Item 5. Market for Registrant’s Common Equity
ITEM
5. MARKET FOR REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
Market
Information
The
Companys Common Stock is traded on the NASDAQ Capital Market under the symbol WVVI.
Holders
As
of March 26, 2024, the Company had approximately 3,177 Common Stock stockholders of record. As some of our shares of Common Stock are
held in street name by brokers on behalf of stockholders, we are unable to estimate the total number of beneficial holders
of our Common Stock represented by these record holders.
Dividends
The
Company has paid dividends on the Preferred Stock. The Company has not paid any dividends on its Common Stock, and the Company does not
anticipate paying any dividends on Common Stock in the foreseeable future. The Company intends to use its earnings to expand its vineyards,
winemaking, and customer service facilities.
20
Equity
Compensation Plans
The
Company had no equity compensation plan pursuant to which equity awards could be granted and no outstanding options or other equity awards
as of December 31, 2023.
Recent
Sales of Unregistered Securities
None.
Issuer
Purchases of Equity Securities
None.
ITEM
6. [RESERVED]
ITEM
7. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The
following Managements Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with
the Companys financial statements and related notes. Some statements and information contained in this Managements Discussion
and Analysis of Financial Condition and Results of Operations are not historical facts but are forward-looking statements. For a discussion
of these forward-looking statements, and of important factors that could cause results to differ materially from the forward-looking
statements contained in this report, see Cautionary Note on Forward-Looking Statements.
While
our significant accounting policies are described in more detail in Note 1 to our financial statements, we believe the following accounting
policies are those most critical to the judgements and estimates used in the preparation of our financial statements.
Critical
Accounting Policies and Estimates
Managements
Discussion and Analysis of Financial Condition and Results of Operations discusses Willamette Valley Vineyards financial statements,
which have been prepared in accordance with generally accepted accounting principles. As such, management is required to make certain
estimates, judgments and assumptions that are believed to be reasonable based upon the information available. On an on-going basis, management
evaluates its estimates and judgments, including those related to product returns, bad debts, inventories, leases, investments, income
taxes, financing operations, and contingencies and litigation. Management bases its estimates and judgments on historical experience
and on various other factors that are believed to be reasonable under the circumstances, the results of which form the basis for making
judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ
from these estimates under different assumptions or conditions.
Revenue
– The Companys principal sources of revenue are derived from direct sales and sales through distributors of wine. Distributor
sales are recognized from wine sales at the time of shipment and passage of title. The Companys payment arrangements with wholesalers
provide primarily 30-day terms and, to a limited extent, 45-day, 60-day, or longer terms for some international wholesalers. Direct sales
through the Companys tasting rooms are recognized at the point of sales. Sales through the internet and wine club sales are recognized
when the product has shipped to the customer.
The
Company pays depletion allowances to the Companys distributors based on their sales to their customers. The Company sets these
allowances on a monthly basis and the Companys distributors bill them back on a monthly basis. All depletion expenses associated
with a given month are recognized in that month as a reduction of revenues. The Company also reimburses for samples used by distributors
up to 1.5% of product sold to the distributors. Sample expenses are recognized at the time the Company is billed by the distributor as
a selling, general and administrative expense.
21
Amounts
paid by customers to the Company for shipping and handling expenses are included in the net revenue. Expenses incurred for outbound shipping
and handling charges are included in selling, general and administrative expense.
Inventory
– The Company values inventories at the lower of actual cost to produce the inventory or net realizable value. The Company
regularly reviews inventory quantities on hand and adjusts its production requirements for the next twelve months based on estimated
forecasts of product demand. A significant decrease in demand could result in an increase in the amount of excess inventory quantities
on hand. In the future, if the Companys inventory cost is determined to be greater than the net realizable value of the inventory
upon sale, the Company would be required to recognize such excess costs in its cost of goods sold at the time of such determination.
Therefore, although the Company makes every effort to ensure the accuracy of its forecasts of future product demand, any significant
unanticipated changes in demand could have a significant impact on the ultimate selling price and cases sold and, therefore, the carrying
value of the Companys inventory and its reported operating results.
Additionally,
the Company regularly evaluates inventory for obsolescence and marketability and if it determines that the inventory is obsolete, or
no longer suitable for use or marketable, the cost of that inventory is recognized in cost of sales at the time of such determination.
