Blueprint
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
10-Q
☒
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the
quarterly period ended September 30, 2016
☐ TRANSITION
REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
Commission
File Number 000-21522
WILLAMETTE VALLEY VINEYARDS,
INC.
(Exact
name of registrant as specified in charter)
|
Oregon
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93-0981021
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(State or other jurisdiction of incorporation or
organization)
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(I.R.S. Employer Identification No.)
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8800 Enchanted Way, S.E., Turner, Oregon 97392
(Address
of principal executive offices) (Zip Code)
Registrant's
telephone number, including area code: (503) 588-9463
Indicate
by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Exchange Act
during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days: ☒
YES ☐ NO
Indicate
by check mark whether the registrant has submitted electronically
and posted on its corporate Web site, if any, every Interactive
Data File required to be submitted and posted pursuant to Rule 405
of Regulation S-T (§232.405 of this chapter) during the
preceding 12 months (or for such shorter period that the registrant
was required to submit and post such files): ☒ YES ☐
NO
Indicate
by check mark whether the registrant is a large accelerated filer,
an accelerated filer, a non-accelerated filer, or a smaller
reporting company. See the definitions of “large accelerated
filer,” “accelerated filer,” and “smaller
reporting company” in Rule 12b-2 of the Exchange
Act:
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☐ Large
accelerated filer
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☐ Accelerated
filer
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|
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☐
Non-accelerated filer
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☒ Smaller
reporting company
|
Indicate
by checkmark whether the registrant is a shell company (as defined
in Rule 12b-2 of the Exchange Act): ☐
YES ☒ NO
Number
of shares of common stock outstanding as of November 10, 2016:
4,979,785
Number
of shares of preferred stock outstanding as of November 10, 2016:
2,396,954
WILLAMETTE
VALLEY VINEYARDS, INC.
INDEX
TO FORM 10-Q
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Part I - Financial Information
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3
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Item 1 - Financial Statements
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3
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Balance Sheets
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3
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Statements of Operations
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4
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Statements of Cash Flows
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5
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Notes to Unaudited Interim Financial Statements
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6
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Item 2 - Management's Discussion and Analysis of Financial
Condition and Results of Operations
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12
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Item 3 - Quantitative and Qualitative Disclosures about Market
Risk
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17
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Item 4 - Controls and Procedures
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17
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Part II - Other Information
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18
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Item 1 - Legal Proceedings
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18
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Item 1A - Risk Factors
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18
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Item 2 - Unregistered Sales of Equity Securities and Use of
Proceeds
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18
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Item 3 - Defaults Upon Senior Securities
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19
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Item 4 - Mine Safety Disclosures
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19
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Item 5 - Other Information
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19
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Item 6 - Exhibits
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19
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Signatures
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20
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PART I: FINANCIAL INFORMATION
Item 1 – Financial Statements
WILLAMETTE VALLEY VINEYARDS, INC.
BALANCE SHEETS
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ASSETS
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CURRENT ASSETS
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Cash
and cash equivalents
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$7,840,400
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$4,010,664
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Restricted
cash
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-
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1,476,232
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Accounts
receivable, net
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1,414,614
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1,684,502
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Inventories
(Note 2)
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11,811,464
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10,632,462
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Prepaid
expenses and other current assets
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73,705
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131,173
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Income
tax receivable
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-
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204,513
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Total
current assets
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21,140,183
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18,139,546
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Investment
in Kore Wine Company
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59,186
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60,000
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Vineyard
development costs, net
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4,395,991
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3,699,947
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Property
and equipment, net (Note 3)
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18,192,809
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16,729,162
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Debt
issuance costs, net
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46,934
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50,221
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TOTAL ASSETS
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$43,835,103
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$38,678,876
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LIABILITIES AND SHAREHOLDERS’ EQUITY
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CURRENT LIABILITIES
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Accounts
payable
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$346,719
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$386,137
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Accrued
expenses
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819,863
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604,580
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Income
taxes payable
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284,383
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-
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Investor
deposits for preferred stock
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-
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1,476,232
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Current
portion of note payable
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245,417
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245,417
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Current
portion of long term debt
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364,601
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349,003
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Current
portion of deferred revenue-distribution agreement
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142,857
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142,857
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Unearned
revenue
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90,316
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73,200
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Grapes
payable
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1,044,848
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816,879
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Total
current liabilities
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3,339,004
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4,094,305
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Note
payable, net of current portion
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-
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245,417
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Long-term
debt, net of current portion
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4,549,039
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4,824,015
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Deferred
rent liability
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120,364
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140,756
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Deferred
revenue-distribution agreement, net of current portion
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130,938
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238,083
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Deferred
gain
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97,196
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121,267
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Deferred
income taxes
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1,848,000
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1,848,000
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Total
liabilities
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10,084,541
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11,511,843
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COMMITMENTS AND CONTINGENCIES
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SHAREHOLDERS’ EQUITY
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Redeemable preferred stock, no par value, 10,000,000 shares
authorized,
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2,396,954 shares, aggregate liquidation preference $10,272,778,
issued
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and outstanding at September 30, 2016 and 1,074,338 shares
issued
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and
outstanding at December 31, 2015 respectively.
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9,387,601
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3,735,437
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Common
stock, no par value, 10,000,000 shares authorized, 5,219,411
and
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5,139,177
shares issued at September 30, 2016 and December 31,
2015,
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respectively,
4,994,061 and 4,989,216 shares outstanding at
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September
30, 2016 and December 31, 2015, respectively.
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8,690,670
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8,998,760
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Retained
earnings
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15,672,291
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14,432,836
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Total
shareholders’ equity
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33,750,562
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27,167,033
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TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY
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$43,835,103
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$38,678,876
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The accompanying notes are an integral part of this financial
statement
WILLAMETTE VALLEY VINEYARDS, INC.
