Document and Entity Information
Document and Entity Information - shares | 6 Months Ended | |
Jun. 30, 2019 | Aug. 14, 2019 | |
Document And Entity Information | ||
Entity Registrant Name | WILLAMETTE VALLEY VINEYARDS INC | |
Entity Central Index Key | 0000838875 | |
Document Type | 10-Q | |
Document Period End Date | Jun. 30, 2019 | |
Amendment Flag | false | |
Current Fiscal Year End Date | --12-31 | |
Is Entity's Reporting Status Current? | Yes | |
Entity Filer Category | Non-accelerated Filer | |
Entity Emerging Growth Company | false | |
Entity Small Business | true | |
Entity Shell Company | false | |
Entity Common Stock, Shares Outstanding | 4,964,529 | |
Document Fiscal Period Focus | Q2 | |
Document Fiscal Year Focus | 2019 |
BALANCE SHEETS (Unaudited)
BALANCE SHEETS (Unaudited) - USD ($) | Jun. 30, 2019 | Dec. 31, 2018 |
CURRENT ASSETS | ||
Cash and cash equivalents | $ 8,246,642 | $ 9,737,467 |
Accounts receivable, net | 1,753,549 | 2,352,890 |
Inventories (Note 2) | 16,413,091 | 16,247,109 |
Prepaid expenses and other current assets | 174,962 | 219,800 |
Income tax receivable | 171,947 | 77,063 |
Total current assets | 26,760,191 | 28,634,329 |
Other assets | 34,836 | 34,836 |
Vineyard development costs, net | 7,356,300 | 7,028,920 |
Property and equipment, net (Note 3) | 26,231,199 | 25,784,451 |
Operating lease right of use assets | 4,971,990 | 0 |
TOTAL ASSETS | 65,354,516 | 61,482,536 |
CURRENT LIABILITIES | ||
Accounts payable | 649,226 | 844,820 |
Accrued expenses | 685,921 | 911,129 |
Current portion of note payable | 1,508,582 | 1,685,181 |
Current portion of long-term debt | 424,832 | 417,293 |
Current portion of lease liabilities | 191,290 | 0 |
Unearned revenue | 461,438 | 517,710 |
Grapes payable | 0 | 1,019,129 |
Total current liabilities | 3,921,289 | 5,395,262 |
Long-term debt, net of current portion and debt issuance costs | 6,043,785 | 6,251,316 |
Lease liabilities, net of current portion | 4,833,625 | 0 |
Deferred rent liability | 0 | 50,480 |
Deferred gain | 8,935 | 24,983 |
Deferred income taxes | 2,200,227 | 2,200,227 |
Total liabilities | 17,007,861 | 13,922,268 |
COMMITMENTS AND CONTINGENCIES | ||
SHAREHOLDERS' EQUITY | ||
Redeemable preferred stock, no par value, 10,000,000 shares authorized, 4,662,768 shares issued and outstanding, liquidation preference $19,863,392 at June 30, 2019 and 4,662,768 shares issued and outstanding, liquidation preference $19,350,487, at December 31, 2018, respectively. | 18,832,006 | 18,319,102 |
Common stock, no par value, 10,000,000 shares authorized, 4,964,529 shares issued and outstanding at June 30, 2019 and December 31, 2018, respectively. | 8,512,489 | 8,512,489 |
Retained earnings | 21,002,160 | 20,728,677 |
Total shareholder's equity | 48,346,655 | 47,560,268 |
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY | $ 65,354,516 | $ 61,482,536 |
BALANCE SHEETS (Unaudited) (Par
BALANCE SHEETS (Unaudited) (Parenthetical) - USD ($) | Jun. 30, 2019 | Dec. 31, 2018 |
SHAREHOLDERS' EQUITY | ||
Preferred stock, par value | $ 0 | $ 0 |
Preferred stock, authorized shares | 10,000,000 | 10,000,000 |
Preferred stock, issued shares | 4,662,768 | 4,662,768 |
Preferred stock, outstanding shares | 4,662,768 | 4,662,768 |
Preferred stock, liquidation preference | $ 19,863,392 | $ 19,350,487 |
Common stock, par value | $ 0 | $ 0 |
Common stock, authorized shares | 10,000,000 | 10,000,000 |
Common stock, issued shares | 4,964,529 | 4,964,529 |
Common stock, outstanding shares | 4,964,529 | 4,964,529 |
STATEMENTS OF OPERATIONS (Unaud
STATEMENTS OF OPERATIONS (Unaudited) - USD ($) | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2019 | Jun. 30, 2018 | Jun. 30, 2019 | Jun. 30, 2018 | |
Income Statement [Abstract] | ||||
SALES, NET | $ 5,790,837 | $ 5,821,292 | $ 10,789,623 | $ 10,353,911 |
COST OF SALES | 2,292,479 | 2,099,186 | 4,010,629 | 3,741,561 |
GROSS PROFIT | 3,498,358 | 3,722,106 | 6,778,994 | 6,612,350 |
OPERATING EXPENSES: | ||||
Sales and marketing | 1,906,586 | 1,641,372 | 3,681,586 | 3,168,451 |
General and administrative | 995,341 | 901,829 | 1,936,539 | 1,792,650 |
