What changed in this filing

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Item 1. Financial Statements

2023-11-14 compared with 2023-08-14 · 244 added, 201 removed, 441 unchanged (50% of the section changed)

2 unchanged sentences

BALANCE SHEETS

September 30,

CURRENT ASSETS

7 unchanged sentences

Operating lease right of use assets

$ 101,726,092

LIABILITIES AND SHAREHOLDERS EQUITY

3 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, 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.

Redeemable preferred stock, no par value, 10,000,000 shares authorized, 9,303,988 shares issued and outstanding, liquidation preference of $ 40,146,708 , at September 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 September 30, 2023 and December 31, 2022, respectively.

Retained earnings

1 unchanged sentence

LIABILITIES AND SHAREHOLDERS EQUITY

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

$ 101,726,092

accompanying notes are an integral part of this condensed financial statement

VALLEY VINEYARDS, INC.

1 unchanged sentence

Three months ended

Six months ended

Nine months ended

September 30,

COST OF SALES

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Total operating expenses

INCOME (LOSS) FROM OPERATIONS

LOSS FROM OPERATIONS

( 1,226,035 )

OTHER INCOME (EXPENSE)

1 unchanged sentence

Interest expense

Other income (expense), net

INCOME (LOSS) BEFORE INCOME TAXES

INCOME TAX (EXPENSE) BENEFIT

NET INCOME (LOSS)

Other income, net

LOSS BEFORE INCOME TAXES

( 1,308,235 )

( 1,326,748 )

( 1,089,879 )

INCOME TAX BENEFIT

Accrued preferred stock dividends

( 1,535,158 )

( 1,399,837 )

LOSS APPLICABLE TO COMMON SHAREHOLDERS

$ ( 838,701 )

$ ( 1,416,433 )

$ ( 2,498,510 )

$ ( 2,191,199 )

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

accompanying notes are an integral part of this condensed financial statement

VALLEY VINEYARDS, INC.

STATEMENTS OF SHAREHOLDERS EQUITY

Six-Month Period Ended June 30, 2023

Nine-Month Period Ended September 30, 2023

Preferred Stock

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Balance at June 30, 2023

Six-Month Period Ended June 30, 2022

Preferred stock dividends accrued

Balance at September 30, 2023

Nine-Month Period Ended September 30, 2022

Preferred Stock

5 unchanged sentences

Balance at June 30, 2022

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

Preferred stock dividends accrued

Balance at September 30, 2022

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

Net income (loss)

$ ( 963,352 )

$ ( 791,362 )

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

5 unchanged sentences

( 3,864,269 )

( 1,781,097 )

Prepaid expenses and other current assets

4 unchanged sentences

( 1,326,278 )

( 1,388,601 )

Accounts payable

1 unchanged sentence

Net cash from operating activities

( 2,139,960 )

CASH FLOWS FROM INVESTING ACTIVITIES

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Payment on installment note for property purchase

Proceeds from line of credit

Proceeds from bank overdraft

Payments on line of credit

Payments on long-term debt

Proceeds from investor deposits held as liability

Proceeds from long-term debt

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Right of use assets obtained in exchange for operating lease liabilities

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, 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.

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.

accompanying unaudited interim financial statements as of September 30, 2023 and for the three and nine months ended September 30, 2023

and 2022 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, 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

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.

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

results for the three and nine months ended September 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.

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Schedule of Earnings Per Share

Three months ended June 30,

Six months ended June 30,

Net income (loss)

Three months ended September 30,

Nine months ended September 30,

$ ( 326,982 )

$ ( 949,821 )

$ ( 963,352 )

$ ( 791,362 )

Accrued preferred stock dividends

( 1,535,158 )

( 1,399,837 )

Net loss applicable to common shares

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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:

June 30, 2023

September 30, 2023

December 31, 2022

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Schedule of Property and Equipment, Net

June 30, 2023

September 30, 2023

December 31, 2022

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Property and equipment, net

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.

expense for the three months ended September 30, 2023 and 2022 was $ 738,354 and $ 567,394 , respectively.

