What changed in this filing

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Item 1. Financial Statements

2022-11-14 compared with 2022-08-11 · 259 added, 227 removed, 431 unchanged (53% of the section changed)

2 unchanged sentences

BALANCE SHEETS

September 30,

CURRENT ASSETS

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SHAREHOLDERS EQUITY

Redeemable preferred stock, no

par value, 10,000,000

shares authorized, 8,483,862

shares issued and outstanding, liquidation preference of $ 36,141,252 ,

at June 30, 2022 and 7,523,539

shares issued and outstanding, liquidation preference of $ 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 June 30, 2022 and December 31, 2021, respectively.

Redeemable preferred stock, no par value, 10,000,000 shares authorized, 8,483,862 shares issued and outstanding, liquidation preference of $ 36,607,864 , at September 30, 2022 and 7,523,539 shares issued and outstanding, liquidation preference of $ 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 September 30, 2022 and December 31, 2021, respectively.

Retained earnings

1 unchanged sentence

LIABILITIES AND SHAREHOLDERS EQUITY

The accompanying notes are an integral part of this condensed financial statement

accompanying notes are an integral part of this condensed financial statement

VALLEY VINEYARDS, INC.

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Three months ended

Six months ended

Nine months ended

September 30,

COST OF SALES

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Total operating expenses

INCOME FROM OPERATIONS

INCOME (LOSS) FROM OPERATIONS

( 1,226,035 )

OTHER INCOME (EXPENSE)

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Interest expense

Other income (expense), net

INCOME BEFORE INCOME TAXES

INCOME TAX PROVISION

Other income, net

INCOME (LOSS) BEFORE INCOME TAXES

( 1,308,235 )

( 1,089,879 )

INCOME TAX (EXPENSE) BENEFIT

NET INCOME (LOSS)

Accrued preferred stock dividends

( 1,399,837 )

( 1,083,213 )

NET INCOME (LOSS) APPLICABLE TO COMMON SHAREHOLDERS

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Earnings (loss) per common share after preferred dividends, basic and diluted

Weighted-average number of common shares outstanding

The accompanying notes are an integral part of this condensed financial statement

Weighted-average number of common shares outstanding, basic and diluted

accompanying notes are an integral part of this condensed financial statement

VALLEY VINEYARDS, INC.

STATEMENTS OF SHAREHOLDERS EQUITY

Six-Month Period Ended June 30, 2022

Nine-Month Period Ended September 30, 2022

Preferred Stock

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Balance at June 30, 2022

Six-Month Period Ended June 30, 2021

Preferred stock dividends accrued

Balance at September 30, 2022

Nine-Month Period Ended September 30, 2021

Preferred Stock

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Balance at June 30, 2021

The accompanying notes are an integral part of this condensed financial statement

Stock compensation expense

Preferred stock dividends accrued

Balance at September 30, 2021

accompanying notes are an integral part of this condensed financial statement

VALLEY VINEYARDS, INC.

OF CASH FLOWS

Six months ended June 30,

Nine months ended September 30,

CASH FLOWS FROM OPERATING ACTIVITIES

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

Net income (loss)

$ ( 791,362 )

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

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( 1,326,278 )

( 1,307,165 )

Accounts payable

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Net cash from operating activities

( 2,139,960 )

CASH FLOWS FROM INVESTING ACTIVITIES

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Accrued preferred stock dividends

The accompanying notes are an integral part of this condensed financial statement

accompanying notes are an integral part of this condensed financial statement

TO UNAUDITED INTERIM FINANCIAL STATEMENTS

BASIS OF PRESENTATION

accompanying unaudited interim financial statements as of June 30, 2022 and for the three and six months ended June 30, 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.

accompanying unaudited interim financial statements as of September 30, 2022 and for the three and nine months ended September 30, 2022

and 2021 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, 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

information or footnote disclosures normally included in financial statements prepared in accordance with U.S.

GAAP have been condensed

or omitted pursuant to the rules and regulations of the Securities and Exchange Commission.