Vineyard
Development – The Company capitalizes internal vineyard development costs prior to the vineyard land becoming fully productive.
These costs consist primarily of the costs of the vines and expenditures related to labor and materials to prepare the land and construct
vine trellises. Amortization of such costs as annual crop costs is done on a straight-line basis for the estimated economic useful life
of the vineyard, which is estimated to be 30 years. The Company regularly evaluates the recoverability of capitalized costs. Amortization
of vineyard development costs are included in capitalized crop costs that in turn are included in inventory costs and ultimately become
a component of cost of goods sold.
Income
Taxes – The Company accounts for income taxes using the asset and liability approach. This requires the recognition of deferred
tax assets and liabilities for the expected future tax consequences of temporary differences between the financial statement and the
tax basis of assets and liabilities at the applicable tax rates. The Company evaluates deferred tax assets, and records a valuation allowance
against those assets, if available evidence suggests that some of those assets will not be realized.
The
effect of uncertain tax positions would be recorded in the financial statements only after determining a more likely than not probability
that the uncertain tax positions would withstand an examination by tax authorities based on the technical merits of the position. The
tax benefit to be recognized is measured as the largest amount of benefit that is greater than fifty percent likely of being realized
upon ultimate settlement. As facts and circumstances change, management reassesses these probabilities and would record any changes in
the financial statements as appropriate.
Overview
The
Company generates revenue from the sales of wine to wholesalers and direct to consumers. The Company is experiencing increased levels
of competition in traditional wholesale to retail grocery distribution from large California based wineries that are acquiring, producing,
and marketing Oregon branded wines. Direct to consumer sales primarily include sales through the Companys tasting rooms and wine
club. Direct to consumer sales provide a higher gross profit to the Company due to prices received being closer to retail than those
prices paid by wholesalers. The Company continues to emphasize growth in direct-to-consumer sales through use of the Hospitality Center,
opening new tasting rooms and growth in wine club membership. The Company had 11,541 wine club memberships for the year ended December
31, 2023, a net increase of 1,540 when compared to 2022. Additionally, the Companys Preferred Stock sales since August 2015 have
resulted in approximately 14,385 preferred stockholders, many of which the Company believes are wine enthusiasts. When considering joint
ownership, we believe these new shareholders represent approximately 21,577 potential customers of the Company. The Company also has
approximately 3,177 shareholders of Common Stock which we believe represent an estimated 4,765 potential customers when considering joint
ownership. Additionally, the Company has made a significant investment in developing alternative wine brands, products, direct sales
methods, and locations.
22
Periodically,
the Company will sell grapes or bulk wine, which primarily consist of inventory that does not meet Company standards or is in excess
of production targets. However, this activity is not a significant part of the Companys activities.
The
Company sold approximately 191,619 and 187,371 cases of produced wine during the years ended December 31, 2023 and 2022, respectively,
an increase of 4,248 cases, or 2.3% in the current year over the prior year. The increase in case sales was the result of more direct
to consumer sales in 2023 when compared to 2022.
Cost
of Sales includes grape costs, whether purchased or grown at Company vineyards, crush costs, winemaking and processing costs, bottling,
packaging, warehousing, and shipping and handling costs associated with purchased production materials. For grapes grown at Company vineyards,
costs include farming expenditures and amortization of vineyard development costs.
At
December 31, 2023, wine inventory included 131,647 cases of bottled wine and 785,363 gallons of bulk wine in various stages of the aging
process. Cased 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 234,086 cases during the year ended December 31, 2023.
Results
of Operations
2023
compared to 2022
Net loss was $1,198,593 and $646,492, for the years
ended December 31, 2023 and 2022, respectively, an increase of $552,101, or 85.4%, for the year ended December 31, 2023 over the prior
year period. The primary reason for this increase was a higher gross profit from additional sales revenue, being more than offset by higher
operating expenses. This was primarily related to higher tasting room expenses as a result of some locations being open for longer for
the year ended December 31, 2023, compared to the previous year.
