What changed in this filing

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Item 1. Financial Statements

2022-05-12 compared with 2021-11-12 · 340 added, 393 removed, 293 unchanged (71% of the section changed)

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BALANCE SHEETS

September 30,

CURRENT ASSETS

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Total liabilities

COMMITMENTS AND CONTINGENCIES

COMMITMENTS AND CONTINGENCIES (NOTE 8)

SHAREHOLDERS EQUITY

Redeemable preferred stock, no par value, 10,000,000 shares authorized, 6,564,923 shares issued and outstanding, liquidation preference $ 28,327,643 , at September 30, 2021 and 6,309,508 shares issued and outstanding, liquidation preference $ 26,184,458 , at December 31, 2020.

Common stock, no par value, 10,000,000 shares authorized, 4,964,529 shares issued and outstanding at September 30, 2021 and December 31, 2020, respectively.

Redeemable preferred stock, no par value, 10,000,000 shares authorized, 8,483,862 shares issued and outstanding, liquidation preference $ 35,674,639 , at March 31, 2022 and 7,523,539 shares issued and outstanding, liquidation preference $ 31,222,687 , at December 31, 2021.

Common stock, no par value, 10,000,000 shares authorized, 4,964,529 shares issued and outstanding at March 31, 2022 and December 31, 2021, respectively.

Retained earnings

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VALLEY VINEYARDS, INC.

CONDENSED STATEMENTS OF OPERATIONS

STATEMENTS OF OPERATIONS

Three months ended

Nine months ended

September 30,

COST OF SALES

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Total operating expenses

INCOME FROM OPERATIONS

INCOME (LOSS) FROM OPERATIONS

OTHER INCOME (EXPENSE)

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Interest expense

Other income, net

INCOME BEFORE INCOME TAXES

INCOME TAX PROVISION

INCOME (LOSS) BEFORE INCOME TAXES

INCOME TAX (EXPENSE)

NET INCOME (LOSS)

Accrued preferred stock dividends

( 1,083,213 )

INCOME APPLICABLE TO COMMON SHAREHOLDERS

common share after preferred dividends, basic and diluted

Weighted-average number of common

shares outstanding

APPLICABLE TO COMMON SHAREHOLDERS

Loss per common share after preferred dividends, basic and diluted

Weighted-average number of common shares outstanding

accompanying notes are an integral part of this financial statement

VALLEY VINEYARDS, INC.

CONDENSED STATEMENTS OF SHAREHOLDERS EQUITY

Nine-Month Period Ended September 30, 2021

STATEMENTS OF SHAREHOLDERS EQUITY

Three-Month Period Ended March 31, 2022

Preferred Stock

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Balance at March 31, 2022

Issuance of preferred stock, net

Preferred stock dividends accrued

Balance at June 30, 2021

Stock compensation expense

Preferred stock dividends accrued

Balance at September 30, 2021

Nine-Month Period Ended September 30, 2020

Three-Month Period Ended March 31, 2021

Preferred Stock

Balance at December 31, 2020

Issuance of preferred stock, net

Preferred stock dividends accrued

Balance at March 31, 2021

Preferred stock dividends accrued

Balance at June 30, 2020

Preferred stock dividends accrued

Balance at September 30, 2020

accompanying notes are an integral part of this financial statement

VALLEY VINEYARDS, INC.

STATEMENTS OF CASH FLOWS

Nine months ended September 30,

OF CASH FLOWS

Three months ended March 31,

CASH FLOWS FROM OPERATING ACTIVITIES

Adjustments to reconcile net income to net cash from operating activities:

Net income (loss)

Adjustments to reconcile net income (loss) to net cash from operating activities:

Depreciation and amortization

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Loan fee amortization

Stock compensation expense

Change in operating assets and liabilities:

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Prepaid expenses and other current assets

Income taxes receivable

Income tax receivable

Unearned revenue

Lease liabilities

Grapes payable

( 1,388,601 )

( 1,307,165 )

Accounts payable

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CASH FLOWS FROM INVESTING ACTIVITIES

Proceeds from disposition of property and equipment

Additions to vineyard development costs

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( 5,030,471 )

( 3,422,004 )

Net cash from investing activities

( 6,867,420 )

Net cash used in investing activities

( 5,138,816 )

CASH FLOWS FROM FINANCING ACTIVITIES

Proceeds from Paycheck Protection Program

Payments on Paycheck Protection Program

( 1,655,200 )

Payment on installment note for property purchase

Payments on long-term debt

Proceeds from investor deposits held as liability

Proceeds from issuance of preferred stock

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NET CHANGE IN CASH AND CASH EQUIVALENTS

( 5,179,127 )

CASH AND CASH EQUIVALENTS, beginning of period

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NON-CASH INVESTING AND FINANCING ACTIVITIES

Purchases of property and equipment and vineyard development costs included in

accounts payable

Purchases of property and equipment and vineyard development costs included in accounts payable

Reduction in investor deposits for preferred stock

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BASIS OF PRESENTATION

accompanying unaudited interim financial statements as of September 30, 2021 and for the three and nine months ended September 30, 2021

and 2020 have been prepared in conformity with accounting principles generally accepted in the United States (U.S.

for interim financial statements.

The financial information as of December 31, 2020 is derived from the audited financial statements

presented in the Willamette Valley Vineyards, Inc.

(the Company) Annual Report on Form 10-K for the year ended December

31, 2020 (the 2020 Report).

Certain information or footnote disclosures normally included in financial statements prepared

in accordance with U.S.

accompanying unaudited interim financial statements as of March 31, 2022 and for the three months ended March 31, 2022 and 2021 have

been prepared in conformity with accounting principles generally accepted in the United States (U.S.

GAAP) for interim

financial statements.

The financial information as of December 31, 2021 is derived from the audited financial statements presented in

the Willamette Valley Vineyards, Inc.

(the Company) Annual Report on Form 10-K for the year ended December 31, 2021 (the

2021 Report).

Certain information or footnote disclosures normally included in financial statements prepared in accordance

GAAP have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission.

In the opinion of management, the accompanying financial statements include all adjustments necessary (which are of a normal recurring

nature) for the fair statement of the results of the interim periods presented.

The accompanying financial statements should be read

in conjunction with the Companys audited financial statements for the year ended December 31, 2020, as presented in the Companys

Annual Report on Form 10-K.

results for the three and nine months ended September 30, 2021 are not necessarily indicative of the results that may be expected for

the entire year ending December 31, 2021, or any portion thereof.

The COVID-19 pandemic and restrictions

imposed by federal, state, and local governments in response to the outbreak have disrupted and will continue to disrupt our business.

In the State of Oregon, where we operate the Companys winery in Turner, Oregon, and most of our vineyards, in response to the

COVID-19 pandemic individuals are being encouraged to practice social distancing, which when combined with any future orders could adversely

affect our sales revenues and consequently impact our liquidity, financial condition and results of operations.

