WILLAMETTE VALLEY VINEYARDS INC 10-Q

Item 1 – Financial Statements WILLAMETTE VALLEY VINEYARDS, INC. CONDENSED BALANCE SHEETS (Unaudited) September 30, December 31, 2025 2024 ASSETS CURRENT ASSETS Cash and cash equivalents $ 372,566 $ 320,883 Accounts receivable, net 2,192,506 3,151,810 Inventories 34,267,179 32,907,489 Prepaid expenses and other current assets 361,473 519,608 Income tax receivable 785,431 19,267 Total current assets 37,979,155 36,919,057 Other assets 13,824 13,824 Vineyard development costs, net 8,674,046 8,769,542 Property and equipment, net 50,098,097 52,012,151 Operating lease right of use assets 10,832,925 11,302,566 TOTAL ASSETS $ 107,598,047 $ 109,017,140 LIABILITIES AND SHAREHOLDERS’ EQUITY CURRENT LIABILITIES Accounts payable $ 1,878,998 $ 1,584,466 Accrued expenses 1,943,859 2,097,736 Investor deposits for preferred stock 1,621,598 - Bank overdraft 600,291 473,016 Line of credit 1,164,558 2,405,815 Note payable 913,103 995,968 Current portion of long-term debt 993,875 952,171 Current portion of lease liabilities 474,932 481,801 Unearned revenue 2,036,683 2,470,125 Grapes payable 557,853 1,519,087 Total current liabilities 12,185,750 12,980,185 Long-term debt, net of current portion and debt issuance costs 14,270,632 12,911,831 Lease liabilities, net of current portion 11,010,791 11,354,746 Deferred income taxes 2,536,648 2,536,648 Total liabilities 40,003,821 39,783,410 COMMITMENTS AND CONTINGENCIES (NOTE 10) SHAREHOLDERS’ EQUITY Redeemable preferred stock, no par value, 100,000,000 shares authorized, 10,239,573 shares issued and outstanding, liquidation preference $ 44,183,758 , at September 30, 2025 and 10,239,573 shares issued and outstanding, liquidation preference $ 42,494,228 , at December 31, 2024. 45,046,926 43,357,396 Common stock, no par value, 10,000,000 shares authorized, 4,964,529 shares issued and outstanding at September 30, 2025 and December 31, 2024, respectively. 8,601,621 8,512,489 Retained earnings 13,945,679 17,363,845 Total shareholders' equity 67,594,226 69,233,730 TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY $ 107,598,047 $ 109,017,140 The accompanying notes are an integral part of this condensed financial statement 3 WILLAMETTE VALLEY VINEYARDS, INC. CONDENSED STATEMENTS OF OPERATIONS (Unaudited) Three months ended Nine months ended September 30, September 30, 2025 2024 2025 2024 SALES, NET $ 8,353,200 $ 9,370,713 $ 26,090,546 $ 28,506,151 COST OF SALES 3,349,228 3,562,599 10,110,848 10,953,625 GROSS PROFIT 5,003,972 5,808,114 15,979,698 17,552,526 OPERATING EXPENSES Sales and marketing 4,444,433 4,326,851 12,605,778 12,692,804 General and administrative 1,773,066 1,617,769 5,059,261 5,061,899 Total operating expenses 6,217,499 5,944,620 17,665,039 17,754,703 LOSS FROM OPERATIONS ( 1,213,527 ) ( 136,506 ) ( 1,685,341 ) ( 202,177 ) OTHER INCOME (EXPENSE) Interest expense, net ( 304,957 ) ( 257,192 ) ( 873,323 ) ( 750,573 ) Other income (expense), net ( 18,662 ) ( 4,424 ) 126,364 96,169 LOSS BEFORE INCOME TAXES ( 1,537,146 ) ( 398,122 ) ( 2,432,300 ) ( 856,581 ) INCOME TAX BENEFIT 444,696 115,177 703,664 247,809 NET LOSS ( 1,092,450 ) ( 282,945 ) ( 1,728,636 ) ( 608,772 ) Accrued preferred stock dividends ( 563,177 ) ( 563,250 ) ( 1,689,530 ) ( 1,689,676 ) LOSS APPLICABLE TO COMMON SHAREHOLDERS $ ( 1,655,627 ) $ ( 846,195 ) $ ( 3,418,166 ) $ ( 2,298,448 ) Loss per common share after preferred dividends, basic and diluted $ ( 0.33 ) $ ( 0.17 ) $ ( 0.69 ) $ ( 0.46 ) Weighted-average number of common shares outstanding, basic and diluted 4,964,529 4,964,529 4,964,529 4,964,529 The accompanying notes are an integral part of this condensed financial statement 4 WILLAMETTE VALLEY VINEYARDS, INC. CONDENSED STATEMENTS OF SHAREHOLDERS’ EQUITY (Unaudited) Nine-Month Period Ended September 30, 2025 Redeemable Preferred Stock Common Stock Retained Shares Dollars Shares Dollars Earnings Total Balance at December 31, 2024 10,239,573 $ 43,357,396 4,964,529 $ 8,512,489 $ 17,363,845 $ 69,233,730 Preferred stock dividends accrued - 563,177 - - ( 563,177 ) - Net loss - - - - ( 728,981 ) ( 728,981 ) Balance at March 31, 2025 10,239,573 43,920,573 4,964,529 8,512,489 16,071,687 68,504,749 Preferred stock dividends accrued - 563,176 - - ( 563,176 ) - Net income - - - - 92,795 92,795 Balance at June 30, 2025 10,239,573 44,483,749 4,964,529 8,512,489 15,601,306 68,597,544 Stock based compensation - - - 89,132 - 89,132 Preferred stock dividends accrued - 563,177 - - ( 563,177 ) - Net loss - - - - ( 1,092,450 ) ( 1,092,450 ) Balance at September 30, 2025 10,239,573 $ 45,046,926 4,964,529 $ 8,601,621 $ 13,945,679 $ 67,594,226 Nine-Month Period Ended September 30, 2024 Redeemable Preferred Stock Common Stock Retained Shares Dollars Shares Dollars Earnings Total Balance at December 31, 2023 10,046,833 $ 42,388,036 4,964,529 $ 8,512,489 $ 19,734,680 $ 70,635,205 Issuance of preferred stock, net 192,740 969,359 - - - 969,359 Preferred stock dividends accrued - 563,177 - - ( 563,177 ) - Net loss - - - - ( 521,805 ) ( 521,805 ) Balance at March 31, 2024 10,239,573 43,920,572 4,964,529 8,512,489 18,649,698 71,082,759 Preferred stock dividends accrued - 563,249 - - ( 563,249 ) - Net income - - - - 195,978 195,978 Balance at June 30, 2024 10,239,573 44,483,821 4,964,529 8,512,489 18,282,427 71,278,737 Preferred stock dividends accrued - 563,250 - - ( 563,250 ) - Net loss - - - - ( 282,945 ) ( 282,945 ) Balance at September 30, 2024 10,239,573 $ 45,047,071 4,964,529 $ 8,512,489 $ 17,436,232 $ 70,995,792 The accompanying notes are an integral part of this condensed financial statement 5 WILLAMETTE VALLEY VINEYARDS, INC. STATEMENTS OF CASH FLOWS (Unaudited) Nine months ended September 30, 2025 2024 CASH FLOWS FROM OPERATING ACTIVITIES Net loss $ ( 1,728,636 ) $ ( 608,772 ) Adjustments to reconcile net loss to net cash from operating activities: Depreciation and amortization 2,441,167 2,493,106 Loss on disposition of property & equipment 21,212 - Common stock compensation expense 89,132 - Non-cash lease expense 492,003 417,473 Debt issuance costs 15,323 9,935 Change in operating assets and liabilities: Accounts receivable 959,304 431,954 Inventories ( 1,359,690 ) ( 3,046,229 ) Prepaid expenses and other current