Net loss applicable to common shareholders was $3,245,690
and $2,512,943, for the years ended December 31, 2023 and 2022, respectively, an increase of $732,747, or 29.2%, for the year ended December
31, 2023 over the prior year period. This increase was primarily driven by a higher net loss and higher preferred stock dividends.
The
Company had net sales revenues of $39,136,114 and $33,934,081 for the years December 31, 2023 and 2022, respectively, an increase of
$5,202,033, or 15.3%, for the year ended December 31, 2023 over the prior year period primarily as a result of an increase in revenue
from direct sales of $4,786,730, or 30.4% in 2023 compared to 2022, and an increase in revenue from sales to distributors of $415,303
or 2.3% in 2023 compared to 2022.
The
Company has three primary sales channels: direct-to-consumer retail sales, in-state sales to distributors, and out-of-state sales to
distributors. During 2023, revenues from retail sales increased 31.0%, revenues from in-state sales decreased 5.0%, and revenues from
out-of-state sales increased 6.1%, compared to 2022.
Direct
sales included $69,924 and $97,652 of bulk wine and grape sales in the years ended December 31, 2023 and 2022, respectively, and represented
approximately 52.4% and 46.4% of the Companys total revenue for 2023 and 2022, respectively, while the Companys remaining
revenues came from sales through distributors.
23
The
following table sets forth certain information regarding the Companys revenue, excluding excise taxes, from the Winerys
operations for the twelve months ended December 31, 2023 and 2022:
Year ended
December 31,
2023
2022
Retail sales
$ 20,680,024
$ 15,786,241
In-state sales
5,686,517
5,987,410
Out-of-state sales
13,131,363
12,374,881
Bulk wine/miscellaneous sales
69,924
97,652
Total revenue
39,567,828
34,246,184
Less excise taxes
(431,714 )
(312,103 )
Sales, net
$ 39,136,114
$ 33,934,081
Retail
sales revenues for the years ended December 31, 2023 and 2022 were $20,680,024 and $15,786,241 respectively, an increase of $4,893,783,
or 31.0%, for the year ended December 31, 2023 over the prior year period. The increase in retail sales revenues in 2023 compared to
2022 was mostly a result of increased revenues from new retail locations being open for longer during 2023.
Bulk
Wine/miscellaneous sales revenues for the years ended December 31, 2023 and 2022 were $69,924 and $97,652, respectively, a decrease of
$27,728, or 28.4%, for the year ended December 31, 2023, over the prior year period.
In-state
sales revenues for the years ended December 31, 2023 and 2022 were $5,686,517 and $5,987,410, respectively, a decrease of $300,893, or
5.0%, for the year ended December 31, 2023 over the prior year period.
Out-of-state
sales revenues for the years ended December 31, 2023 and 2022 were $13,131,363 and $12,374,881, respectively, an increase of $756,482,
or 6.1%.
The
Company pays alcohol excise taxes to both the OLCC and to the TTB. These taxes are based on product sales volumes. The Company is liable
for the taxes upon the removal of product from the Companys warehouse on a per gallon basis. The Company also pays taxes on the
grape harvest on a per ton basis to the OLCC for the Oregon Wine Board. The Companys excise related taxes for the years ended
December 31, 2023 and 2022 were $431,714 and $312,103, respectively, an increase of $119,611, for the year ended December 31, 2023 over
the prior year period. This increase was due primarily to a larger crop processed and the timing of removals in 2023.
Cost
of Sales was $16,578,986 and $15,119,985 for the years ended December 31, 2023 and 2022, respectively, an increase of $1,459,001, or
9.6%, for the year ended December 31, 2023, over the prior year period. This change was primarily the result of increased sales and the
mix of sales between direct and distributors between the two periods.
Gross
profit was $22,557,128 and $18,814,096 for the years ended December 31, 2023 and 2022, respectively, an increase of $3,743,032 or 19.9%,
for the year ended December 31, 2023 over the prior year period. This increase was generally driven by an increase in sales revenues
in 2023.
The
gross margin percentage was 57.6% and 55.4% for the years ended December 31, 2023 and 2022, respectively, an increase of 2.2 percentage
points, for the year ended December 31, 2023 over the prior year period. This increase in the gross profit percentage was primarily the
result of higher direct sales prices and more sales coming from direct to consumer sales in 2023.