Total operating expenses | 2,901,927 | 2,543,201 | 5,618,125 | 4,961,101 |
INCOME FROM OPERATIONS | 596,431 | 1,178,905 | 1,160,869 | 1,651,249 |
OTHER INCOME (EXPENSE) | ||||
Interest income | 840 | 2,137 | 10,286 | 9,004 |
Interest expense | (111,088) | (116,284) | (221,502) | (235,002) |
Other income, net | 8,091 | 45,336 | 121,100 | 138,042 |
INCOME BEFORE INCOME TAXES | 494,274 | 1,110,094 | 1,070,753 | 1,563,293 |
INCOME TAX PROVISION | (134,363) | (306,839) | (284,366) | (429,583) |
NET INCOME | 359,911 | 803,255 | 786,387 | 1,133,710 |
Accrued preferred stock dividends | (256,452) | (256,438) | (512,904) | (511,332) |
INCOME APPLICABLE TO COMMON SHAREHOLDERS | $ 103,459 | $ 546,817 | $ 273,483 | $ 622,378 |
Income per common share after preferred dividends | $ 0.02 | $ 0.11 | $ 0.06 | $ 0.13 |
Weighted average number of common shares outstanding | 4,964,529 | 4,964,529 | 4,964,529 | 4,964,529 |
STATEMENTS OF SHAREHOLDERS' EQU
STATEMENTS OF SHAREHOLDERS' EQUITY (Unaudited) - USD ($) | Redeemable Preferred Stock | Common Stock | Retained Earnings | Total |
Beginning balance, shares at Dec. 31, 2017 | 4,427,991 | 4,964,529 | ||
Beginning balance, amount at Dec. 31, 2017 | $ 17,339,508 | $ 8,512,489 | $ 18,889,012 | $ 44,741,009 |
Preferred stock sold, shares | 206,432 | |||
Preferred stock sold, amount | $ 435,856 | 435,856 | ||
Preferred stock dividends accrued | $ 254,893 | (254,893) | ||
Net income | 330,454 | 330,454 | ||
Ending balance, shares at Mar. 31, 2018 | 4,634,423 | 4,964,529 | ||
Ending balance, amount at Mar. 31, 2018 | $ 18,030,257 | $ 8,512,489 | 18,964,573 | 45,507,319 |
Beginning balance, shares at Dec. 31, 2017 | 4,427,991 | 4,964,529 | ||
Beginning balance, amount at Dec. 31, 2017 | $ 17,339,508 | $ 8,512,489 | 18,889,012 | 44,741,009 |
Net income | 1,133,710 | |||
Ending balance, shares at Jun. 30, 2018 | 4,662,518 | 4,964,529 | ||
Ending balance, amount at Jun. 30, 2018 | $ 18,830,502 | $ 8,512,489 | 19,511,390 | 46,854,381 |
Beginning balance, shares at Mar. 31, 2018 | 4,634,423 | 4,964,529 | ||
Beginning balance, amount at Mar. 31, 2018 | $ 18,030,257 | $ 8,512,489 | 18,964,573 | 45,507,319 |
Preferred stock sold, shares | 28,095 | |||
Preferred stock sold, amount | $ 543,807 | 543,807 | ||
Preferred stock dividends accrued | $ 256,438 | (256,438) | ||
Net income | 803,255 | 803,255 | ||
Ending balance, shares at Jun. 30, 2018 | 4,662,518 | 4,964,529 | ||
Ending balance, amount at Jun. 30, 2018 | $ 18,830,502 | $ 8,512,489 | 19,511,390 | 46,854,381 |
Beginning balance, shares at Dec. 31, 2018 | 4,662,768 | 4,964,529 | ||
Beginning balance, amount at Dec. 31, 2018 | $ 18,319,102 | $ 8,512,489 | 20,728,677 | 47,560,268 |
Preferred stock dividends accrued | $ 256,452 | (256,452) | ||
Net income | 426,476 | 426,476 | ||
Ending balance, shares at Mar. 31, 2019 | 4,662,768 | 4,964,529 | ||
Ending balance, amount at Mar. 31, 2019 | $ 18,575,554 | $ 8,512,489 | 20,898,701 | 47,986,744 |
Beginning balance, shares at Dec. 31, 2018 | 4,662,768 | 4,964,529 | ||
Beginning balance, amount at Dec. 31, 2018 | $ 18,319,102 | $ 8,512,489 | 20,728,677 | 47,560,268 |
Net income | 786,387 | |||
Ending balance, shares at Jun. 30, 2019 | 4,662,768 | 4,964,529 | ||
Ending balance, amount at Jun. 30, 2019 | $ 18,832,006 | $ 8,512,489 | 21,002,160 | 48,346,655 |
Beginning balance, shares at Mar. 31, 2019 | 4,662,768 | 4,964,529 | ||
Beginning balance, amount at Mar. 31, 2019 | $ 18,575,554 | $ 8,512,489 | 20,898,701 | 47,986,744 |
Preferred stock dividends accrued | $ 256,452 | (256,452) | ||
Net income | 359,911 | 359,911 | ||
Ending balance, shares at Jun. 30, 2019 | 4,662,768 | 4,964,529 | ||
Ending balance, amount at Jun. 30, 2019 | $ 18,832,006 | $ 8,512,489 | $ 21,002,160 | $ 48,346,655 |
STATEMENTS OF CASH FLOWS (Unaud
STATEMENTS OF CASH FLOWS (Unaudited) - USD ($) | 6 Months Ended | |
Jun. 30, 2019 | Jun. 30, 2018 | |
CASH FLOWS FROM OPERATING ACTIVITIES | ||
Net income | $ 786,387 | $ 1,133,710 |
Adjustments to reconcile net income to net cash from operating activities: | ||
Depreciation and amortization | 899,429 | 801,147 |