assets 158,135 291,486 Income taxes receivable ( 766,164 ) ( 278,801 ) Unearned revenue ( 433,442 ) ( 254,228 ) Lease liabilities ( 373,186 ) ( 334,739 ) Grapes payable ( 961,234 ) ( 1,886,226 ) Accounts payable 154,251 ( 204,986 ) Accrued expenses ( 153,877 ) 810,199 Net cash from operating activities ( 1,445,702 ) ( 2,159,828 ) CASH FLOWS FROM INVESTING ACTIVITIES Additions to vineyard development costs ( 55,955 ) ( 167,465 ) Additions to property and equipment ( 256,593 ) ( 1,487,687 ) Net cash from investing activities ( 312,548 ) ( 1,655,152 ) CASH FLOWS FROM FINANCING ACTIVITIES Payment on installment note for property purchase ( 82,865 ) ( 77,957 ) Proceeds from (payments on) bank overdraft 127,275 ( 178,620 ) Proceeds from (payments on) line of credit ( 1,241,257 ) 775,022 Payments on long-term debt ( 1,626,515 ) ( 389,254 ) Proceeds from investor deposits held as liability 1,621,598 - Proceeds from long-term debt 3,011,697 3,500,000 Proceeds from issuance of preferred stock - 250,502 Net cash from financing activities 1,809,933 3,879,693 NET CHANGE IN CASH AND CASH EQUIVALENTS 51,683 64,713 CASH AND CASH EQUIVALENTS, beginning of period 320,883 238,482 CASH AND CASH EQUIVALENTS, end of period $ 372,566 $ 303,195 NON-CASH INVESTING AND FINANCING ACTIVITIES Purchases of property and equipment and vineyard development costs included in accounts payable $ 150,748 $ 208,496 Reduction in investor deposits for preferred stock $ - $ 718,857 Accrued preferred stock dividends $ 1,689,530 $ 1,689,676 The accompanying notes are an integral part of this condensed financial statement 6 NOTES TO UNAUDITED INTERIM FINANCIAL STATEMENTS 1) BASIS OF PRESENTATION The accompanying unaudited interim financial statements as of September 30, 2025 and for the three and nine months ended September 30, 2025 and 2024 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, 2024 is derived from the audited financial statements presented in the Willamette Valley Vineyards, Inc. (the “Company”) Annual Report on Form 10-K for the year ended December 31, 2024. Certain information or footnote disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission. In the opinion of management, the accompanying financial statements include all adjustments necessary (which are of a normal recurring nature) for the fair statement of the results of the interim periods presented. The accompanying financial statements should be read in conjunction with the Company’s audited financial statements for the year ended December 31, 2024, as presented in the Company’s Annual Report on Form 10-K. Operating results for the three and nine months ended September 30, 2025 are not necessarily indicative of the results that may be expected for the entire year ending December 31, 2025, or any portion thereof. The Company’s revenues include direct to consumer sales and national sales to distributors. These sales channels utilize shared resources for production, selling, and distribution. Basic loss per share after preferred stock dividends are computed based on the weighted-average number of common shares outstanding each period. The following table presents the earnings per share after preferred stock dividends calculation for the periods shown: Schedule of Earning Per Share Three months ended September 30, Nine months ended September 30, 2025 2024 2025 2024 Numerator Net loss $ ( 1,092,450 ) $ ( 282,945 ) $ ( 1,728,636 ) $ ( 608,772 ) Accrued preferred stock dividends ( 563,177 ) ( 563,250 ) ( 1,689,530 ) ( 1,689,676 ) Net loss applicable to common shares $ ( 1,655,627 ) $ ( 846,195 ) $ ( 3,418,166 ) $ ( 2,298,448 ) Denominator Weighted-average number of common shares outstanding basic and diluted 4,964,529 4,964,529 4,964,529 4,964,529 Loss per common share after preferred dividends, basic and diluted $ ( 0.33 ) $ ( 0.17 ) $ ( 0.69 ) $ ( 0.46 ) Subsequent to the filing of the 2024 Report there were no accounting pronouncements issued by the Financial Accounting Standards Board (“FASB”) that would have a material effect on the Company’s unaudited interim condensed financial statements. 2) INVENTORIES The Company’s inventories, by major classification, are summarized as follows, as of the dates shown: Schedule of Inventories September 30, 2025 December 31, 2024 Winemaking and packaging materials $ 1,437,983 $ 1,303,152 Work-in-process (costs relating to unprocessed and/or unbottled wine products) 13,967,947 14,990,375 Finished goods (bottled wine and related products) 18,861,249 16,613,962 Total inventories $ 34,267,179 $ 32,907,489 7 3) PROPERTY AND EQUIPMENT, NET The Company’s property and equipment consists of the following, as of the dates shown: Schedule of Property and Equipment, Net September 30, 2025 December 31, 2024 Construction in progress $ 626,890 $ 633,179 Land, improvements, and other buildings 15,342,674 15,342,674 Winery, tasting room buildings, and hospitality center 44,123,730 44,146,543 Equipment 21,139,144 20,835,506 Property and equipment, gross 81,232,438 80,957,902 Accumulated depreciation ( 31,134,341 ) ( 28,945,751 ) Property and equipment, net $ 50,098,097 $ 52,012,151 Depreciation expense for the three months ended September 30, 2025 and 2024 was $ 757,851 and $ 785,581 , respectively. Depreciation expense for the nine months ended September 30, 2025 and 2024 was $ 2,289,716 and $ 2,368,537 , respectively. 