24
Selling, general and administrative expenses were
$23,764,330 and $19,360,514 for the years ended December 31, 2023 and 2022, respectively, an increase of $4,403,816, or 22.7%, for the
year ended December 31, 2023 over the prior year period. This increase was primarily as a result of more sales coming from tasting rooms
which have higher selling costs and from newer locations being open for longer in 2023.
Loss from operations was $1,207,202 and $546,418 for
the years ended December 31, 2023 and 2022, respectively, an increase of $660,784, or 120.9%, for the year ended December 31, 2023 compared
to the prior year period. This increase included higher depreciation costs of
$1,232,459 in 2023 mostly relating to the investment in new locations.
Interest
income was $27 and $5,496 for the years ended December 31, 2023 and 2022, respectively, a decrease of $5,469 for the year ended December
31, 2023 over the prior year. Interest expense was $594,106 and $367,745 for the years ended December 31, 2023 and 2022, respectively,
an increase of $226,361, or 61.6%, for the year ended December 31, 2023 over the prior year period. The increase in interest expense
was mainly due to the increase in average loan balances in 2023 compared to the previous year.
Other
income, net, was $114,827 and $142,529 for the years ended December 31, 2023 and 2022, respectively, a decrease of $27,702, or 19.4%,
for the year ended December 31, 2023 over the prior year period.
Provision for income tax benefit was $487,861 and
$119,646 for the years ended December 31, 2023 and 2022, respectively, an increase of $368,215, for the year ended December 31, 2023 over
the prior year period. This increase in income tax benefit in 2023 compared to 2022 was primarily the result of a higher loss from operations
in 2023 and an increase in the effective tax rate in 2023.
Loss per common share after preferred dividends was
$0.65 and $0.51 for the years ended December 31, 2023 and 2022, respectively, an increase of $0.14, or 29.2%, for the year ended December
31, 2023 over the prior year period. The primary reason for this increase was an increase in net loss and higher preferred stock dividends
in 2023 compared to 2022.
The
Company had cash balances of $238,482 at December 31, 2023, and $338,676 at December 31, 2022. The Company had an outstanding line of
credit balance of $2,684,982 at December 31, 2023, and $166,617 at December 31, 2022. The Company had a bank overdraft of $393,416 at
December 31, 2023, and no overdraft at December 31, 2022.
EBITDA
In
2023, the Companys earnings before interest, taxes, depreciation, and amortization (EBITDA) increased 22.1% to $2,334,602
from $1,912,012 in 2022, primarily as a result of increased depreciation costs in 2023.
EBITDA
does not reflect the impact of a number of items that affect our net income (loss), including financing costs. EBITDA is not a measure
of financial performance under the accounting principles generally accepted in the United States of America, referred to as GAAP,
and should not be considered as an alternative to net income (loss) or income (loss) from operations as a measure of performance, nor
as an alternative to net cash from operating activities as a measure of liquidity. We use EBITDA as a benchmark measurement of our own
operating results and as a benchmark relative to our competitors. We consider it to be a meaningful supplement to operating income (loss)
as a performance measure primarily because depreciation and amortization expense are not actual cash costs, and depreciation expense
varies widely from company to company in a manner that we consider largely independent of the underlying cost efficiency of our operating
facilities.
EBITDA
has significant limitations as an analytical tool, and should not be considered in isolation, or as a substitute for analysis of our
GAAP results as reported. Because of these limitations, EBITDA should only be considered as a supplemental performance measure and should
not be considered as a measure of liquidity or cash available to us to invest in the growth of our business. See the Statement of Cash
Flows set out in our financial statements included herein.
25
The
following table provides a reconciliation of net loss (the most comparable GAAP measure) to EBITDA for the periods indicated:
Year Ended December 31,
2023
2022
Net loss
$ (1,198,593 )
$ (646,492 )
Depreciation and amortization expense
3,426,977
2,315,901
Interest expense
594,106
367,745
Interest income
(27 )
(5,496 )
Income tax benefit
(487,861 )
(119,646 )
EBITDA
$ 2,334,602
$ 1,912,012
Sales
Wine
case sales for the years ended December 31, 2023 and 2022 and ending inventory amounts for the year ended December 31, 2023, are shown
in the following table:
Cases Sold
Cases Sold
Cases On-Hand
Varietal/Product
2023
2022
December 31, 2023
Pinot Noir/Estate
17,334
16,079
21,554
Pinot Noir/Barrel Select
10,093
19,789
1,185
Pinot Noir/Founders Reserve
3,988
4,519
5,091
Pinot Noir/Special Designates
12,706
14,083
16,028
Pinot Noir/Whole Cluster
60,070
50,674
32,697
Pinot Gris
33,279
33,568
9,109
Riesling
19,982
19,298
7,879
Chardonnay
5,191
5,010
5,246
Other
28,976
24,351
32,858
Total
191,619
187,371
131,647
Approximately
54% of the Companys case sales during 2023 were of the Companys flagship varietal, Pinot Noir. Case sales of Pinot Gris
and Riesling follow with approximately 17% and 10% of case sales, respectively. The Company sold approximately 191,619 and 187,371 cases
of Company-produced wine during the years ended December 31, 2023 and 2022, respectively. This represents an increase of approximately
4,248 cases, or 2.3%, 2023 compared to 2022. The increase in case sales in 2023 compared to 2022 was the result of an increase in direct-to-consumer
case sales.
The
Company has three primary sales channels: 1) direct-to-consumer sales; 2) in-state sales to distributors; and 3) out-of-state sales to
distributors. These three sales channels represent 52.4%, 14.4% and 33.2%, of total revenue for the year ended December 31, 2023, respectively.
This compares to 46.4%, 17.5% and 36.1% of total revenue for the year ended December 31, 2022, respectively. Miscellaneous and grape
sales are included in direct-to-consumer sales.
The
Companys direct-to-consumer sales and national sales to distributors offer comparable products to customers and utilize similar
processes and share resources for production, selling and distribution. Direct-to-consumer sales generate a higher gross profit margin
than national sales to distributors due to differentiated pricing between these segments.
26
Wine
Inventory
The
Company had 131,647 cases of bottled wine on-hand at the end of 2023. Management believes sufficient bulk wine inventory is on-hand to
bottle approximately 330,000 cases of wine in 2023, and that sufficient stock is on hand to meet current demand levels until the 2023
vintage becomes available.
Production
Capacity
Current
production volumes are within the current production capacity constraints of the Winery, when including storage capacity at the Tualatin
Winery and utilization of temporary storage when appropriate. In 2023, 234,086 cases were produced. We have the capacity to store and
process about 275,000 cases of wine per year at the Estate Winery but can expand that capacity by utilizing storage at the Tualatin Winery
and temporary storage. Management continues to invest in new production technologies intended to increase the efficiency and quality
of wine production. During 2023, the Company did not utilize the wine production facilities at the Tualatin Winery but did utilize it
for wine storage. The Tualatin Winery has capacity to produce approximately 28,000 cases of wine. Management intends to fully utilize
the production capacity at the Estate Winery before expanding into the Tualatin Winery.
Grape
Supply
For
the 2023 and 2022 vintages, the Company grew approximately 42% and 66% of all grapes harvested, respectively. The remaining grapes harvested
were purchased from other growers. In 2023 and 2022, 18% and 8% of grapes harvested were purchased under short-term contracts, and 40%
and 26% of grapes harvested were purchased under long-term contracts, respectively. The Company considers short-term contracts to be
for single vintage years and long-term contracts to cover multiple vintage years.
Grapes
are typically harvested and received in September and October of the vintage year. Upon receipt, the grapes are weighed, and a quality
analysis is performed to ensure the grapes meet the standards set forth in the purchase contract. Based on the quantity of qualifying
grapes received, the full amount payable to the grower is recorded to the grapes payable liability account. Approximately 50% of the
grapes payable amount is due in November of the vintage year. The remaining amount is due in March of the following year. The grapes
are processed into wine, which is typically bottled and available for sale between five months and two years from the date of harvest.
The
Company received $3,313,483 and $1,868,742 worth of grapes from long-term contracts during the years ended December 31, 2023 and 2022,
respectively. The Company received $1,941,572 and $639,677 worth of grapes from short-term contracts during the years ended December
31, 2023 and 2022, respectively. Total grapes payable was $2,446,233 and $1,208,673 as of December 31, 2023 and 2022, respectively. Total
grapes payable includes $1,357,649 and $934,371 of grapes payable from long-term contracts as of December 31, 2023 and 2022, respectively.