STATEMENTS OF OPERATIONS
(Unaudited)
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SALES, NET
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$4,741,711
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$4,244,519
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$13,564,508
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$12,878,174
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COST OF SALES
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1,700,460
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1,608,568
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4,999,908
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5,178,536
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GROSS PROFIT
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3,041,251
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2,635,951
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8,564,600
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7,699,638
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SELLING, GENERAL & ADMINISTRATIVE EXPENSES
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2,046,948
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1,889,206
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6,000,017
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5,609,342
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INCOME FROM OPERATIONS
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994,303
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746,745
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2,564,583
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2,090,296
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OTHER INCOME (EXPENSE)
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Interest
income
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2,688
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74
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7,489
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78
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Interest
expense
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(71,264)
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(76,535)
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(216,429)
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(231,544)
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Other
income, net
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35,626
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37,502
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162,126
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155,427
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INCOME BEFORE INCOME TAXES
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961,353
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707,786
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2,517,769
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2,014,257
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INCOME TAX PROVISION
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(361,542)
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(253,530)
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(952,896)
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(735,532)
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NET INCOME
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599,811
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454,256
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1,564,873
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1,278,725
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Accrued preferred stock dividends
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(131,832)
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-
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(325,418)
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-
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INCOME APPLICABLE TO COMMON SHAREHOLDERS
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$467,979
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$454,256
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$1,239,455
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$1,278,725
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Basic income per common share after preferred
dividends
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$0.09
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$0.09
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$0.25
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$0.26
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Diluted income per common share after preferred
dividends
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$0.09
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$0.09
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$0.25
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$0.26
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Weighted average number of
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basic common shares outstanding
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4,994,061
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4,956,163
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4,993,571
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4,916,467
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Weighted average number of
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diluted common shares outstanding
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4,998,444
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5,007,883
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4,997,737
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4,964,520
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The accompanying notes are an integral part of this financial
statement
WILLAMETTE
VALLEY VINEYARDS, INC.
STATEMENTS OF CASH FLOWS
(Unaudited)
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Nine months ended September 30,
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CASH FLOWS FROM OPERATING ACTIVITIES
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Net
income
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$1,564,873
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$1,278,725
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Adjustments
to reconcile net income to net cash:
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from
operating activities
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Depreciation
and amortization
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990,107
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950,441
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Stock
based compensation expense
|
748
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10,955
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Non-cash
loss from investment in Kore Wine Company
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814
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-
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Deferred
rent liability
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(20,392)
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(17,205)
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Deferred
gain
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(24,071)
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(24,072)
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Change
in operating assets and liabilities:
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Accounts
receivable
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269,888
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301,932
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Inventories
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(1,179,002)
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(473,092)
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Prepaid
expenses and other current assets
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57,468
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(239,450)
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Income
taxes receivable
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204,513
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203,976
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Unearned
revenue
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17,116
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13,407
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Deferred
revenue-distribution agreement
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(107,145)
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(107,145)
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Grapes
payable
|
227,969
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(64,364)
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Accounts
payable
|
(43,443)
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(117,131)
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Accrued
expenses
|
215,283
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241,626
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Income
taxes payable
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284,383
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-
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Net
cash from operating activities
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2,459,109
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1,958,603
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CASH FLOWS FROM INVESTING ACTIVITIES
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Investment
in Kore Wine Company
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-
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(60,000)
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Additions
to vineyard development costs
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(740,183)
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(561,487)
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Additions
to property and equipment
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(2,402,303)
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(2,112,071)
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Net
cash from investing activities
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(3,142,486)
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(2,733,558)
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CASH FLOWS FROM FINANCING ACTIVITIES
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Proceeds
from installment note for property purchase
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-
|
490,834
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Proceeds
from investor deposits held as restricted cash
|
1,476,232
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(3,038,278)
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Proceeds
from investor deposits held as liability
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(1,476,232)
|
3,038,278
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Payment
on installment note for property purchase
|
(245,417)
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-
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Payments
on long-term debt
|
(259,378)
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(244,953)
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Proceeds
from issuance of preferred stock
|
5,326,746
|
-
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Proceeds
from exercise of stock options
|
194,052
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454,515
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Repurchase
of common stock
|
(502,890)
|
(250,025)
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Net
cash from financing activities
|
4,513,113
|
450,371
|
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NET CHANGE IN CASH AND CASH EQUIVALENTS
|
3,829,736
|
(324,584)
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CASH AND CASH EQUIVALENTS, beginning of period
|
4,010,664
|
519,761
|
|
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CASH AND CASH EQUIVALENTS, end of period
|
$7,840,400
|
$195,177
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NON-CASH INVESTING AND FINANCING ACTIVITIES
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Purchases
of property and equipment and vineyard development
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|
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costs
included in accounts payable
|
$20,113
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$44,390
|
The accompanying notes are an integral part of this financial
statement
NOTES TO UNAUDITED INTERIM FINANCIAL STATEMENTS
1) BASIS OF PRESENTATION
The
accompanying unaudited interim financial statements as of September
30, 2016 and for the three and nine months ended September 30, 2016
and 2015 have been prepared in conformity with accounting
principles generally accepted in the United States
(“GAAP”) for interim financial statements. The
financial information as of December 31, 2015 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, 2015. 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, 2015,
as presented in the Company’s Annual Report on Form
10-K.
Operating
results for the three and nine months ended September 30, 2016 are
not necessarily indicative of the results that may be expected for
the entire year ending December 31, 2016, 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
earnings per share after preferred stock dividends are computed
based on the weighted-average number of common shares outstanding
each period. Diluted earnings per share are computed using the
weighted average number of shares of common stock and dilutive
common shares outstanding during the period. Dilutive shares from
stock options and other instruments are excluded from the
computation when their effect is anti-dilutive. There were no
anti-dilutive shares outstanding as of September 30, 2016 and 2015.
4,383 and 51,720 dilutive shares are included in the computation of
dilutive earnings per share for the three month periods ended
September 30, 2016 and 2015, respectively. 4,166 and 48,053
dilutive shares are included in the computation of dilutive
earnings per share for the nine month periods ended September 30,
2016 and 2015, respectively.
