What changed in this filing

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Item 1. Financial Statements

2023-08-14 compared with 2023-05-12 · 239 added, 202 removed, 403 unchanged (52% of the section changed)

16 unchanged sentences

Investor deposits for preferred stock

Bank overdraft

Line of credit

11 unchanged sentences

SHAREHOLDERS EQUITY

Redeemable preferred stock, no par value, 10,000,000 shares authorized,

shares issued and outstanding, liquidation preference

$ 39,123,269 , at March 31, 2023 and 9,185,666 shares issued and

outstanding, liquidation preference $ 38,120,514 , at December 31, 2022.

Common stock, no par value, 10,000,000 shares authorized, 4,964,529

shares issued

and outstanding at March 31, 2023 and

December 31, 2022, respectively.

Redeemable preferred stock, no par value, 10,000,000 shares authorized, 9,303,988 shares issued and outstanding, liquidation preference of $ 39,634,989 , at June 30, 2023 and 9,185,666 shares issued and outstanding, liquidation preference $ 38,120,514 , at December 31, 2022.

Common stock, no par value, 10,000,000 shares authorized, 4,964,529 shares issued and outstanding at June 30, 2023 and December 31, 2022, respectively.

Retained earnings

1 unchanged sentence

LIABILITIES AND SHAREHOLDERS EQUITY

accompanying notes are an integral part of this financial statement

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

VALLEY VINEYARDS, INC.

1 unchanged sentence

Three months ended

Six months ended

COST OF SALES

3 unchanged sentences

Total operating expenses

LOSS FROM OPERATIONS

INCOME (LOSS) FROM OPERATIONS

OTHER INCOME (EXPENSE)

1 unchanged sentence

Interest expense

LOSS BEFORE INCOME TAXES

( 1,025,786 )

INCOME TAX BENEFIT

Other income (expense), net

INCOME (LOSS) BEFORE INCOME TAXES

INCOME TAX (EXPENSE) BENEFIT

NET INCOME (LOSS)

Accrued preferred stock dividends

NET LOSS APPLICABLE TO COMMON SHAREHOLDERS

( 1,023,439 )

LOSS APPLICABLE TO COMMON SHAREHOLDERS

$ (1,659,809 )

Loss per common share after preferred

dividends, basic and diluted

Weighted-average number of common shares

outstanding, basic and diluted

accompanying notes are an integral part of this financial statement

Loss per common share after preferred dividends, basic and diluted

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

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

VALLEY VINEYARDS, INC.

STATEMENTS OF SHAREHOLDERS EQUITY

Three-Month Period Ended March 31, 2023

Six-Month Period Ended June 30, 2023

Preferred Stock

3 unchanged sentences

Balance at March 31, 2023

Three-Month Period Ended March 31, 2022

Preferred stock dividends accrued

Balance at June 30, 2023

Six-Month Period Ended June 30, 2022

Preferred Stock

3 unchanged sentences

Balance at March 31, 2022

accompanying notes are an integral part of this financial statement

Preferred stock dividends accrued

Balance at June 30, 2022

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

VALLEY VINEYARDS, INC.

OF CASH FLOWS

Three months ended March 31,

Six months ended June 30,

CASH FLOWS FROM OPERATING ACTIVITIES

Net income (loss)

$ ( 636,370 )

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

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

Depreciation and amortization

5 unchanged sentences

Prepaid expenses and other current assets

Income tax receivable

Income taxes receivable

Unearned revenue

6 unchanged sentences

Net cash from operating activities

( 1,279,932 )

CASH FLOWS FROM INVESTING ACTIVITIES

8 unchanged sentences

Payment on installment note for property purchase

Proceeds from bank overdraft

Proceeds from line of credit

8 unchanged sentences

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

1 unchanged sentence

Right of use assets obtained in exchange for operating lease liabilities

accompanying notes are an integral part of this financial statement

TO UNAUDITED INTERIM CONDENSED FINANCIAL STATEMENTS

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

TO UNAUDITED INTERIM FINANCIAL STATEMENTS

BASIS OF PRESENTATION

accompanying unaudited interim condensed financial statements as of March 31, 2023 and for the three months ended March 31, 2023 and

accompanying unaudited interim financial statements as of June 30, 2023 and for the three and six months ended June 30, 2023 and 2022

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

interim financial statements.