In the opinion of management, the accompanying

financial statements include all adjustments necessary (which are of a normal recurring nature) for the fair statement of the results

of the interim periods presented.

The accompanying 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 and six months ended June 30, 2022 are not necessarily indicative of the results that may be expected for the entire

year ending December 31, 2022, or any portion thereof.

Certain information or footnote disclosures normally included in financial statements prepared in accordance with U.S.

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, 2021, as presented in the Companys Annual Report on Form 10-K.

results for the three and nine months ended September 30, 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 outbreak in Oregon and other parts of the United States, as well as the response to COVID-19 by federal, state and local governments

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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;

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

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

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

of Earnings Per Share

months ended June 30,

preferred stock dividends

(loss) applicable to common shares

Three months ended September 30,

Nine months ended September 30,

Net income (loss)

$ ( 949,821 )

$ ( 791,362 )

Weighted-average

common shares outstanding

(loss) per common share after preferred dividends, basic and diluted

Accrued preferred stock dividends

( 1,399,837 )

( 1,083,213 )

Net income (loss) applicable to common shares

$ ( 1,416,433 )

$ ( 2,191,199 )

Weighted-average common shares outstanding basic and diluted

Earnings (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)

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Schedule of Inventories

June 30, 2022

September 30, 2022

December 31, 2021

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Schedule of Property and Equipment, Net

June 30, 2022

September 30, 2022

December 31, 2021

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Property and equipment, net

expense for the six months ended June 30, 2022 and 2021 was $ 816,806 and $ 818,116 , respectively.

Depreciation expense for the three months

ended June 30, 2022 and 2021 was $ 432,826 and $ 406,759 , respectively.

expense for the nine months ended September 30, 2022 and 2021 was $ 1,384,200 and $ 1,230,459 , respectively.

Depreciation expense for the

three months ended September 30, 2022 and 2021 was $ 567,394 and $ 446,033 , 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 June 30, 2022 and December 31, 2021, there was no outstanding balance

At September 30, 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 June 30, 2022, the Company was in compliance with these financial

As of September 30, 2022, the Company was in compliance with these

financial covenants.

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

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

As of June 30, 2022, the Company

had a balance of $1,248,993 due on this note.

As of September 30, 2022, the

Company had a balance of $1,225,194 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 $ 5,301,492 and $ 5,535,097 as of June 30, 2022 and December 31, 2021, respectively.

of $ 5,183,190 and $ 5,535,097 as of September 30, 2022 and December 31, 2021, respectively.

The outstanding loans require monthly principal

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The general purposes of these loans were to make capital improvements to the winery and vineyard facilities.

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

As of June 30, 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.

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

Schedule of Long term debt maturity

2022 (excluding the six months ended June 30, 2022)

of June 30, 2022, the Company had unamortized debt issuance costs of $ 125,860 .

As of December 31, 2021, the Company had unamortized 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.

2022 (excluding the nine months ended September 30, 2022)

of September 30, 2022, the Company had unamortized debt issuance costs of $ 122,548 .

As of December 31, 2021, the Company had unamortized

debt issuance costs of $ 132,484 .

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

preferred stock sales 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.

INTEREST AND TAXES PAID

taxes – The Company paid $ 502,000 and $ 40,000 in income taxes for the three months ended June 30, 2022 and 2021, respectively.

The Company paid $ 502,000 and $ 40,000 in income taxes for the six months ended June 30, 2022 and 2021, respectively.

– The Company paid $ 83,776 and $ 95,052 for the three months ended June 30, 2022 and 2021, respectively, in interest on long-term

The Company paid $ 175,222 and $ 190,783 for the six months ended June 30, 2021 and 2020, respectively, in interest on long-term

taxes – The Company paid zero and $ 245,000 in income taxes for the three months ended September 30, 2022 and 2021, respectively.

The Company paid $ 502,000 and $ 285,000 in income taxes for the nine months ended September 30, 2022 and 2021, respectively.