NOTES TO UNAUDITED INTERIM FINANCIAL
STATEMENTS
1) BASIS OF PRESENTATION - continued
The
following table presents the earnings per share after preferred
stock dividends calculation for the periods shown:
|
|
Three months ended September 30,
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Nine months ended September 30,
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Numerator
|
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Net
income
|
$599,811
|
$454,256
|
$1,564,873
|
$1,278,725
|
|
Accrued
preferred stock dividends
|
(131,832)
|
-
|
(325,418)
|
-
|
|
|
|
|
|
|
|
Net
income applicable to common shares
|
$467,979
|
$454,256
|
$1,239,455
|
$1,278,725
|
|
|
|
|
|
|
|
Denominator
|
|
|
|
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|
|
|
|
|
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Basic
weighted average common shares
|
4,994,061
|
4,956,163
|
4,993,571
|
4,916,467
|
|
Dilutive
stock options
|
4,383
|
51,720
|
4,166
|
48,053
|
|
|
|
|
|
|
|
Diluted
weighted average common shares
|
4,998,444
|
5,007,883
|
4,997,737
|
4,964,520
|
|
|
|
|
|
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|
Basic income per common share
|
|
|
|
|
|
after preferred
dividends
|
$0.09
|
$0.09
|
$0.25
|
$0.26
|
|
|
|
|
|
|
|
Diluted income per common share
|
|
|
|
|
|
after preferred
dividends
|
$0.09
|
$0.09
|
$0.25
|
$0.26
|
2) INVENTORIES
The
Company’s inventories, by major classification, are
summarized as follows, as of the dates shown:
|
|
|
|
|
|
|
|
|
Winemaking
and packaging materials
|
$506,094
|
$690,292
|
|
Work-in-process
(costs relating to
|
|
|
|
unprocessed
and/or unbottled wine products)
|
5,401,886
|
6,058,701
|
|
Finished
goods (bottled wine and related products)
|
5,903,484
|
3,883,469
|
|
|
|
|
|
Current
inventories
|
$11,811,464
|
$10,632,462
|
NOTES
TO UNAUDITED INTERIM FINANCIAL
STATEMENTS
3) PROPERTY AND EQUIPMENT
The
Company’s property and equipment consists of the following,
as of the dates shown:
|
|
|
|
|
|
|
|
|
Construction
in progress
|
$1,112,396
|
$482,284
|
|
Land,
improvements and other buildings
|
6,435,443
|
5,089,472
|
|
Winery
building and hospitality center
|
13,903,433
|
13,756,320
|
|
Equipment
|
9,303,507
|
9,055,987
|
|
|
|
|
|
|
30,754,779
|
28,384,063
|
|
|
|
|
|
Accumulated
depreciation
|
(12,561,970)
|
(11,654,901)
|
|
|
|
|
|
Property
and equipment, net
|
$18,192,809
|
$16,729,162
|
In
September 2016 the Company installed two 32,000 gallon fermentation
tanks at the Estate Winery. The addition of these tanks increases
the Company’s production capacity by approximately 27,000
cases.
4) DISTRIBUTION AGREEMENT RECEIVABLE AND DEFERRED
REVENUE
Effective
September 1, 2011, the Company entered into an agreement with
Young’s Market Company for distribution of Company-produced
wines in Oregon and Washington. The terms of this contract include
exclusive rights to distribute Willamette Valley Vineyard’s
wines in Oregon and Washington for seven years. In an effort to
facilitate the transition, with as little disruption as possible,
Young’s Market Company agreed to compensate Willamette Valley
Vineyards for ongoing Oregon sales and branding efforts. The total
amount of $1,000,000 received by the Company, related to this
agreement, is being recognized as revenue on a straight line basis
over the seven year life of the agreement. For the three months
ended September 30, 2016 and 2015, the Company has recognized
revenue related to this agreement in the amount of $35,715 and
$35,715, respectively, recorded to other income. For the nine
months ended September 30, 2016 and 2015, the Company has
recognized revenue related to this agreement in the amount of
$107,145 and $107,145, respectively, recorded to other
income.
5) DEBT
Line of Credit Facility – In December of 2005 the
Company entered into a revolving line of credit agreement with
Umpqua Bank that allows borrowings of up to $2,000,000 against
eligible accounts receivable and inventories as defined in the
agreement. The revolving line bears interest at prime, is payable
monthly, and is subject to annual renewal. In February of 2016, the
Company renewed the credit agreement until July 31, 2017. The
interest rate was 3.5% at September 30, 2016 and December 31, 2015.
At September 30, 2016 and December 31, 2015 there was no
outstanding balance on this revolving line of credit.
The
line of credit agreement includes various covenants which, among
other things, require the Company to maintain minimum amounts of
tangible net worth, debt/worth ratio, and debt service coverage as
defined. As of September 30, 2016, the Company was in compliance
with these financial covenants.
Note payable – In April of 2015 the Company purchased
approximately 42 acres of farmland in the Walla Walla AVA under
terms that included paying one third of the price upon closing and
one third in each of the two subsequent years. As of September 30,
2016 the Company had a balance of $245,417 due on April 1, 2017. No
interest accrues under the terms of this note. As of December 31,
2015 the Company had a balance due of $490,834.
Long Term Debt - The Company has four long term debt
agreements with Farm Credit Services with an aggregate outstanding
balance of $4,913,640 and $5,173,018 as of September 30, 2016 and
December 31, 2015, respectively. These loans require monthly
principal and interest payments of $53,058 for the life of the
loans, at annual fixed interest rates ranging from 4.75% to 6.70%,
and with maturity dates ranging from 2024 through 2028. The general
purposes of these loans were to make capital improvements to the
winery and vineyard facilities.
NOTES
TO UNAUDITED INTERIM FINANCIAL STATEMENTS
6) STOCK BASED COMPENSATION
The
Company has a stock incentive plan, originally created in 1992, and
most recently amended in 2001. No additional grants may be made
under the plan. All stock options have an exercise price that is
equal to the fair market value of the Company’s stock on the
date the options were granted. Administration of the plan,
including determination of the number, term, and type of options to
be granted, lies with the Board of Directors or a duly authorized
committee of the Board of Directors. Options were generally granted
based on employee performance with vesting periods ranging from
date of grant to seven years. At the date of the grant, the maximum
term before expiration is ten years.
The
following table presents information related to the value of
outstanding stock options for the period shown:
|
|
|
|
|
|
|
|
|
|
Weighted
Average Exercise
|
Weighted
Average Exercise
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding
at beginning of period
|
7,000
|
$3.09
|
67,000
|
$3.22
|
|
Granted
|
-
|
-
|
-
|
-
|
|
Exercised
|
-
|
-
|
(60,000)
|
3.23
|
|
Forfeited
|
-
|
-
|
-
|
-
|
|
|
|
|
|
|
|
Outstanding
at end of period
|
7,000
|
$3.09
|
7,000
|
$3.09
|
At
September 30, 2016, the Company had 7,000 vested stock options with
no unrecognized compensation expense.
The
Company expenses stock options on a straight-line basis over the
options’ related vesting term. Compensation expense related
to stock options for the three months ended September 30, 2016 and
2015 was $4 and $372, respectively. Compensation expense related to
stock options for the nine months ended September 30, 2016 and 2015
was $748 and $10,955, respectively.
Stock
options exercised during the three months ended September 30, 2016
and 2015 were 0 and 58,000, respectively. Stock options exercised
during the nine months ended September 30, 2016 and 2015 were
60,000 and 115,971, respectively.
7) INTEREST AND TAXES PAID
Income taxes – The Company paid $0 and $291,000 in
income taxes for the three months ended September 30, 2016 and
2015, respectively. The Company paid $464,250 and $531,550 in
income taxes for the nine months ended September 30, 2016 and 2015,
respectively.
Interest - The Company paid $71,683 and $76,930 for the
three months ended September 30, 2016 and 2015, respectively, in
interest on long-term debt and revolving line of credit. The
Company paid $218,150 and $233,585 for the nine months ended
September 30, 2016 and 2015, respectively, in interest on long-term
debt and revolving line of credit.
8) 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 includes
retail sales in the tasting room and remote sites, Wine Club 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.
NOTES
TO UNAUDITED INTERIM FINANCIAL
STATEMENTS
8) SEGMENT REPORTING - continued
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
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 margin,
directly attributable selling expenses, and contribution margin of
the segments for the three and nine month periods ending September
30, 2016 and 2015. Sales figures are net of related excise
taxes.
|
|
Three Months Ended September 30,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales,
net
|
$2,052,390
|
$1,767,638
|
$2,689,321
|
$2,476,881
|
$4,741,711
|
$4,244,519
|
|
Cost
of Sales
|
633,116
|
541,918
|
1,067,344
|
1,066,650
|
1,700,460
|
1,608,568
|
|
Gross
Margin
|
1,419,274
|
1,225,720
|
1,621,977
|
1,410,231
|
3,041,251
|
2,635,951
|
|
Selling
Expenses
|
808,761
|
797,073
|
361,004
|
369,632
|
1,169,765
|
1,166,705
|
|
Contribution
Margin
|
$610,513
|
$428,647
|
$1,260,973
|
$1,040,599
|
$1,871,486
|
$1,469,246
|
|
Percent
of Sales
|
43.3%
|
41.6%
|
56.7%
|
58.4%
|
100.0%
|
100.0%
|
|
|
Nine
Months Ended September 30,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales,
net
|
$5,019,220
|
$5,150,223
|
$8,545,288
|
$7,727,951
|
$13,564,508
|
$12,878,174
|
|
Cost
of Sales
|
1,328,828
|
1,556,335
|
3,671,080
|
3,622,201
|
4,999,908
|
5,178,536
|
|
Gross
Margin
|
3,690,392
|
3,593,888
|
4,874,208
|
4,105,750
|
8,564,600
|
7,699,638
|
|
Selling
Expenses
|
2,332,103
|
2,225,678
|
1,189,349
|
1,170,875
|
3,521,452
|
3,396,553
|
|
Contribution
Margin
|
$1,358,289
|
$1,368,210
|
$3,684,859
|
$2,934,875
|
$5,043,148
|
$4,303,085
|
|
Percent
of Sales
|
37.0%
|
40.0%
|
63.0%
|
60.0%
|
100.0%
|
100.0%
|
Direct
sales include $148,752 and $6,690 of bulk wine sales in the three
months ended September 30, 2016 and 2015, respectively. Direct
sales include $148,752 and $645,653 of bulk wine sales in the nine
months ended September 30, 2016 and 2015,
respectively.
9) SALE OF PREFERRED STOCK
In August 2015, the Company commenced a public offering of our
Series A Redeemable Preferred Stock pursuant to a registration
statement filed with the Securities and Exchange Commission. The
preferred stock under this issue is non-voting and will rank senior
in rights and preferences to the Company’s common stock.
Shareholders of this issue will be entitled to receive dividends,
when and as declared by the Company’s Board of Directors, at
a rate of $0.22 per share. 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 of $4.15 per share plus accrued but unpaid dividends
and a redemption premium equal to 3% of the original issue price of
$4.15 per share. The Company registered this transaction with the
securities authorities of the States of Oregon and Washington and
subsequently obtained a listing on the NASDAQ under the trading
symbol WVVIP. This issue had an aggregate initial offering price
not to exceed $6,000,000 and was fully subscribed as of December
31, 2015.
NOTES
TO UNAUDITED INTERIM FINANCIAL
STATEMENTS
9) SALE OF PREFERRED STOCK - continued
On December 22, 2015 the Company filed a Registration Statement on
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. On February 28, 2016 shareholders of the Series A
Redeemable Preferred Stock approved an increase in shares
designated as Series A Redeemable Preferred Stock, from 1,445,783
to 2,857,548 shares, and amended the certificate of designation for
those shares to allow the Company’s Board of Directors to
make future increases. On March 10, 2016 the Company filed a
Prospectus Supplement to the December 2015 Form S-3, pursuant to
which the Company proposed to offer and sell, on a delayed or
continuous basis, up to 970,588 additional shares of Series A
redeemable Preferred stock having proceeds not to exceed
$4,125,000. This stock was established to be sold in four offering
periods beginning with an offering price of $4.25 per share and
concluding at $4.55 per share. The Company has sold substantially
all preferred stock, available under this offering, as of September
30, 2016.
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.
11) SUBSEQUENT EVENTS
Subsequent
events are events or transactions that occur after the balance
sheet date but before financial statements are issued. The Company
recognizes in the financial statements the effects of all
subsequent events that provide additional evidence about conditions
that existed at the date of the balance sheet, including the
estimates inherent in the process of preparing the financial
statements. The Company’s financial statements do not
recognize subsequent events that provide evidence about conditions
that did not exist at the date of the balance sheet but arose after
the balance sheet date and before financial statements are
issued.
In
October 2016, the Company entered into an agreement to purchase
approximately 40 acres of vineyard land, part of which is in the
Dundee AVA. Additionally, the Company entered into purchase
agreements to buy two parcels of land in the Walla Walla AVA,
totaling approximately 37 acres, but has not yet completed those
transactions.
In October 2016 the Company determined that approximately 74 tons
of Pinot Noir grapes, received from a contract grower, contained
excess sulfur making them unusable for the production of
wine. As of September 30, 2016 work-in-process inventory
included $95,272 attributable to these grapes. In November
2016 the Company reduced inventory by $95,272 and established a
corresponding $95,272 receivable from the grower who supplied the
defective grapes.
In
October 2016 the Company settled a claim, against a neighboring
farmer, for the over-spray of chemicals that damaged Pinot Noir
grapes in the Elton Vineyard in 2013. As a result of a settlement
of $180,000, the Company received $110,000, net of attorney fees,
which will be recorded as Other Income in the fourth quarter of
2016.
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” “intends,” “plans,”
“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, changes in
consumer spending, the reduction in consumer demand for premium
wines and the impact of governmental regulatory decisions. 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 in the Company’s Annual Report on Form
10-K for the year ended December 31, 2015, 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 financial
statements, which have been prepared in accordance with accounting
principles generally accepted in the United States of America. The
preparation of these 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, 2015. Such policies were unchanged during
the three months ended September 30, 2016.
Overview
The
Company’s wines are made from grapes grown in vineyards
owned, leased or contracted by the Company, and from grapes
purchased from other nearby vineyards. The grapes are harvested,
fermented and made into wine 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 and Tualatin Estates
labels. The Company also owns the Tualatin Estate Vineyards and
Winery, located near Forest Grove, Oregon. The Company generates
revenues from the sales of wine to wholesalers and direct to
consumers.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS - continued
Direct
to consumer sales primarily include sales through the
Company’s tasting rooms and wine club. Direct to consumer
sales are more profitable 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 the Company’s recently remodeled 35,642 square foot
hospitality facility at the Winery and expansion and growth in wine
club membership. Additionally, the Company’s preferred stock
sales since August 2015 have resulted in approximately 3,591 new
preferred stockholders many of which the Company believes are wine
enthusiasts. When considering joint ownership, these new
shareholders represent approximately 5,000 potential customers of
the Company. Membership in the Company’s wine club increased
by approximately 293 net members, or 4.6%, to a total of 6,663
members for the nine months ending September 30, 2016. The Company
believes the increase in preferred shareholders, who receive
enhanced discounts, has reduced the number of people who would
otherwise become Wine Club members. However, management anticipates
that new preferred shareholders will purchase the Company’s
wines over a longer period of time, than the average Wine Club
member, making their enhanced winery status beneficial to the
Company.
Periodically,
the Company will sell grapes or bulk wine, due to them not meeting
Company standards or being excess to production targets, however
this is not a significant part of the Company’s activities.
The Company had bulk wine sales of $148,752 for the three months
ended September 30, 2016 and $6,690 in bulk wine sales in the same
period of 2015. The Company had bulk wine sales of $148,752 for the
nine months ended September 30, 2016 and $645,653 in bulk wine
sales in the same period of 2015.
The
Company sold approximately 95,105 and 87,765 cases of produced wine
during the nine months ended September 30, 2016 and 2015,
respectively, an increase of 7,340 cases, or 8.4% in the current
year period over the prior year period. The increase in wine
sales was primarily the result of increased direct to consumer
sales as well as increased sales through distributors in
2016.
Cases
sold in 2016 include approximately 43 cases of unfulfilled
“futures”, where a customer prepays for a wine not yet
released. Cases sold in 2015 include approximately 43 cases of
unfulfilled “futures”, where a customer prepays for a
wine not yet released. Proceeds from these sales are not recognized
as revenue until shipped and are reflected as unearned revenue.
Selling expenses for these sales are recognized in the period in
which the expense is incurred.
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, 2016, wine inventory includes approximately 106,698
cases of bottled wine and 286,600 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 approximately 134,718 cases
during the nine months ended September 30, 2016.
Net
income for the three months ended September 30, 2016 and 2015 was
$599,811 and $454,256, respectively, an increase of $145,555, or
32.0%, in the current year period over the prior year period. Net
income for the nine months ended September 30, 2016 and 2015 was
$1,564,873 and $1,278,725, respectively, an increase of $286,148,
or 22.4%, in the current year period over the prior year
period.
Income
applicable to common shareholders for the three months ended
September 30, 2016 and 2015 was $467,979 and $454,256,
respectively, an increase of $13,723, or 3.0%, in the current year
period over the prior year period. Income applicable to common
shareholders for the nine months ended September 30, 2016 and 2015
was $1,239,455 and $1,278,725, respectively, a decrease of $39,270,
or 3.1%, in the current year period over the prior year
period.
Gross
profit for the three months ended September 30, 2016 and 2015 was
$3,041,251 and $2,635,951, respectively, an increase of $405,300,
or 15.4%, in the current year period over the prior year period.
Gross profit as a percentage of net sales for the three months
ended September 30, 2016 and 2015 was 64.1% and 62.1%, an increase
of 2.0 percentage points, in the current year period over the prior
year period. Gross profit for the nine months ended September 30,
2016 and 2015 was $8,564,600 and $7,699,638, respectively, an
increase of $864,962, or 11.2%, in the current year period over the
prior year period. Gross profit as a percentage of net sales for
the nine months ended September 30, 2016 and 2015 was 63.1% and
59.8%, an increase of 3.3 percentage points, in the current year
period over the prior year period.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS - continued
The
Company generated $0.09 in basic earnings per share after preferred
dividends during each of the three months ended September 30, 2016
and 2015. The Company generated $0.25 and $0.26 in basic earnings
per share after preferred dividends during the nine months ended
September 30, 2016 and 2015, respectively.
Management
believes earnings per share will continue to be effectively reduced
by preferred stock dividends until funds from the sale of preferred
stock are deployed in new wineries and begin generating a return on
those funds.
The Company
continues to receive positive recognition through national
magazines, regional publications, local newspapers and online
bloggers.
The
Company's Founder Jim Bernau was nominated for 'Person of the
Year' in the Wine Star Awards presented by Wine Enthusiast
Magazine.
The Company was selected as the Best Vineyard/Tasting Room
Experience by Sunset Magazine in their annual Sunset Travel
Awards. The Sunset Travel Awards honor the
West's top destinations in lodging, dining, cultural tourism,
outdoor adventure and attractions. The Company is the first
Oregon winery to win the award.
Wine Enthusiast Magazine rated the Company's 2015 Whole Cluster
Pinot Noir a 90 point and Editors' Choice, Whole Cluster Rose' a 90
point and Editors' Choice, Pinot Gris a 90 point and Editors'
Choice, 2013 Elton Pinot Noir a 90 point, and 2014 Estate
Chardonnay a 90 point score.
Portland Monthly Magazine included the Company's 2014 Estate Pinot
Noir (#13) and 2014 Estate Chardonnay (#32) on the list of Oregon's
50 Best Wines.
The Company's 26th annual Grape Stomp Championships & Harvest
Celebration was featured in a USA Today article titled, "Where to
stomp grapes this harvest season." The article was also syndicated
to the Portland Tribune.
The Company's 2015 Estate Rose' of Pinot Noir was a featured
wine selection in a Cleveland.com online article titled, "3 West
Coast roses at varying prices."
The Company's 2014 Riesling was Wine Spectator's featured
wine pairing for Labor Day Grilling with heritage pork
chops.
Colorado Spring's The Gazette newspaper selected the
Company's 2015 Estate Rose' of Pinot Noir for the "Think pink for
summer's drink" article.
The Tri-City Herald in central Washington wrote an article
called, "Great Northwest Wine: The world of Oregon Pinot Noir,"
including a tasting note of the Company's 2014 Estate Pinot
Noir.
SouthCoast Today shared the Company's winery story and rated the
wines as "outstanding."
The Company partnered with the Portland Timbers major league soccer
team for the 2016 season. The partnership includes in-stadium
experiences and tastings, premium concession offerings and joint
advertising.
The Company partnered with a major dairy Co-op on in-store displays
and promotions featuring their cheese and the Company's wine in two
major chain stores.
The Company partnered with Timberline Lodge on a sustainable food
educational dinner series called Pasture and Pinot Noir. The
program is expected to run through the end of the year and feature
grass-fed beef paired with the Company's wines in their on-site
restaurant.
The Company participated in Chicago Gourmet and Los Angeles Food
and Wine events.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS - continued
RESULTS OF OPERATIONS
Revenue
Sales
for the three months ended September 30, 2016 and 2015 were
$4,741,711 and $4,244,519, respectively, an increase of $497,192,
or 11.7%, in the current year period over the prior year period.
This increase was primarily caused by increases in retail
sales of $284,752, and sales through distributors of $212,440 in
the three months ended September 30, 2016 compared to the same
period in the prior year. Sales for the nine months ended
September 30, 2016 and 2015 were $13,564,508 and $12,878,174,
respectively, an increase of $686,334, or 5.3%, in the current year
period over the prior year period. This increase was primarily
caused by an increase in core
retail sales (direct sales less bulk sales) of $370,855 and sales
through distributors of $817,337, being partially offset by a
decrease in bulk wine and miscellaneous sales of $501,858 in the
first nine months of 2016 compared to the same period in the prior
year. The increase in core retail sales during both periods
of 2016 was primarily the result of increased wine club, tasting
room and other direct sales. The decrease in bulk wine sales in
both the third quarter and first nine months of 2016, when compared
to the same periods in 2015, was primarily the result of less
excess wine available in 2016 when compared to 2015. The increase
in sales through distributors was not attributable to an isolated
factor.
Cost of Sales
Cost of
Sales for the three months ended September 30, 2016 and 2015 were
$1,700,460 and $1,608,568, respectively, an increase of $91,892, or
5.7%, in the current period over the prior year period. Cost of
Sales for the nine months ended September 30, 2016 and 2015 were
$4,999,908 and $5,178,536, respectively, a decrease of $178,628, or
3.4%, in the current period over the prior year period. The
increase in the third quarter, compared to the same period in 2015,
is primarily the result of increase sales. The decrease in both the
third quarter and first nine months of 2016, compared to same
periods of 2015, were primarily the result of an overall increase
in margins of vintages currently being sold which was mainly caused
by the release of vintages in 2016 with lower cost of goods due to
higher 2014 and 2015 harvest yields.
Gross Profit
Gross
profit for the three months ended September 30, 2016 and 2015 was
$3,041,251 and $2,635,951, respectively, an increase of $405,300,
or 15.4%, in the current year period over the prior year period.
Gross profit for the nine months ended September 30, 2016 and 2015
was $8,564,600 and $7,699,638, respectively, an increase of
$864,962, or 11.2%, in the current year period over the prior year
period. The increase in both periods was primarily the result of an
overall increase in core retail sales and sales through
distributors in addition to the release of vintages with higher
profit margins in 2016 that more than offset the decrease in bulk
wine sales during the year.
Gross
profit as a percentage of net sales for the three months ended
September 30, 2016 and 2015 was 64.1% and 62.1%, an increase of 2.0
percentage points, in the current year period over the prior year
period. Gross profit as a percentage of net sales for the nine
months ended September 30, 2016 and 2015 was 63.1% and 59.8%, an
increase of 3.3 percentage points, in the current year period over
the prior year period. The increase in gross profit percentage
during 2016 over the comparable periods in 2015 was primarily the
result of the release of vintages with lower cost of goods due to
higher 2014 and 2015 harvest yields.
While
the Company’s gross profit percentage has benefited from
higher harvest yields in 2014 and 2015, it expects that these
higher margins will not exist with several core wines produced from
the 2016 harvest. During the 2016 harvest a major grape supplier
delivered significantly fewer grapes than required under contract.
As a result the Company was required to pursue some higher cost
options to hit production targets on these wines and anticipates
lower gross profit percentages as a result.
Selling, General and Administrative Expense
Selling,
general and administrative expense for the three months ended
September 30, 2016 and 2015 was $2,046,948 and $1,889,206,
respectively, an increase of $157,742, or 8.3%, in the current year
period over the prior year period. Selling, general and
administrative expense for the nine months ended September 30, 2016
and 2015 was $6,000,017 and $5,609,342, respectively, an increase
of $390,675, or 7.0%, in the current year period over the prior
year period. The increase in both periods in 2016 compared to the
same periods in 2015 was primarily the result of increased retail
selling efforts and general marketing in 2016 as well as increases
in administrative costs not attributable to an isolated
factor.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS - continued
Interest Expense
Interest
expense for the three months ended September 30, 2016 and 2015 was
$71,264 and $76,535, respectively, a decrease of $5,271 or 6.9%, in
the current year period over the prior year period. Interest
expense for the nine months ended September 30, 2016 and 2015 was
$216,429 and $231,544, respectively, a decrease of $15,115 or 6.5%,
in the current year period over the prior year period. The
reduction in interest expense in both periods of 2016 compared to
the same periods in 2015 was primarily the result of reduced debt
in the current year when compared to the prior year.
Income Taxes
The
income tax expense for the three months ended September 30, 2016
and 2015 was $361,542 and $253,530, respectively, an increase of
$108,012 or 42.6%, in the current year period over the prior year
period. The Company’s estimated federal and state combined
income tax rate was 37.5% and 35.8% for the three months ended
September 30, 2016 and 2015, respectively. The income tax expense
for the nine months ended September 30, 2016 and 2015 was $952,896
and $735,532, respectively, an increase of $217,634 or 29.6%, in
the current year period over the prior year period. The
Company’s estimated federal and state combined income tax
rate was 37.8% and 36.5% for the nine months ended September 30,
2016 and 2015, respectively.
Net Income
Net
income for the three months ended September 30, 2016 and 2015 was
$599,811 and $454,256, respectively, an increase of $145,555, or
32.0%, in the current year period over the prior year period. Net
income for the nine months ended September 30, 2016 and 2015 was
$1,564,873 and $1,278,725, respectively, an increase of $286,148,
or 22.4%, in the current year period over the prior year period.
The increase in both the third quarter and the first nine months of
2016, compared to the same periods in 2015, was primarily the
result of an overall increase in sales of wines combined with
higher margins in the current periods compared to the prior year
periods.
Income Applicable to Common Shareholders
Income
applicable to common shareholders for the three months ended
September 30, 2016 and 2015 was $467,979 and $454,256,
respectively, an increase of $13,723, or 3.0%, in the current
quarter over the same quarter in the prior year, mainly as a result
of higher net income partially offset by the accrual of preferred
stock dividends in the third quarter of 2016. Income applicable to
common shareholders for the nine months ended September 30, 2016
and 2015 was $1,239,455 and $1,278,725, respectively, a decrease of
$39,270, or 3.1%, in the current year period over the prior year
period. The decrease in the nine months ended September 30, 2016
compared to the same period in 2015 was primarily the result of
increased net income, in the current period when compared to the
prior year period, being more than offset by the accrual of
preferred stock dividends.
Liquidity and Capital Resources
At
September 30, 2016, the Company had a working capital balance of
$17.8 million and a current working capital ratio of 6.33:1. At
December 31, 2015, the Company had a working capital balance of
$14.0 million and a current working capital ratio of
4.43:1.
At
September 30, 2016, the Company had a cash balance of $7,840,400
compare to a cash balance of $4,010,664 at December 31, 2015. This
change was primarily the result of proceeds from operating
activities and the sale of preferred stock partially offset by
spending on capital improvements.
Total
cash provided by operating activities in the nine months ended
September 30, 2016 was $2,459,109. Cash provided by operating
activities from operations for the nine months ended September 30,
2016 was primarily associated with income from operations partially
offset by an increase in inventory.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS - continued
Total
cash used in investing activities in the nine months ended
September 30, 2016 was $3,142,486. Cash used in investing
activities for the nine months ended September 30, 2016 primarily
consisted of property and equipment purchases and vineyard
development.
Property
and equipment assets net of accumulated depreciation increased to
$18,192,809 as of September 30, 2016 compared to $16,729,162 as of
December 31, 2015, mainly as a result a $1,463,647 increase in
assets categorized as land, improvements and other buildings during
the first nine months of 2016.
Total
cash provided by financing activities in the nine months ended
September 30, 2016 was $4,513,113. Cash provided by financing
activities for the nine months ended September 30, 2016 consisted
primarily of proceeds from the sale of preferred stock and the
exercise of stock options partially offset by the repurchase of
common stock and the payment of debt.
Non-cash
investing and financing activities in the nine months ended
September 30, 2016 was $20,113. This change was primarily the
result of timing differences in the payment of
invoices.
The
Company has an asset-based loan agreement (the “line of
credit”) with Umpqua Bank that allows it to borrow up to
$2,000,000. The Company renewed this agreement, in February of
2014, until July 31, 2017. The index rate of prime plus zero, with
a floor of 3.25%, at September 30, 2016 is 3.5%. The loan agreement
contains certain restrictive financial covenants with respect to
total equity, debt-to-equity and debt coverage that must be
maintained by the Company on a quarterly basis. As of September 30,
2016, the Company was in compliance with all of the financial
covenants.
At
September 30, 2016 and December 31, 2015 the Company had no balance
outstanding on the line of credit. At September 30, 2016, the
Company had $2,000,000 available on the line of
credit.
As of
September 30, 2016 the Company had an installment note payable of
$245,417, due on April 1, 2017, associated with the purchase of 42
acres of farmland in the Walla Walla AVA. As of December 31, 2015
the Company had a balance of $490,834 due on this
note.
As of
September 30, 2016, the Company had a total long-term debt balance
of $4,913,640, including the portion due in the next year, owed to
Farm Credit Services. As of December 31, 2015, the Company had a
total long-term debt balance of $5,173,018.
The
Company believes that cash flow from operations and funds available
under the Company’s existing credit facilities will be
sufficient to fund the Company’s ongoing operating activities
and our anticipated capital requirement for at least twelve
months.
Off Balance Sheet Arrangements
As of
September 30, 2016 and December 31, 2015, the Company had no
off-balance sheet arrangements.
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.
ITEM 4:
CONTROLS AND PROCEDURES
Disclosure Controls and Procedures – The Company
carried out an evaluation as of the end of the period covered by
this Quarterly Report on Form 10-Q, under the supervision and with
the participation of the Company’s management, including the
Company’s Chief Executive Officer and the Company’s
Chief Financial Officer, of the effectiveness of the
Company’s disclosure controls and procedures pursuant to
paragraph (b) of Rule 13a-15 and 15d-5 under the Securities
Exchange Act of 1934, as amended (the “Exchange Act”).
Based on that review, the Chief Executive Officer and the Chief
Financial Officer have concluded that the Company’s
disclosure controls and procedures are effective, as of the end of
the period covered by this report, to ensure that information
required to be disclosed by the Company in the reports the Company
files or submit under the Exchange Act (1) is recorded, processed,
summarized, and reported within the time periods specified in the
Securities and Exchange Commission’s rules and forms, and (2)
is accumulated and communicated to the Company’s management,
including the Company’s principal executive officer and
principal financial officer, as appropriate, to allow timely
decisions regarding required disclosure.
CONTROLS AND PROCEDURES - continued
Changes in Internal Control over Financial Reporting
– There
have been no changes in our internal control over financial
reporting during the quarter ended September 30, 2016
that have materially affected, or are
reasonably likely to materially affect, our internal control over
financial reporting.
PART II: OTHER INFORMATION
Item 1 - Legal Proceedings.
From
time to time, the Company is a party to various judicial and
administrative proceedings arising in the ordinary course of
business. The Company’s management and legal counsel have
reviewed the probable outcome of any proceedings that were pending
during the period covered by this report, the costs and expenses
reasonably expected to be incurred, the availability and limits of
the Company’s insurance coverage, and the Company’s
established liabilities. While the outcome of legal proceedings
cannot be predicted with certainty, based on the Company’s
review, the Company believes that any unrecorded liability that may
result as a result of any legal proceedings is not likely to have a
material effect on the Company’s liquidity, financial
condition or results from operations.
Item 1A - Risk Factors.
In addition to the other information set forth in this Quarterly
Report, you should carefully consider the factors discussed in Part
I, “Item 1A. Risk Factors” in our Annual Report on Form
10-K for the fiscal year ended December 31, 2015 (the “2015
Annual Report”), which could materially affect our business,
results of operations or financial condition.
The risk factors have not materially changed as of September 30,
2016 from those disclosed in the 2015 Annual
Report. However, it is important to note that the risks
described in our 2015 Annual Report are not the only risks facing
us. Additional risks and uncertainties not currently known to us or
that we currently deem to be immaterial also may eventually prove
to materially adversely affect our business, results of operations
or financial condition.
Item 2 - Unregistered Sales of Equity Securities and Use of
Proceeds.
(a)
– (b) Not applicable
(c)
ISSUER
PURCHASES OF EQUITY SECURITIES
|
|
|
|
|
|
|
|
Period |
Total
Number of Shares (or Units) Purchased
|
Average
Price Paid per Share (or Unit)
|
Total
Number of Shares (or Units) Purchased as Part of Publicly Announced
Plans or Programs
|
Maximum
Number (or Approximate Dollar Value) of Shares that May Yet be
Purchased Under the Plans or Programs
|
|
Month
#1
|
|
|
|
|
|
July
2016
|
2,000
|
$8.06
|
2,000
|
$128,029
|
|
Month
#2
|
|
|
|
|
|
August
2016
|
10,301
|
$8.02
|
10,301
|
$295,390
|
|
Month
#3
|
|
|
|
|
|
September
2016
|
7,933
|
$8.05
|
7,933
|
$231,557
|
|
Total
|
20,234
|
$8.04
|
20,234
|
$231,557
|
Item 2 - Unregistered Sales of Equity Securities and Use of
Proceeds. - continued
In
November of 2015 the Company’s Board of Directors (the
“Board”) approved a program to repurchase common stock
of the Company. Under the November 2015 Board action, the Company
funded a plan to repurchase up to $250,000 of our common stock
through the open market. On April 25, 2016, the Board approved
allocating additional funds to increase the plan balance back to
the $250,000 level and additionally approved the repurchase of up
to $100,000 of the Company’s common stock from private
parties. On August 29, 2016 the Board approved adding an additional
$250,000 to the plan. This plan is intended to remain in place
until all funding for the plan is depleted or the plan is expanded
or terminated by the Board. As of September 30, 2016, $279,168
remained unspent under this plan.
Item 3 - Defaults upon Senior Securities.
None.
Item 4 - Mine Safety Disclosures.
Not
applicable.
Item 5 – Other Information.
None.
Item 6 – Exhibits.
3.1
Articles of
Incorporation of Willamette Valley Vineyards, Inc. (incorporated by
reference from the Company's Regulation A Offering Statement on
Form 1-A, File No. 24S-2996)
3.2
Articles of
Amendment, dated August 22, 2000 (incorporated herein by reference
to Exhibit 3.4 to the Company’s Form 10-Q for the quarterly
period ended June 30, 2008, filed August 14, 2008, File No.
000-21522)
3.3
Amended and Restated
Bylaws of Willamette Valley Vineyards, Inc. (incorporated
by reference from the Company's Current Reports on Form 8-K filed
with the SEC on November 20, 2015 [File No.
001-37610])
101
The following
financial information from the Corporation’s Quarterly Report
on Form 10-Q for the quarter ended September 30, 2016, furnished
electronically herewith, and formatted in XBRL (Extensible Business
Reporting Language): (i) Balance Sheets, (ii) Statements of
Operations; (iii) Statements of Cash Flows; and (iv) Notes to
Financial Statements, tagged as blocks of text. (Filed
herewith).
SIGNATURES
Pursuant
to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
WILLAMETTE
VALLEY VINEYARDS, INC.
|
Date: November 10,
2016
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By:
|
/s/
James
W. Bernau
|
|
|
|
|
James W.
Bernau
|
|
|
|
|
Chief
Executive Officer
|
|
|
|
|
(Principal
Executive Officer) |
|
|
Date: November 10,
2016
|
By:
|
/s/
Richard
F. Goward Jr.
|
|
|
|
|
Richard F. Goward
Jr.
|
|
|
|
|
Chief
Financial Officer
|
|
|
|
|
(Principal
Accounting and Financial Officer)
|