4) DEBT Line of Credit Facility – In December of 2005, the Company entered into a revolving line of credit agreement with Columbia 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 November 2022, the Company increased the borrowing line up to $ 5,000,000 . In July 2025, the Company renewed the credit agreement until July 31, 2026. The Company had an outstanding line of credit balance of $ 1,164,558 at September 30, 2025, at an interest rate of 7.0%, and an outstanding line of credit balance of $ 2,405,815 at December 31, 2024, at an interest rate of 7.0%. The line of credit agreement includes various covenants, which among other things, requires the Company to maintain minimum amounts of tangible net worth, debt-to-equity, and debt service coverage, as defined, and limits the level of acquisitions of property and equipment. As of December 31, 2024, the Company was in compliance with these financial covenants. Notes Payable – In February 2017, the Company purchased property, including vineyard land, bare land, and structures in the Dundee Hills American Viticultural Area (AVA) under terms that included a 15 year note payable with quarterly payments of $42,534, bearing interest at 6%. The note may be called by the owner, up to the outstanding balance, with 180 days written notice. As of September 30, 2025, the Company had a balance of $ 913,103 due on this note. As of December 31, 2024, the Company had a balance of $ 995,968 due on this note. Long-Term Debt – The Company has four long term debt agreements with AgWest with an aggregate outstanding balance of $ 15,428,093 and $ 14,042,910 as of September 30, 2025 and December 31, 2024, respectively. The first two outstanding loans require 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. These loans are collateralized against the property on the main estate in Salem. The third loan requires monthly principal and interest payments of $87,989 at an annual interest rate of 6.66%, and with a maturity date of 2039. The fourth loan allows borrowings up to $4,350,000 against property defined in the agreement. The line of credit bears interest at 7.10% and has a maturity date of April, 2027. The general purposes of these loans were to make capital improvements to the winery and vineyard facilities. These loans are collateralized against the property on the Company estates in Salem and Tualatin. 8 As of September 30, 2025, future minimum principal payments of long-term debt are as follows for the years ending December 31: Schedule of Future Minimum Principal Payment for Long-Term Debt Maturities 2025 238,841 2026 1,008,215 2027 3,161,508 2028 1,130,789 2029 1,007,284 Thereafter 8,881,456 Total $ 15,428,093 As of September 30, 2025, the Company had unamortized debt issuance costs of $ 163,586 . As of December 31, 2024, the Company had unamortized debt issuance costs of $ 178,908 . 5) INTEREST AND TAXES PAID Income taxes – The Company paid $ 17,500 in income taxes for the three months ended September 30, 2025 and $ 27,000 in income taxes for the three months ended September 30, 2024. The Company paid $ 62,500 in income taxes for the nine months ended September 30, 2025 and $ 27,000 in income taxes for the nine months ended September 30, 2024. On July 4, 2025, a budget and reconciliation package referred to as the One Big Beautiful Bill Act ("OBBBA") was signed into law. The OBBBA enacts significant changes to U.S. tax and related laws, including, among other things, expensing of domestic research expenses, increasing the limit of the interest expense deduction to thirty percent of EBITDA, and one hundred percent bonus depreciation on eligible property acquired after January 19, 2025. There was no material change to the Company’s effective income tax rate as a result of these changes for the period ending September 30, 2025. Interest – The Company paid $ 227,510 and $ 127,444 for the three months ended September 30, 2025 and 2024, respectively, in interest on debt and the line of credit. The Company paid $ 723,311 and $ 391,962 for the nine months ended September 30, 2025 and 2024, respectively, in interest on debt and the line of credit. 6) SEGMENT REPORTING The Company has identified two operating segments, Direct Sales and Distributor Sales, based upon their different distribution channels, margins and selling strategies. Direct Sales include retail sales in the tasting rooms, wine club sales, internet sales, on-site events, kitchen and catering sales and other sales made directly to the consumer without the use of an intermediary, including sales of bulk wine or grapes. Distributor Sales include all sales through a third party where prices are given at a wholesale rate. The two segments reflect how the Company’s operations are evaluated by senior management and the structure of its internal financial reporting. The Company evaluates performance based on the gross profit of the respective business segments. Selling expenses that can be directly attributable to the segment, including depreciation of segment specific assets, are included, however, centralized selling expenses and general and administrative expenses are not allocated between operating segments. Therefore, net income (loss) information for the respective segments is not available. Discrete financial information related to segment assets, other than segment specific depreciation associated with selling, is not available and that information continues to be aggregated. The following table outlines the sales, cost of sales, gross profit, directly attributable selling expenses, and contribution margin of the segments for the three and nine month periods ended September 30, 2025 and 2024. Sales figures are net of related excise taxes. Schedule of Segment reporting Three Months Ended September 30, Direct Sales Distributor Sales Unallocated Total 2025 2024 2025 2024 2025 2024 2025 2024 Sales, net $ 4,636,319 $ 5,020,739 $ 3,716,881 $ 4,349,974 $ - $ - $ 8,353,200 $ 9,370,713 Cost of sales 1,350,484 1,427,377 1,998,744 2,135,222 - - 3,349,228 3,562,599 Gross profit 3,285,835 3,593,362 1,718,137 2,214,752 - - 5,003,972 5,808,114 Selling expenses 3,391,143 3,551,780 778,617 513,578 274,673 261,493 4,444,433 4,326,851 Contribution margin $ ( 105,308 ) $ 41,582 $ 939,520 $ 1,701,174 Percent of total sales 55.5 % 53.6 % 44.5 % 46.4 % General and administration expenses 1,773,066 1,617,769 1,773,066 1,617,769 Loss from operations $ ( 1,213,527 ) $ ( 136,506 ) Nine Months Ended September 30, Direct Sales Distributor Sales Unallocated Total 2025 2024 2025 2024 2025 2024 2025 2024 Sales, net $ 14,444,767 $ 15,028,067 $ 11,645,779 $ 13,478,084 $ - $ - $ 26,090,546 $ 28,506,151 Cost of sales 3,987,946 4,330,945 6,122,902 6,622,680 - - 10,110,848 10,953,625 Gross profit 10,456,821 10,697,122 5,522,877 6,855,404 - - 15,979,698 17,552,526 Selling expenses 9,732,449 10,412,084 2,072,256 1,523,369 801,073 757,351 12,605,778 12,692,804 Contribution margin $ 724,372 $ 285,038 $ 3,450,621 $ 5,332,035 Percent of total sales 55.4 % 52.7 % 44.6 % 47.3 % General and administration expenses 5,059,261 