– The Company paid $ 88,102 and $ 93,234 for the three months ended September 30, 2022 and 2021, respectively, in interest on

long-term debt.

The Company paid $ 263,326 and $ 284,017 for the nine months ended September 30, 2021 and 2020, respectively, in interest

on long-term debt.

SEGMENT REPORTING

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

segments for the three and six month periods ending June 30, 2022 and 2021.

segments for the three and nine month periods ending September 30, 2022 and 2021.

Sales figures are net of related excise taxes.

of Revenue by Reporting Segments

Months Ended June 30,

Months Ended September 30,

margin (loss)

$ ( 805,362 )

of total sales

and administration expenses

from operations

Months Ended June 30,

(loss) from operations

$ ( 1,226,035 )

Months Ended September 30,

of total sales

and administration expenses

from operations

sales include zero bulk wine sales for the three months ended June 30, 2022 and June 30, 2021.

Direct sales include $10,500 for bulk wine

sales for the six months ended June 30, 2022 and zero bulk wine sales for the six months ended June 30, 2021.

(loss) from operations

$ ( 917,824 )

sales include zero bulk wine sales for the three months ended September 30, 2022 and September 30, 2021.

Direct sales include $10,500

for bulk wine sales for the nine months ended September 30, 2022 and zero bulk wine sales for the nine months ended September 30, 2021.

SALE OF PREFERRED STOCK

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2020 Form S-3 is not to exceed $20,000,000 .

On June 10, 2020, the Company filed with the SEC a Prospectus Supplement to the January 2020 Form S-3, pursuant to which the Company

On September 10, 2020, the Company filed with the SEC a Prospectus Supplement to the January 2020 Form S-3, pursuant to which the Company

proposed to offer and sell, on a delayed or continuous basis, up to 1,917,525 shares of Series A Redeemable Preferred Stock having proceeds

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periods with four separate offering prices beginning with an offering price of $ 4.85 per share and concluding with an offering of $ 5.15

As of June 30, 2022, the Company had received aggregate proceeds of $8,533,086 from sales of our Series A Redeemable

As of September 30, 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.

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

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.

No further shares of Series A Redeemable Preferred Stock may be offered or sold under this

Prospectus Supplement and all shares sold under this Prospectus Supplement were issued as of June 30, 2022.

of September 30, 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.

No further shares of Series A Redeemable Preferred Stock may be offered or sold under

this Prospectus Supplement and all shares sold under this Prospectus Supplement were issued as of September 30, 2022.

June 30, 2022, the Company filed a shelf Registration Statement on Form S-3 (the June 2020 Form S-3) with the SEC pertaining

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and concluding with an offering of $5.35 per share.

On September 1, 2022, the Company filed with the SEC a Prospectus Supplement to the

June 2022 Form S-3, pursuant to which the Company proposed to offer and sell, on a delayed or continuous basis, up to 284,995 shares

of Series A Redeemable Preferred Stock having proceeds not to exceed $1,467,729.

This Prospectus Supplement established that our shares

of preferred stock were to be sold in three offering periods with three separate offering prices beginning with an offering price of

$5.15 per share and concluding with an offering of $5.35 per share.

On October 3, 2022, the Company filed with the SEC a Prospectus Supplement

to the June 2022 Form S-3, pursuant to which the Company proposed to offer and sell, on a delayed or continuous basis, up to 233,564

shares of Series A Redeemable Preferred Stock having proceeds not to exceed $1,226,211.

This Prospectus Supplement established that our

shares of preferred stock were to be sold in two offering periods with two separate offering prices beginning with an offering price

of $5.25 per share and concluding with an offering of $5.35 per share.

Net proceeds of $2,053,468 have been received under these offerings

as of September, 30 2022 for the issuance of Preferred Stock.

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 June 30, 2022 and December 31, 2021 was $527,868 and $682,881, respectively, which are recorded as a component of unearned revenue on the balance

at September 30, 2022 and December 31, 2021 was $474,290 and $682,881, respectively, which are recorded as a component of 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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The lease contains an escalation provision tied to the CPI not to exceed 2% per annum.