Even after orders are

loosened or lifted, the impact of lost wages due to COVID-19 related unemployment may dampen consumer spending for some time in the future.

Companys operations could be further disrupted if a significant number of employees are unable or unwilling to work, whether because

of illness, quarantine, restrictions on travel or fear of contracting COVID-19, which could further materially adversely affect liquidity,

financial position and results of operations.

To support employees and protect the health and safety of employees and customers, the

Company may offer enhanced health and welfare benefits, provide bonuses to employees, and purchase additional sanitation supplies and

personal protective materials.

These measures will increase operating costs and adversely affect liquidity.

COVID-19 pandemic may also adversely affect the ability of grape suppliers to fulfill their obligations, which may negatively affect

If suppliers are unable to fulfill their obligation, the Company could face shortages of grapes, and operations and sales

could be adversely impacted.

opinion of management, the accompanying financial statements include all adjustments necessary (which are of a normal recurring nature)

for the fair statement of the results of the interim periods presented.

The accompanying unaudited interim financial statements

should be read in conjunction with the Companys audited financial statements for the year ended December 31, 2021, as presented

in the Companys Annual Report on Form 10-K.

results for the three months ended March 31, 2022 are not necessarily indicative of the results that may be expected for the entire year

ending December 31, 2022, or any portion thereof.

COVID-19 pandemic has been declared a National Public Health Emergency in the United States, and on March 8, 2020, Oregon Governor Kate

Brown declared a state of emergency to address the spread of COVID-19 in Oregon.

The outbreak in Oregon and other parts of the United

States, as well as the response to COVID-19 by federal, state and local governments have had a material adverse impact on economic and

market conditions in the United States.

Although the administration of vaccines in Oregon and throughout the United States contributed

to the lifting of restrictive measures, there remains ongoing uncertainty about the impact of COVID-19 variations on infection levels.

The re-emergence of significant increases in infection rates could result in governments re-imposing some restrictive measures that could

reduce or impair economic activity.

Consequently, the COVID-19 pandemic and the government responses to the outbreak presents continued

uncertainty and risk with respect to the Company and its performance and financial results.

the required Oregon Healthy Authority protocols, a state-of-the-art UV light filtration has been installed in the Companys HVAC

system to reduce harmful viruses in the air at its tasting room locations and staff offices.

have not yet experienced significant disruptions to our supply chain network;

however, any future restrictions imposed by our local or

state governments may have a negative impact on our future direct to consumer sales.

Additionally,

the demand for the Companys wine sold directly or through distributors to restaurants, bars, and other hospitality locations could

be reduced in the near-term due to the re-imposition of orders from state and local governments restricting consumers from visiting,

as well as in some cases the temporary closure of such establishments.

extent of the future impact of the COVID-19 pandemic on the Companys business is highly uncertain and difficult to predict, as

the response to the pandemic is continuing to evolve.

The severity of the impact of the COVID-19 pandemic on the Companys business

will depend on a number of factors, including, but not limited to, the duration and severity of the pandemic and the extent and severity

of the impact on the Companys customers, all of which are uncertain and cannot be predicted.

Companys revenues include direct to consumer sales and national sales to distributors.

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for production, selling, and distribution.

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

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

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

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

of Earnings Per Share

Three months ended September 30,

Nine months ended September 30,

Three months ended March 31,

Net income (loss)

Accrued preferred stock dividends

Net loss applicable to common shareholders

$ ( 565,554 )

Net income applicable to common shares

Weighted-average common shares outstanding

Earnings per common share after preferred dividends - basic and diluted

$ ( 236,951 )

Weighted-average number of common shares outstanding

Loss per common share after preferred dividends, basic and diluted

to the filing of the 2021 Report there were no accounting pronouncements issued by the Financial Accounting Standards Board (FASB)

that would have a material effect on the Companys unaudited interim condensed financial statements.

The following provides an

update of new accounting pronouncements applicable to the Company as of September 30, 2021.

Standard Update (ASU) 2019-12, Income Taxes (Topic 740), Update (ASU) 2019-12, Income Taxes (Topic 740).

This standard simplifies the accounting for income taxes by removing certain Codification exceptions and others to be discussed.

This was adopted on January 1, 2021, and Management does not believe there will be a significant impact.

Reclassifications

- Certain immaterial amounts from prior periods have been reclassified to conform to current years' presentation.

Companys inventories, by major classification, are summarized as follows, as of the dates shown:

Schedule of Inventories

September 30, 2021

March 31, 2022

December 31, 2021

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Schedule of Property and Equipment, Net

September 30, 2021

March 31, 2022

December 31, 2021

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Land, improvements, and other buildings

Winery, tasting room buildings, and hospitality center

Winery buildings and hospitality center

Property and equipment, gross

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Property and equipment, net

expense for the nine months ended September 30, 2021 and 2020 was $ 1,230,459 and $ 1,176,207 , respectively.

Depreciation expense for the

3 months ended September 30, 2021 and 2020 was $ 446,033 and $ 394,859 , respectively.

expense for the three months ended March 31, 2022 and 2021 was $ 378,634 and $ 411,357 , respectively.

of Credit Facility – In December of 2005, the Company entered into a revolving line of credit agreement with Umpqua Bank that

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the Company renewed the credit agreement until July 31, 2023.

At September 30, 2021 and December 31, 2020, there was no outstanding balance

At March 31, 2022 and December 31, 2021, there was no outstanding balance

on this revolving line of credit.

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debt to tangible net worth, and debt service coverage, as defined.

As of September 30, 2021, the Company was in compliance with these

financial covenants.

As of March 31, 2022, the Company was in compliance with these financial

Payable – In February 2017, the Company purchased property, including vineyard land, bare land, and structures in the Dundee Hills

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The note may be called by the owner, up to the outstanding balance, with 180 days written notice.

As of September 30, 2021, the

Company had a balance of $1,318,301 due on this note.

As of March 31, 2022, the Company

had a balance of $1,272,440 due on this note.

As of December 31, 2021, the Company had a balance of $1,295,541 due on this note.

Debt – The Company has two long-term debt agreements with Farm Credit Services (FCS) with an aggregate outstanding balance

of $ 5,649,703 and $ 5,984,272 as of September 30, 2021 and December 31, 2020, respectively.

of $ 5,418,283 and $ 5,535,097 as of March 31, 2022 and December 31, 2021, respectively.

The outstanding loans require monthly

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loan agreements contain covenants, which require the Company to maintain certain financial ratios and balances.

At September 30, 2021,

the Company was in compliance with these covenants.