Loss/(gain) on disposition of property & equipment | 487 | 72 |
Non-cash loss from other assets | 0 | 14,317 |
Loan fee amortization | 6,563 | 6,624 |
Deferred rent liability | (50,480) | (15,772) |
Deferred gain | (16,049) | (16,048) |
Change in operating assets and liabilities: | ||
Accounts receivable, net | 599,341 | 358,213 |
Inventories | (165,982) | (151,887) |
Prepaid expenses and other current assets | 44,838 | (43,222) |
Unearned revenue | (56,272) | (41,524) |
Deferred revenue-distribution agreement | 0 | (71,430) |
Grapes payable | (1,019,129) | (1,455,569) |
Accounts payable | (195,828) | (474,940) |
Accrued expenses | (225,208) | (91,908) |
Income taxes payable/(receivable) | (94,884) | 95,284 |
Net cash from operating activities | 513,213 | 47,067 |
CASH FLOWS FROM INVESTING ACTIVITIES | ||
Additions to vineyard development costs | (349,362) | (632,647) |
Additions to property and equipment | (1,271,522) | (2,370,272) |
Net cash from investing activities | (1,620,884) | (3,002,919) |
CASH FLOWS FROM FINANCING ACTIVITIES | ||
Payment on installment note for property purchase | (176,599) | (174,348) |
Payments on long-term debt | (206,555) | (196,688) |
Proceeds from issuance of preferred stock | 0 | 549,357 |
Net cash from financing activities | (383,154) | 178,321 |
NET CHANGE IN CASH AND CASH EQUIVALENTS | (1,490,825) | (2,777,531) |
CASH AND CASH EQUIVALENTS, beginning of period | 9,737,467 | 13,776,257 |
CASH AND CASH EQUIVALENTS, end of period | 8,246,642 | 10,998,726 |
NON-CASH INVESTING AND FINANCING ACTIVITIES | ||
Purchases of property and equipment and vineyard development costs included in accounts payable | $ 136,778 | $ 161,217 |
1. BASIS OF PRESENTATION
1. BASIS OF PRESENTATION | 6 Months Ended |
Jun. 30, 2019 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
NOTE 1. BASIS OF PRESENTATION | The accompanying unaudited interim financial statements as of June 30, 2019 and for the three and six months ended June 30, 2019 and 2018 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, 2018 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, 2018. 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, 2018, as presented in the Company’s Annual Report on Form 10-K. Operating results for the three and six months ended June 30, 2019 are not necessarily indicative of the results that may be expected for the entire year ending December 31, 2019, 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. Earnings 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: Three months ended June 30, Six months ended June 30, 2019 2018 2019 2018 Numerator Net income $ 359,911 $ 803,255 $ 786,387 $ 1,133,710 Accrued preferred stock dividends (256,452 ) (256,438 ) (512,904 ) (511,332 ) Net income applicable to common shares $ 103,459 $ 546,817 $ 273,483 $ 622,378 Denominator Weighted average common shares 4,964,529 4,964,529 4,964,529 4,964,529 Income per common share after preferred dividends $ 0.02 $ 0.11 $ 0.06 $ 0.13 Recently issued accounting standards (adopted) Leases The Company adopted this new standard on its financial statements on January 1, 2019 using the cumulative effect adjustment method and determined right-of-use assets to be approximately $5.0 million as of December 31, 2018 of which approximately $4.8 million, or 96.0%, represent the lease of vineyard property. The Company recognized these right-of-use assets, and their respective liabilities, and began amortizing them prospectively beginning in first quarter 2019. This standard had a material impact on its Balance Sheet but a minimal direct impact on its Statement of Operations. Because 96.0% of the Company’s leases are for vineyard land, lease costs are recognized either as part of capitalized vineyard development costs or inventory valuation depending on the productive or pre-productive nature of the vineyard. Therefore, most changes to lease expenses as a result of this standard flow through inventory and ultimately become part of cost of sales. The accounting standards that have been issued by the FASB or other standards-setting bodies that do not require adoption until a future date are not expected to have a material impact on our financial statements upon adoption. |