The
Company plans to address long-term grape supply needs by developing new vineyards on properties currently owned or secured by lease.
The Company has approximately 53 acres of vineyards that have been planted but are in the pre-productive stage. We anticipate that these
vineyards will begin producing grapes within the next one to three years. The Company has approximately 213 acres of land that is suitable
for future vineyard development. The Company intends to seek out opportunities to acquire land for future grape plantings in order to
continue to increase available quantities, maintain control over farming practices, more effectively manage grape costs and mitigate
uncertainty associated with long-term contracts.
27
Wine
Quality
Continued
awareness of the Willamette Valley Vineyards brand and the quality of its wines was enhanced by national and regional media coverage
throughout 2023 including the accolades below.
James
Suckling rated the Companys 2021 Estate Pinot Noir 91 points, Dijon Clone Chardonnay 91 points and the 2022 Pinot Gris 90 points.
Wine
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. 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.
Sunset
International Wine Competition awarded the Companys 2022 Whole Cluster Rosé of Pinot Noir 94 points with a Gold Medal.
Sip
Magazines Best of the Northwest rated the Companys 2022 Pinot Blanc a Double Gold.
Global
Fine Wine Challenge awarded the Companys 2019 Griffin Creek Cabernet Franc and 2019 Domaine Willamette Brut both Gold.
Seasonality
The
Company has historically experienced and expects to continue to experience seasonal fluctuations in its revenue and net income. Typically,
first quarter sales are the lowest of any given year, and sales volumes increase progressively through the fourth quarter mostly because
of consumer buying habits.
Liquidity
and Capital Resources
At
December 31, 2023, the Company had a working capital balance of $18.4 million and a current ratio of 2.33:1. The Company had cash balances
of $238,482, at December 31, 2023.
Total
cash used in operating activities for the year ended December 31, 2023 was $1,998,850, which resulted primarily from a net loss in 2023
as well as increased inventory and lease liabilities. This was partially offset by increased depreciation, a reduction in accounts receivable
and an increase in grapes payable.
Total
cash used in investing activities for the year ended December 31, 2023 was $4,726,970, which primarily consisted of cash used on construction
activity and vineyard development costs.
Total
cash provided from financing activities for the year ended December 31, 2023 was $6,615,626, which primarily consisted of proceeds from
the issuance of Preferred Stock and an increase in the line of credit and long term debt, being partially offset by the payment of a
preferred stock dividend.
In
December of 2005, the Company entered into a revolving line of credit agreement with Umpqua Bank (the Credit Agreement)
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. In July
2023 the line of credit was renewed for an additional two years. The Company had an outstanding line of credit balance
of $2,684,982 at December 31, 2023, at an interest rate of 8.0%, and an outstanding line of credit balance of $166,617 at December 31,
2022, at an interest rate of 6.5%. As of December 31, 2023, the Company was out of compliance with
a debt covenant contained in the Credit Agreement. The Company has received a waiver from Umqua Bank waiving this violation until the
next measurement date of December 31, 2024.
As
of December 31, 2023, the Company had a total long-term debt balance of $7,590,659 owed to AgWest, including the portion due in the next
year, exclusive of debt issuance costs of $105,989. As of December 31, 2022, the Company had a total long-term debt balance of $7,062,654,
exclusive of debt issuance costs of $119,237. The debt with AgWest was used to finance the Estate Hospitality Center and subsequent remodels,
invest in winery equipment to increase the Companys winemaking capacity, acquire new vineyard land for future development and
provide operating capital.
28
As
of December 31, 2023, the Company had an installment note payable of $1,100,735, due in quarterly payments of $42,534 through February
2032, associated with the purchase of property in the Dundee Hills AVA.
The
Company believes that cash flow from operations and funds available under its existing credit facilities and preferred stock program
will be sufficient to meet the Companys foreseeable short and long-term operating needs.
Inflation
The
Companys management does not believe inflation has had a material impact on the Companys revenues or loss during 2023 or
2022.
ITEM
7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not
required.
29
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