In the event of future noncompliance with the Companys debt covenants, FCS

would have the right to declare the Company in default, and at FCS option without notice or demand, the unpaid principal balance of the

loan, plus all accrued unpaid interest thereon and all other amounts due would immediately become due and payable.

of September 30, 2021, the Company had unamortized debt issuance costs of $ 135,796 .

At March 31, 2022, the

Company was in compliance with these covenants.

In the event of future noncompliance with the Companys debt covenants, FCS would

have the right to declare the Company in default, and at FCS option without notice or demand, the unpaid principal balance of the loan,

plus all accrued unpaid interest thereon and all other amounts due would immediately become due and payable.

of March 31, 2022, the Company had unamortized debt issuance costs of $ 129,172 .

As of December 31, 2021, the Company had unamortized

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INTEREST AND TAXES PAID

taxes – The Company paid $ 245,000 and $ 578,000 tax in income taxes for the three months ended September 30, 2021 and 2020,

respectively.

The Company paid $ 285,000 and $ 578,000 in income taxes for the nine months ended September 30, 2021 and 2020, respectively.

– The Company paid $ 93,234 and $ 90,165 for the three months ended September 30, 2021 and 2020, respectively, in interest on long-term

The Company paid $ 284,017 and $ 294,620 for the nine months ended September 30, 2021 and 2020, respectively, in interest on long-term

Taxes – The Company paid no income taxes for the three months ended March 31, 2022 and 2021, respectively.

– The Company paid $ 87,977 and $ 95,512 for the three months ended March 31, 2022 and 2021, respectively, in interest on long-term

SEGMENT REPORTING

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margins and selling strategies.

Direct Sales include retail sales in the tasting room and remote sites, wine club sales, internet sales,

on-site events, kitchen and catering sales and other sales made directly to the consumer without the use of an intermediary, including

sales of bulk wine or grapes.

Direct Sales include retail sales in the tasting rooms, wine club sales, internet sales, on-site events,

kitchen and catering sales and other sales made directly to the consumer without the use of an intermediary, including sales of bulk

wine or grapes.

Distributor Sales include all sales through a third party where prices are given at a wholesale rate.

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expenses and general and administrative expenses are not allocated between operating segments.

Therefore, net income information for

the respective segments is not available.

Therefore, net income (loss) information

for the respective segments is not available.

Discrete financial information related to segment assets, other than segment specific depreciation

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following table outlines the sales, cost of sales, gross margin, directly attributable selling expenses, and contribution margin of the

segments for the three and nine month periods ending September 30, 2021 and 2020.

segments for the three month periods ending March 31, 2022 and 2021.

Sales figures are net of related excise taxes.

of Revenue by Reporting Segments

Months Ended September 30,

Cost of sales

Percent of sales

and administration

from operations

Months Ended September 30,

Months Ended March 31,

Cost of Sales

Selling Expenses

Contribution Margin

Percent of Sales

and administration

from operations

sales include no bulk wine sales in the three months ended September 30, 2021 and 2020.

Direct sales include zero and $ 28,734 of bulk

wine sales in the nine months ended September 30, 2021 and 2020, respectively.

General and Administration

Income (loss) from Operations

$ ( 136,232 )

sales include $10,500 in bulk wine sales in the three months ended March 31, 2022 compared to no bulk wine sales in the three months

ended March 31, 2021.

SALE OF PREFERRED STOCK

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per share and concluding with an offering of $ 5.15 per share.

As of September 30, 2021, the Company had received aggregate proceeds

As of March 31, 2022, the Company had received aggregate proceeds

of $8,533,086 from sales of our Series A Redeemable Preferred Stock, net of acquisition costs, under this offering.

This Prospectus Supplement

has been closed and all related shares issued as of December 31, 2021.

June 11, 2021, the Company filed with the SEC an additional Prospectus Supplement to the January 2020 Form S-3, pursuant to which the

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Stock having proceeds not to exceed $10,700,000.

Net proceeds of $2,899,346 have been received under this offering as of September, 30

2021 for the issuance of Preferred Stock.

of March 31, 2022, the Company had received aggregate proceeds of $9,008,334 from sales of our Series A Redeemable Preferred Stock, net

of acquisition costs, under this offering.

This Prospectus Supplement has been closed and all related shares issued as of March 31, 2022.

have the option to receive dividends as cash or as a gift card for purchasing Company products.

The amount of unused dividend gift cards

at March 31, 2022 and 2021 was $594,611 and $682,881, respectively and is recorded as unearned revenue on the balance sheet.

accrued but not paid will be added to the liquidation preference of the stock until the dividend is declared and paid.

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equal to the original issue price plus accrued but unpaid dividends and a redemption premium equal to 3% of the original issue price.

COMMITMENTS AND CONTINGENCIES

determine if an arrangement is a lease at inception.

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a formula-based escalation provision with a maximum increase of 4% every three years.

February 2007 , the Company entered into a lease agreement for 59 acres of vineyard land at Elton Vineyards.

In June 2021 the company

entered into a new 11 year lease for this property.

2007, the Company entered into a lease agreement for 59 acres of vineyard land at Elton Vineyards.

In June 2021 , the Company entered

into a new 11 year

lease for this property.

The lease contains an escalation provision tied to the CPI not to exceed 2% per annum.

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with increases not allowed in any year being carried forward to following years.

September 2021, the Company entered into a lease for 10 years, with two five-year renewal options for a retail wine facility in Vancouver,

The lease defines the payments over the term of the lease and option periods.

February 2022, the Company entered into a lease for 10 years, with three five-year renewal options for a retail wine facility in Lake

Oswego, Oregon.

The lease defines the payments over the term of the lease and option periods.

following tables provide lease cost and other lease information:

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Three Months Ended

Nine Months Ended

September 30, 2021

March 31, 2022

Operating lease cost - Vineyards

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Weighted-average discount rate - Operating leases

of September 30, 2021, maturities of lease liabilities were as follows:

assets obtained in exchange for new operating lease obligations were $1,600,552 and zero for the three months ended March 31 2022 and

2021, respectively.

Company has two additional operating leases that have not yet commenced as of March 31, 2022, and as such, have not been recognized in

the Companys balance sheet.

These operating leases are expected to commence in 2022 with lease terms of 10 years.

of March 31, 2022, maturities of lease liabilities were as follows:

of Maturities of Lease Liabilities

Years Ended December 31,

2021 remainder of period

Total minimal lease payments

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Lease liabilities, net of current portion

9) COMMITMENTS AND CONTINGENCIES

– From time to time, in the normal course of business, the Company is a party to legal proceedings.

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would be due.

DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Willamette – In 2019, the Board of Directors approved the construction of a new tasting room at the Bernau Estate Vineyard, expected

to be completed during the 2022 fiscal year.

The total construction costs for the Domaine Willamette Tasting Room is expected to be approximately

$15.6 million, of which we expect will be funded through cash on hand.