2. INVENTORIES
2. INVENTORIES | 6 Months Ended |
Jun. 30, 2019 | |
Inventory Disclosure [Abstract] | |
NOTE 2. INVENTORIES | The Company’s inventories, by major classification, are summarized as follows, as of the dates shown: June 30, 2019 December 31, 2018 Winemaking and packaging materials $ 892,945 $ 736,902 Work-in-process (costs relating to unprocessed and/or unbottled wine products) 6,719,383 8,527,814 Finished goods (bottled wine and related products) 8,800,763 6,982,393 Current inventories $ 16,413,091 $ 16,247,109 |
3. PROPERTY AND EQUIPMENT
3. PROPERTY AND EQUIPMENT | 6 Months Ended |
Jun. 30, 2019 | |
Property, Plant and Equipment [Abstract] | |
NOTE 3. PROPERTY AND EQUIPMENT | The Company’s property and equipment consists of the following, as of the dates shown: June 30, 2019 December 31, 2018 Construction in progress $ 2,817,584 $ 1,747,047 Land, improvements and other buildings 11,135,596 11,135,596 Winery building and hospitality center 16,099,378 15,993,490 Equipment 12,777,659 12,750,152 42,830,217 41,626,285 Accumulated depreciation (16,599,018 ) (15,841,834 ) Property and equipment, net $ 26,231,199 $ 25,784,451 |
4. DISTRIBUTION AGREEMENT RECEI
4. DISTRIBUTION AGREEMENT RECEIVABLE AND DEFERRED REVENUE | 6 Months Ended |
Jun. 30, 2019 | |
Deferred Revenue Disclosure [Abstract] | |
NOTE 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 expiring September 1, 2018. 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. As a result, the Company was due to receive $250,000 per year starting on September 2011 for each of the next four years for a total of $1,000,000. In October of 2014, the Company received payment of the final $250,000 under this agreement. 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 June 30, 2019 and 2018, the Company has recognized revenue related to this agreement in the amount of $0 and $35,715, respectively, recorded to other income. For the six months ended June 30, 2019 and 2018, the Company has recognized revenue related to this agreement in the amount of $0 and $71,430, respectively, recorded to other income. |
5. DEBT
5. DEBT | 6 Months Ended |
Jun. 30, 2019 | |
Debt Disclosure [Abstract] | |
NOTE 5. DEBT | Line of Credit Facility – Notes payable In February of 2017 the Company purchased property, including vineyard land, bare land and structures in the Dundee Hills AVA under terms that included a 15 year note payable with quarterly payments of $42,534 at 6%. The note may be called by the owner, up to the outstanding balance, with 180 days written notice. As of June 30, 2019 the Company had a balance of $1,508,582 due on this note. As of December 31, 2018 the Company had a balance of $1,547,514 due on this note. Long Term Debt The Company has an outstanding loan with Toyota Credit Corporation maturing in February 2021, at zero interest, with an outstanding balance of $18,168 and $23,906 as of June 30, 2019 and December 31, 2018, respectively. The purpose of this loan was to purchase a vehicle. As of June 30, 2019 the Company had unamortized debt issuance costs of $165,662. As of December 31, 2018 the Company had unamortized debt issuance costs of $172,225. |
6. INTEREST AND TAXES PAID
6. INTEREST AND TAXES PAID | 6 Months Ended |
Jun. 30, 2019 | |
Other Income and Expenses [Abstract] | |
NOTE 6. INTEREST AND TAXES PAID | Income taxes Interest |
7. SEGMENT REPORTING
7. SEGMENT REPORTING | 6 Months Ended |
Jun. 30, 2019 | |
Segment Reporting [Abstract] | |