Depreciation expense for the

nine months ended September 30, 2023 and 2022 was $ 2,197,966 and $ 1,384,200 , 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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In November 2022, the Company increased the borrowing line up to $5,000,000.

The Company had

an outstanding line of credit balance of $ 1,505,793 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.

In July 2023 the

line of credit was renewed for an additional two years.

The Company had no outstanding line of credit balance at September 30, 2023,

at an interest rate of 8.00%, and an outstanding balance of $ 166,617 at December 31, 2022.

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

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of December 31, 2022, the Company was out of compliance with a debt covenant.

The Company has received a waiver from Umqua Bank waiving

The Company has received a waiver from Umpqua Bank waiving

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

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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, 2023, the Company

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

As of September 30, 2023, the

Company had a balance of $ 1,126,374 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 $ 7,717,435 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.

$ 7,062,654 as of September 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 $ 865,933 and $ 972,940 as of September 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 $3,826,502 and $4,089,714 as of September 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 7.80% at September 30, 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 September 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 .

of September 30, 2023, the Company had unamortized debt issuance costs of $ 109,302 .

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

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INTEREST AND TAXES PAID

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

taxes – The Company paid zero in income taxes for the three months ended September 30, 2023 and 2022.

The Company received

$ 19,456 and paid $ 502,000 in income taxes for the nine months ended September 30, 2023, and 2022, respectively.

– The Company paid $ 99,861 and $ 88,102 for the three months ended September 30, 2023 and 2022, respectively, in interest on

short and long-term debt.

The Company paid $ 286,045 and $ 263,326 for the nine months ended September 30, 2023 and 2022, respectively,

in interest on short and 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, 2023 and 2022.

segments for the three and nine month periods ended September 30, 2023 and 2022.

Sales figures are net of related excise taxes.

Schedule of Segment reporting

Months Ended June 30,

Three Months Ended September 30,

Distributor Sales

Cost of sales

Selling expenses

Contribution margin (deficit)

$ ( 255,602 )

$ ( 805,362 )

Percent of total sales

and administration expenses

from operations

Months Ended June 30,

General and administration expenses

Loss from operations

$ ( 282,768 )

$ ( 1,226,035 )

Nine Months Ended September 30,

Distributor Sales

Cost of sales

margin (deficit)

Selling expenses

Contribution margin (deficit)

$ ( 321,995 )

Percent of total sales

and administration expenses

General and administration expenses

Loss from operations

$ ( 948,879 )

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.

$ ( 917,824 )

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

Direct sales include $ 10,000

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

SALE OF PREFERRED STOCK

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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

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

Preferred Stock.

On June 30, 2023, 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 727,835 shares of Series A Redeemable Preferred Stock

having proceeds not to exceed $3,530,000.

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 $4.85 per share and concluding with an offering

of $5.35 per share.

Net proceeds of $1,935,821 have been received under this offering as of September, 30 2023 for the issuance of Preferred

October 27, 2023, 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 288,659 shares of Series A Redeemable Preferred Stock having proceeds not

to exceed $1,400,000.

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

at September 30, 2023 and December 31, 2022 was $ 738,183 and $ 1,106,970 , respectively, and is recorded as unearned revenue on the balance

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.

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.

To 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.

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determine if an arrangement is a lease at inception.

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

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

The Company does not currently have

any finance leases.

On our condensed balance sheet, our operating leases are included in Operating lease

right-of-use 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

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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 17 acres of agricultural land in Dundee, Oregon.

These acres are

being developed into vineyards.

This lease contains an annual payment that remains constant throughout the term of the lease.

2017 , the Company entered into a 25-year lease

for approximately 17 acres of agricultural land in Dundee, Oregon.

These acres are being developed into vineyards.

This lease contains

an annual payment that remains constant throughout the term of the lease.

Leases – Non-Vineyard – In September 2018 , the Company renewed an existing lease for three years , with two one-year renewal

2 unchanged sentences

year renewal option and defined payments over the term of the lease.

January 2018 , the Company assumed a lease, through December 2022, for its Maison Bleue tasting room in Walla Walla, Washington.

