What changed in this filing

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Item 1. Business

2025-03-25 compared with 2024-03-26 · 108 added, 113 removed, 411 unchanged (35% of the section changed)

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channels, margins and selling strategies.

Direct sales include retail sales in the tasting rooms, wine club sales, online sales, on-site

Direct sales include retail sales in our tasting rooms, wine club sales, online sales, on-site

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

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Brut Rose, $80 per bottle;

and Riesling, $19 per bottle (all bottle prices included

herein are the suggested retail prices).

The Companys mission for this brand is to become the premier producer of Pinot Noir in

the Pacific Northwest.

and Riesling, $19 per bottle (all bottle prices included herein are the suggested retail prices).

The Companys mission for this brand is to become the premier producer of Pinot Noir in the Pacific Northwest.

its Domaine Willamette label, the Company produces and sells the following types of wine in 750 ml bottles:

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$70 per bottle;

and Cabernet Sauvignon, $75 per bottle.

Cabernet Sauvignon, $80 per bottle;

and Malbec, $70 per bottle.

its Maison Bleue label, the Company produces and sells the following types of wine in 750 ml bottles:

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Natoma, Côte du Bleue and Père Ami.

overview – The United States wine industry has seen a rapid increase in wineries established

The United States wine industry added 400 new wineries in 2022, a 3% increase from 2021, according to Wine Analytics Report .

From 2009 to 2021, the number of U.S.

wineries grew from 6,357 to 11,053, according to Statista, and consequently the wine industry can

be considered one of the fastest-growing segments in agriculture.

According to Wine Business Monthly’s

February 2024 report, the number of US active wineries in 2023 stood at 11,620, showing a 1% decrease compared to the peak in 2022.

total retail value of wine sales has increased from $26.3 billion in 2000 to $78.4 billion in 2021, according to Statista.

overview – Although the United States wine industry added 400 new wineries in 2022, a 3% increase from 2021, according to

Wine Analytics Report .

According to a Wine Business Monthlys February 2024 report, the number of U.S.

active wineries

in 2023 stood at 11,620, which represented a 1% decrease compared to the number of wineries in 2022.

The total US wine market was

estimated at $81.3 billion in 2023 by Grand View research.

Average wine consumption per United States resident was 2.68 gallons in

2023, down 15 percent compared to the 2021 peak.

Additionally,

1.1 billion gallons of wine were consumed in 2021, an increase of 413 million from 2005 (Statista).

This growth rate has recently slowed and according

to Silicon Valley Bank’s 2024 annual report premium wineries faced a challenging landscape in 2023.

According to this report, while

the value of premium wine continued to grow, volume sales were anticipated to finish lower for the year.

Additionally, direct-to-consumer

volume and value sales declined and tasting room visitation dropped for the second consecutive year and consumer demand for the overall

wine category continued its decline, with fewer U.S.

consumers opting for wine and choosing alternatives such as ready-to-drink beverages,

spirits, cannabis, or abstaining altogether.

A 2023 study conducted by the Wine

Market Council of 1,500 U.S.

consumers identified a significant downward trend in wine consumption attributed to a general reduction

in alcohol consumption, primarily for health reasons.

Previously considered a “healthy” option on the Healthy Eating Pyramid,

alcohol consumption is now cautioned against by organizations like the World Health Organization.

we believe the industry is expected to stabilize in 2024 around the current levels.

However, of concern, consumption growth is mainly

amongst those over 60 years old, with the most significant growth area among 70-80-year-olds.

Consequently, we believe future positive

sales and growth will depend on the industry targeting younger consumers.

According to the State of the Wine Industry 2023 by Rob McMillan,

younger wine consumers are not limited by cost;

instead, they seek something enticing to draw them in to learn more about wine, including

but not limited to health, sustainability, social values, and transparent labeling,

according to Silicon Valley Banks 2025 annual report, premium wineries faced a challenging landscape in 2024.

According to this

report, US wine volume consumed has reduced over the last four years.

Additionally, direct-to-consumer volume declined and tasting room

visitation dropped for the third consecutive year and consumer demand for the overall wine category continued its decline, with fewer

consumers opting for wine and choosing alternatives such as ready-to-drink beverages, spirits, cannabis, or abstaining altogether.