Construction on the Tasting Room began in July, 2019 and as of

March 31, 2022, we had spent approximately $12.1 million on the project from our cash reserves.

MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

used in this Quarterly Report on Form 10-Q, we, us, our and the Company

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Looking Statements

Managements Discussion and Analysis of Financial Condition and Results of Operations and other sections of this Form 10-Q

contain forward looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.

These forward-looking

statements involve risks and uncertainties that are based on current expectations, estimates and projections about the Companys

business, and beliefs and assumptions made by management.

Managements Discussion and Analysis of Financial Condition and Results of Operations and other sections of this Form 10-Q contain

forward looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.

These forward-looking statements

involve risks and uncertainties that are based on current expectations, estimates and projections about the Companys business,

and beliefs and assumptions made by management.

Words such as expects, anticipates, intends,

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to identify such forward-looking statements.

Therefore, actual outcomes and results may differ materially from what is expressed

or forecasted in such forward-looking statements due to numerous factors, including, but not limited to:

availability of financing

for growth, availability of adequate supply of high quality grapes, successful performance of internal operations, impact of competition,

changes in wine broker or distributor relations or performance, impact of possible adverse weather conditions, impact of reduction

in grape quality or supply due to disease or smoke from forest fires, changes in consumer spending, the reduction in consumer

demand for premium wines, and the impact of the COVID-19 pandemic and the policies of United States federal, state and local governments

in response to such pandemic.

In addition, such statements could be affected by general industry and market conditions and growth

rates, and general domestic economic conditions.

Many of these risks as well as other risks that may have a material adverse impact

on our operations and business, are identified in Item 1A Risk Factors in the Companys Annual Report on Form

10-K for the year ended December 31, 2020, as well as in the Companys other Securities and Exchange Commission filings

The forward-looking statements in this report are made as of the date hereof, and, except as otherwise required by

law, the Company disclaims any intention or obligation to update or revise any forward-looking statements or to update the reasons

why the actual results could differ materially from those projected in the forward-looking statements, whether as a result of

new information, future events or otherwise.

Therefore, actual outcomes and results may differ materially from what is expressed or forecasted

in such forward-looking statements due to numerous factors, including, but not limited to:

availability of financing for growth, availability

of adequate supply of high quality grapes, successful performance of internal operations, impact of competition, changes in wine broker

or distributor relations or performance, impact of possible adverse weather conditions, impact of reduction in grape quality or supply

due to disease or smoke from forest fires, changes in consumer spending, the reduction in consumer demand for premium wines, and the

impact of the COVID-19 pandemic and the policies of United States federal, state and local governments in response to such pandemic.

In addition, such statements could be affected by general industry and market conditions and growth rates, and general domestic economic

Many of these risks as well as other risks that may have a material adverse impact on our operations and business, are identified

in Item 1A Risk Factors in the Companys Annual Report on Form 10-K for the year ended December 31, 2021, as well

as in the Companys other Securities and Exchange Commission filings and reports.

The forward-looking statements in this report

are made as of the date hereof, and, except as otherwise required by law, the Company disclaims any intention or obligation to update

or revise any forward-looking statements or to update the reasons why the actual results could differ materially from those projected

in the forward-looking statements, whether as a result of new information, future events or otherwise.

Accounting Policies

foregoing discussion and analysis of the Companys financial condition and results of operations are based upon our financial

statements, which have been prepared in accordance with U.S.

The preparation of these financial statements requires the

Companys management to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and

expenses, and related disclosure of contingent assets and liabilities.

On an on-going basis, the Company evaluates its estimates,

including those related to revenue recognition, collection of accounts receivable, valuation of inventories, and amortization

of vineyard development costs.

The Company bases its estimates on historical experience and on various other assumptions that

are believed to be reasonable under the circumstances.

foregoing discussion and analysis of the Companys financial condition and results of operations are based upon our unaudited

condensed financial statements, which have been prepared in accordance with U.S.

The preparation of these unaudited condensed

financial statements requires the Companys management to make estimates and judgments that affect the reported amounts of

assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities.

On an on-going basis, the Company

evaluates its estimates, including those related to revenue recognition, collection of accounts receivable, valuation of inventories,

and amortization of vineyard development costs.

The Company bases its estimates on historical experience and on various other assumptions

that are believed to be reasonable under the circumstances.

Actual results may differ from these estimates under different assumptions

or conditions.

A description of the Companys critical accounting policies and related judgments and estimates that affect

the preparation of the Companys financial statements is set forth in the Companys Annual Report on Form 10-K for

the year ended December 31, 2020.

Such policies were unchanged during the nine months ended September 30, 2021.

A description of the Companys critical accounting policies and related judgments and estimates that affect the

preparation of the Companys financial statements is set forth in the Companys Annual Report on Form 10-K for the year ended

December 31, 2021.

Such policies were unchanged during the three months ended March 31, 2022.

Company, one of the largest wine producers in Oregon by volume, believes its success is dependent upon its ability to:

and purchase high quality vinifera wine grapes;

(1) grow and purchase

high quality vinifera wine grapes;

(2) vinify the grapes into premium, super premium and ultra-premium wine;

achieve significant brand recognition for its wines, first in Oregon, and then nationally and internationally;

(4) effectively

distribute and sell its products nationally;

(3) achieve significant

brand recognition for its wines, first in Oregon, and then nationally and internationally;

(4) effectively distribute and sell its products

and (5) continue to build on its base of direct to consumer sales.

Companys goal is to continue to build on a reputation for producing some of Oregons finest, most sought-after wines.

The Company has focused on positioning itself for strategic growth through property purchases, property development and issuance

of the Companys Series A Redeemable Preferred Stock (the Preferred Stock).

Management expects near term financial

results to be negatively impacted by these activities as a result of incurring costs of accrued preferred stock dividends, strategic

planning and development costs and other growth associated costs.

Companys wines are made from grapes grown in vineyards owned, leased or contracted by the Company, and from grapes purchased

from other vineyards.

The grapes are harvested, fermented and made into wine primarily at the Companys winery in Turner

Oregon (the Winery) and the wines are sold principally under the Companys Willamette Valley Vineyards label,

but also under the Griffin Creek, Pambrun, Elton, Maison Bleue, Metis, Natoma, Elton, Domaine Willamette and Tualatin Estates

The Company also owns the Tualatin Estate Vineyards and Winery, located near Forest Grove, Oregon.

The Company generates

revenues from the sales of wine to wholesalers and direct to consumers.

Company has focused on positioning itself for strategic growth through property purchases, property development and issuance of the Companys

Series A Redeemable Preferred Stock (the Preferred Stock).

Management expects near term financial results to be negatively

impacted by these activities as a result of incurring costs of accrued preferred stock dividends, strategic planning and development

costs and other growth associated costs.