2008 , the Company entered into a 34 -year

In July 2008 , the Company entered into a 34-year

lease agreement with a property owner in the Eola Hills for approximately 110 acres adjacent to the existing Elton Vineyards site.

Terms of this agreement contain rent increases, that rises as the vineyard is developed, and contains an escalation provision of CPI

plus 0.5% per year capped at 4%.

Terms of this agreement contain rent increases, that rises as the vineyard is developed,

and contains an escalation provision of CPI plus 0.5% per year capped at 4%.

March 2017 , the Company entered into a 25-year lease for approximately 18 acres of agricultural land in Dundee, Oregon.

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Three Months Ended

Six Months Ended

June 30, 2022

Nine Months Ended

September 30, 2022

Operating lease cost - Vineyards

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Other Information

Cash paid for amounts included in the measurement of lease liabilities

Cash paid for amounts included in the measurement

of lease liabilities

Operating cash flows from operating leases - Vineyard

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Weighted-average discount rate - Operating leases

assets obtained in exchange for new operating lease obligations were $3,360,917 and zero for the six-months ended June 30, 2022 and 2021,

respectively.

Company has one lease that has not yet commenced as of June 30, 2022, and as such, has not been recognized in the Companys balance

assets obtained in exchange for new operating lease obligations were $3,360,917 and zero for the nine-months ended September 30, 2022

and 2021, respectively.

Company has one lease that has not yet commenced as of September 30, 2022, and as such, has not been recognized in the Companys

balance sheet.

The operating lease is expected to be in 2023 with lease a term of 10 years.

of June 30, 2022, maturities of lease liabilities were as follows:

of September 30, 2022, maturities of lease liabilities were as follows:

of Maturities of Lease Liabilities

Years Ended December 31,

2022 (excluding the six months ended June 30, 2022)

2022 (excluding the nine months ended September 30, 2022)

Total minimal lease payments

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would be due.

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 June 31, 2022, we had spent approximately $13.6 million on the project from our cash reserves.

SUBSEQUENT EVENTS

Agreement – In October 2022, the Company entered into a $5,000,000 loan agreement with FCS.

As of the filing date there

have been no withdrawals under this agreement.

MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

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Such policies

were unchanged during the six months ended June 30, 2022.

were unchanged during the nine months ended September 30, 2022.

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

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this is not a significant part of the Companys activities.

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

June 30, 2022 and zero bulk wine sales for the same period of 2021.

Company sold 85,133 and 98,420 cases of produced wine during the six months ended June 30, 2022 and 2021, respectively, a decrease of

13,287 cases, or 13.5% in the current year period over the prior year period.

The decrease in wine case sales was primarily the

result of decreased case sales through distributors.

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

September 30, 2022 and zero bulk wine sales for the same period of 2021.

Company sold 127,007 and 145,143 cases of produced wine during the nine months ended September 30, 2022 and 2021, respectively, a decrease

of 18,136 cases, or 12.5% in the current year period over the prior year period.

The decrease in wine case sales was primarily the result

of decreased case sales through distributors due to a lack of available product.

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

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of vineyard development costs.

June 30, 2022, wine inventory included 131,585 cases of bottled wine and 220,459 gallons of bulk wine in various stages of the aging

September 30, 2022, wine inventory included 154,525 cases of bottled wine and 123,543 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 75,078 cases during the six months ended June 30, 2022.

Winery bottled 141,619 cases during the nine months ended September 30, 2022.

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

bloggers including the accolades below.

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

Tualatin Estate Chardonnay with 91 points.

The 2019 Bernau Block Pinot Noir received 90 points and the 2019 Elton Pinot Noir received

The inaugural vintage of the 2017 Bernau Estate Méthode Traditionnelle Brut received 91 points

and the 2017 Bernau Estate Blanc de Blancs received 90 points.

Enthusiast Magazine rated the 2019 Founders Reserve Pinot Noir with 90 points.