According to the Wine Business Analytics 2024 Year in Review direct to consumer shipping in 2024 was down 10% year over year in volume

and down 5% year over year in value.

2023 study conducted by the Wine Market Council of 1,500 U.S.

consumers identified a significant downward trend in wine consumption attributed

to a general reduction in alcohol consumption, primarily for health reasons.

Previously considered a healthy option on

the Healthy Eating Pyramid, alcohol consumption is now cautioned against by organizations like the World Health Organization.

we expect the industry to stabilize in 2025 around the current levels.

We believe future positive sales and growth will depend on the

industry targeting younger consumers.

According to the State of the Wine Industry Report 2023 by Rob McMillan, younger wine consumers

are not limited by cost;

instead, they seek something enticing to draw them in to learn more about wine, including but not limited to

health, sustainability, social values, and transparent labeling,

Companys Board of Directors and management believe the winerys focus on integrity in winemaking, small scale, storied estate

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overall number of wineries increased from 1,116 to 1,143 with the biggest increases coming from the Willamette Valley, which added 24

Planted acres of wine grape vineyards increased by 2,588 acres from 41,899 to 44,487, an increase of 6%, 40,774 acres of which

were harvested.

Planted acres of wine grape vineyards increased by 1,512 acres from 44,487 to 45,999, an increase of 3%, 40,313 acres

of which were harvested.

Oregon wine grapes produced a 2023 crop with a total value of $349 million, an increase of 6% from 2022.

leads all varieties accounting for 71% of planted acreage and 67% of production.

According to UOIPRE, Oregon case sales in 2022 were

5.7 million, an 8% increase from 2021.

Noir leads all varieties accounting for 60% of planted acreage and 59% of production.

According to UOIPRE, Oregon case sales in 2023

were 6.0 million, a 5% increase from 2022.

of climate, soil and other growing conditions, we believe the Willamette Valley in western Oregon is ideally suited to growing superior

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phylloxera, an aphid-like insect that feeds on the roots of grapevines, has been found in several commercial vineyards in Oregon.

to the California experience, most Oregon phylloxera infestations have expanded very slowly and have done only minimal damage.

Nevertheless,

phylloxera does constitute a significant risk to Oregon vineyards.

Prior to the discovery of phylloxera in Oregon, all vine plantings

in the Companys Estate Vineyard, in Turner, Oregon, were with non-resistant rootstock.

In 1997, the Company purchased Tualatin

Vineyards at the Tualatin Winery, which has phylloxera at its site.

All current plantings are with, and all future planting will be with,

phylloxera-resistant rootstock at that location.

The Company takes commercially reasonable precautions in an effort to prevent the spread

of phylloxera to other vineyards.

to the California experience, most Oregon phylloxera infestations have expanded very slowly.

Nevertheless, phylloxera does constitute

a significant risk to Oregon vineyards.

Prior to the discovery of phylloxera in Oregon, all vine plantings in the Companys Estate

Vineyard, in Turner, Oregon, were with non-resistant rootstock.

In 1997, the Company purchased Tualatin Vineyards at the Tualatin Winery,

which has phylloxera at its site.

All current plantings are with, and all future planting will be with, phylloxera-resistant rootstock

at that location.

The Company believes it has taken commercially reasonable precautions in an effort to prevent the spread of phylloxera

to other vineyards.

a result of these factors, subject to the risks and uncertainties identified in this Annual Report on Form 10-K, the Company believes

that long-term prospects for growth in the Oregon wine industry are good.

The Company believes that over the next several years,

the Oregon wine industry will grow at a faster rate than the overall domestic wine industry, and that much of this growth will favor

producers of premium, super premium and ultra-premium wines such as the Companys Estate, Elton, Domaine Willamette, Pambrun, Maison

Bleue and Griffin Creek brands.

The Company believes that over the next several years, the

Oregon wine industry will grow at a faster rate than the overall domestic wine industry, and that much of this growth will favor producers

of premium, super premium and ultra-premium wines such as the Companys Estate, Elton, Domaine Willamette, Pambrun, Maison Bleue

and Griffin Creek brands.

Companys Board of Directors and management believe the Winerys focus on integrity in winemaking, small scale, storied estate

vineyards, environmental stewardship, support for community needs and participatory wine experiences are reflective of the values of

a number of prospective, developing wine enthusiasts.

