incentive Plan Compensation | Other Comp. | Total | | :----------------------- | :--- | :------- | :------ | :------------------------------------- | :---------- | :------ | | Bernau, James W., President, CEO | 2020 | $276,704 | $276,704 | - | $52,908 | $606,316 | | Bernau, James W., President, CEO | 2019 | $271,812 | $233,488 | - | $108,906 | $614,206 | | John Ferry, Chief Financial Officer | 2020 | $145,000 | - | $15,000 | $1,750 | $161,750 | | John Ferry, Chief Financial Officer | 2019 | $35,000 | - | - | $495 | $35,495 | - Mr. Bernau's annual salary is **$235,000** with CPI increases; his bonus is calculated as a percentage of pre-tax income (5% on first **$1.75 million**, 7.5% over **$1.75 million**, capped at base salary)[349](index=349&type=chunk)[350](index=350&type=chunk) - Mr. Ferry's annual salary is **$140,000** and he is eligible for an annual performance-based incentive up to **$15,000**[351](index=351&type=chunk) Director Compensation (2020) | Name | Fees Earned in Cash | All Other Compensation | Total | | :------------- | :------------------ | :--------------------- | :------ | | James L. Ellis | $9,177 | $2,354 | $11,531 | | Sean M. Cary | $3,150 | - | $3,150 | | Craig Smith | $3,050 | - | $3,050 | | Stan G. Turel | $3,250 | - | $3,250 | | Leslie Copland | $5,828 | - | $5,828 | - Board members receive a **$1,000 yearly stipend**, **$500 per in-person meeting**, **$250 per teleconference meeting**, and additional fees for committee meetings[353](index=353&type=chunk) [ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS](index=57&type=section&id=ITEM%2012.%20SECURITY%20OWNERSHIP%20OF%20CERTAIN%20BENEFICIAL%20OWNERS%20AND%20MANAGEMENT%20AND%20RELATED%20STOCKHOLDER%20MATTERS) This section details beneficial ownership of Common Stock as of March 15, 2021, listing major shareholders and management, noting the absence of active equity compensation plans - The Company does not have active equity compensation plans or outstanding options/equity awards[354](index=354&type=chunk) Beneficial Ownership of Common Stock (March 15, 2021) | Name | Number of Shares Beneficially Owned | Percent of Shares Outstanding | | :------------------------------------ | :-------------------------------- | :---------------------------- | | James W. Bernau, President/CEO, Chair of the Board | 422,743 | 8.5% | | Christopher Riccardi | 385,485 | 7.8% | | Carl D. Thoma | 336,189 | 6.8% | | All Directors and Executive Officers as a group (7 persons) | 464,500 | 9.4% | - The percentage of outstanding shares is calculated based on **4,964,529 shares of common stock outstanding** as of March 15, 2021[358](index=358&type=chunk) [ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE](index=58&type=section&id=ITEM%2013.%20CERTAIN%20RELATIONSHIPS%20AND%20RELATED%20TRANSACTIONS,%20AND%20DIRECTOR%20INDEPENDENCE) No material related party transactions exceeding **$120,000** occurred in 2020; all proposed transactions require Board approval, and most directors are deemed independent - No material related party transactions exceeding **$120,000** occurred in 2020 or are currently proposed[360](index=360&type=chunk) - All proposed related party transactions require approval by a disinterested majority of the Board[361](index=361&type=chunk) - All directors, except James W. Bernau and James L. Ellis, are considered 'independent' under SEC and NASDAQ standards[362](index=362&type=chunk) [ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES](index=59&type=section&id=ITEM%2014.%20PRINCIPAL%20ACCOUNTING%20FEES%20AND%20SERVICES) Moss Adams LLP served as the independent auditor, with total fees of **$250,510 in 2020** and **$249,051 in 2019** for audit and tax services, requiring Audit Committee pre-approval for non-audit services - Moss Adams LLP served as the independent registered public accounting firm for 2020 and 2019[363](index=363&type=chunk) Principal Accounting Fees and Services (2019-2020) | Fee Category | 2020 | 2019 | | :------------- | :--------- | :--------- | | Audit fees | $198,200 | $183,282 | | Tax fees | $52,310 | $65,769 | | **Total** | **$250,510** | **$249,051** | | 401k financial statement audit | $15,500 | - | - The Company's policy requires pre-approval by the Audit Committee for all non-audit services[364](index=364&type=chunk) [ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES](index=60&type=section&id=ITEM%2015.%20EXHIBITS,%20FINANCIAL%20STATEMENT%20SCHEDULES) This section lists all 10-K report documents, including financial statements and exhibits, with financial statement schedules omitted as not required or redundant - Financial statements are filed as part of this report[366](index=366&type=chunk) - All financial statement schedules are omitted because they are not required, not applicable, or the information is included in the financial statements or notes[367](index=367&type=chunk) - A comprehensive list of exhibits is provided, including corporate governance documents, employment agreements, and certifications[368](index=368&type=chunk)
Willamette Valley Vineyards(WVVI) - 2020 Q3 - Quarterly Report
2020-11-12 21:30
UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2020 o TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT Commission File Number 000-21522 WILLAMETTE VALLEY VINEYARDS, INC. (Exact name of registrant as specified in charter) | Oregon | 93-0981021 | | --- | --- | | (State or other jurisdiction of incorporation or organization) | ( ...
Willamette Valley Vineyards(WVVI) - 2020 Q2 - Quarterly Report
2020-08-12 21:03
UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2020 WILLAMETTE VALLEY VINEYARDS, INC. (Exact name of registrant as specified in charter) Oregon 93-0981021 (State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.) 8800 Enchanted Way, S.E., Turner, Oregon 97392 (Address of principal executive offices) (Zip ...
Willamette Valley Vineyards(WVVI) - 2020 Q1 - Quarterly Report
2020-05-13 21:03
SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q o QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 UNITED STATES For the quarterly period ended March 31, 2020 o TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT Commission File Number 000-21522 WILLAMETTE VALLEY VINEYARDS, INC. (Exact name of registrant as specified in charter) Oregon 93-0981021 (State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identificati ...
Willamette Valley Vineyards(WVVI) - 2019 Q4 - Annual Report
2020-03-11 21:24
UNITED STATES SECURITIES AND EXCHANGE COMMISSION WILLAMETTE VALLEY VINEYARDS, INC. (Exact name of registrant as specified in its charter) (State or other jurisdiction of incorporation or organization) Washington, D.C. 20549 FORM 10-K (Mark One) x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2019 or o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ___________ ...