Sunset International Wine Competition rated our 2021 Whole Cluster Rosé of Pinot Noir with 91 points & Gold and our 2021

Pinot Gris with 90 points and Gold.

Sommeliers Choice Awards rated our 2021 Whole Cluster Rosé of Pinot Noir with Gold and 91 points and our 2021 Pinot Gris

with 90 points and Gold.

& Spirits rated the 2021 Whole Cluster Rosé of Pinot Noir with 91 points and Best Buy.

Enthusiast rated the Companys 2020 Riesling with 90 points & Best Buy, and in the Top 100 Best Buy Wines for 2022.

Young from International Wine Report rated the Companys 2019 Bernau Block Pinot Noir 90 points, 2019 Bernau Block Chardonnay 92

points, 2019 Elton Pinot Noir 92 points.

The Companys Elton wines the 2019 Florine Pinot Noir 90 points, 2019 Self-Rooted Pinot

Noir 91 points and 2019 Chardonnay 91 points.

The Companys Pambrun wines the 2019 Cabernet Sauvignon 92 points, 2019 Merlot 92

points and 2019 Chrysologue 91 points.

The Companys Maison Bleue wines the 2019 Gravière Syrah 92 points, 2019 Voyageur

Syrah 93 points, 2019 Frontière Syrah 92 points and 2021 Lisette Rosé 91 points.

of COVID-19 on Operations

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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;

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OF OPERATIONS

revenue for the three months ended June 30, 2022 and 2021 were $8,700,861 and $8,949,951, respectively, a decrease of $249,090, or 2.8%,

revenue for the three months ended September 30, 2022 and 2021 were $7,602,878 and $7,641,228, respectively, a decrease of $38,350, or

0.5%, in the current year period over the prior year period.

This decrease was caused by a decrease in

sales through distributors of $929,661 being partially offset by an increase in direct sales of $680,571 in the current year three-month

This decrease was caused by a decrease

in sales through distributors of $133,386 being partially offset by an increase in direct sales of $95,036 in the current year three-month

period over the prior year period.

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The increase in direct sales to consumers was primarily the result of retail sales increases

in tasting room revenue.

Sales revenue for the six months ended June 30, 2022 and 2021 were $14,943,179 and $14,715,289, respectively,

an increase of $227,890, or 1.5%, in the current year period over the prior year period.

from the opening of new tasting rooms in 2022.

Three new locations in Dundee, Oregon, Lake Oswego, Oregon and Vancouver, Washington have

opened in 2022.

Sales revenue for the nine months ended September 30, 2022 and 2021 were $22,546,057 and $22,356,517, respectively, an

increase of $189,540, or 0.8%, in the current year period over the prior year period.

This increase was caused by an

increase in revenues from direct sales of $1,331,695 and a decrease in revenues from sales through distributors of $1,103,805 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 tasting room sales.

The decrease in sales through distributors was primarily the result of an decrease in off-premise sales.

of Sales for the three months ended June 30, 2022 and 2021 were $3,873,604 and $3,810,228, respectively, an increase of $63,376, or

1.7%, in the current period over the prior year period.

increase in revenues from direct sales of $1,426,731 being partially offset by a decrease in revenues from sales through distributors

of $1,237,191 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 tasting room sales from the opening of three new locations in 2022.

The decrease in sales through distributors

was primarily the result of a decrease in off-premise sales.

of Sales for the three months ended September 30, 2022 and 2021 were $3,708,695 and $3,179,590, respectively, an increase of $529,105,

or 16.6%, in the current period over the prior year period.

This change was primarily the result of an increase in product costs in 2022

mostly due to higher fruit and packaging costs.

Cost of Sales for the six months ended June 30, 2022 and 2021 were $6,395,893 and

$6,081,999, respectively, an increase of $313,894 or 5.2%, in the current period over the prior year period.