NOTE 7. 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. 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 six month periods ending June 30, 2019 and 2018. Sales figures are net of related excise taxes. Three Months Ended June 30, Direct Sales Distributor Sales Total 2019 2018 2019 2018 2019 2018 Sales, net $ 2,359,444 $ 2,353,487 $ 3,431,393 $ 3,467,805 $ 5,790,837 $ 5,821,292 Cost of Sales 689,204 650,359 1,603,275 1,448,827 2,292,479 2,099,186 Gross Margin 1,670,240 1,703,128 1,828,118 2,018,978 3,498,358 3,722,106 Selling Expenses 1,156,397 1,030,106 578,391 545,403 1,734,788 1,575,509 Contribution Margin $ 513,843 $ 673,022 $ 1,249,727 $ 1,473,575 $ 1,763,570 $ 2,146,597 Percent of Sales 40.7% 40.4% 59.3% 59.6% 100.0% 100.0% Six Months Ended June 30, Direct Sales Distributor Sales Total 2019 2018 2019 2018 2019 2018 Sales, net $ 4,079,621 $ 3,903,643 $ 6,710,002 $ 6,450,268 $ 10,789,623 $ 10,353,911 Cost of Sales 1,032,643 1,038,543 2,977,986 2,703,018 4,010,629 3,741,561 Gross Margin 3,046,978 2,865,100 3,732,016 3,747,250 6,778,994 6,612,350 Selling Expenses 2,230,768 2,016,858 1,131,059 995,706 3,361,827 3,012,564 Contribution Margin $ 816,210 $ 848,242 $ 2,600,957 $ 2,751,544 $ 3,417,167 $ 3,599,786 Percent of Sales 37.8% 37.7% 62.2% 62.3% 100.0% 100.0% Direct sales include $2,800 and $134,970 of bulk wine sales in the three months ended June 30, 2019 and 2018, respectively. Direct sales include $45,563 and $134,970 of bulk wine sales in the six months ended June 30, 2019 and 2018, respectively. |
8. SALE OF PREFERRED STOCK
8. SALE OF PREFERRED STOCK | 6 Months Ended |
Jun. 30, 2019 | |
Equity [Abstract] | |
NOTE 8. 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 ranks senior in rights and preferences to the Company’s common stock. Shareholders of this issue are 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. On December 23, 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 sold all preferred stock available under this offering. On May 3, 2017, the Company filed with the SEC 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 2,298,851 additional shares of Series A Redeemable Preferred stock having proceeds not to exceed $10,000,000. This stock was established to be sold in four offering periods beginning with an offering price of $4.35 per share and concluding at $4.65 per share. The Company sold all preferred stock available under this offering. |
9. LEASES
9. LEASES | 6 Months Ended |
Jun. 30, 2019 | |
Leases [Abstract] | |
NOTE 9. LEASES | In February 2016, the FASB issued Accounting Standards Update 2016-02 (ASU 2016-02), Leases (Topic 842). ASU 2016-02 requires lessees to recognize a right-of-use (ROU) asset and lease liability in the balance sheet for all leases, including operating leases, with terms of more than twelve months. Recognition, measurement and presentation of expenses and cash flows from a lease by a lessee have not significantly changed from previous guidance. The amendments also require qualitative disclosures along with specific quantitative disclosures. We adopted this guidance using the cumulative-effect adjustment method on January 1, 2019, meaning we did not restate prior periods. Current year financial information is presented under the guidance in Topic 842, while prior year information will continue to be presented under Topic 840. Adoption of the standard resulted in the recognition of an operating ROU asset of approximately $5.0 million, of which $4.8 million, or 96.0%, represent the lease of vineyard property. Vineyard lease costs are recognized either as part of capitalized vineyard development costs or inventory valuation depending on the productive or pre-productive nature of the vineyard. As such, adoption of the standard did not have a material impact on our Statement of Operations or Statement of Cash flows but did have a material impact on our Balance Sheet. We determine if an arrangement is a lease at inception. On our balance sheet, our operating leases are included in Operating lease right-of-use assets, 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 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. Operating lease 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 lease contains a formula-based escalation provision with a maximum increase of 4% every three years. Approximately $99,000 of the total gain of $176,000 has been deferred and is being amortized over the life of the lease. This property is referred to as the Meadowview Vineyard, and includes approximately 49 acres of producing vineyards. The amortization of the deferred gain is recorded as an offset to expense in selling, general and administrative expenses. In February 2007, the Company entered into a lease agreement for 59 acres of vineyard land at Elton Vineyards. This lease is for a 10-year term with four five-year renewals at the Company’s option. The lease contains an escalation provision tied to the CPI not to exceed 2% per annum. In 2017, the Company exercised its option to renew the lease until December 31, 2022. 