5,061,899 5,059,261 5,061,899 Loss from operations $ ( 1,685,341 ) $ ( 202,177 ) 9 7) SALE OF PREFERRED STOCK On July 1, 2022, the Company filed a shelf Registration Statement on Form S-3 (the “July 2022 Form S-3”) with the United States Securities and Exchange Commission (the “SEC”) pertaining to the potential future issuance of one or more classes or series of debt, equity, or derivative securities. The maximum aggregate offering amount of securities sold pursuant to the June 2022 Form S-3 is not to exceed $20,000,000. From August 1, 2022 to November 1, 2022 the Company filed with the SEC four Prospectus Supplements 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 an aggregate of 1,076,578 shares of Series A Redeemable Preferred Stock having proceeds not to exceed an aggregate of $5,636,714. Each of these Prospectus Supplements established that our shares of preferred stock were to be sold in one to three offering periods offering prices including $5.15 per share, $5.25 per share and $5.35 per share. Net proceeds of $3,558,807 have been received under these offerings as of September 30, 2025 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. On 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. This Prospectus Supplement established that our shares of preferred stock were to be sold in one offering period with an offering price of $4.85 per share. Net proceeds of $3,938,066 have been received under these offerings as of September 30, 2025 for the issuance of Preferred Stock. On June 17, 2025, the Company filed a shelf Registration Statement on Form S-3 (the “June 2025 Form S-3”) with the SEC pertaining to the potential future issuance of one or more classes or series of debt, equity, or derivative securities. The maximum aggregate offering amount of securities sold pursuant to the June 2025 Form S-3 is not to exceed $20,000,000. On July 3, 2025, the Company filed with the SEC a Prospectus Supplement to the June 2025 Form S-3, pursuant to which the Company proposed to offer and sell, on a delayed or continuous basis, up to 1,343,284 shares of Series A Redeemable Preferred Stock having proceeds not to exceed $4,500,000. Net proceeds of $1,621,598 have been received under these offerings as of September 30, 2025 for the issuance of Preferred Stock. Shareholders 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 September 30, 2025 and December 31, 2024 was $1,321,760 and $1,853,982, respectively, and is recorded as unearned revenue on the balance sheets. Revenue from gift cards is recognized when the gift card is redeemed by a customer. When the likelihood of a gift card being redeemed by a customer is determined to be remote and the Company expects to be entitled to the breakage, then the value of the unredeemed gift card is recognized as revenue. We determine the gift card breakage rate based upon Company-specific historical redemption patterns. To date we have determined that no breakage should be recognized related to our gift cards. Dividends accrued but not paid will be added to the liquidation preference of the stock until the dividend is declared and paid. At any time after June 1, 2021, the Company has the option, but not the obligation, to redeem all of the outstanding preferred stock in an amount equal to the original issue price plus accrued but unpaid dividends and a redemption premium equal to 3% of the original issue price. 8) EQUITY INCENTIVE PLAN The Willamette Valley Vineyards Inc, 2025 Omnibus Equity Incentive Plan ("2025 Plan") was adopted by the Company's board of directors on September 9, 2025. The 2025 Plan provides for the grant of Options, Share Appreciation Rights, Restricted Share Units, Other Share-based Awards or any combination of the foregoing to selected employees, directors and independent contractors of the Company. During the three months ended September 30, 2025, the Company granted 285,000 restricted shares and share units under the 2025 Plan. As of September 30, 2025, no shares had been registered with the SEC under this plan. The Company filed the registration statement to register the shares related to the 2025 Plan on November 12, 2025. The 15,000 shares that vested prior to November 12, 2025 will be issued during the three month period ended December 31, 2025. The Company recognized $89,132 in stock-based compensation expense during the three months ended September 30, 2025 related to the 2025 Plan. 9) LEASES We determine if an arrangement is a lease at inception. On our condensed balance sheets, 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. ROU assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at the commencement date based on the present value of lease payments over the lease term. For leases that do not provide an implicit rate, we use our incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. We use the implicit rate when readily determinable. Lease expense for operating lease payments is recognized on a straight-line basis over the lease term. Significant judgment may be required when determining whether a contract contains a lease, the length of the lease term, the allocation of the consideration in a contract between lease and non-lease components, and the determination of the discount rate included in our leases. We review the underlying objective of each contract, the terms of the contract, and consider our current and future business conditions when making these judgments. 