2023, the Company entered into a new lease to December 2027 with one five year renewal option, and defined payments over the term of

2018 , the Company assumed a lease, through December 2022, for its Maison Bleue tasting room in Walla Walla, Washington.

In January 2023, the

Company entered into a new lease to December 2027 with one five year renewal option, and defined payments over the term of the lease.

February 2020 , the Company entered into a lease for 5 years , with three five-year renewal options for a retail wine facility in Folsom,

2 unchanged sentences

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

March 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.

2021 , the Company entered into a lease for 10 years ,

with two five-year renewal options for a retail wine facility in Vancouver, Washington.

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

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Three Months Ended

Six Months Ended

June 30, 2023

Nine Months Ended

September 30, 2023

Operating lease cost - Vineyards

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Weighted-average discount rate - Operating leases

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

assets obtained in exchange for new operating lease obligations were $1,090,735 and $3,360,917 for the nine months ended September 30,

2023 and 2022, respectively.

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

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

of Maturities of Lease Liabilities

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would be due.

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

There were $1,904,736 and $1,208,673 in grape purchases for the three and nine months periods ended September 30, 2023

MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

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Such policies

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

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

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.

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.

Company sold 143,286 and 127,007 cases of produced wine during the nine months ended September 30, 2023 and 2022, respectively, an increase

of 16,279 cases, or 12.8% 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.

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

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, 2023, wine inventory included 127,104 cases of bottled wine and 352,326 gallons of bulk wine in various stages of the aging

September 30, 2023, wine inventory included 172,280 cases of bottled wine and 519,138 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.

Winery bottled 205,486 cases during the nine months ended September 30, 2023.

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

bloggers including the accolades below.

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

Enthusiast Magazine rated the Companys 2022 Whole Cluster Pinot Noir 90 points, 2022 White Pinot Noir 91 points, 2022 Maison Bleue

Voltigeur Viognier 90 points, 2020 Métis Red Blend 92 points and Cellar Selection.

OF OPERATIONS

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 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.

revenue for the three months ended September 30, 2023 and 2022 were $9,348,066 and $7,602,878, respectively, an increase of $1,745,188,

or 23.0%, in the current year period over the prior year period.

This increase was caused by an

increase in sales through distributors of $412,728 and an increase in direct sales of $1,332,460 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 nine months ended September 30, 2023 and 2022 were $28,383,249 and $22,546,057, respectively,

an increase of $5,837,192, or 25.9%, in the current year period over the prior year period.

This increase was caused by an

increase in revenues from direct sales of $4,134,603 and an increase in revenues from sales through distributors of $1,702,589 in the

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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.

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.

of Sales for the three months ended September 30, 2023 and 2022 were $3,663,488 and $3,708,695, respectively, a decrease of $45,207,

or 1.2%, in the current period over the prior year period.

This change was primarily the result of an increase in direct sales compared

to sales through distributors in the third quarter of 2023 compared to the same quarter of 2022.

Cost of Sales for the nine months ended

September 30, 2023 and 2022 were $11,969,630 and $10,104,588, respectively, an increase of $1,865,042 or 18.5%, in the current period

over the prior year period.

This change was primarily the result of an increase in both direct and distributor sales in 2023.

profit as a percentage of net sales for the three months ended September 30, 2023 and 2022 was 60.8% and 51.2%, respectively, an increase

of 9.6 percentage points in the current year period over the prior year period, mostly as a result of the change in mix of products compared

to the same quarter of 2022.

Gross profit as a percentage of net sales for the nine months ended September 30, 2023 and 2022 was 57.8%

and 55.2%, respectively, an increase of 2.6 percentage points in the current year period over the prior year period.

This increase was

primarily the result of an increase in direct sales compared to sales through distributors.

General and Administrative Expenses

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.

general and administrative expenses for the three months ended September 30, 2023 and 2022 was $5,967,346 and $5,120,218 respectively,

an increase of $847,128 or 16.5%, in the current quarter over the same quarter in the prior year.