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 rises as the vineyard is developed, and contains an escalation provision of CPI plus .5% per year capped at 4%. This property is referred to as part of Ingram Vineyard. In March 2017, the Company entered into a 25-year lease for approximately 20 acres of agricultural land in Dundee, Oregon. These acres are being developed into vineyards. This lease contains an annual payment that remains constant throughout the term of the lease. This property is referred to as part of Bernau Estate Vineyard. Operating Leases – Non-Vineyard In January 2018, the Company assumed a lease, with four remaining years, for its Maison Bleue tasting room in Walla Walla, Washington. The lease contains fixed payments that increase over the term of the agreement. Operating leases – Not yet commenced The following tables provide lease cost and other lease information for the three and six months ended June 30, 2019: Three Months Ended Six Months Ended June 30, 2019 June 30, 2019 Lease Cost Operating Lease cost - Vineyards $ 113,685 $ 227,370 Operating Lease cost - Other 17,580 35,160 Short-term lease cost 9,273 17,900 Total Lease Cost $ 140,538 $ 280,430 Other information (Gains) and losses on sale and leaseback transactions, net $ (8,024 ) $ (16,048 ) Cash paid for amounts included in the measurement of lease liabilities Operating cash flows from operating leases - Vineyard 104,948 209,514 Operating cash flows from operating leases - Other 17,400 34,800 Weighted-average remaining lease term - operating leases 18.42 18.42 Weighted-average discount rate - operating leases 6.24 % 6.24 % As of June 30, 2019, maturities of lease liabilities were as follows: Operating Years Ended December 31, Leases 2019 $ 107,019 2020 222,420 2021 210,307 2022 197,651 2023 190,730 Thereafter 4,096,788 Present value of operational lease liabilities $ 5,024,915 |
10. COMMITMENTS AND CONTINGENCI
10. COMMITMENTS AND CONTINGENCIES | 6 Months Ended |
Jun. 30, 2019 | |
Commitments and Contingencies Disclosure [Abstract] | |
NOTE 10. COMMITMENTS AND CONTINGENCIES | Litigation Grape Purchases |
11. SUBSEQUENT EVENTS
11. SUBSEQUENT EVENTS | 6 Months Ended |
Jun. 30, 2019 | |
Subsequent Events [Abstract] | |
NOTE 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. Line of Credit Facility – |
1. BASIS OF PRESENTATION (Table
1. BASIS OF PRESENTATION (Tables) | 6 Months Ended |
Jun. 30, 2019 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Earnings per share | Three months ended June 30, Six months ended June 30, 2019 2018 2019 2018 Numerator Net income $ 359,911 $ 803,255 $ 786,387 $ 1,133,710 Accrued preferred stock dividends (256,452 ) (256,438 ) (512,904 ) (511,332 ) Net income applicable to common shares $ 103,459 $ 546,817 $ 273,483 $ 622,378 Denominator Weighted average common shares 4,964,529 4,964,529 4,964,529 4,964,529 Income per common share after preferred dividends $ 0.02 $ 0.11 $ 0.06 $ 0.13 |
2. INVENTORIES (Tables)
2. INVENTORIES (Tables) | 6 Months Ended |
Jun. 30, 2019 | |
Inventory Disclosure [Abstract] | |
Inventories | June 30, 2019 December 31, 2018 Winemaking and packaging materials $ 892,945 $ 736,902 Work-in-process (costs relating to unprocessed and/or unbottled wine products) 6,719,383 8,527,814 Finished goods (bottled wine and related products) 8,800,763 6,982,393 Current inventories $ 16,413,091 $ 16,247,109 |
3. PROPERTY AND EQUIPMENT (Tabl
3. PROPERTY AND EQUIPMENT (Tables) | 6 Months Ended |
Jun. 30, 2019 | |
Property, Plant and Equipment [Abstract] | |