This change was

primarily the result of an increase in fruit and packaging costs in 2022 and the mix of sales channels and vintages sold between the

profit as a percentage of net sales for the three months ended June 30, 2022 and 2021 was 55.5% and 57.4%, respectively, a decrease of

1.9 percentage points in the current year period over the prior year period mostly as a result of higher fruit and packaging costs in

the second quarter of 2022 compared to the same quarter of 2021.

Gross profit as a percentage of net sales for the six months ended June

30, 2022 and 2021 was 57.2% and 58.7%, respectively, a decrease of 1.5 percentage points in the current year period over the prior year

This decrease was primarily the result of higher fruit and labor costs in the first six months of 2022 compared to the same period

in the prior year.

Cost of Sales for the nine months ended September 30, 2022 and 2021 were $10,104,588

and $9,261,589, respectively, an increase of $842,999 or 9.1%, in the current period over the prior year period.

This change was primarily

the result of an increase in fruit and packaging costs in 2022 and the mix of sales channels and vintages sold between the two periods.

profit as a percentage of net sales for the three months ended September 30, 2022 and 2021 was 51.2% and 58.4%, respectively, a decrease

of 7.2 percentage points in the current year period over the prior year period mostly as a result of higher fruit and packaging costs

in the third quarter of 2022 compared to the same quarter of 2021.

Gross profit as a percentage of net sales for the nine months ended

September 30, 2022 and 2021 was 55.2% and 58.6%, respectively, a decrease of 3.4 percentage points in the current year period over the

prior year period.

This decrease was primarily the result of higher fruit, packaging and labor costs in the first nine months of 2022

compared to the same period in the prior year.

General and Administrative Expenses

general and administrative expense for the three months ended June 30, 2022 and 2021 was $4,382,814 and $3,602,129 respectively, an increase

of $780,685, or 21.7%, 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 $784,489, or 35.1% being partially offset by a decrease in general and administrative expenses of $3,804, or 0.3%

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

Selling, general and administrative expense for the six months ended June

30, 2022 and 2021 was $8,239,075 and $6,919,687, respectively, an increase of $1,319,388, or 19.1%, in the current year period over the

Selling, general and administrative expense for the

three months ended September 30, 2022 and 2021 was $5,120,218 and $3,768,765 respectively, an increase of $1,351,453, or 35.9%, 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

$1,438,872 or 61.6% in the third quarter of 2022 compared to the same quarter of 2022 being partially offset by a decrease in general

and administrative expenses of $87,419, or 6.1% in the current quarter compared to the same quarter last year.

Selling, general and administrative

expense for the nine months ended September 30, 2022 and 2021 was $13,359,293 and $10,688,452, respectively, an increase of $2,670,841,

or 25.0%, in the current year period over the prior year period.

This increase was primarily the result of an increase in selling expenses

of $2,584,423, or 38.6% combined with an increase in general and administrative expenses of $86,418, or 2.2% in the current year period

compared to the same period in 2021.

Selling expenses increased in both the third quarter and nine months of 2022 compared to the same

periods in 2021 primarily as a result of more sales coming from tasting rooms which have higher selling costs and from costs related to

the development of four new tasting room and restaurant locations.

The contribution loss related to the opening of the four new locations

were $654,518 in the current quarter and $1,089,380 in the first nine months of 2022.

The contribution loss included lease, labor and

selling costs related to the new locations in 2022.

expense for the three months ended September 30, 2022 and 2021 was $87,220 and $96,473, respectively, a decrease of $9,253 or 9.6%, in

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

Interest expense for the nine months ended September 30, 2022 and

2021 was $269,037 and $293,548, respectively, a decrease of $24,511 or 8.3%, in the current year period over the prior year period.

decrease in interest expense for the third quarter and first nine months of 2022 was primarily the result of decreased debt in the current

periods compared to the third quarter and first nine months of 2021.

income tax (expense) benefit for the three months ended September 30, 2022 and 2021 was $358,414 and $(172,256), respectively, a decrease

of $530,670 or 308.1%, in the third quarter of 2022 over the same quarter in the prior year mostly as a result of the lower pre-tax income

in the third quarter of 2022, compared to the same quarter in 2021.