Companys wines are made from grapes grown in vineyards owned, leased or contracted by the Company, and from grapes purchased from

other vineyards.

The grapes are harvested, fermented and made into wine primarily at the Companys winery in Turner Oregon (the

Winery) and the wines are sold principally under the Companys Willamette Valley Vineyards label, but also under

the Griffin Creek, Pambrun, Elton, Maison Bleue, Metis, Natoma, Pere Ami, Elton, Domaine Willamette and Tualatin Estates labels.

Company also owns the Tualatin Estate Vineyards and Winery, located near Forest Grove, Oregon.

Company generates revenues from the sales of wine to wholesalers and direct to consumers.

to consumer sales primarily include sales through the Companys tasting rooms, telephone, internet and wine club.

to consumer sales are at a higher unit price than sales through distributors due to prices received being closer to retail than

those prices paid by wholesalers.

The Company continues to emphasize growth in direct to consumer sales through the Companys

35,642 square foot hospitality facility at the Winery, expansion of our operations, and growth in wine club membership.

Additionally,

the Companys Preferred Stock sales since August 2015 have resulted in approximately 8,000 new preferred stockholders many

of which the Company believes are wine enthusiasts.

When considering joint ownership, we believe these new stockholders represent

approximately 12,000 current and potential customers of the Company.

Direct to consumer

sales are at a higher unit price than sales through distributors due to prices received being closer to retail than those prices paid

by wholesalers.

The Company continues to emphasize growth in direct to consumer sales through the Companys existing tasting rooms

and the opening of new locations, and growth in wine club membership.

Additionally, the Companys Preferred Stock sales since August

2015 have resulted in approximately 10,000 new preferred stockholders many of which the Company believes are wine enthusiasts.

When considering

joint ownership, we believe these new stockholders represent approximately 15,000 current and potential customers of the Company.

Periodically,

the Company will sell grapes or bulk wine, due to them not meeting Company standards or being in excess of production targets,

however this is not a significant part of the Companys activities.

The Company had no bulk wine sales for the nine months

ended September 30, 2021 and $28,734 in bulk wine sales for the same period of 2020.

Company sold 145,153 and 130,705 cases of produced wine during the nine months ended September 30, 2021 and 2020, respectively,

an increase of 14,448 cases, or 11.1% in the current year period over the prior year period.

The increase in wine case sales

was primarily the result of increased direct case sales as well as increased case sales through distributors.

the Company will sell grapes or bulk wine, due to them not meeting Company standards or being in excess of production targets, however

this is not a significant part of the Companys activities.

The Company had $10,500 in bulk wine sales for the three months ended

March 31, 2022 and no bulk wine sales for the same period of 2021.

Company sold 33,639 and 38,060 cases of produced wine during the three months ended March 31, 2022 and 2021, respectively, a decrease

of 4,421 cases, or 11.6% in the current year period over the prior year period.

The decrease in wine case sales was primarily the

result of the lack of availability of some vintages until later in the quarter when compared to the prior year period.

of sales includes grape costs, whether purchased or grown at Company vineyards, winemaking and processing costs, bottling, packaging,

2 unchanged sentences

of vineyard development costs.

At September 30, 2021, wine inventory included

135,129 cases of bottled wine and 326,685 gallons of bulk wine in various stages of the aging process.

Case wine is expected to be sold

over the next 12 to 24 months and generally before the release date of the next vintage.

The Winery bottled 173,319 cases during

the nine months ended September 30, 2021.

Valley Vineyards continues to receive positive recognition through national magazines, regional publications, local newspapers

and online bloggers including the accolades below.

International Wine Report awarded the Companys 2018 Bernau Block Pinot Noir with 90 points, 2019 Estate Pinot Noir with

a 90 points, 2019 Estate Chardonnay with 91 points and Estate Rose of Pinot Noir with 91 points,

Wine Panel awarded the Companys 2019 Estate Pinot Noir with 91 points, 2020 Pinot Gris with 93 points and 2019

White Pinot Noir with 90 points,

Press Northwest described the 2020 Whole Cluster Rose of Pinot Noir with a Unanimously Outstanding!

Companys 2020 Whole Cluster Pinot Noir was featured in an article by Wine Enthusiast called, In Oregons

Willamette Valley, Elegant Pinot Noir for Less than $40, with the wines 90 point score included.

March 31, 2022, wine inventory included 113,586 cases of bottled wine and 385,333 gallons of bulk wine in various stages of the aging

Case wine is expected to be sold over the next 12 to 24 months and generally before the release date of the next vintage.

Winery bottled 46,142 cases during the three months ended March 31, 2022.

Valley Vineyards continues to receive positive recognition through national magazines, regional publications, local newspapers and online

bloggers including the accolades below.

Enthusiast rated the Companys 2019 Tualatin Estate Chardonnay with 91 points, 2019 Tualatin Estate Pinot Noir with 90 points, 2017 Bernau

Estate Brut with 92 points & Editors Choice and 2017 Bernau Estate Blanc de Blancs with 91 points.

Suckling rated the Companys 2019 Vintage 46 Chardonnay with 94 points, 2019 Vintage 46 Pinot Noir with 93 points, 2019 Elton Pinot Noir

with 92 points and 2019 Bernau Block Pinot Noir with 90 points.

He reviewed the Companys Elton wines and awarded the 2019 Self-Rooted

Pinot Noir with 95 points, 2019 Florine Pinot Noir with 92 points and 2019 Chardonnay with 93 points.

He reviewed the Companys Pambrun

wines and scored the 2019 Merlot with 90 points and 2019 Chrsyologue with 90 points.

The Companys Maison Bleue wines received

scores of 94 points for the 2019 Voyageur Syrah, 94 points from the 2019 Graveiere Syrah and 93 points for the 2019 Frontiere Syrah.

The Companys Bernau Estate methode traditionelle sparkling wines were reviewed and awarded 91 points for the 2017 Brut, 92 points for

the 2017 Brut Rose and 90 points for the 2017 Blanc de Blancs.

rated the Companys 2019 Estate Pinot Noir with 90 points, 2019 Tualatin Estate Pinot Noir with 90 points, 2018 Elton Pinot Noir with

91 points, 2018 Bernau Block Pinot Noir with 93 points, 2018 Tualatin Estate Pinot Noir with 92 points and 2018 Hannah Pinot Noir with

Vinous also reviewed the Companys Pambrun wines and scored the 2018 Pambrun Cabernet Sauvignon with 92 points, 2018 Pambrun

Merlot with 92 points and 2018 Pambrun Chrysologue with 92 points.

The Companys Maison Bleue wines recieved scores of 92 points

for the 2019 Voyageur Syrah, 92 points from the 2019 Graveiere Syrah and 92 points for the 2019 Frontiere Syrah.