10 Operating leases – Vineyard - In December 1999 , under a sale-leaseback agreement, the Company sold approximately 79 acres of the Tualatin Vineyards property with a net book value of approximately $1,000,000 for approximately $ 1,500,000 cash and entered into a 20 year operating lease agreement, with three five-year extension options, and contains an escalation provision of 2.5% per year. The Company extended the lease in January 2019 until January 2025. The Company extended the lease in July 2024 until January 2030. This property is referred to as the Peter Michael Vineyard and includes approximately 69 acres of producing vineyards. For right of use asset and liability calculations the Company has concluded it is reasonably certain to extend available options through January 2035. In December 2004 , under a sale-leaseback agreement, the Company sold approximately 75 acres of the Tualatin Vineyards property with a net book value of approximately $551,000 for approximately $ 727,000 cash and entered into a 15 year operating lease agreement, with three five-year extension options, for the vineyard portion of the property. The first two five year extensions have been exercised. The lease contains a formula-based escalation provision with a maximum increase of 4% every three years. This property is referred to as the Meadowview Vineyard and includes approximately 49 acres of producing vineyards. For right of use asset and liability calculations the Company has concluded it is reasonably certain to extend available options through November 2033. In February 2007 , the Company entered into a lease agreement for 59 acres of vineyard land at Elton Vineyard. In June 2021 the Company entered into a new 11 year lease for this property. The lease contains an escalation provision tied to the CPI not to exceed 2% per annum. This property includes 54 acres of producing vineyards and 2 additional plantable acres. For right of use asset and liability calculations the Company has concluded it is reasonably certain to extend available options through December 2031. In July 2008 , the Company entered into a 34-year lease agreement with a property owner in the Eola Hills for approximately 110 acres adjacent to the existing Elton Vineyards site. These 110 acres are being developed into vineyards. Terms of this agreement contain rent increases, that rise as the vineyard is developed, and contains an escalation provision of CPI plus 0.5% per year capped at 4%. This property is referred to as part of Ingram Vineyard and includes 93 acres of producing vineyards and 17 additional plantable acres. For right of use asset and liability calculations the Company has concluded it is reasonably certain to extend available options through December 2053. In March 2017 , the Company entered into a 25-year lease for approximately 17 acres of agricultural land in Dundee, Oregon. This lease contains an annual payment that remains constant throughout the term of the lease. This property is referred to as part of Bernau Estate Vineyard and includes 9 acres of producing vineyards. Operating Leases – Non-Vineyard – In January 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. For right of use asset and liability calculations the Company has not included the renewal option. In February 2020 , the Company entered into a lease for 5 years , with three five-year renewal options for a retail wine facility in Folsom, California, referred to as Willamette Wineworks. The lease contains an escalation provision tied to the CPI not to exceed 3% per annum with increases not allowed in any year being carried forward to the following years. In September 2025 the Company amended the renewal options and extended the lease until February 2027. For right of use asset and liability calculations the Company has concluded it is reasonably certain to extend available options through February 2040. In March 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. For right of use asset and liability calculations the Company has concluded it is reasonably certain to extend available options through August 2041. In February 2022 , the Company entered into a lease for 10 years , with three five-year renewal options for a retail wine facility in Lake Oswego, Oregon. The lease defines the payments over the term of the lease and option periods. For right of use asset and liability calculations the Company has concluded it is reasonably certain to extend available options through January 2042 . In May 2022 , the Company entered into a lease for 10 years , with two five-year renewal options for a retail wine facility in Happy Valley, Oregon. The lease defines the payments over the term of the lease and option periods. For right of use asset and liability calculations the Company has concluded it is reasonably certain to extend available options through May 2042. In January 2023 , the Company entered into a lease for 10 years , with three five-year renewal options for a retail wine facility in Bend, Oregon. The lease defines the payments over the term of the lease. For right of use asset and liability calculations the Company has not included the renewal option. 11 The following tables provide lease cost and other lease information: Schedule of Lease Cost and Information Nine Months Ended Nine Months Ended September 30, 2025 September 30, 2024 Lease Cost Operating lease cost - Vineyards $ 375,544 $ 344,346 Operating lease cost - Other 734,486 743,321 Short-term lease cost 31,683 28,543 Total lease cost $ 1,141,713 $ 1,116,210 Other Information Cash paid for amounts included in the measurement of lease liabilities Operating cash flows from operating leases - Vineyard $ 351,512 $ 346,662 Operating cash flows from operating leases - Other $ 657,253 $ 658,272 Weighted-average remaining lease term - Operating leases in years 14.25 15.19 Weighted-average discount rate - Operating leases 7.67 % 7.90 % Right-of-use assets obtained in exchange for new operating lease obligations were $22,362 for the nine months ended September 30, 2025 and zero for the nine months ended September 30, 2024. As of September 30, 2025, maturities of lease liabilities were as follows: Schedule of Maturities of Lease Liabilities Operating Years Ended December 31, Leases 2025 $ 324,459 2026 1,315,508 2027 1,376,460 2028 1,369,170 2029 1,379,314 Thereafter 13,889,048 Total minimal lease payments 19,653,959 Less present value adjustment ( 8,168,236 ) Operating lease liabilities 11,485,723 Less current lease liabilities ( 474,932 ) Lease liabilities, net of current portion $ 11,010,791 10) COMMITMENTS AND CONTINGENCIES Litigation – From time to time, in the normal course of business, the Company is a party to legal proceedings. Management believes that these matters will not have a material adverse effect on the Company’s financial position, results of operations, or cash flows, but, due to the nature of litigation, the ultimate outcome of any potential actions cannot presently be determined. Grape Purchases – The Company has entered into long-term grape purchase agreements with a number of Willamette Valley wine grape growers. With these agreements the Company purchases an annually agreed upon quantity of fruit, at pre-determined prices, within strict quality standards and crop loads. The Company cannot calculate the minimum or maximum payment as such a calculation is dependent in large part on unknowns such as the quantity of fruit needed by the Company and the availability of grapes produced that meet the strict quality standards in any given year. If no grapes are produced that meet the contractual quality levels, the grapes may be refused, and no payment would be due. 12 ITEM 2: MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS As used in this Quarterly Report on Form 10-Q, “we,” “us,” “our” and “the Company” refer to Willamette Valley Vineyards, Inc. Forward Looking Statements This Management’s Discussion and Analysis of Financial Condition and Results of Operations and other sections of this Form 10-Q contain forward looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements involve risks and uncertainties that are based on current expectations, estimates and projections about the Company’s business, and beliefs and assumptions made by management. Words such as “expects,” “anticipates,” “intends,” “plans,” “believes,” “seeks,” “estimates”, “predicts,” “potential,” “should,” or “will” or the negative thereof and variations of such words and similar expressions are intended to identify such forward-looking statements. Therefore, actual outcomes and results may differ materially from what is expressed or forecasted in such forward-looking statements due to numerous factors, including, but not limited to: availability of financing for growth, availability of adequate supply of high quality grapes, successful performance of internal operations, impact of competition, changes in wine broker or distributor relations or performance, impact of possible adverse weather conditions, impact of reduction in grape quality or supply due to disease or smoke from forest fires, changes in consumer spending, and the reduction in consumer demand for premium wines. In addition, such statements could be affected by general industry and market conditions and growth rates, and general domestic economic conditions. Many of these risks as well as other risks that may have a material adverse impact on our operations and business, are identified in Item 1A “Risk Factors” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2024, as well as in the Company’s other Securities and Exchange Commission filings and reports. The forward-looking statements in this report are made as of the date hereof, and, except as otherwise required by law, the Company disclaims any intention or obligation to update or revise any forward-looking statements or to update the reasons why the actual results could differ materially from those projected in the forward-looking statements, whether as a result of new information, future events or otherwise. Critical Accounting Policies The foregoing discussion and analysis of the Company’s financial condition and results of operations are based upon our unaudited condensed financial statements, which have been prepared in accordance with U.S. GAAP. The preparation of these unaudited condensed financial statements requires the Company’s management to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. On an on-going basis, the Company evaluates its estimates, including those related to revenue recognition, collection of accounts receivable, valuation of inventories, and amortization of vineyard development costs. The Company bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances. Actual results may differ from these estimates under different assumptions or conditions. A description of the Company’s critical accounting policies and related judgments and estimates that affect the preparation of the Company’s financial statements is set forth in the Company’s Annual Report on Form 10-K for the year ended December 31, 2024. Such policies were unchanged during the nine months ended September 30, 2025. Overview The Company, one of the largest wine producers in Oregon by volume, believes its success is dependent upon its ability to: (1) grow and purchase high quality vinifera wine grapes; (2) vinify the grapes into premium, super premium and ultra-premium wine; (3) achieve significant brand recognition for its wines, first in Oregon, and then nationally and internationally; (4) effectively distribute and sell its products nationally; and (5) continue to build on its base of direct to consumer sales. The Company’s goal is to continue to build on a reputation for producing some of Oregon’s finest, most sought-after wines. The Company has focused on positioning itself for strategic growth through property purchases, property development and issuance of the Company’s Series A Redeemable Preferred Stock (the “Preferred Stock”). Management expects near term financial results to be negatively impacted by these activities as a result of incurring costs of accrued preferred stock dividends, strategic planning and development costs and other growth associated costs. The Company’s wines are made from grapes grown in vineyards owned, leased or contracted by the Company, and from grapes purchased from other vineyards. The grapes are harvested, fermented and made into wine primarily at the Company’s winery in Turner Oregon (the “Winery”) and the wines are sold principally under the Company’s Willamette Valley Vineyards label, but also under the Griffin Creek, Pambrun, Elton, Maison Bleue, Metis, Natoma, Pere Ami, Elton, Domaine Willamette and Tualatin Estates labels. The Company also owns the Tualatin Estate Vineyards and Winery, located near Forest Grove, Oregon and the Domaine Willamette Winery located near Dundee, Oregon. The Company generates revenues from the sales of wine to wholesalers and direct to consumers. 