Property and equipment | June 30, 2019 December 31, 2018 Construction in progress $ 2,817,584 $ 1,747,047 Land, improvements and other buildings 11,135,596 11,135,596 Winery building and hospitality center 16,099,378 15,993,490 Equipment 12,777,659 12,750,152 42,830,217 41,626,285 Accumulated depreciation (16,599,018 ) (15,841,834 ) Property and equipment, net $ 26,231,199 $ 25,784,451 |
7. SEGMENT REPORTING (Tables)
7. SEGMENT REPORTING (Tables) | 6 Months Ended |
Jun. 30, 2019 | |
Segment Reporting [Abstract] | |
Segment reporting | Three Months Ended June 30, Direct Sales Distributor Sales Total 2019 2018 2019 2018 2019 2018 Sales, net $ 2,359,444 $ 2,353,487 $ 3,431,393 $ 3,467,805 $ 5,790,837 $ 5,821,292 Cost of Sales 689,204 650,359 1,603,275 1,448,827 2,292,479 2,099,186 Gross Margin 1,670,240 1,703,128 1,828,118 2,018,978 3,498,358 3,722,106 Selling Expenses 1,156,397 1,030,106 578,391 545,403 1,734,788 1,575,509 Contribution Margin $ 513,843 $ 673,022 $ 1,249,727 $ 1,473,575 $ 1,763,570 $ 2,146,597 Percent of Sales 40.7% 40.4% 59.3% 59.6% 100.0% 100.0% Six Months Ended June 30, Direct Sales Distributor Sales Total 2019 2018 2019 2018 2019 2018 Sales, net $ 4,079,621 $ 3,903,643 $ 6,710,002 $ 6,450,268 $ 10,789,623 $ 10,353,911 Cost of Sales 1,032,643 1,038,543 2,977,986 2,703,018 4,010,629 3,741,561 Gross Margin 3,046,978 2,865,100 3,732,016 3,747,250 6,778,994 6,612,350 Selling Expenses 2,230,768 2,016,858 1,131,059 995,706 3,361,827 3,012,564 Contribution Margin $ 816,210 $ 848,242 $ 2,600,957 $ 2,751,544 $ 3,417,167 $ 3,599,786 Percent of Sales 37.8% 37.7% 62.2% 62.3% 100.0% 100.0% |
9. LEASES (Tables)
9. LEASES (Tables) | 6 Months Ended |
Jun. 30, 2019 | |
Leases [Abstract] | |
Lease cost and other lease information | Three Months Ended Six Months Ended June 30, 2019 June 30, 2019 Lease Cost Operating Lease cost - Vineyards $ 113,685 $ 227,370 Operating Lease cost - Other 17,580 35,160 Short-term lease cost 9,273 17,900 Total Lease Cost $ 140,538 $ 280,430 Other information (Gains) and losses on sale and leaseback transactions, net $ (8,024 ) $ (16,048 ) Cash paid for amounts included in the measurement of lease liabilities Operating cash flows from operating leases - Vineyard 104,948 209,514 Operating cash flows from operating leases - Other 17,400 34,800 Weighted-average remaining lease term - operating leases 18.42 18.42 Weighted-average discount rate - operating leases 6.24 % 6.24 % |
Maturities of lease liabilities | Years Ended December 31, Leases 2019 $ 107,019 2020 222,420 2021 210,307 2022 197,651 2023 190,730 Thereafter 4,096,788 Present value of operational lease liabilities $ 5,024,915 |
1. BASIS OF PRESENTATION (Detai
1. BASIS OF PRESENTATION (Details) - USD ($) | 3 Months Ended | 6 Months Ended | ||||
Jun. 30, 2019 | Mar. 31, 2019 | Jun. 30, 2018 | Mar. 31, 2018 | Jun. 30, 2019 | Jun. 30, 2018 | |
Numerator | ||||||
Net income | $ 359,911 | $ 426,476 | $ 803,255 | $ 330,454 | $ 786,387 | $ 1,133,710 |
Accrued preferred stock dividends | (256,452) | (256,438) | (512,904) | (511,332) | ||
Net income applicable to common shares | $ 103,459 | $ 546,817 | $ 273,483 | $ 622,378 | ||
Denominator | ||||||
Weighted average common shares | 4,964,529 | 4,964,529 | 4,964,529 | 4,964,529 | ||
Income per common share after preferred dividends | $ 0.02 | $ 0.11 | $ 0.06 | $ 0.13 |
2. INVENTORIES (Details)
2. INVENTORIES (Details) - USD ($) | Jun. 30, 2019 | Dec. 31, 2018 |
Inventory Disclosure [Abstract] | ||
Winemaking and packaging materials | $ 892,945 | $ 736,902 |
Work-in-progress (costs relating to unprocessed and/or unbottled wine products) | 6,719,383 | 8,527,814 |
Finished goods (bottled wine and related products) | 8,800,763 | 6,982,393 |
Current inventories | $ 16,413,091 | $ 16,247,109 |
3. PROPERTY AND EQUIPMENT (Deta
3. PROPERTY AND EQUIPMENT (Details) - USD ($) | Jun. 30, 2019 | Dec. 31, 2018 |
Property, Plant and Equipment [Abstract] | ||
Construction in progress | $ 2,817,584 | $ 1,747,047 |
Land, improvements and other buildings | 11,135,596 | 11,135,596 |
Winery building and hospitality center | 16,099,378 | 15,993,490 |
Equipment | 12,777,659 | 12,750,152 |
Property and equipment, gross | 42,830,217 | 41,626,285 |