The financial information as of December 31, 2022 is derived from the audited financial statements

presented in the Willamette Valley Vineyards, Inc.

GAAP) for interim

financial statements.

The financial information as of December 31, 2022 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, 2022.

31, 2022 (the 2022 Report).

Certain 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 unaudited

interim condensed financial statements should be read in conjunction with the Companys audited financial statements for the

year ended December 31, 2022, as presented in the Companys Annual Report on Form 10-K.

results for the three months ended March 31, 2023 are not necessarily indicative of the results that may be expected for the entire year

ending December 31, 2023, or any portion thereof.

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, 2022, as presented in the Companys Annual Report on Form 10-K.

results for the three and six months ended June 30, 2023 are not necessarily indicative of the results that may be expected for the entire

year ending December 31, 2023, or any portion thereof.

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

1 unchanged sentence

for production, selling, and distribution.

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:

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:

Schedule of Earnings Per Share

Three months ended March 31,

Three months ended June 30,

Six months ended June 30,

Net income (loss)

$ ( 636,370 )

Accrued preferred stock dividends

Net loss applicable to common shareholders

( 1,023,439 )

Net loss applicable to common shares

$ ( 403,267 )

Weighted-average number of common shares outstanding basic and diluted

$ ( 209,212 )

$ ( 1,659,809 )

$ ( 774,766 )

Weighted-average common shares outstanding

Loss per common share after preferred dividends, basic and diluted

1 unchanged sentence

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

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:

March 31, 2023

June 30, 2023

December 31, 2022

6 unchanged sentences

Schedule of Property and Equipment, Net

March 31, 2023

June 30, 2023

December 31, 2022

1 unchanged sentence

Land, improvements, and other buildings

Winery buildings and hospitality center

Winery, tasting room buildings, and hospitality center

Property and equipment, gross

3 unchanged sentences

Property and equipment, net

expense for the three months ended March 31, 2023 and 2022 was $ 726,564 and $ 378,634 , respectively.

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

that allows borrowing up to $ 2,000,000 against eligible accounts receivable and inventories, as defined in the agreement.

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

2021, the Company renewed the credit agreement until July 31, 2023.

expense for the three months ended June 30, 2023 and 2022 was $ 744,048 and $ 432,826 , respectively.

Depreciation expense for the six

months ended June 30, 2023 and 2022 was $ 1,459,612 and $ 816,806 , respectively.

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

allows borrowing up to $ 2,000,000 against eligible accounts receivable and inventories, as defined in the agreement.

The revolving line

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

In July 2021, the Company renewed

the credit agreement until July 31, 2023.

In November 2022, the Company increased the borrowing line up to $5,000,000.

The Company had an outstanding line of credit balance of $ 1,178,078 at March 31, 2023, at an interest rate of 7.25%, and

an outstanding balance of $166,617 at December 31, 2022.

The Company had

an outstanding line of credit balance of $ 1,505,793 at June 30, 2023, at an interest rate of 7.75%, and an outstanding balance of $ 166,617

at December 31, 2022.

In July 2023 the line of credit was renewed for an additional two years.

line of credit agreement includes various covenants, which among other things, requires the Company to maintain minimum amounts of tangible

6 unchanged sentences

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

As of March 31, 2023, the Company

As of June 30, 2023, the Company

had a balance of $ 1,151,633 due on this note.

As of December 31, 2022, the Company had a balance of $ 1,201,038 due on this note.

Debt – The Company has three long term debt agreements with AgWest with an aggregate outstanding balance of $ 7,952,402

and $ 7,062,654 as of March 31, 2023 and

December 31, 2022, respectively.

The first loan requires monthly principal and interest payments of $15,557 for the life of the

loan, at an annual fixed interest rate of 4.75% with a maturity date of 2028, and outstanding balance of $937,535 and $972,940 as of

March 31, 2023 and December, 31, 2022, respectively.

The second loan requires monthly principal and interest payments of $46,510 for

the life of the loan, at an annual fixed interest rate of 5.21% with a maturity date of 2032, and outstanding balance of $4,002,367

and $4,089,714 as of March 31, 2023 and December, 31, 2022, respectively.

The general purposes of these loans were to make capital

improvements to the winery and vineyard facilities.