Companys 2021 Estate Rose of Pinot Noir received a 92 points and Judges Selection from The Global Fine Wine Challenge.

of COVID-19 on Operations

COVID-19 pandemic has been declared a National Public Health Emergency in the United States, and on March 8, 2020, Oregon Governor

Kate Brown declared a state of emergency to address the spread of COVID-19 in Oregon.

The outbreak in Oregon and other parts

of the United States, as well as the response to COVID-19 by federal, state and local governments could have a continued material

adverse impact on economic and market conditions in the United States, which may negatively affect our business and operations.

Although the administration of vaccines in Oregon and throughout the United States contributed to the lifting of certain restrictive

measures, there remains ongoing uncertainty about the impact of COVID-19 variations on infection levels.

The re-emergence of significant

increases in infection rates could result in governments re-imposing restrictive measures that could reduce or impair economic

Consequently, the COVID-19 pandemic and the government responses to the outbreak presents continued uncertainty and

risk with respect to the Company and its performance and financial results.

the exception of key operations personnel, we have shifted our office staff to remote workstations, and we expect we will continue

to operate remotely until management determines it is safe for employees to return to offices.

Far exceeding the required Oregon

Healthy Authority protocols, a new state-of-the-art UV light filtration has been installed in the Companys HVAC system

to reduce harmful viruses in the air at its tasting room locations and staff offices.

COVID-19 pandemic has been declared a National Public Health Emergency in the United States, and on March 8, 2020, Oregon Governor Kate

Brown declared a state of emergency to address the spread of COVID-19 in Oregon.

The outbreak in Oregon and other parts of the United

States, as well as the response to COVID-19 by federal, state and local governments have had a material adverse impact on economic and

market conditions in the United States.

Although the administration of vaccines in Oregon and throughout the United States contributed

to the lifting of restrictive measures, there remains ongoing uncertainty about the impact of COVID-19 variations on infection levels.

The re-emergence of significant increases in infection rates could result in governments re-imposing some restrictive measures that could

reduce or impair economic activity.

Consequently, the COVID-19 pandemic and the government responses to the outbreak presents continued

uncertainty and risk with respect to the Company and its performance and financial results.

the required Oregon Healthy Authority protocols, a state-of-the-art UV light filtration has been installed in the Companys HVAC

system to reduce harmful viruses in the air at its tasting room locations and staff offices.

have not yet experienced significant disruptions to our supply chain network;

however, any future restrictions imposed by our

local or state governments may have a negative impact on our future direct to consumer sales.

In response to the previous closure

of, and capacity restrictions in, our tasting rooms, the Company launched curbside pick-ups, and complimentary shipping specials

with minimum purchase, which were able to more than offset the expected declines in direct to consumer sales.

however, any future restrictions imposed by our local or

state governments may have a negative impact on our future direct to consumer sales.

Additionally,

the demand for the Companys wine sold directly or through distributors to restaurants, bars, and other hospitality locations

could be reduced in the near-term due to the re-imposition of orders from state and local governments restricting consumers from

visiting, as well as in some cases the temporary closure of such establishments.

extent of the impact of the COVID-19 pandemic on the Companys business is highly uncertain and difficult to predict, as

the response to the pandemic, and in particular the response to the COVID-19 variants that have emerged, is continuing to evolve.

The severity of the impact of the COVID-19 pandemic on the Companys business will depend on a number of factors, including,

but not limited to, the duration and severity of the pandemic and the extent and severity of the impact on the Companys

customers, all of which are uncertain and cannot be predicted.

the demand for the Companys wine sold directly or through distributors to restaurants, bars, and other hospitality locations could

be reduced in the near-term due to the re-imposition of orders from state and local governments restricting consumers from visiting,

as well as in some cases the temporary closure of such establishments.

extent of the future impact of the COVID-19 pandemic on the Companys business is highly uncertain and difficult to predict, as

the response to the pandemic is continuing to evolve.

The severity of the impact of the COVID-19 pandemic on the Companys business

will depend on a number of factors, including, but not limited to, the duration and severity of the pandemic and the extent and severity

of the impact on the Companys customers, all of which are uncertain and cannot be predicted.

RESULTS OF OPERATIONS

revenue for the three months ended September 30, 2021 and 2020 were $7,641,228 and $6,918,131, respectively, an increase of $723,097,

revenue for the three months ended March 31, 2022 and 2021 was $6,242,318 and $5,765,338, respectively, an increase of $476,980,

or 8.3%, in the current year period over the prior year period.

This increase was caused by an

increase in direct sales of $699,172 and an increase in direct sales through distributors of $23,925 in the current year three-month

period over the prior year period.

The increase in direct sales to consumers was primarily the result of increased revenue

from tasting room sales, phone sales and wine club sales.

Sales revenue for the nine months ended September 30, 2021 and 2020

were $22,356,517 and $19,008,680, respectively, an increase of $3,347,837, or 17.6%, in the current year period over the prior

This increase was mainly caused by an increase in revenues

from direct sales of $2,000,026 and an increase in revenues from sales through distributors of $1,347,811 in the current year

period over the prior year period.

The increase in revenues from direct sales to consumers was primarily the result of

increased phone sales, wine club and internet sales.

The increase in sales through distributors was primarily the result of an

increase in off-premise sales.

of Sales for the three months ended September 30, 2021 and 2020 were $3,179,590 and $2,696,934, respectively, an increase of $482,656,

This increase was caused by an increase in revenues from direct

sales of $651,124 being partially offset by a decrease in revenues from shipments to distributors of $174,144 in the current year three-month

period over the same period in the prior year.

increase in direct sales to consumers was primarily the result of increased retail sales revenues from our tasting rooms, wine club and

The decrease in revenue from the distributors was primarily attributed

to the lack of available inventory to ship.

of sales for the three months ended March 31, 2022 and 2021 was $2,522,289 and $2,271,771, respectively, an increase of $250,518,

or 11.0%, in the current period over the prior year period.

This change was primarily the result of an increase in sales and the

mix of vintages sold in 2021.

Cost of Sales for the nine months ended September 30, 2021 and 2020 were $9,261,589 and $7,373,909,

respectively, an increase of $1,887,680 or 25.6%, in the current period over the prior year period.

This change was primarily

the result of an increase in sales in 2021 and the mix of sales channels and vintages sold between the two periods.

Gross profit as a percentage of net sales for the three

months ended September 30, 2021 and 2020 was 58.4% and 61.0%, respectively, a decrease of 2.6 percentage points in the current year period

over the prior year period mostly as a result of higher cost vintages produced in 2020 that were sold in 2021.

Gross profit as a percentage

of net sales for the nine months ended September 30, 2021 and 2020 was 58.6% and 61.2%, respectively, a decrease of 2.6 percentage points

in the current year period over the prior year period.