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

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The Company has

released wines under the Pambrun label beginning with the 2015 vintage year and Maison Bleue label beginning with the 2016 vintage.

Additionally,

the Company has developed a single vineyard brand near Hopewell, Oregon adjacent to the current site of Elton Vineyards to produce wine

under the Elton label.

This brand produces primarily Pinot Noir and Chardonnay, also for sale in the ultra-premium space.

has released wines under the Elton label beginning with the 2015 vintage year.

In 2020, the Company opened a microwinery featuring wine

tasting and a custom blending experience under the name Willamette Wineworks, in historic Folsom, California, and began selling wine

under the brand name Natoma.

In 2022, the Company opened a sparkling wine facility and tasting room called Domaine Willamette, at Bernau

Estate that features the Companys sparkling wines, as well as its other reserve wines, and its biodynamic farming practices.

released wines under the Pambrun label beginning with the 2015 vintage year and under the Maison Bleue label beginning with the 2016

vintage year.

Additionally, the Company has developed a single vineyard brand near Hopewell, Oregon adjacent to the current site of Elton

Vineyards to produce wine under the Elton label.

This brand produces primarily Pinot Noir and Chardonnay, also for sale in the ultra-premium

The Company has released wines under the Elton label beginning with the 2015 vintage year.

In 2020, the Company opened a microwinery

featuring wine tasting and a custom blending experience under the name Willamette Wineworks, in historic Folsom, California, and began

selling wine under the brand name Natoma.

In 2022, the Company opened a sparkling wine facility and tasting room called Domaine Willamette,

at Bernau Estate that features the Companys sparkling wines, as well as its other reserve wines, and its biodynamic farming practices.

Company owns and leases approximately 1,018 acres of land, of which 801 acres are either currently planted as vineyards or are suitable

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and 777 clones have been grafted onto seven acres of self-rooted, non-phylloxera-resistant vines at the Companys Estate Vineyard.

2023, crop yields were roughly 14% below the 10-year average and the Companys producing acres yielded approximately 867 tons of

2024, crop yields were roughly 1% above the 10-year average and the Companys producing acres yielded approximately 913 tons of

grapes an increase of 5.3% over approximately 867 tons of grapes produced in 2023.

Company fulfills its remaining grape needs by purchasing grapes from other nearby vineyards at competitive prices.

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Dundee, Oregon.

on properties – The Companys winery facilities at the Estate Winery are subject to two mortgages with an aggregate principal

balance of $4,565,710 at December 31, 2023.

The two outstanding loans require aggregate monthly principal and interest payments of $62,067

for the life of the loans, at annual fixed interest rates of 4.75% and 5.21%, and with maturity dates of 2028 and 2032, respectively.

on properties – The Companys winery facilities at the Estate Winery are subject to three mortgages with an aggregate

principal balance of $14,042,910 at December 31, 2024.

The first two outstanding loans require aggregate monthly principal and interest

payments of $62,067 for the life of the loans, at annual fixed interest rates of 4.75% and 5.21%, and with maturity dates of 2028 and

2032, respectively.

The third outstanding loan currently requires aggregate monthly principal and interest payments of $87,989 on the

loan, at an annual variable interest rate of 6.66% with a maturity date of 2039.

production – The Company operates on the principle that winemaking is a natural, but highly technical, process requiring the

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Companys historical annual grape harvest and wine production from 2005 to 2024 is as follows:

produced per ton harvested vary between years mainly due to the timing of when the cases are produced.

and Distribution

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2014, the Company launched daily food pairings to accompany its wines.

Led by the Winery Chef, the menu highlights Pacific Northwest

inspired dishes paired with the Companys wines.

The culinary offering has now expanded to include Pairings Wine Dinners,

which are community-style wine dinners hosted regularly throughout each month.

In 2019, the Company added a new experience offered throughout

the week called Pairings Exploration that features four wines paired with four small bites to educate guests on food and wine pairing.

In December 2021, the Company debuted a Pinot Noir Clonal Blending experience giving guests the ability to be a winemaker for a day by

crafting their own custom blends from barrel.

The menu highlights Pacific Northwest inspired dishes paired with

the Companys wines.

The culinary offering has now expanded to include Pairings Wine Dinners, which are community-style

wine dinners hosted regularly throughout the year.