The third loan bears interest at Northwest Variable base which was 7.00% at

March 31, 2023 and 6.50% at December 31,2022, with interest due annually and principal at maturity on November 1, 2025 with an

available line of $ 5,000,000 and outstanding balance of $ 3,012,500 and $ 2,000,000 as of March 31, 2023 and December, 31, 2022,

respectively.

of March 31, 2023, the Company had unamortized debt issuance costs of $ 115,925 .

As of December 31, 2022, the Company had unamortized

debt issuance costs of $ 119,237 .

Debt – The Company has three long term debt agreements with AgWest with an aggregate outstanding balance of $ 7,841,963 and

$ 7,062,654 as of June 30, 2023 and December 31, 2022, respectively.

The first loan requires monthly principal and interest payments of

$15,557 for the life of the loan, at an annual fixed interest rate of 4.75% with a maturity date of 2028, and outstanding balance of

$901,949 and $972,940 as of June 30, 2023 and December, 31, 2022, respectively.

The second loan requires monthly principal and interest

payments of $46,510 for the life of the loan, at an annual fixed interest rate of 5.21% with a maturity date of 2032, and outstanding

balance of $3,915,014 and $4,089,714 as of June 30, 2023 and December, 31, 2022, respectively.

The general purposes of these loans were

to make capital improvements to the winery and vineyard facilities.

The third loan bears interest at Northwest Variable base which was

7.50% at June 31, 2023 and 6.50% at December 31,2022, with interest due annually and principal at maturity on November 1, 2025 with an

available line of $ 5,000,000 and outstanding balance of $ 3,025,000 and $ 2,000,000 as of June 30, 2023 and December, 31, 2022, respectively.

In July 2023 the available line was increased to $ 10,000,000 .

of June 30, 2023, the Company had unamortized debt issuance costs of $ 112,613 .

As of December 31, 2022, the Company had unamortized debt

issuance costs of $ 119,237 .

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

3 unchanged sentences

INTEREST AND TAXES PAID

Taxes – The Company received $ 19,456 in income taxes for the three months ended March 31, 2023 and paid no income taxes for

the 3 months ended March 31, 2022.

– The Company paid $ 93,805 and $ 87,977 for the three months ended March 31, 2023 and 2022, respectively, in interest on long-term

taxes – The Company paid zero and $ 502,000 in income taxes for the three months ended June 30, 2023 and 2022, respectively.

The Company received $ 19,456 and paid $ 502,000 in income taxes for the six months ended June 30, 2023 and 2022, respectively.

– The Company paid $ 92,379 and $ 83,776 for the three months ended June 30, 2023 and 2022, respectively, in interest on long-term

The Company paid $ 186,184 and $ 175,222 for the six months ended June 30, 2022 and 2020, respectively, in interest on long-term

SEGMENT REPORTING

14 unchanged sentences

associated with selling, is not available and that information continues to be aggregated.

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

segments for the three month periods ending March 31, 2023 and 2022.

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, 2023 and 2022.

Sales figures are net of related excise taxes.

Schedule of Segment reporting

Three Months Ended March 31,

Distributor Sales

Months Ended June 30,

Cost of sales

Selling and Marketing Expenses

Contribution Margin

$ ( 432,785 )

Percent of Sales

General and Administration Expenses

Percent of total sales

and administration expenses

from operations

Months Ended June 30,

Cost of sales

margin (deficit)

Percent of total sales

and administration expenses

(loss) from operations

$ ( 666,111 )

$ ( 136,232 )

sales include $ 10,000 in bulk wine sales in the three months ended March 31, 2023 compared to $ 10,500 bulk wine sales in the three months

ended March 31, 2022.

sales include zero bulk wine sales for the three months ended June 30, 2023 and June 30, 2022.

Direct sales include $ 10,000 bulk wine

sales for the six months ended June 30, 2023 and $ 10,500 bulk wine sales for the six months ended June 30, 2022.

SALE OF PREFERRED STOCK

23 unchanged sentences

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

On November 1, 2022, the Company filed with the SEC a Prospectus Supplement to the July 2022 Form S-3, pursuant to which the

Company proposed to offer and sell, on a delayed or continuous basis, up to 344,861 shares of Series A Redeemable Preferred Stock having

proceeds not to exceed $1,845,009.