This decrease was primarily the result of higher cost vintages produced in 2020

and sold in 2021 combined with the mix of products sold in the period.

This change was primarily the result of an increase in sales in the first

quarter of 2022 compared to the same quarter in 2021.

profit for the three months ended March 31, 2022 and 2021 was $3,720,029 and $3,493,567, respectively, an increase of $226,462, or 6.5%,

in the first quarter of 2022 over the same quarter in the prior year.

This increase was primarily the result of an increase in direct

sales in the first three months of the current year compared to the same period in 2021.

profit as a percentage of net sales for the three months ended March 31, 2022 and 2021 was 59.6% and 60.6%, respectively, a decrease

of 1.0 percentage point in the current quarter over the same quarter in the prior year.

The decrease was primarily the result of the

higher product costs of the more recent vintages sold in the current quarter.

General and Administrative Expenses

general and administrative expense for the three months ended September 30, 2021 and 2020 was $3,768,765 and $2,917,363 respectively,

an increase of $851,402, or 29.2%, in the current quarter over the same quarter in the prior year.

This increase was primarily

the result of an increase in selling expenses of $459,168, or 24.5% and an increase in general and administrative expenses of

$392,234, or 37.7% in the current quarter compared to the same quarter last year.

Selling, general and administrative expense

for the nine months ended September 30, 2021 and 2020 was $10,688,452 and $8,302,825, respectively, an increase of $2,385,627,

or 28.7%, in the current year period over the prior year period.

This increase was primarily the result of an increase in selling

expenses of $1,448,919, or 27.7% and an increase in general and administrative expenses of $936,708, or 30.6% in the current year

period compared to the same period in 2020.

Selling expenses increased in both the third quarter and nine months of 2021 compared

to the same periods in 2020 primarily as a result of our tasting rooms being open for more days in 2021 compared to 2020 resulting

in higher labor and related costs associated with operating the tasting rooms.

General and administrative expenses increased in

the third quarter of 2021 compared to the same quarter of 2020 primarily a result of more maintenance costs and professional fees

and increased for the nine months ended September 30, 2021 compared to the same period in 2020, primarily as a result of increased

maintenance and compensation related costs compared to the same period in 2020.

expense for the three months ended September 30, 2021 and 2020 was $96,473 and $103,283, respectively, a decrease of $6,810 or

6.6%, in the third quarter of 2021 over the same quarter in the prior year.

Interest expense for the nine months ended September

30, 2021 and 2020 was $293,548 and $314,158, respectively, a decrease of $20,610 or 6.6%, in the current year period over the

prior year period.

The decrease in interest expense for the third quarter and nine months of 2021 compared to the same periods

in 2020 was primarily the result of decreased debt in the current period compared to the third quarter and nine months of 2020.

income tax expense for the three months ended September 30, 2021 and 2020 was $172,256 and $343,464, respectively, a decrease

of $171,208 or 49.8%, in the third quarter of 2021 compared to the same quarter in the prior year as a result of lower pre-tax

income in the third quarter of 2021, compared to the same quarter in 2020.

The Companys estimated federal and state combined

income tax rate was 27.4% and 27.7% for the three months ended September 30, 2021 and 2020, respectively.

The income tax expense

for the nine months ended September 30, 2021 and 2020 was $624,839 and $869,230, respectively, a decrease of $244,391 or 28.1%,

in the current year period over the prior year period mostly a result of lower pre-tax income in the first nine months of 2021,

compared to the same period in 2020.

The Companys estimated federal and state combined income tax rate was 27.4% for both

the nine months ended September 30, 2021 and 2020, respectively.

income for the three months ended September 30, 2021 and 2020 was $456,191 and $896,799, respectively, a decrease of $440,608,

or 49.1%, in the third quarter of 2021 over the same quarter in the prior year.

Net income for the nine months ended September

30, 2021 and 2020 was $1,656,427 and $2,304,302, respectively, a decrease of $647,875, or 28.1%, in the current year period over

the prior year period.

The decrease in net income for the third quarter and nine months of 2021, compared to the comparable periods

in 2020, was primarily the result higher gross profits in 2021 being more than offset by increased operating expenses mostly as

a result of increased costs associated with our tasting rooms being open for more days in 2021 compared to 2020.

Applicable to Common Shareholders

applicable to common shareholders for the three months ended September 30, 2021 and 2020 was $95,120 and $640,347, respectively,

a decrease of $545,227, or 85.1%, in the third quarter of 2021 over the same quarter in the prior year.

Income applicable to common

shareholders for the nine months ended September 30, 2021 and 2020 was $573,214 and $1,534,946, respectively, a decrease of $961,732,

or 62.7%, in the current year period over the prior year period.

The decrease in income applicable to common shareholders in the

third quarter and nine months of 2021, compared to the same periods of 2020, was the result of lower net income and higher dividend

costs associated with the increased number of shares of Preferred Stock in the current periods compared to the same periods in 2020.

general and administrative expenses for the three months ended March 31, 2022 and 2021 was $3,856,261 and $3,317,558, respectively, an

increase of $538,703, or 16.2%, in the current quarter over the same quarter in the prior year.

This increase was primarily the result

of an increase in selling expenses of $361,062, or 17.1% and an increase in general and administrative expenses of $177,641, or 14.8%

in the current quarter compared to the same quarter last year.

Selling expenses increased in 2022 compared to 2021 primarily as

a result of the higher selling expenses related to the increase in direct sales and start up costs related to the opening of new tasting

room locations.

General and administrative expenses increased in the first quarter of 2022 compared to the same quarter of 2021 primarily

as a result of higher maintenance, human resource and IT costs.

expense for the three months ended March 31, 2022 and 2021 was $91,446 and $99,576, respectively, a decrease of $8,130 or 8.2%, in the

first quarter of 2022 over the same quarter in the prior year.

The decrease in interest expense for the first quarter was primarily the

result of lower debt compared to the first quarter of 2021.

Tax (Expense) Benefit

income tax (expense) benefit for the three months ended March 31, 2022 and 2021 was $37,323 and $(46,279),

respectively, an increase of $83,602 or 180.6%, in the first quarter of 2022 over the same quarter in the prior year, primarily

as a result of lower pre-tax income in the first quarter of 2022, compared to the same quarter in 2021.

The Companys estimated

federal and state combined income tax rate for the three months ended March 31, 2022 and 2021 was 27.4% and 27.4%, respectively.

Income (Loss)

income (loss) for the three months ended March 31, 2022 and 2021 was $(98,942) and $122,685, respectively, a decrease of $221,627, or

180.6%, in the first quarter of 2022 over the same quarter in the prior year.

The decrease in net income for the first quarter of 2022,

compared to the comparable period in 2021, was primarily the result of higher selling and administrative expenses.