In December 2021, the Company debuted a Pinot Noir Clonal Blending experience giving

guests the ability to be a winemaker for a day by crafting their own custom blends from barrel.

Winery has developed a Winery Ambassador program, which connects its Ambassadors with customers throughout the United States

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The Company sells its wine through its own e-commerce

website and direct ships where permissible.

Company also operates eight additional tasting rooms at the following locations:

(i) historic downtown McMinnville, Oregon;

Tualatin Vineyard, Oregon;

(i) McMinnville, Oregon;

(ii) Tualatin Vineyard, Oregon;

(iii) Lake Oswego, Oregon;

(iv) Happy Valley, Oregon;

(v) downtown Walla Walla, Washington;

(vi) Vancouver,

(vii) Folsom, California, and (viii) Bend, Oregon.

(v) Walla Walla, Washington;

(vi) Vancouver, Washington;

(vii) Folsom, California,

and (viii) Bend, Oregon.

Company holds various festivals and events at its locations throughout the year.

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The Companys products are distributed in 49 states and the

District of Columbia, and there are three non-domestic (export) customers.

For 2023 and 2022, sales to distributors and wine brokers

contributed approximately 47.6% and 53.6% of the Companys revenue from operations, respectively.

District of Columbia, and there are two non-domestic (export) customers.

For 2024 and 2023, sales to distributors and wine brokers contributed

approximately 46.6% and 47.6% of the Companys revenue from operations, respectively.

– Oregon wineries are a popular tourist destination with many bed & breakfasts, motels and fine dining restaurants available.

The Willamette Valley, Oregons leading wine region has approximately 69% of the states wineries and vineyards, is home

to approximately 1,016 wineries.

An additional advantage for Willamette Valley wine tourism is the proximity of the wineries to Portland

(Oregons largest city and most popular destination).

From Portland, tourists can visit the Willamette Valley winery of their choice

in anywhere from a 45 minute to a two-hour drive.

The Willamette Valley, Oregons leading wine region, has approximately 74% of the states wineries and is home to approximately

843 wineries.

An additional advantage for Willamette Valley wine tourism is the proximity of the wineries to Portland (Oregons

largest city and most popular destination).

From Portland, tourists can visit the Willamette Valley winery of their choice in anywhere

from a 45 minute to a two-hour drive.

Company believes the locations of the Estate Winery next to Interstate 5, and the Domaine Willamette Winery next to Highway 99W, significantly

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and believes its prices are competitive with other Oregon wineries.

Larger scale production is necessary to satisfy retailers

and restaurants demand and the Company believes that additional production capacity will be needed to meet estimated future demand.

Furthermore, the Company believes that its estimated aggregate production capacity of 720,000 gallons (303,000 cases) per year at its

Estate and Tualatin locations give it significant competitive advantages over most Oregon wineries in areas such as marketing, distribution

arrangements, grape purchasing, and access to financing.

The current production level of most Oregon wineries is generally much smaller

than the estimated production capacity level of the Companys Wineries.

With respect to label recognition, the Company believes

that its unique structure as a publicly owned company will give it a significant advantage in gaining market share in Oregon, as well

as penetrating other wine markets.

Furthermore, the Company believes that its estimated aggregate production

capacity of 720,000 gallons (303,000 cases) per year at its Estate and Tualatin locations give it significant competitive advantages

over most Oregon wineries in areas such as marketing, distribution arrangements, grape purchasing, and access to financing.

production level of most Oregon wineries is generally much smaller than the estimated production capacity level of the Companys

With respect to label recognition, the Company believes that its unique structure as a publicly owned company will give it

a significant advantage in gaining market share in Oregon, as well as penetrating other wine markets.

Regulation of the Wine Industry

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alternative processes or costs.

of December 31, 2023, the Company had approximately 223 full-time employees and 123 part-time, or on call employees.

addition, the Company hires additional employees for seasonal work as required.

The Companys employees are not represented by

any collective bargaining unit.

of December 31, 2024, the Company had approximately 161 full-time employees and 149 part-time employees.

In addition, the Company hires

additional employees for seasonal work as required.

The Companys employees are not represented by any collective bargaining unit.

The Company believes it maintains positive relations with its employees.

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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-K

Item 1. Business