13 Direct to consumer sales primarily include sales through the Company’s tasting rooms, telephone, internet and wine club. Direct to consumer sales are at a higher unit price than sales through distributors 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 the Company’s existing tasting rooms and the opening of new locations, and growth in wine club membership. Additionally, the Company’s Preferred Stock sales since August 2015 have resulted in approximately 14,385 new preferred stockholders many of which the Company believes are wine enthusiasts. When considering joint ownership, we believe these new stockholders represent approximately 21,577 current and potential customers of the Company. Periodically, the Company will sell grapes or bulk wine, due to them not meeting Company standards or being in excess of production targets, however this is not a significant part of the Company’s activities. The Company sold 124,254 and 135,424 cases of produced wine during the nine months ended September 30, 2025 and 2024, respectively, a decrease of 11,170 cases, or 8.2% in the current year period over the prior year period. The decrease in wine case sales was the result of decreased case sales through distributors. Cost of sales includes grape costs, whether purchased or grown at Company vineyards, winemaking and processing costs, bottling, packaging, warehousing, and shipping and handling costs. For grapes grown at Company vineyards, costs include farming expenditures and amortization of vineyard development costs. At September 30, 2025, wine inventory included 231,368 cases of bottled wine and 612,224 gallons of bulk wine in various stages of the aging process. Case wine is expected to be sold over the next 12 to 24 months and generally before the release date of the next vintage. The Winery bottled 146,176 cases during the nine months ended September 30, 2025. Willamette Valley Vineyards continues to receive positive recognition through national magazines, regional publications, local newspapers and online bloggers including the accolades below. The tasting room at the Company’s Estate Winery in the Salem Hills, Oregon was awarded the Best Wine Tasting Room in the country by USA Today in their 10 Best Readers’ Choice Awards for the second consecutive year. The Company was also awarded the #2 Best Wine Club in the nation by USA Today for the second consecutive year. Wine Enthusiast Magazine rated the 2022 Père Ami Red Blend 93 points, 2022 Métis Red Blend 94 points, Willamette Valley Vineyards 2023 Founders’ Reserve Pinot Noir and 2023 Dijon Clone Chardonnay 92 points, and the 2023 Founders’ Reserve Chardonnay 91 points. James Suckling rated the 2023 Founders’ Reserve Pinot Noir and Chardonnay 93 points. National Sales’ 2023 White Pinot Noir received 91 points and 2023 Pinot Gris 90 points. USA Wine Ratings Competition awarded the Company’s 2023 Estate Pinot Noir 94 points, 2023 Whole Cluster Pinot Noir 93 points, National Sales’ 2023 Pinot Gris and 2023 White Pinot Noir 92 points, the 2023 Dijon Clone Pinot Noir rated 92 points. RESULTS OF OPERATIONS Revenue Sales revenue for the three months ended September 30, 2025 and 2024 were $8,353,200 and $9,370,713, respectively, a decrease of $1,017,513, or 10.9%, in the current year period over the prior year period. This decrease was caused by a decrease in direct sales of $384,420, and a decrease in sales through distributors of $633,093 in the current year three-month period over the prior year period. The decrease in revenue from direct sales was primarily related to lower internet and telephone sales. Sales revenue for the nine months ended September 30, 2025 and 2024 were $26,090,546 and $28,506,151, respectively, a decrease of $2,415,605, or 8.5%, in the current year period over the prior year period. This decrease was caused by a decrease in revenues from direct sales of $583,300 and a decrease in revenues from sales through distributors of $1,832,305 in the current year period over the prior year period. The decrease in revenues from sales through distributors was primarily the result of lower case sales in the current year. Cost of Sales Cost of Sales for the three months ended September 30, 2025 and 2024 were $3,349,228 and $3,562,599, respectively, a decrease of $213,371, or 6.0%, in the current period over the prior year period. This change was primarily the result of lower sales in the current quarter compared to the same quarter last year. Cost of Sales for the nine months ended September 30, 2025 and 2024 were $10,110,848 and $10,953,625, respectively, a decrease of $842,777 or 7.7%, in the current period over the prior year period. This change was primarily the result of lower case sales in the first nine months of 2025 when compared to the same period in 2024. 14 Gross Profit Gross profit as a percentage of net sales for the three months ended September 30, 2025 and 2024 was 59.9% and 62.0%, respectively, a decrease of 2.1 percentage points in the current year period over the prior year period, mostly as a result of higher percentage rebates paid to distributors compared to the same quarter of 2024. Gross profit as a percentage of net sales for the nine months ended September 30, 2025 and 2024 was 61.2% and 61.6%, respectively, a decrease of 0.4 percentage points in the current year period over the prior year period. The decrease was primarily the result of higher percentage rebates paid to distributors in the first nine months of 2025 compared to the same period in the prior year. Selling, General and Administrative Expenses Selling, general and administrative expenses for the three months ended September 30, 2025 and 2024 was $6,217,499 and $5,944,620 respectively, an increase of $272,879, or 4.6%, in the current quarter over the same quarter in the prior year. The increase was primarily the result of an increase in selling and marketing expenses of $117,582, or 2.7% and an increase in general and administrative expenses of $155,297, or 9.6% in the current quarter compared to the same quarter last year. Selling, general and administrative expense for the nine months ended September 30, 2025 and 2024 was $17,665,039 and $17,754,703, respectively, a decrease of $89,664, or 0.5%, in the current year period over the prior year period. This decrease was primarily the result of a decrease in selling and marketing expenses of $87,026, or 0.7% combined with a decrease in general and administrative