Accumulated depreciation | (16,599,018) | (15,841,834) |
Property and equipment, net | $ 26,231,199 | $ 25,784,451 |
4. DISTRIBUTION AGREEMENT REC_2
4. DISTRIBUTION AGREEMENT RECEIVABLE AND DEFERRED REVENUE (Details Narrative) - USD ($) | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2019 | Jun. 30, 2018 | Jun. 30, 2019 | Jun. 30, 2018 | |
Deferred Revenue Disclosure [Abstract] | ||||
Distribution agreement receivable, revenue recognized during period | $ 0 | $ 35,715 | $ 0 | $ 71,430 |
5. DEBT (Details Narrative)
5. DEBT (Details Narrative) - USD ($) | Jun. 30, 2019 | Dec. 31, 2018 |
Unamortized debt issuance costs | $ 165,662 | $ 172,225 |
Umpqua Bank | ||
Aggregate outstanding balance | 0 | 0 |
Walla Walla | ||
Aggregate outstanding balance | 0 | 137,667 |
Dundee Hills | ||
Aggregate outstanding balance | 1,508,582 | 1,547,514 |
Farm Credit Services | ||
Aggregate outstanding balance | 6,616,111 | 6,816,928 |
Toyota Credit Corporation | ||
Aggregate outstanding balance | $ 18,168 | $ 23,906 |
6. INTEREST AND TAXES PAID (Det
6. INTEREST AND TAXES PAID (Details Narrative) - USD ($) | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2019 | Jun. 30, 2018 | Jun. 30, 2019 | Jun. 30, 2018 | |
Other Income and Expenses [Abstract] | ||||
Income taxes paid | $ 379,250 | $ 334,000 | $ 379,250 | $ 334,000 |
Interest paid | $ 109,009 | $ 115,161 | $ 217,719 | $ 229,837 |
7. SEGMENT REPORTING (Details)
7. SEGMENT REPORTING (Details) - USD ($) | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2019 | Jun. 30, 2018 | Jun. 30, 2019 | Jun. 30, 2018 | |
Sales, net | $ 5,790,837 | $ 5,821,292 | $ 10,789,623 | $ 10,353,911 |
Cost of sales | 2,292,479 | 2,099,186 | 4,010,629 | 3,741,561 |
Gross margin | 3,498,358 | 3,722,106 | 6,778,994 | 6,612,350 |
Selling expenses | 1,734,788 | 1,575,509 | 3,361,827 | 3,012,564 |
Contribution margin | $ 1,763,570 | $ 2,146,597 | $ 3,417,167 | $ 3,599,786 |
Percent of sales | 100.00% | 100.00% | 100.00% | 100.00% |
Direct Sales | ||||
Sales, net | $ 2,359,444 | $ 2,353,487 | $ 4,079,621 | $ 3,903,643 |
Cost of sales | 689,204 | 650,359 | 1,032,643 | 1,038,543 |
Gross margin | 1,670,240 | 1,703,128 | 3,046,978 | 2,865,100 |
Selling expenses | 1,156,397 | 1,030,106 | 2,230,768 | 2,016,858 |
Contribution margin | $ 513,843 | $ 673,022 | $ 816,210 | $ 848,242 |
Percent of sales | 40.70% | 40.40% | 37.80% | 37.70% |
Distributor Sales | ||||
Sales, net | $ 3,431,393 | $ 3,467,805 | $ 6,710,002 | $ 6,450,268 |
Cost of sales | 1,603,275 | 1,448,827 | 2,977,986 | 2,703,018 |
Gross margin | 1,828,118 | 2,018,978 | 3,732,016 | 3,747,250 |
Selling expenses | 578,391 | 545,403 | 1,131,059 | 995,706 |
Contribution margin | $ 1,249,727 | $ 1,473,575 | $ 2,600,957 | $ 2,751,544 |
Percent of sales | 59.30% | 59.60% | 62.20% | 62.30% |
7. SEGMENT REPORTING (Details N
7. SEGMENT REPORTING (Details Narrative) - USD ($) | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2019 | Jun. 30, 2018 | Jun. 30, 2019 | Jun. 30, 2018 | |
Segment Reporting [Abstract] | ||||
Bulk wine sales | $ 2,800 | $ 134,970 | $ 45,563 | $ 134,970 |
9. LEASES (Details)
9. LEASES (Details) | 3 Months Ended | 6 Months Ended |
Jun. 30, 2019USD ($) | Jun. 30, 2019USD ($) | |
Lease Cost | ||
Operating lease cost - vineyards | $ 113,685 | $ 227,370 |
Operating lease cost - other | 17,580 | 35,160 |
Short-term lease cost | 9,273 | 17,900 |
Total lease cost | 140,538 | 280,430 |
Other Information | ||
(Gains) and losses on sale and leaseback transactions, net | (8,024) | (16,048) |
Operating cash flows from operating leases - vineyard | 104,948 | 209,514 |
Operating cash flows from operating leases - other | $ 17,400 | $ 34,800 |
Weighted-average remaining lease term - operating leases | 18 years 5 months 1 day | 18 years 5 months 1 day |
Weighted-average discount rate - operating leases | 6.24% | 6.24% |
9. LEASES (Details 1)
9. LEASES (Details 1) | Jun. 30, 2019USD ($) |
Leases [Abstract] | |
2019 | $ 107,019 |
2020 | 222,420 |
2021 | 210,307 |
2022 | 197,651 |
2023 | 190,730 |
Thereafter | 4,096,788 |
Present value of operational lease liabilities | $ 5,024,915 |