The Companys estimated federal and state combined income tax

rate was 27.4% and 27.4% for the three months ended September 30, 2022 and 2021, respectively.

The income tax (expense) benefit for the

nine months ended September 30, 2022 was $298,517 and a $(624,839) for September 30, 2021, respectively, a decrease of $923,356 or 147.8%,

in the current year period over the prior year period mostly a result of lower pre-tax income in the first nine months of 2022, compared

to the same period in 2021.

The Companys estimated federal and state combined income tax rate was 27.4% for the nine months ended

September 30, 2022 and 2021.

Income (Loss)

income (loss) for the three months ended September 30, 2022 and 2021 was $(949,821) and $456,191, respectively, a decrease of $1,406,012,

or 308.2%, in the third quarter of 2022 over the same quarter in the prior year.

Net income (loss) for the nine months ended September

30, 2022 and 2021 was $(791,362) and $1,656,427, respectively, a decrease of $2,447,789, or 147.8%, in the current year period over the

prior year period.

This increase was primarily the result of an increase in selling expenses of $1,145,551, or 26.3% combined with an

increase in general and administrative expenses of $173,837, or 6.8% in the current year period compared to the same period in 2021.

Selling expenses increased in both the first half and second quarter of 2022 compared to the same periods in 2021 primarily as a result

of more sales coming from tasting rooms which have higher selling costs and from costs related to the development of new locations.

selling, general and administrative expenses related to the opening of new locations were $254,744 in the current quarter and $438,873

in the first six months of 2022 compared to the same period in the prior year.

expense for the three months ended June 30, 2022 and 2021 was $90,371 and $97,499, respectively, a decrease of $7,128 or 7.3%, in the

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

Interest expense for the six months ended June 30, 2022 and 2021 was

$181,817 and $197,075, respectively, a decrease of $15,258 or 7.7%, in the current year period over the prior year period.

in interest expense for the second quarter and first six months of 2022 was primarily the result of decreased debt in the current periods

compared to the second quarter and first six months of 2021.

income tax expense for the three months ended June 30, 2022 and 2021 was $97,220 and $406,304, respectively, a decrease of $309,084 or

76.1%, in the second quarter of 2022 over the same quarter in the prior year mostly as a result of the lower pre-tax income in the second

quarter of 2022, compared to the same quarter in 2021.

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

and 27.4% for the three months ended June 30, 2022 and 2021, respectively.

The income tax expense for the six months ended June 30, 2022

and 2021 was $59,897 and $452,583, respectively, a decrease of $392,686 or 86.8%, in the current year period over the prior year period

mostly a result of lower pre-tax income in the first six months of 2022, compared to the same period in 2021.

The Companys estimated

federal and state combined income tax rate was 27.4% for the six months ended June 30, 2022 and 2021.

income for the three months ended June 30, 2022 and 2021 was $257,401 and $1,077,551, respectively, a decrease of $820,150, or 76.1%,

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

Net income for the six months ended June 30, 2022 and 2021 was

$158,459 and $1,200,236, respectively, a decrease of $1,041,777, or 86.8%, in the current year period over the prior year period.

decrease in net income for the second quarter and decrease in net income for the first half of 2022, compared to the comparable periods

in 2021, was primarily the result of changes in the gross profits and operating expenses.

The decrease in net income for the third quarter and for the first nine months of 2022, compared to the comparable

periods in 2021, was primarily the result of higher product costs and additional costs related to the opening of three new locations

Income (Loss) Applicable to Common Shareholders

Net income (loss) applicable to common shareholders

for the three months ended June 30, 2022 and 2021 was $(209,212) and $715,045, respectively, a decrease of $924,257, or 129.3%, in the

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

Net income (loss) applicable to common shareholders for the six months

ended June 30, 2022 and 2021 was $(774,766) and $478,094, respectively, a decrease of $1,252,860, or 262.1%, in the current year period

over the prior year period.