expenses of $2,638, or 0.1% in the current year period compared to the same period in 2024. General and administrative expenses decreased in the first nine months of 2025 compared to the same period in the prior year primarily as a result of lower legal costs being partly offset by higher administration costs. Interest Expense Interest expense for the three months ended September 30, 2025 and 2024 was $304,957 and $257,192, respectively, an increase of $47,765 or 18.6%, in the third quarter of 2025 over the same quarter in the prior year. Interest expense for the nine months ended September 30, 2025 and 2024 was $873,323 and $750,573, respectively, an increase of $122,750 or 16.4%, in the current year period over the prior year period. The increase in interest expense for the third quarter and first nine months of 2025 was primarily the result of increased long term debt in these periods compared to the third quarter and first nine months of 2024. Income Taxes The income tax benefit for the three months ended September 30, 2025 and 2024 was $444,696 and $115,177, respectively, an increase of $329,519 or 286.1%, in the third quarter of 2025 over the same quarter in the prior year mostly as a result of the higher pre-tax loss in the third quarter of 2025, compared to the same quarter in 2024. The Company’s estimated federal and state combined income tax rate was 28.9% and the three months ended September 30, 2025 and 2024. The income tax benefit for the nine months ended September 30, 2025 and 2024 was $703,664 and $247,809, respectively, an increase of $455,855 or 184.0% 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 2025, compared to the same period in 2024. The Company’s estimated federal and state combined income tax rate was 28.9% for the nine months ended September 30, 2025 and 2024. Net Loss Net loss for the three months ended September 30, 2025 and 2024 was $1,092,450 and $282,945, respectively, an increase of $809,505, or 286.1%, in the third quarter of 2025 over the same quarter in the prior year. Net loss for the nine months ended September 30, 2025 and 2024 was $1,728,636 and $608,772, respectively, an increase of $1,119,864, or 184.0%, in the current year period over the prior year period. The increase in net loss for the third quarter and increase in net loss for the nine months of 2025, compared to the comparable periods in 2024, was primarily the result of lower revenue in 2025. Net Loss Applicable to Common Shareholders Net loss applicable to common shareholders for the three months ended September 30, 2025 and 2024 was $1,655,627 and $846,195 respectively, an increase of $809,432, or 95.7%, in the third quarter of 2025 over the same quarter in the prior year. Net loss applicable to common shareholders for the nine months ended September 30, 2025 and 2024 was $3,418,166 and $2,298,448, respectively, an increase of $1,119,718, or 48.7%, in the current year period over the prior year period. The increase in loss applicable to common shareholders in the third quarter and the first nine months of 2025, compared to the same period of 2024, was the result of a higher net loss in the current periods. Liquidity and Capital Resources At September 30, 2025, the Company had a working capital balance of $25.8 million and a current working capital ratio of 3.12:1. 15 At September 30, 2025, the Company had a cash balance of $372,566. At December 31, 2024, the Company had a cash balance of $320,883. Total cash used for operating activities in the nine months ended September 30, 2025 was $1,445,702. Cash used in operating activities for the nine months ended September 30, 2025 was primarily associated with a net loss, as well as reduced grapes payable and increased inventory, being partially offset by depreciation and amortization and a reduction in accounts receivable. Total cash used in investing activities in the three months ended September 30, 2025 was $312,548. Cash used in investing activities for the nine months ended September 30, 2025 consisted of cash used on equipment and vineyard development costs. Total cash generated from financing activities in the nine months ended September 30, 2025 was $1,809,933. Cash generated from financing activities for the nine months ended September 30, 2025 primarily consisted of proceeds from long-term debt and investor deposits for preferred stock partially offset by the repayment of long-term debt and the line of credit. In December of 2005, the Company entered into a revolving line of credit agreement with Columbia 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 November 2022, the Company increased the borrowing line up to $5,000,000. In July 2025, the Company renewed the credit agreement until July 31, 2026. The Company had an outstanding line of credit balance of $1,164,558 at September 30, 2025, at an interest rate of 7.0%, and an outstanding line of credit balance of $2,405,815 at December 31, 2024, at an interest rate of 7.0%. The line of credit agreement includes various covenants, which among other things, requires the Company to maintain minimum amounts of tangible net worth, debt-to-equity, and debt service coverage, as defined, and limits the level of acquisitions of property and equipment. As of December 31, 2024, the Company was in compliance with these financial covenants. As of September 30, 2025, the Company had a 15-year installment note payable of $913,103, due in quarterly payments of $42,534, associated with the purchase of property in the Dundee Hills AVA. As of September 30, 2025, the Company had a total long-term debt balance of $15,428,093, including the portion due in the next year, owed to AgWest, exclusive of debt issuance costs of $163,586. As of December 31, 2024, the Company had a total long-term debt balance of $14,042,910, exclusive of debt issuance costs of $178,908. The Company believes that cash flow from operations and funds available under the Company’s existing credit facilities and through preferred stock sales will be sufficient to meet the Company’s long-term needs. ITEM 3: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK As a smaller reporting company, the Company is not required to provide the information required by this item.