This Prospectus Supplement established that our shares of preferred stock were to be sold in one offering

period with an offering price of $5.35 per share.

Net proceeds of $3,558,807 have been received under these offerings as of March, 31

2023 for the issuance of Preferred Stock.

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.

On November 1, 2022, the

Company filed with the SEC a Prospectus Supplement to the July 2022 Form S-3, pursuant to which the Company proposed to offer and sell,

on a delayed or continuous basis, up to 344,861 shares of Series A Redeemable Preferred Stock having proceeds not to exceed $1,845,009.

This Prospectus Supplement established that our shares of preferred stock were to be sold in one offering period with an offering price

of $5.35 per share.

Net proceeds of $3,558,807 have been received under these offerings as of June, 30 2023 for the issuance of Preferred

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, 2023 and December 31, 2022 was $ 967,074 and $ 1,106,970 , respectively and is recorded as unearned revenue on the

balance sheets.

The amount of unused dividend gift cards

at June 30, 2023 and December 31, 2022 was $ 830,243 and $ 1,106,970 , respectively and is recorded as unearned revenue on the balance sheets.

Revenue from gift cards is recognized when the gift card is redeemed by a customer.

When the likelihood of a gift

card being redeemed by a customer is determined to be remote and the Company expects to be entitled to the breakage, then the value

of the unredeemed gift card is recognized as revenue.

We determine the gift card breakage rate based upon Company-specific

historical redemption patterns.

To date we have determined that no breakage should be recognized related to our gift

When the likelihood of a gift card being redeemed

by a customer is determined to be remote and the Company expects to be entitled to the breakage, then the value of the unredeemed gift

card is recognized as revenue.

We determine the gift card breakage rate based upon Company-specific historical redemption patterns.

date we have determined that no breakage should be recognized related to our gift cards.

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

5 unchanged sentences

On our balance sheet, our operating leases are included in Operating lease right-of-use

assets (ROU), Curren t portion of lease liabilities,

and Lease liabilities, net of current portion.

The Company does not currently have any finance leases.

assets (ROU), Current portion of lease liabilities, and Lease liabilities, net of current portion.

The Company does not currently have

any finance leases.

assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease

58 unchanged sentences

Three Months Ended

March 31, 2023

Six Months Ended

June 30, 2023

Operating lease cost - Vineyards

8 unchanged sentences

Weighted-average discount rate - Operating leases

assets obtained in exchange for new operating lease obligations were $ 695,565 and $ 1,600,552 for the three months ended March 31, 2023

assets obtained in exchange for new operating lease obligations were $1,090,735 and $3,200,021 for the six-months ended June 30, 2023

and 2022, respectively.

of March 31, 2023, maturities of lease liabilities were as follows:

of June 30, 2023, maturities of lease liabilities were as follows:

of Maturities of Lease Liabilities

Years Ended December 31,

2023, for remaining 6 months

Total minimal lease payments

16 unchanged sentences

would be due.

There were no grape purchases for the three and six months period ended June 30, 2023 and 2022.

MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

41 unchanged sentences

Such policies

were unchanged during the three months ended March 31, 2023.

were unchanged during the three months ended June 30, 2023.

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

33 unchanged sentences

this is not a significant part of the Companys activities.

The Company sold 42,387 and 33,639 cases of produced

wine during the three months ended March 31, 2023 and 2022, respectively, an increase of 8,748 cases, or 26.0% in the current year period

over the prior year period.

The increase in wine case sales was primarily the result of having more locations and more availability

of some vintages in the quarter when compared to the prior year period.

Cost of sales includes grape costs, whether purchased

or grown at Company vineyards, winemaking and processing costs, bottling, packaging, warehousing, and shipping and handling costs.

grapes grown at Company vineyards, costs include farming expenditures and amortization of vineyard development costs.

At March 31, 2023, wine inventory included 106,487

cases of bottled wine and 523,910 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 56,974 cases during the three

months ended March 31, 2023.

Company sold 96,269 and 85,133 cases of produced wine during the six months ended June 30, 2023 and 2022, respectively, an increase of

11,136 cases, or 13.1% in the current year period over the prior year period.

The increase in wine case sales was primarily the

result of increased case sales through distributors and direct to the consumer.

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

warehousing, and shipping and handling costs.