This increase was primarily the result

of an increase in selling and marketing expenses of $577,384, or 15.3% and an increase in general and administrative expenses of $269,744,

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

or 20.0% in the current quarter compared to the same quarter in the prior year.

Selling, general and administrative expense for the nine

months ended September 30, 2023 and 2022 was $17,362,498 and $13,359,293, respectively, an increase of $4,003,205 or 30.0%, 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 $3,413,667,

or 36.8% combined with an increase in general and administrative expenses of $589,538, or 14.4% in the current year period compared to

the same period in 2022.

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

expense for the three months ended September 30, 2023 and 2022 was $171,272 and $87,220, respectively, an increase of $84,052 or 96.4%,

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

Interest expense for the nine months ended September 30, 2023 and

2022 was $460,309 and $269,037, respectively, an increase of $191,272 or 71.1%, 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.

The increase in interest expense for the third quarter and first nine months of 2023 was primarily the result of increased debt at higher

interest rates in the current periods compared to the third quarter and first nine months of 2022.

income tax benefit for the three months ended September 30, 2023 and 2022 was $123,344 and $358,414, respectively, a decrease of $235,070

or 65.6%, in the third quarter of 2023 compared to the same quarter in the prior year mostly as a result of the lower pre-tax loss in

the third 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 September 30, 2023 and 2022, respectively.

The income tax benefit for the nine months ended

September 30, 2023 and 2022 was $363,396 and $298,517, respectively, an increase of $64,879 or 21.7%, in the current year period over

the prior year period, mostly a result of a higher pre-tax loss in the first nine 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 nine months ended September 30, 2023 and 2022,

respectively.

loss for the three months ended September 30, 2023 and 2022 was $326,982 and $949,821, respectively, a decrease of $622,839, or 65.6%,

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

Net loss for the nine months ended September 30, 2023 and 2022

was $963,352 and $791,362, respectively, an increase of $171,990, or 21.7%, in the current year period over the prior year period.

Loss Applicable to Common Shareholders

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.

loss applicable to common shareholders for the three months ended September 30, 2023 and 2022 was $838,701 and $1,416,433, respectively,

a decrease of $577,732, or 40.8%, in the third 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.

shareholders for the nine months ended September 30, 2023 and 2022 was $2,498,510 and $2,191,199, respectively, an increase of $307,311,

or 14.0%, in the current year period over the prior year period.

The decrease in the loss applicable to common shareholders in the third

quarter was the result of a lower net loss in the current period.

The increase in the loss applicable to common shareholders in the first

nine months of 2023, compared to the same period of 2022, was the result of a higher net loss and higher dividend costs in the current

and Capital Resources

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.

September 30, 2023, the Company had a working capital balance of $17.7 million and a current working capital ratio of 2.44:1.

September 30, 2023, the Company had a cash balance of $213,432.

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

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.

decrease is primarily the result of investments in property and equipment and inventories.

cash used for operating activities in the nine months ended September 30, 2023 was $68,089.

Cash used in operating activities for the

nine months ended September 30, 2023 was primarily associated with increased inventories, being partially offset by decreased accounts

receivable and depreciation and amortization.

cash used in investing activities in the nine months ended September 30, 2023 was $3,718,612.

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, 2023 was $3,661,457.

Cash generated from financing activities

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.

for the nine months ended September 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

4 unchanged sentences

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

The Company had an outstanding line of credit

balance of $1,505,793 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.

The Company had no outstanding line of credit

balance at September 30, 2023, at an interest rate of 8.00%, and an outstanding balance of $166,617 at December 31, 2022.

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

1 unchanged sentence

of December 31, 2022, the Company was out of compliance with a debt covenant.

The Company has received a waiver from Umqua Bank waiving

The Company has received a waiver from Umpqua Bank waiving

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

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

of September 30, 2023, the Company had a 15-year installment note payable of $1,126,374, due in quarterly payments of $42,534, associated

with the purchase of property in the Dundee Hills AVA.

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.

of September 30, 2023, the Company had a total long-term debt balance of $7,717,435, including the portion due in the next year, owed

to AgWest, exclusive of debt issuance costs of $109,301.

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

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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