The decrease in income applicable to common shareholders in the second quarter and the first six months of

2022, compared to the same periods of 2021, was the result of lower net income and higher dividend costs in the current period.

income (loss) applicable to common shareholders for the three months ended September 30, 2022 and 2021 was $(1,416,433,) and $95,120,

respectively, a decrease of $1,511,553, in the third quarter of 2022 over the same quarter in the prior year.

Net income (loss) applicable

to common shareholders for the nine months ended September 30, 2022 and 2021 was $(2,191,199) and $573,214, respectively, a decrease

of $2,764,413, in the current year period over the prior year period.

The decrease in net income applicable to common shareholders in

the third quarter and the first nine months of 2022, compared to the same periods of 2021, was the result of lower net income and higher

dividend costs in the current period.

and Capital Resources

June 30, 2022, the Company had a working capital balance of $20.0 million and a current working capital ratio of 3.99:1.

June 30, 2022, the Company had a cash balance of $3,128,407, while at December 31, 2021, the Company had a cash balance of $13,747,285.

This decrease in cash was primarily the result of investments in construction activity, the payment of grapes payable and an increase

in inventories.

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.

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 June 30, 2022, we had incurred approximately $13.6 million on the project.

cash used in operating activities in the six months ended June 30, 2022 was $979,069.

Cash used in operating activities for the six months

ended June 30, 2022 was primarily associated with increased inventory, and payment of grapes payable, partially offset by non-cash lease

expense, and depreciation and amortization.

cash used in investing activities in the six months ended June 30, 2022 was $10,129,564.

Cash used in investing activities for the six

months ended June 30, 2022 consisted of cash used on construction activity and vineyard development costs.

cash generated from financing activities in the six months ended June 30, 2022 was $489,755.

September 30, 2022, the Company had a working capital balance of $16.5 million and a current working capital ratio of 2.84:1.

September 30, 2022, the Company had a cash balance of $363,363, while at December 31, 2021, the Company had a cash balance of $13,747,285.

This decrease in cash was primarily the result of investments in property and equipment of $13,117,674, the payment of grapes payable

and an increase in inventories.

cash used in operating activities in the nine months ended September 30, 2022 was $2,139,961.

Cash used in operating activities for the

nine months ended September 30, 2022 was primarily associated with increased inventory, and payment of grapes payable, being partially

offset by non-cash lease expense, and depreciation and amortization.

cash used in investing activities in the nine months ended September 30, 2022 was $13,645,084.

Cash used in investing activities for

the nine months ended September 30, 2022 consisted of cash used on property and equipment and vineyard development costs.

cash generated from financing activities in the nine months ended September 30, 2022 was $2,401,123.

Cash generated from financing activities

for the six months ended June 30, 2022 consisted of proceeds from the issuance of Preferred Stock, partially offset by

the repayment of debt.

for the nine months ended September 30, 2022 consisted of proceeds from the deposits for and 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

4 unchanged sentences

agreement until July 31, 2023.

At June 30, 2022 and December 31, 2021, there was no outstanding balance on this revolving line of credit.

of June 30, 2022, the Company had a 15-year installment note payable of $1,248,993, due in quarterly payments of $42,534, associated

At September 30, 2022 and December 31, 2021, there was no outstanding balance on this revolving line of

of September 30, 2022, the Company had a 15-year installment note payable of $1,225,194, due in quarterly payments of $42,534, associated

with the purchase of property in the Dundee Hills AVA.

of June 30, 2022, the Company had a total long-term debt balance of $5,301,492, including the portion due in the next year, owed to Farm

Credit Services, exclusive of debt issuance costs of $125,860.

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.

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

of September 30, 2022, the Company had a total long-term debt balance of $5,183,190, including the portion due in the next year, owed

to Farm Credit Services, exclusive of debt issuance costs of $122,548.

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 and through

preferred stock sales will be sufficient to meet the Companys short-term needs.

We will continue to evaluate funding mechanisms

to support our long-term funding requirements.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

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What changed 10-Q

Item 1. Financial Statements