For grapes grown at Company vineyards, costs include farming expenditures and amortization

of vineyard development costs.

June 30, 2023, wine inventory included 127,104 cases of bottled wine and 352,326 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 132,020 cases during the six months ended June 30, 2023.

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 2021 Estate Pinot Noir 91 points, Dijon Clone Chardonnay 91 points and the 2022 Pinot Gris 90 points.

Francisco Chronicle Wine Competition 2023 awarded the Companys White Pinot Noir with a Gold Medal.

Great Northwest Wine Competition awarded the Companys 2017 Brut with a Double Gold Medal.

Enthusiast Magazine rated the Companys 2021 Estate Pinot Noir 91 points, 2021 Dijon Clone Pinot Noir 90 points and 2021 Founders

Reserve Pinot Noir 90 points.

Sunset International Wine Competition awarded the Companys 2022 Whole Cluster Rosé of Pinot Noir 94 points with a Gold

OF OPERATIONS

revenue for the three months ended March 31, 2023 and 2022 was $8,308,940 and $6,242,318, respectively, an increase of $2,066,622, or

revenue for the three months ended June 30, 2023 and 2022 were $10,726,243 and $8,700,861, respectively, an increase of $2,025,382, or

23.3%, in the current year period over the prior year period.

This increase was caused by an increase in revenues from direct sales

of $1,114,341 and an increase in revenues from shipments to distributors of $952,281 in the current year three-month period over the

same period in the prior year.

The increase in

direct sales to consumers was primarily the result of more tasting rooms in 2023 compared to 2022 and an increase in wine club sales.

The increase in revenue from the distributors was primarily attributed to more

inventory being available to ship in the current year three-month period over the same period in the prior year.

of sales for the three months ended March 31, 2023 and 2022 was $3,830,477 and $2,522,289, respectively, an increase of $1,308,188, or

This increase was caused by an increase

in sales through distributors of $337,579 and an increase in direct sales of $1,687,803 in the current year three-month period over the

prior year period.

The increase in revenue from sales through distributors was primarily attributed to more availability of new

vintage wines compared to the prior year.

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

rooms in 2023.

Sales revenue for the six months ended June 30, 2023 and 2022 were $19,035,183 and $14,943,179, respectively, an increase

of $4,092,004, or 27.4%, in the current year period over the prior year period.

This increase was caused by an

increase in revenues from direct sales of $2,802,144 and an increase in revenues from sales through distributors of $1,289,860 in the

current year period over the prior year period.

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

of more tasting room locations in the current year.

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

in off-premise sales.

of Sales for the three months ended June 30, 2023 and 2022 were $4,475,665 and $3,873,604, respectively, an increase of $602,061, or

15.5%, in the current period over the prior year period.

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

of 2023 compared to the same quarter in 2022 and higher product costs.

profit for the three months ended March 31, 2023 and 2022 was $4,478,463 and $3,720,029, respectively, an increase of $758,434, or 20.4%,

in the first quarter of 2023 over the same quarter in the prior year.

This increase was primarily the result of an increase in sales

in the first three months of the current year compared to the same period in 2022 being partially offset by an increase in product costs.

profit as a percentage of net sales for the three months ended March 31, 2023 and 2022 was 53.9% and 59.6%, respectively, a decrease

of 5.7 percentage points 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.

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

Cost of Sales

for the six months ended June 30, 2023 and 2022 were $8,306,142 and $6,395,893, respectively, an increase of $1,910,249 or 29.9%, in

the current period over the prior year period.

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

sales in 2023.

profit as a percentage of net sales for the three months ended June 30, 2023 and 2022 was 58.3% and 55.5%, respectively, an increase

of 2.8 percentage points in the current year period over the prior year period, mostly as a result of a higher percentage of sales coming

from direct to consumer sales compared to the same quarter of 2022.

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

June 30, 2023 and 2022 was 56.4% and 57.2%, respectively, a decrease of 0.8 percentage points in the current year period over the prior

This decrease was primarily the result of higher fruit and labor costs in the first six months of 2023 compared to the same

period in the prior year, offset by a higher direct to consumer percentage of sales.

General and Administrative Expenses

general and administrative expenses for the three months ended March 31, 2023 and 2022 was $5,453,413 and $3,856,261, respectively, an

general and administrative expenses for the three months ended June 30, 2023 and 2022 was $5,941,739 and $4,382,814 respectively, an

increase of $1,558,925, or 35.6%, 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 $1,505,853, or 60.8% and an increase in general and administrative expenses of $91,299, or 6.6%

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

Selling expenses increased in 2023 compared to 2022 primarily as a result

of the higher selling expenses related to the increase in direct sales and having more tasting room locations.

General and administrative

expenses increased in the first quarter of 2023 compared to the same quarter of 2022 primarily as a result of higher property taxes and

labor cost increases.

expense for the three months ended March 31, 2023 and 2022 was $124,422 and $91,446, respectively, an increase of $32,976 or 36.1%, in

the first quarter of 2023 over the same quarter in the prior year.

The increase in interest expense for the first quarter was primarily

the result of higher debt and higher interest rates compared to the first quarter of 2022.

income tax benefit for the three months ended March 31, 2023 and 2022 was $280,963 and $37,323, respectively, an increase of $243,640

or 652.8%, in the first quarter of 2023 over the same quarter in the prior year, primarily as a result of a higher pre-tax loss in the

first quarter of 2023, compared to the same quarter in 2022.

The Companys estimated federal and state combined income tax rate

for the three months ended March 31, 2023 and 2022 was 27.4%.

loss for the three months ended March 31, 2023 and 2022 was $744,823 and $98,942, respectively, an increase of $645,881, or 652.8%, in

the first quarter of 2023 over the same quarter in the prior year.

The increase in net loss for the first quarter of 2023, compared to

the comparable period in 2022, was primarily the result of higher selling expenses and higher product costs.

of an increase in selling and marketing expenses of $1,330,430, or 44.1% and an increase in general and administrative expenses of $228,495,

or 16.8% in the current quarter compared to the same quarter last year.

Selling, general and administrative expense for the six months

ended June 30, 2023 and 2022 was $11,395,152 and $8,239,075, respectively, an increase of $3,156,077, or 38.3%, in the current year period

over the prior year period.

This increase was primarily the result of an increase in selling and marketing expenses of $2,836,283, or

51.6% combined with an increase in general and administrative expenses of $319,794, or 11.7% in the current year period compared to the

same period in 2022.

Selling expenses increased in both the first half and second quarter of 2023 compared to the same periods in 2022

primarily as a result of having more tasting room locations in 2023.

expense for the three months ended June 30, 2023 and 2022 was $164,615 and $90,371, respectively, an increase of $74,244 or 82.2%, in

the second quarter of 2023 over the same quarter in the prior year.

Interest expense for the six months ended June 30, 2023 and 2022

was $289,037 and $181,817, respectively, an increase of $107,220 or 59.0%, in the current year period over the prior year period.

increase in interest expense for the second quarter and first six months of 2023 was primarily the result of increased debt at higher

interest rates in the current periods compared to the second quarter and first six months of 2022.

income tax expense for the three months ended June 30, 2023 and 2022 was $40,911 and $97,220, respectively, a decrease of $56,309 or

57.9%, in the second quarter of 2023 over the same quarter in the prior year mostly as a result of the lower pre-tax income in the second

quarter of 2023, compared to the same quarter in 2022.

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

for the three months ended June 30, 2023 and 2022, respectively.

The income tax expense (benefit) for the six months ended June 30, 2023

and 2022 was $(240,052) and $59,897, respectively, a decrease of $299,949, in the current year period over the prior year period, mostly

a result of lower pre-tax income in the first six months of 2023, compared to the same period in 2022.

The Companys estimated

federal and state combined income tax rate was 27.4% for the six months ended June 30, 2023 and 2022, respectively.

Income (Loss)

income for the three months ended June 30, 2023 and 2022 was $108,453 and $257,401, respectively, a decrease of $148,948, or 57.9%, in

the second quarter of 2023 over the same quarter in the prior year.

Net income (loss) for the six months ended June 30, 2023 and 2022

was $(636,370) and $158,459, respectively, a decrease of $794,829, or 501.6%, in the current year period over the prior year period.

The decrease in net income for the second quarter and decrease in net income for the first half of 2023, compared to the comparable periods

in 2022, was primarily the result of higher selling expenses.

Loss Applicable to Common Shareholders

loss applicable to common shareholders for the three months ended March 31, 2023 and 2022 was $1,256,542 and $565,554, respectively,

an increase of $690,988, or 122.2%, in the first quarter of 2023 over the same quarter in the prior year.

The increase in loss applicable

to common shareholders in the first quarter of 2023, compared to the same period of 2022, was the result of a higher net loss and a higher

accrued preferred stock dividend in the current period.

loss applicable to common shareholders for the three months ended June 30, 2023 and 2022 was $403,267 and $209,212, respectively, an

increase of $194,055, or 92.8%, in the second quarter of 2023 over the same quarter in the prior year.

Net loss applicable to common

shareholders for the six months ended June 30, 2023 and 2022 was $1,659809 and $774,766, respectively, an increase of $885,043, or 114.2%,

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 2023, compared to the same periods of 2022, was the result of lower net income and higher dividend costs

in the current period.

and Capital Resources

March 31, 2023, the Company had a working capital balance of $19.1 million and a current working capital ratio of 3.32:1.

March 31, 2023, the Company had a cash balance of $154,340.

June 30, 2023, the Company had a working capital balance of $18.8 million and a current working capital ratio of 3.11:1.

June 30, 2023, the Company had a cash balance of $553,180.

At December 31, 2022, the Company had a cash balance of $338,676.

This decrease

is primarily the result of the payment of grapes payable and accounts payable being partially offset by a reduction in accounts receivable.

cash used for operating activities in the three months ended March 31, 2023 was $1,279,932.

Cash used in operating activities for the

three months ended March 31, 2023 was primarily associated with reduced grapes payable, accounts payable and increased inventories, being

partially offset by decreased accounts receivable.

cash used in investing activities in the three months ended March 31, 2023 was $1,500,176.

Cash used in investing activities for the

three months ended March 31, 2023 primarily consisted of cash used on construction activity and vineyard development costs.

cash generated from financing activities in the three months ended March 31, 2023 was $2,595,772.

This increase

is primarily the result of proceeds from the line of credit, long term debt and a reduction in receivables.

cash used for operating activities in the six months ended June 30, 2023 was $147,422.

Cash used in operating activities for the six

months ended June 30, 2023 was primarily associated with reduced grapes payable and increased inventories, being partially offset by

decreased accounts receivable.

cash used in investing activities in the three months ended June 30, 2023 was $2,109,897.

Cash used in operating activities for the six

months ended June 30, 2023 was primarily associated with reduced accounts payable, grapes payable and increased inventories, being partially

offset by decreased accounts receivable.

cash generated from financing activities in the six months ended June 30, 2023 was $2,471,823.

Cash generated from financing activities

for the three months ended March 31, 2023 primarily consisted of proceeds from the issuance of Preferred Stock, long and short term debt

being partially offset by the repayment of debt.

for the six months ended June 30, 2023 primarily consisted of proceeds from the issuance of Preferred Stock, proceeds from the line of

credit and long-term debt being partially offset by the repayment of long-term 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

5 unchanged sentences

The Company had an outstanding line of credit

balance of $1,178,078 at March 31, 2023, at an interest rate of 7.25%, and an outstanding balance of $166,617 at December 31, 2022.

balance of $1,505,793 at June 30, 2023, at an interest rate of 7.75%, and an outstanding balance of $166,617 at December 31, 2022.

July 2023 the line of credit was renewed for an additional two years.

line of credit agreement includes various covenants, which among other things, requires the Company to maintain minimum amounts of tangible

3 unchanged sentences

this violation until the next measurement date of December 31, 2023.

of March 31, 2023, the Company had a 15-year installment note payable of $1,176,519, due in quarterly payments of $42,534, associated

of June 30, 2023, the Company had a 15-year installment note payable of $1,151,633, due in quarterly payments of $42,534, associated

with the purchase of property in the Dundee Hills AVA.

of March 31, 2023, the Company had a total long-term debt balance of $7,952,402, including the portion due in the next year, owed to

AgWest, exclusive of debt issuance costs of $115,925.

of June 30, 2023, the Company had a total long-term debt balance of $7,841,963, including the portion due in the next year, owed to AgWest,

exclusive of debt issuance costs of $112,613.

As of December 31, 2022, the Company had a total long-term debt balance of $7,062,654,

5 unchanged sentences

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