Loss Applicable to Common Shareholders

l oss applicable to common shareholders for the three

months ended March 31, 2022 and 2021 was $565,554 and $236,951, respectively, an increase of $328,603, or 138.7%, in the first quarter

of 2022 over the same quarter in the prior year.

The increase in loss applicable to common shareholders in the first quarter of 2022,

compared to the same period of 2021, was the result of a lower net income and a higher accrued preferred stock dividend in the current

and Capital Resources

September 30, 2021, the Company had a working capital balance of $23.9 million and a current working capital ratio of 3.25:1.

September 30, 2021, the Company had a cash balance of $13,891,696.

March 31, 2022, the Company had a working capital balance of $23.9 million and a current working capital ratio of 4.23:1.

March 31, 2022, the Company had a cash balance of $8,568,158.

At December 31, 2021, the Company had a cash balance of $13,747,285.

This decrease is primarily the result of cash used in construction activities being partially offset with the proceeds from Preferred

Stock subscriptions.

The construction of a new tasting room and winery in Dundee, Oregon is expected to cost approximately $15.6

million, which will be funded through a combination of cash on hand as well as equity financing through Preferred Stock offerings.

Construction began in July 2019 and was paused in March 2020 as a result of the uncertainty surrounding the COVID-19 pandemic

and has now been restarted.

As of September 30, 2021, we had incurred approximately $8.7 million on the project.

cash generated from operating activities in the nine months ended September 30, 2021 was $3,770,784.

Cash from operating activities

for the nine months ended September 30, 2021 was primarily associated with net income, reduced receivables, increased grapes payable

and income tax receivable, being partially offset by increased inventory and a reduction in accrued expenses.

cash used in investing activities in the nine months ended September 30, 2021 was $6,867,420.

Cash used in investing activities

for the nine months ended September 30, 2021 primarily consisted of cash used on construction activity and vineyard development

cash generated from financing activities in the nine months ended September 30, 2021 was $2,988,577.

Cash generated from financing

activities for the nine months ended September 30, 2021 primarily consisted of proceeds from investor deposits related to the

Preferred Stock offering as well as the issuance of Preferred Stock, being partially offset by the repayment of debt.

decrease is primarily the result of investing in construction activity and the payment of grapes payable.

The construction

of a new tasting room and winery in Dundee, Oregon is expected to cost approximately $15.6 million, which is expected to be funded through

a combination of cash on hand as well as equity financing through Preferred Stock offerings.

Construction began in July 2019 and was

paused in March 2020 as a result of the uncertainty surrounding the COVID-19 pandemic and has now been restarted.

As of March 31, 2022,

we had incurred approximately $12.1 million on the project.

cash used for operating activities in the three months ended March 31, 2022 was $670,304.

Cash used in operating activities for the three

months ended March 31, 2022 was primarily associated with reduced grapes payable, accounts payable and increased inventories, being partially

offset by decreased accounts receivable and depreciation and amortization.

cash used in investing activities in the three months ended March 31, 2022 was $5,138,816.

Cash used in investing activities for the

three months ended March 31, 2022 primarily consisted of cash used on construction activity and vineyard development costs.

cash generated from financing activities in the three months ended March 31, 2022 was $629,993.

Cash generated from financing activities

for the three months ended March 31, 2022 primarily consisted of proceeds from the issuance of Preferred Stock, being partially offset

by the repayment of debt.

December of 2005, the Company entered into a revolving line of credit agreement with Umpqua Bank that allows borrowing up to $2,000,000

2 unchanged sentences

at prime less 0.5%, with a floor of 3.25%, is payable monthly, and is subject to renewal.

In July 2021, the Company renewed the

credit agreement until July 31, 2023.

At September 30, 2021 and December 31, 2020, there was no outstanding balance on this revolving

line of credit.

of September 30, 2021, the Company had a 15-year installment note payable of $1,318,301, due in quarterly payments of $42,534,

associated with the purchase of property in the Dundee Hills AVA.

of September 30, 2021, the Company had a total long-term debt balance of $5,649,703, including the portion due in the next year,

owed to Farm Credit Services, exclusive of debt issuance costs of $135,796.

As of December 31, 2020, the Company had a total long-term

debt balance of $5,984,272, exclusive of debt issuance costs of $145,731.

Company believes that cash flow from operations and funds available under the Companys existing credit facilities will

be sufficient to meet the Companys short-term needs.

Due to the uncertainty surrounding the future impact of the COVID-19

pandemic on the Company we will continue to evaluate funding mechanisms to support our long-term funding requirements.

Balance Sheet Arrangements

of September 30, 2021, and December 31, 2020, the Company had no off-balance sheet arrangements.

AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

In July 2021, the Company renewed the credit

agreement until July 31, 2023.

At March 31, 2022 and December 31, 2021, there was no outstanding balance on this revolving line of credit.

of March 31, 2022, the Company had a 15-year installment note payable of $1,272,440, due in quarterly payments of $42,534, associated

with the purchase of property in the Dundee Hills AVA.

of March 31, 2022, the Company had a total long-term debt balance of $5,418,283, including the portion due in the next year, owed to

Farm Credit Services, exclusive of debt issuance costs of $129,172.

As of December 31, 2021, the Company had a total long-term debt balance

of $5,535,097, exclusive of debt issuance costs of $132,484.

Company believes that cash flow from operations and funds available under the Companys existing credit facilities will be sufficient

to meet the Companys short-term needs.

Due to the uncertainty surrounding the future impact of the COVID-19 pandemic on the Company

we will continue to evaluate funding mechanisms to support our long-term funding requirements.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

a smaller reporting company, the Company is not required to provide the information required by this item.

AND PROCEDURES

Controls and Procedures – The Company carried out an evaluation as of the end of the period covered by this Quarterly

Report on Form 10-Q, under the supervision and with the participation of the Companys management, including the Companys

Chief Executive Officer and the Companys Chief Financial Officer, of the effectiveness of the Companys disclosure

controls and procedures pursuant to paragraph (b) of Rule 13a-15 and 15d-5 under the Securities Exchange Act of 1934, as amended

(the Exchange Act).

Based on that review, the Chief Executive Officer and the Chief Financial Officer have concluded

that the Companys disclosure controls and procedures are effective, as of the end of the period covered by this report,

to ensure that information required to be disclosed by the Company in the reports the Company files or submit under the Exchange

Act (1) is recorded, processed, summarized, and reported within the time periods specified in the Securities and Exchange Commissions

rules and forms, and (2) is accumulated and communicated to the Companys management, including the Companys principal

executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure.

in Internal Control over Financial Reporting – There have been no changes in our internal control over financial

reporting during the quarter ended September 30, 2021 that have materially affected, or are reasonably likely to materially affect,

our internal control over financial reporting.

OTHER INFORMATION

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements