UNITED STATES
SECURITIES AND EXCHANGE
COMMISSION
Washington, D.C. 20549
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FORM 10-K
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(Mark One)
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||
☒
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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
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|
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For the fiscal year ended December 31, 2020
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|
|
or
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☐
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
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|
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For the
transition period from _________________ to
_______________________
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Commission file number: 000-21522
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||
WILLAMETTE VALLEY VINEYARDS,
INC.
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||
(Exact name of registrant as
specified in its charter)
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||
Oregon
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93-0981021
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(State or other
jurisdiction ofincorporation or organization)
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(I.R.S.
EmployerIdentification No.)
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|
8800 Enchanted Way, S.E.
Turner, OR 97392
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||
(Address of principal executive
offices)
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||
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||
Registrant’s
telephone number, including area code: (503) 588-9463
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Title
of each class
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Trading
Symbol(s)
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|
Name of
each exchange on which registered
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Common
Stock
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|
WVVI
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NASDAQ
Capital Market
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Series
A Redeemable Preferred Stock
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WVVIP
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NASDAQ
Capital Market
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Securities
registered pursuant to Section 12(g) of the Act:
None
(Title of class)
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||
|
||
Indicate
by check mark if the registrant is a well-known seasoned issuer, as
defined in Rule 405 of the Securities Act: Yes ☐ No
☒
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||
|
||
Indicate
by check mark if the registrant is not required to file reports
pursuant to Section 13 or 15(d) of the Securities Exchange
Act: Yes ☐ No ☒
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Indicate
by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 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 ☐
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||
|
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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 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 ☐ Accelerated filer
☐ Non-accelerated filer ☒ Smaller reporting company
☒ Emerging Growth Company ☐
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||
|
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If an emerging growth company, indicate by check
mark if the registrant has elected not to use the extended
transition period for complying with any new or revised financial
accounting standards provided pursuant to Section 13(a) of the
Exchange Act. ☐
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||
|
||
Indicate by check mark whether the registrant has
filed a report on and attestation to its management’s
assessment of the effectiveness of its internal control over
financial reporting under Section 404(b) of the Sarbanes-Oxley Act
(15 U.S.C. 7262(b)) by the registered public accounting firm that
prepared or issued its audit report. ☐
|
Indicate
by check mark whether the registrant is a shell company (as defined
in Rule 12b-2 of the Act): Yes ☐ No ☒
|
|
The
aggregate market value of common stock held by non-affiliates of
the registrant as of June 30, 2020 was approximately
$27,205,646.
The
number of outstanding shares of the registrant’s Common Stock
as of March 15, 2021 was 4,964,529.
|
|
DOCUMENTS INCORPORATED BY REFERENCE
|
None
|
|
|
|
|
|
|
|
4
|
||
14
|
||
20
|
||
20
|
||
21
|
||
21
|
||
|
|
|
|
|
|
|
|
|
|
|
|
|
||
|
21
|
|
21
|
||
|
||
|
21
|
|
30
|
||
31
|
||
|
||
|
48
|
|
48
|
||
49
|
||
|
|
|
|
|
|
|
|
|
|
|
|
49
|
||
51
|
||
|
||
|
52
|
|
53
|
||
54
|
||
55
|
|
ACRES
|
|
TONS
|
||||||
Vineyard
Name
|
Total
|
Producing
|
Pre-Production
|
Plantable
|
Non-Plantable
|
|
Harvest
2020
|
|
Harvest
2019
|
Owned
Vineyards
|
|
|
|
|
|
|
|
|
|
WVV
Estate
|
107
|
67
|
1
|
-
|
39
|
|
187
|
|
285
|
Tualatin
Estate Vineyard
|
107
|
58
|
2
|
-
|
47
|
|
146
|
|
199
|
Ingram
Vineyard
|
86
|
63
|
-
|
-
|
23
|
|
112
|
|
162
|
Pambrun
Vineyard
|
87
|
20
|
-
|
30
|
37
|
|
33
|
|
28
|
Loeza
Vineyard
|
62
|
18
|
17
|
23
|
4
|
|
-
|
|
-
|
Louisa
Vineyard
|
53
|
-
|
-
|
25
|
28
|
|
-
|
|
-
|
Maison
Bleue Vineyard
|
37
|
5
|
10
|
19
|
3
|
|
13
|
|
-
|
Bernau
Estate
|
20
|
13
|
-
|
-
|
7
|
|
24
|
|
36
|
Dayton
Vineyard
|
40
|
-
|
-
|
34
|
6
|
|
-
|
|
-
|
Lafayette
Vineyard
|
36
|
-
|
-
|
36
|
-
|
|
-
|
|
-
|
Jory
Claim Vineyard
|
68
|
-
|
-
|
64
|
4
|
|
-
|
|
-
|
Sub-Total
|
703
|
244
|
30
|
231
|
198
|
|
515
|
|
710
|
|
|
|
|
|
|
|
|
|
|
Leased
Vineyards
|
|
|
|
|
|
|
|
|
|
Peter
Michael Vineyard
|
79
|
69
|
-
|
-
|
10
|
|
174
|
|
350
|
Meadowview
Vineyard
|
49
|
49
|
-
|
-
|
-
|
|
141
|
|
236
|
Elton
Vineyard
|
59
|
54
|
-
|
2
|
3
|
|
121
|
|
215
|
Ingram
Vineyard
|
110
|
74
|
19
|
17
|
-
|
|
80
|
|
61
|
Bernau
Estate
|
18
|
-
|
7
|
2
|
9
|
|
-
|
|
-
|
Sub-Total
|
315
|
246
|
26
|
21
|
22
|
|
516
|
|
862
|
|
|
|
|
|
|
|
|
|
|
Contracted
Vineyards*
|
|
|
|
|
|
|
|
|
|
Various
|
368
|
368
|
-
|
-
|
-
|
|
1,470
|
|
1,046
|
|
|
|
|
|
|
|
|
|
|
Total
|
1,386
|
858
|
56
|
252
|
220
|
|
2,501
|
|
2,618
|
|
|
|
|
|
|
|
|
|
|
*
Contracted acreage is estimated
|
|
Tons
of
|
Tons
of
|
Total
Tons
|
Gallons
of
|
|
|
Harvest
|
Grapes
|
Grapes
|
of
Grapes
|
Bulk
|
Production
|
Cases
|
Year
|
Grown
|
Purchased
|
Harvested
|
Purchases
|
Year
|
Produced
|
|
|
|
|
|
|
|
2005
|
1,107
|
25
|
1,132
|
-
|
2005
|
72,297
|
2006
|
1,454
|
34
|
1,488
|
-
|
2006
|
81,081
|
2007
|
850
|
896
|
1,746
|
-
|
2007
|
115,466
|
2008
|
551
|
874
|
1,425
|
57,736
|
2008
|
121,027
|
2009
|
1,033
|
1,100
|
2,133
|
74,954
|
2009
|
132,072
|
2010
|
674
|
371
|
1,045
|
4,276
|
2010
|
110,224
|
2011
|
718
|
609
|
1,327
|
9,620
|
2011
|
81,357
|
2012
|
658
|
670
|
1,328
|
7,910
|
2012
|
91,181
|
2013
|
755
|
1,020
|
1,775
|
6,257
|
2013
|
95,638
|
2014
|
1,211
|
970
|
2,181
|
520
|
2014
|
108,958
|
2015
|
1,266
|
1,012
|
2,278
|
-
|
2015
|
120,794
|
2016
|
921
|
1,052
|
1,973
|
47,780
|
2016
|
141,416
|
2017
|
1,631
|
1,622
|
3,253
|
15,900
|
2017
|
151,332
|
2018
|
1,501
|
1,063
|
2,564
|
800
|
2018
|
164,590
|
2019
|
1,572
|
1,046
|
2,618
|
-
|
2019
|
172,869
|
2020
|
1,031
|
1,470
|
2,501
|
13,173
|
2020
|
175,357
|
|
Twelve
months ended
|
|
|
December
31,
|
|
|
2020
|
2019
|
|
|
|
Retail
sales
|
$10,560,913
|
$9,382,155
|
In-state
sales
|
6,671,743
|
5,215,251
|
Out-of-state
sales
|
10,350,708
|
10,228,132
|
Bulk
wine/miscellaneous sales
|
103,958
|
156,768
|
|
|
|
Total
revenue
|
27,687,322
|
24,982,306
|
|
|
|
Less
excise taxes
|
(372,470)
|
(233,043)
|
|
|
|
Sales,
net
|
$27,314,852
|
$24,749,263
|
|
Year Ended December 31,
|
|
|
2020
|
2019
|
Net Income
|
$3,394,996
|
$2,510,901
|
Depreciation
and amortization expense
|
1,812,394
|
1,812,463
|
Interest
Expense
|
414,061
|
440,999
|
Interest
Income
|
(21,022)
|
(48,066)
|
Income
tax expense
|
1,379,654
|
952,123
|
EBITDA
|
$6,980,083
|
$5,668,420
|
|
Cases
Sold
|
Cases
Sold
|
Cases
On-Hand
|
Varietal/Product
|
2020
|
2019
|
December
31, 2020
|
|
|
|
|
Pinot
Noir/Estate
|
15,801
|
14,696
|
9,739
|
Pinot
Noir/Barrel Select
|
17,522
|
12,713
|
2,202
|
Pinot
Noir/Founders Reserve
|
2,613
|
3,934
|
7,324
|
Pinot
Noir/Special Designates
|
6,603
|
5,217
|
24,470
|
Pinot
Noir/Whole Cluster
|
51,387
|
43,359
|
14,270
|
Pinot
Gris
|
33,448
|
28,810
|
9,329
|
Riesling
|
22,763
|
19,172
|
18,314
|
Chardonnay
|
3,912
|
4,244
|
11,862
|
Table
Wine
|
-
|
16,320
|
8,441
|
Other
|
26,801
|
8,326
|
51,396
|
|
|
|
|
Total
|
180,850
|
156,791
|
157,347
|
|
Payments
Due by Period
|
||||
|
|
Less
than 1
|
2 –
3
|
4
– 5
|
After
5
|
|
Total
|
Year
|
Years
|
Years
|
Years
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term
debt
|
$5,985,228
|
$450,040
|
$969,380
|
$1,072,758
|
$3,493,050
|
Notes
payable
|
1,384,581
|
89,040
|
194,806
|
219,447
|
881,288
|
Grape
payables
|
1,307,165
|
1,307,165
|
-
|
-
|
-
|
Operating
leases
|
8,169,721
|
578,438
|
1,088,731
|
1,012,737
|
5,489,815
|
|
|
|
|
|
|
Total
contractual obligations
|
$16,846,695
|
$2,424,683
|
$2,252,917
|
$2,304,942
|
$9,864,153
|
Report
of Independent Registered Public Accounting Firm
|
32
|
|
Financial
Statements
|
|
|
|
Balance Sheets
|
33
|
|
Statements of Income
|
34
|
|
Statements of Shareholders’ Equity
|
35
|
|
Statements of Cash Flows
|
36
|
|
Notes to Financial Statements
|
37-47
|
|
ASSETS
|
||
|
|
|
|
December 31,
|
December 31,
|
|
2020
|
2019
|
|
|
|
CURRENT ASSETS
|
|
|
Cash
and cash equivalents
|
$13,999,755
|
$7,050,176
|
Accounts
receivable, net (Note 2)
|
2,671,576
|
1,814,004
|
Inventories
(Note 3)
|
17,687,973
|
17,075,080
|
Prepaid
expenses and other current assets
|
182,266
|
202,981
|
Income
tax receivable
|
484,560
|
623,568
|
Total
current assets
|
35,026,130
|
26,765,809
|
|
|
|
Other
assets
|
13,824
|
13,824
|
Vineyard
development costs, net
|
8,020,074
|
7,624,646
|
Property
and equipment, net (Note 4)
|
31,486,856
|
28,648,301
|
Operating
lease right of use assets
|
4,943,463
|
4,862,907
|
|
|
|
TOTAL ASSETS
|
$79,490,347
|
$67,915,487
|
|
|
|
LIABILITIES AND SHAREHOLDERS’ EQUITY
|
||
|
|
|
CURRENT LIABILITIES
|
|
|
Accounts
payable
|
$1,416,210
|
$859,215
|
Accrued
expenses
|
1,335,125
|
1,004,281
|
Investor
deposits for preferred stock
|
510,636
|
-
|
Current
portion of note payable
|
1,384,581
|
1,468,473
|
Current
portion of long-term debt
|
450,040
|
438,378
|
Current
portion of lease liabilities
|
277,686
|
203,482
|
Unearned
revenue
|
622,077
|
604,777
|
Grapes
payable
|
1,307,165
|
792,595
|
Total
current liabilities
|
7,303,520
|
5,371,201
|
|
|
|
Long-term
debt, net of current portion and debt issuance costs
|
5,389,457
|
5,826,161
|
Lease
liabilities, net of current portion
|
4,724,344
|
4,714,413
|
Deferred
income taxes
|
3,251,099
|
2,958,606
|
Total
liabilities
|
20,668,420
|
18,870,381
|
|
|
|
COMMITMENTS AND CONTINGENCIES (Note 12)
|
|
|
|
|
|
SHAREHOLDERS’ EQUITY
|
|
|
Redeemable
preferred stock, no par value, 10,000,000 shares
authorized,
|
||
6,309,508
shares issued and outstanding, liquidation preference
|
||
$26,184,458,
at December 31, 2020 and 4,662,768 shares issued and
|
||
outstanding,
liquidation preference $19,350,487, at December 31,
2019.
|
25,817,305
|
18,319,102
|
Common
stock, no par value, 10,000,000 shares authorized,
4,964,529
|
||
shares issued and outstanding at December 31, 2020 and
|
|
|
December
31, 2019, respectively.
|
8,512,489
|
8,512,489
|
Retained
earnings
|
24,492,133
|
22,213,515
|
Less:
Common stock held in treasury, at cost, 149,961 and 113,418
shares
|
||
at
December 31, 2015 and December 31, 2014, respectively
|
(1,378,303)
|
(897,587)
|
Total
shareholders' equity
|
58,821,927
|
49,045,106
|
|
|
|
LIABILITIES AND SHAREHOLDERS’ EQUITY
|
$79,490,347
|
$67,915,487
|
|
|
Twelve
months ended
|
|
|
December 31,
|
|
|
2020
|
2019
|
|
|
|
SALES, NET
|
$27,314,852
|
$24,749,263
|
COST OF SALES
|
10,585,076
|
9,454,681
|
|
|
|
GROSS PROFIT
|
16,729,776
|
15,294,582
|
|
|
|
OPERATING EXPENSES:
|
|
|
Sales
and marketing
|
7,458,139
|
7,449,088
|
General
and administrative
|
4,269,864
|
4,117,970
|
Total
operating expenses
|
11,728,003
|
11,567,058
|
|
|
|
INCOME FROM OPERATIONS
|
5,001,773
|
3,727,524
|
|
|
|
OTHER INCOME (EXPENSE)
|
|
|
Interest
income
|
21,022
|
48,066
|
Interest
expense
|
(414,061)
|
(440,999)
|
Other
income, net
|
165,916
|
128,433
|
|
|
|
INCOME BEFORE INCOME TAXES
|
4,774,650
|
3,463,024
|
|
|
|
INCOME TAX PROVISION
|
(1,379,654)
|
(952,123)
|
|
|
|
NET INCOME
|
3,394,996
|
2,510,901
|
|
|
|
Preferred stock dividends
|
(1,116,378)
|
(1,026,063)
|
|
|
|
INCOME APPLICABLE TO COMMON SHAREHOLDERS
|
$2,278,618
|
$1,484,838
|
|
|
|
Earnings per common share after preferred dividends,
|
|
|
basic and diluted
|
$0.46
|
$0.30
|
|
|
|
Weighted-average number of
|
|
|
common shares outstanding
|
4,964,529
|
4,964,529
|
|
|
Redeemable
|
|
|
|
|
|
|
Preferred Stock
|
Common Stock
|
Retained
|
|
||
|
Shares
|
Dollars
|
Shares
|
Dollars
|
Earnings
|
Total
|
|
|
|
|
|
|
|
Balance at December 31, 2018
|
4,662,768
|
$18,319,102
|
4,964,529
|
$8,512,489
|
$20,728,677
|
$47,560,268
|
|
|
|
|
|
|
|
Preferred
stock dividends declared
|
-
|
-
|
-
|
-
|
(1,026,063)
|
$(1,026,063)
|
|
|
|
|
|
|
|
Net
income
|
-
|
-
|
-
|
-
|
2,510,901
|
$2,510,901
|
|
|
|
|
|
|
|
Balance at December 31, 2019
|
4,662,768
|
18,319,102
|
4,964,529
|
8,512,489
|
22,213,515
|
49,045,106
|
|
|
|
|
|
|
|
Issuance
of preferred stock, net
|
1,646,740
|
7,498,203
|
-
|
-
|
-
|
$7,498,203
|
|
|
|
|
|
|
|
Preferred
stock dividends declared
|
-
|
-
|
-
|
-
|
(1,116,378)
|
(1,116,378)
|
|
|
|
|
|
|
|
Net
income
|
-
|
-
|
-
|
-
|
3,394,996
|
3,394,996
|
|
|
|
|
|
|
|
Balance at December 31, 2020
|
6,309,508
|
$25,817,305
|
4,964,529
|
$8,512,489
|
$24,492,133
|
$58,821,927
|
|
|
Year ended December 31,
|
|
|
2020
|
2019
|
|
|
|
CASH FLOWS FROM OPERATING ACTIVITIES
|
|
|
Net
income
|
$3,394,996
|
$2,510,901
|
Adjustments
to reconcile net income to net cash from operating
activities:
|
|
|
Depreciation
and amortization
|
1,812,394
|
1,812,463
|
(Gain)/loss
on disposition of property & equipment
|
(8,000)
|
487
|
Preferred
stock compensation expense
|
69,721
|
-
|
Non-cash
lease expense
|
3,579
|
21,012
|
Non-cash
loss from other assets
|
-
|
(31,543)
|
Loan
fee amortization
|
13,247
|
13,248
|
Deferred
income taxes
|
292,493
|
758,379
|
Deferred
gain
|
-
|
(24,983)
|
Change
in operating assets and liabilities:
|
|
|
Accounts
receivable, net
|
(857,572)
|
538,886
|
Inventories
|
(612,893)
|
(827,971)
|
Prepaid
expenses and other current assets
|
20,715
|
16,819
|
Income
tax receivable
|
139,008
|
(546,505)
|
Unearned
revenue
|
17,300
|
87,067
|
Grapes
payable
|
514,570
|
(226,534)
|
Accounts
payable
|
290,596
|
96,568
|
Accrued
expenses
|
330,844
|
93,152
|
Net
cash from operating activities
|
5,420,998
|
4,291,446
|
|
|
|
CASH FLOWS FROM INVESTING ACTIVITIES
|
|
|
Additions
to vineyard development
|
(593,157)
|
(783,653)
|
Additions
to property and equipment
|
(4,178,821)
|
(4,534,995)
|
Net
cash from investing activities
|
(4,771,978)
|
(5,318,648)
|
|
|
|
CASH FLOWS FROM FINANCING ACTIVITIES
|
|
|
Proceeds
from Paycheck Protection Program
|
1,655,200
|
-
|
Payments
on Paycheck Protection Program
|
(1,655,200)
|
-
|
Proceeds
from investor deposits held as liability
|
440,915
|
-
|
Payment
on installment note for property purchase
|
(83,892)
|
(216,708)
|
Payments
on long-term debt
|
(438,289)
|
(417,318)
|
Issuance
of preferred stock, net
|
7,498,203
|
-
|
Payment
of preferred stock dividend
|
(1,116,378)
|
(1,026,063)
|
Net
cash from financing activities
|
6,300,559
|
(1,660,089)
|
|
|
|
NET CHANGE IN CASH AND CASH EQUIVALENTS
|
6,949,579
|
(2,687,291)
|
|
|
|
CASH AND CASH EQUIVALENTS, beginning of year
|
7,050,176
|
9,737,467
|
|
|
|
CASH AND CASH EQUIVALENTS, end of year
|
$13,999,755
|
$7,050,176
|
|
|
|
NON-CASH INVESTING AND FINANCING ACTIVITIES
|
|
|
Purchases
of property and equipment and vineyard development
|
|
|
costs
included in accounts payable
|
$320,769
|
$54,371
|
|
|
|
Supplemental
disclosure of cash flow information:
|
|
|
Cash
paid during the year for:
|
|
|
Interest
paid (net of capitalized interest)
|
$413,319
|
$441,693
|
Income
tax paid
|
$956,672
|
$731,250
|
|
Year
ended December 31,
|
|
|
2020
|
2019
|
|
|
|
Balance
at Beginning of Period
|
$10,000
|
$10,000
|
Charged
to costs and expenses
|
-
|
-
|
Write-offs,
net of recoveries
|
-
|
-
|
|
|
|
Balance
at End of Period
|
$10,000
|
$10,000
|
|
December
31,
|
December
31,
|
|
2020
|
2019
|
|
|
|
Winemaking
and packaging materials
|
$690,114
|
$704,736
|
Work-in-process
(costs relating to
|
|
|
unprocessed
and/or unbottled wine products)
|
9,066,782
|
8,313,313
|
Finished
goods (bottled wine and related products)
|
7,931,077
|
8,057,031
|
|
|
|
Total
inventories
|
$17,687,973
|
$17,075,080
|
|
December
31,
|
December
31,
|
|
2020
|
2019
|
|
|
|
Construction
in progress
|
$6,553,803
|
$4,193,467
|
Land,
improvements and other buildings
|
11,787,334
|
11,764,811
|
Winery
buildings and hospitality center
|
17,694,466
|
16,319,704
|
Equipment
|
14,392,923
|
13,751,324
|
|
|
|
|
50,428,526
|
46,029,306
|
|
|
|
Less
accumulated depreciation
|
(18,941,670)
|
(17,381,005)
|
|
|
|
|
$31,486,856
|
$28,648,301
|
|
December
31,
|
|
|
2020
|
2019
|
|
|
|
Northwest
Farm Credit Services Loan #4
|
$1,240,453
|
$1,364,964
|
Northwest
Farm Credit Services Loan #5
|
4,743,819
|
5,046,122
|
Toyota
Credit Corporation
|
956
|
12,431
|
|
5,985,228
|
6,423,517
|
Debt
issuance costs
|
(145,731)
|
(158,978)
|
Current
portion of long-term debt
|
(450,040)
|
(438,378)
|
|
|
|
|
$5,389,457
|
$5,826,161
|
2021
|
$450,040
|
2022
|
472,415
|
2023
|
496,965
|
2024
|
522,793
|
2025
|
549,965
|
Thereafter
|
3,493,050
|
|
|
|
$5,985,228
|
|
Year
Ended December 31,
|
|
|
2020
|
2019
|
|
|
|
Current
tax expense:
|
|
|
Federal
|
$719,341
|
$130,248
|
State
|
367,819
|
63,496
|
|
|
|
|
1,087,160
|
193,744
|
|
|
|
Deferred
tax expense (benefit):
|
|
|
Federal
|
227,248
|
591,493
|
State
|
65,247
|
166,886
|
|
|
|
|
292,495
|
758,379
|
|
|
|
Total
|
$1,379,655
|
$952,123
|
|
Year
Ended December 31,
|
|
|
2020
|
2019
|
|
|
|
Federal
statutory rate
|
21.00%
|
21.00%
|
State
taxes, net of federal benefit
|
6.79%
|
5.93%
|
Permanent
differences
|
0.26%
|
0.47%
|
Tax
credits
|
0.00%
|
0.00%
|
Prior
year adjustments
|
0.76%
|
-0.01%
|
Changes
in tax rates and other
|
0.09%
|
0.11%
|
|
|
|
|
28.90%
|
27.50%
|
|
2020
|
2019
|
|
|
|
Deferred
gain on sale-leaseback
|
$-
|
$-
|
Various
Accruals and Deferred Timing Differences
|
145,195
|
61,319
|
Prepaids
|
(29,404)
|
(52,309)
|
Depreciation
|
(2,744,921)
|
(2,493,973)
|
Inventory
|
(621,969)
|
(473,643)
|
Net
noncurrent deferred tax liability
|
(3,251,099)
|
(2,958,606)
|
|
|
|
Valuation
allowance
|
-
|
-
|
Net
deferred tax liability
|
$(3,251,099)
|
$(2,958,606)
|
|
Twelve Months Ended
|
|
December 31, 2020
|
|
|
Lease Cost
|
|
Operating
Lease cost - Vineyards
|
$454,740
|
Operating
Lease cost - Other
|
139,133
|
Short-term
lease cost
|
33,492
|
Total
Lease Cost
|
$627,365
|
|
|
Other information
|
|
Cash
paid for amounts included in the measurement
|
|
of
lease liabilities,
|
|
Operating
cash flows from operating leases - Vineyard
|
431,702
|
Operating
cash flows from operating leases - Other
|
139,655
|
Weighted-average
remaining lease term - operating leases
|
16.55
|
Weighted-average
discount rate - operating leases
|
6.22%
|
|
|
|
Operating
|
Years Ended December 31,
|
Leases
|
2021
|
$578,438
|
2022
|
553,777
|
2023
|
534,954
|
2024
|
540,365
|
2025
|
472,372
|
Thereafter
|
5,489,815
|
Total
minimal lease payments
|
8,169,721
|
Less
present value adjustment
|
(3,167,691)
|
Operating
lease liabilities
|
5,002,030
|
Less
current lease liabilities
|
(277,686)
|
Lease
liabilities, net of current portion
|
$4,724,344
|
|
|
|
Twelve
Months Ended December 31,
|
|||||
|
Direct
Sales
|
Distributor
Sales
|
Total
|
|||
|
2020
|
2019
|
2020
|
2019
|
2020
|
2019
|
|
|
|
|
|
|
|
Sales,
net
|
$10,533,070
|
$9,463,481
|
$16,781,782
|
$15,285,782
|
$27,314,852
|
$24,749,263
|
Cost
of Sales
|
2,646,706
|
2,521,094
|
7,938,370
|
6,933,587
|
10,585,076
|
9,454,681
|
Gross
Margin
|
7,886,364
|
6,942,387
|
8,843,412
|
8,352,195
|
16,729,776
|
15,294,582
|
Selling
Expenses
|
5,180,431
|
4,659,543
|
1,713,370
|
2,201,091
|
6,893,801
|
6,860,634
|
Contribution
Margin
|
$2,705,933
|
$2,282,844
|
$7,130,042
|
$6,151,104
|
$9,835,975
|
$8,433,948
|
Percent
of Sales, net
|
38.6%
|
38.2%
|
61.4%
|
61.8%
|
100.0%
|
100.0%
|
|
|
|
|
|
|
Group
|
|
Term
|
Name
|
|
Position(s) with the Company
|
|
Age
|
|
Number
|
|
Ends
|
|
|
|
|
|
|
|
|
|
James W. Bernau (3)
|
|
Chairperson of the Board, CEO
|
|
67
|
|
I
|
|
2023
|
|
|
President and Director
|
|
|
|
|
|
|
Craig Smith (2)(3)(4)
|
|
Secretary and Director
|
|
74
|
|
II
|
|
2021
|
John Ferry
|
|
Chief Financial Officer
|
|
55
|
|
NA
|
|
NA
|
James L. Ellis (3)
|
|
Director
|
|
76
|
|
III
|
|
2022
|
Sean M. Cary (2)
|
|
Director
|
|
47
|
|
I
|
|
2023
|
Stan G. Turel (1)(2)(3)(4)
|
|
Director
|
|
72
|
|
II
|
|
2021
|
Leslie Copland (1)
|
|
Director
|
|
65
|
|
III
|
|
2022
|
|
|
|
|
|
|
|
|
|
(1) Member of the Compensation Committee
|
|
|
|
|
|
|
||
(2) Member of the Audit Committee
|
|
|
|
|
|
|
||
(3) Member of the Executive Committee
|
|
|
|
|
|
|
||
(4) Member of the Capital Development Committee
|
|
|
|
|
|
|
Summary
Compensation Table
|
|||||||||
|
|
|
|
|
|
|
Nonqualified
|
|
|
|
|
|
|
|
|
Non-equity
|
Deferred
|
All
|
|
Name,
|
|
|
|
Stock
|
Option
|
Incentive
Plan
|
Comp.
|
Other
|
|
Principal
Position
|
Year
|
Salary
|
Bonus
|
Awards
|
Awards
|
Compensation
|
Earnings
|
Comp.*
|
Total
|
|
|
|
|
|
|
|
|
|
|
Bernau,
James W.,
|
|
|
|
|
|
|
|
|
|
President,
Chief Executive
|
2020
|
$276,704
|
$276,704
|
$-
|
$-
|
$-
|
$-
|
$52,908
|
$606,316
|
President,
Chief Executive
|
2019
|
$271,812
|
$233,488
|
$-
|
$-
|
$-
|
$-
|
$108,906
|
$614,206
|
John
Ferry **
|
|
|
|
|
|
|
|
|
|
Chief
Financial Officer
|
2020
|
$145,000
|
$-
|
$-
|
$-
|
$15,000
|
$-
|
$1,750
|
$161,750
|
Chief
Financial Officer
|
2019
|
$35,000
|
$-
|
$-
|
$-
|
$-
|
$-
|
$495
|
$35,495
|
|
|
|
|
|
|
|
|
|
|
* All
other compensation includes Company payments for medical insurance,
value of lodging, Board of Director stipends, life insurance
payments
and Company 401(k) matching contributions.
|
|||||||||
|
|||||||||
**
Appointed as CFO September 16, 2019
|
|
|
|
|
|
Change
|
|
|
|
|
|
|
|
in
Pension
|
|
|
|
|
|
|
|
Value
and
|
|
|
|
|
|
|
|
Nonqualified
|
|
|
|
Fees
Earned
|
|
|
Non-equity
|
Deferred
|
|
|
|
or
|
Stock
|
Option
|
Incentive
Plan
|
Compensation
|
All
Other
|
|
Name
|
Paid in
Cash
|
Awards
|
Awards
|
Compensation
|
Earnings
|
Compensation
|
Total
|
|
|
|
|
|
|
|
|
James
L. Ellis
|
$9,177
|
-
|
-
|
-
|
-
|
$2,354
|
$11,531
|
Sean
M. Cary
|
3,150
|
-
|
-
|
-
|
-
|
-
|
3,150
|
Craig
Smith
|
3,050
|
-
|
-
|
-
|
-
|
-
|
3,050
|
Stan
G. Turel
|
3,250
|
-
|
-
|
-
|
-
|
-
|
3,250
|
Leslie
Copland
|
5,828
|
-
|
-
|
-
|
-
|
-
|
5,828
|
|
|
|
Percent
of
|
|
Number
of
|
|
Shares
|
|
Shares
Outstanding
|
|
Beneficially
|
|
Stock
|
|
Owned
(1)
|
|
|
|
|
James
W. Bernau, President/CEO, Chair of the Board
|
422,743
|
|
8.5%
|
|
|
|
|
John
Ferry, CFO
|
-
|
|
**
|
|
|
|
|
James
L. Ellis, Director
|
19,865
|
|
**
|
|
|
|
|
Sean
M. Cary, Director
|
5,200
|
|
**
|
|
|
|
|
Stan
G. Turel, Director
|
15,192
|
|
**
|
|
|
|
|
Craig
Smith, Director
|
1,500
|
|
**
|
|
|
|
|
Leslie
Copland, Director
|
-
|
|
**
|
|
|
|
|
Christopher
Riccardi
|
385,485
|
(2)
|
7.8%
|
100
Tall Pine Ln., Apt 2102, Naples, FL 34105
|
|
|
|
|
|
|
|
Carl
D. Thoma
|
336,189
|
(3)
|
6.8%
|
300
N. LaSalle St, Suite 4350. Chicago, IL 60654
|
|
|
|
|
|
|
|
All
Directors and Executive Officers as a group (7
persons)
|
464,500
|
|
9.4%
|
|
|
|
|
**
Less than one percent
|
|
|
|
|
Years
Ended December 31,
|
|
|
2020
|
2019
|
|
|
|
Audit
fees (1)
|
$198,200
|
$183,282
|
Tax
fees (2)
|
52,310
|
65,769
|
|
|
|
|
$250,510
|
$249,051
|
Exhibit Number
|
|
Description
|
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])
|
|
|
|
|
|
|
|
|
|
|
|
|
10.1
|
|
Employment
Agreement between Willamette Valley Vineyards, Inc. and James W.
Bernau dated August 3, 1988 (incorporated by reference from the
Company’s Regulation A Offering Statement on Form 1-A [File
No. 24S-2996])
|
|
|
|
|
|
|
10.3
|
|
Revolving
Note and Loan Agreement dated May 28, 1992 by and between Northwest
Farm Credit Services, Willamette Valley Vineyards, Inc. and James
W. and Cathy Bernau (incorporated
by reference from the Company’s Regulation A Offering
Statement on Form 1-A [File No. 24S-2996])
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
101
|
|
The
following financial information from the Corporation’s Annual
Report on Form 10-K for the year ended December 31, 2020, furnished
electronically herewith, and formatted in XBRL (Extensible Business
Reporting Language); (i) Consolidated Balance Sheets; (ii)
Consolidated Statements of Income; (iii) Consolidated Statements of
Shareholders’ Equity; (iv) Consolidated Statements of Cash
Flows; and (v) Notes to Consolidated Financial Statements, tagged
as blocks of text. (Filed herewith)
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Signature
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Title
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Date
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/s/ James W. Bernau
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Chairperson of the Board,
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March 15, 2021
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James W. Bernau
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President
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(Principal Executive Officer)
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/s/ John Ferry
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Chief Financial Officer
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March 15, 2021
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John Ferry
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(Principal Financial
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and Accounting Officer)
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/s/ James L. Ellis
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Director
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March 15, 2021
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James L. Ellis
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/s/ Craig Smith
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Director
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March 15, 2021
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Craig Smith
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/s/ Stan G. Turel
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Director
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March 15, 2021
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Stan G. Turel
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/s/ Sean M. Cary
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Director
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March 15, 2021
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Sean M. Cary
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/s/ Leslie Copland
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Director
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March 15, 2021
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Leslie Copland
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Document and Entity Information - USD ($) |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2020 |
Mar. 15, 2021 |
Jun. 30, 2020 |
|
Cover [Abstract] | |||
Entity Registrant Name | WILLAMETTE VALLEY VINEYARDS INC | ||
Entity Central Index Key | 0000838875 | ||
Document Type | 10-K | ||
Document Period End Date | Dec. 31, 2020 | ||
Amendment Flag | false | ||
Current Fiscal Year End Date | --12-31 | ||
Is Entity a Well-known Seasoned Issuer? | No | ||
Is Entity a Voluntary Filer? | No | ||
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 Interactive Data Current | Yes | ||
Entity Incorporation, State or Country Code | OR | ||
Entity File Number | 000-21522 | ||
Entity Public Float | $ 27,205,646 | ||
Entity Common Stock, Shares Outstanding | 4,964,529 | ||
Document Fiscal Period Focus | FY | ||
Document Fiscal Year Focus | 2020 |
BALANCE SHEETS (Parenthetical) - USD ($) |
Dec. 31, 2020 |
Dec. 31, 2019 |
---|---|---|
SHAREHOLDERS' EQUITY | ||
Preferred stock, par value | $ 0 | $ 0 |
Preferred stock, authorized shares | 10,000,000 | 10,000,000 |
Preferred stock, issued shares | 6,309,508 | 4,662,768 |
Preferred stock, outstanding shares | 6,309,508 | 4,662,768 |
Liquidation preference | $ 26,184,458 | $ 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 - USD ($) |
12 Months Ended | |
---|---|---|
Dec. 31, 2020 |
Dec. 31, 2019 |
|
Income Statement [Abstract] | ||
Sales, net | $ 27,314,852 | $ 24,749,263 |
Cost of sales | 10,585,076 | 9,454,681 |
Gross profit | 16,729,776 | 15,294,582 |
OPERATING EXPENSES: | ||
Sales and marketing | 7,458,139 | 7,449,088 |
General and administrative | 4,269,864 | 4,117,970 |
Total operating expenses | 11,728,003 | 11,567,058 |
Income from operations | 5,001,773 | 3,727,524 |
OTHER INCOME (EXPENSE) | ||
Interest income | 21,022 | 48,066 |
Interest expense | (414,061) | (440,999) |
Other income, net | 165,916 | 128,433 |
Income before income taxes | 4,774,650 | 3,463,024 |
Income tax provision | (1,379,654) | (952,123) |
Net income | 3,394,996 | 2,510,901 |
Preferred stock dividends | (1,116,378) | (1,026,063) |
Income applicable to common shareholders | $ 2,278,618 | $ 1,484,838 |
Earnings per common share after preferred dividends, basic and diluted | $ .46 | $ 0.30 |
Weighted-average number of common shares outstanding | 4,964,529 | 4,964,529 |
STATEMENTS OF SHAREHOLDERS' EQUITY - USD ($) |
Redeemable Preferred Stock |
Common Stock |
Retained Earnings |
Total |
---|---|---|---|---|
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 declared | (1,026,063) | (1,026,063) | ||
Net income | 2,510,901 | 2,510,901 | ||
Ending balance, shares at Dec. 31, 2019 | 4,662,768 | 4,964,529 | ||
Ending balance, amount at Dec. 31, 2019 | $ 18,319,102 | $ 8,512,489 | 22,213,515 | 49,045,106 |
Issuance of preferred stock, net, shares | 1,646,740 | |||
Issuance of preferred stock, net, amount | $ 7,498,203 | 7,498,203 | ||
Preferred stock dividends declared | (1,116,378) | (1,116,378) | ||
Net income | 3,394,996 | 3,394,996 | ||
Ending balance, shares at Dec. 31, 2020 | 6,309,508 | 4,964,529 | ||
Ending balance, amount at Dec. 31, 2020 | $ 25,817,305 | $ 8,512,489 | $ 24,492,133 | $ 58,821,927 |
1. SUMMARY OF OPERATIONS, BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES |
12 Months Ended |
---|---|
Dec. 31, 2020 | |
Accounting Policies [Abstract] | |
SUMMARY OF OPERATIONS, BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES | Organization and operations – Willamette Valley Vineyards, Inc. (the “Company”) owns and operates vineyards and a winery located in the state of Oregon, and produces and distributes premium, super premium, and ultra-premium wines, primarily Pinot Noir, Pinot Gris, Chardonnay, and Riesling.
The Company has direct-to-consumer sales and national sales to distributors. These sales channels offer comparable products to customers and utilize similar processes and share resources for production, selling and distribution. Direct-to-consumer sales generate a higher gross profit margin than national sales to distributors due to differentiated pricing between these segments.
Basis of presentation – The accompanying financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America, which require management to make certain estimates and assumptions. These estimates and assumptions affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities as of the date of the financial statements, and the reported amounts of revenue and expenses during the reporting period. The Company bases its estimates on historical experience and on various assumptions that are believed to be reasonable under the circumstances at the time. Actual results could differ from those estimates under different assumptions or conditions.
The COVID-19 pandemic and restrictions imposed by federal, state, and local governments in response to the outbreak have disrupted and will continue to disrupt the business. In the State of Oregon where the Company operates the Winery and most of the vineyards, individuals are being encouraged to practice social distancing, are restricted from gathering in groups and, in some areas, have previously been mandated to stay home except for essential activities. In response to the COVID-19 pandemic and government restrictions, the Company has at various times closed the tasting rooms and have launched curbside pick-ups and complimentary shipping specials with minimum purchase. The Company believes the ongoing restrictions and the sudden increase in unemployment caused by the closure of businesses in response to the COVID-19 pandemic may adversely affect sales revenues, which would adversely impact liquidity, financial condition, and results of operations. Even after any stay-at-home orders are loosened or lifted, the impact of lost wages due to COVID-19 related unemployment may dampen consumer spending for some time in the future.
The Company’s operations could be further disrupted if a significant number of employees are unable or unwilling to work, whether because of illness, quarantine, restrictions on travel or fear of contracting COVID-19, which could further materially adversely affect liquidity, financial position and results of operations. To support employees and protect the health and safety of employees and customers, the Company may offer enhanced health and welfare benefits, provide bonuses to employees, and purchase additional sanitation supplies and personal protective materials. These measures will likely increase operating costs and adversely affect our liquidity.
The COVID-19 pandemic may also adversely affect the ability of the Company’s grape suppliers to fulfill their obligations, which may negatively affect operations. If suppliers are unable to fulfill their obligation, the Company could face shortages of grapes, and operations and sales could be adversely impacted.
Financial instruments and concentrations of risk – The Company has the following financial instruments: cash and cash equivalents, accounts receivable, accounts payable, accrued liabilities, grapes payable and long-term debt.
Cash and cash equivalents are maintained at five financial institutions. Deposits held with these financial institutions may exceed the amount of insurance provided on such deposits. Generally, these deposits may be redeemed upon demand and are maintained with a financial institution of reputable credit and therefore bear minimal credit risk.
In 2020, sales to one distributor represented approximately 24.0% of total Company revenue. In 2019, sales to one distributor represented approximately 14.1% of total Company revenue.
Other comprehensive income – The nature of the Company’s business and related transactions do not give rise to other comprehensive income.
Cash and cash equivalents – Cash and cash equivalents include money market funds.
Accounts receivable – The Company performs ongoing credit evaluations of its customers and does not require collateral. A reserve is maintained for potential credit losses. The allowance for doubtful accounts is based on an assessment of the collectability of customer accounts. The Company regularly reviews the allowance by considering factors such as historical experience, credit quality, the age of the accounts receivable balances, and current economic conditions that may affect a customer’s ability to pay. The Company has credit risk associated with uncollateralized trade accounts receivable from all operations totaling $2,671,576 and $1,814,004 as of December 31, 2020 and 2019 inclusive of the allowance for doubtful accounts. The allowance for doubtful accounts is further discussed in Note 2.
Inventories – For Company produced wines, after a portion of the vineyard becomes commercially productive, the annual crop and production costs relating to such portion are recognized as work-in-process inventories. Such costs are accumulated with related direct and indirect harvest costs, wine processing and production costs, and are transferred to finished goods inventories when the wine is produced, bottled, and ready for sale.
The cost of finished goods is recognized as cost of sales when the wine product is sold. Inventories are stated at the lower of first-in, first-out (“FIFO”) cost or net realizable value by variety.
In accordance with general practices in the wine industry, wine inventories are generally included in current assets in the accompanying balance sheets, although a portion of such inventories may be aged for more than one year (Note 3).
Vineyard development costs – Vineyard development costs consist primarily of the costs of the vines and expenditures related to labor and materials to prepare the land and construct vine trellises. The costs are capitalized until the vineyard becomes commercially productive, at which time annual amortization is recognized using the straight-line method over the estimated economic useful life of the vineyard, which is estimated to be 30 years. Accumulated amortization of vineyard development costs aggregated $1,824,610 and $1,626,881 at December 31, 2020 and 2019, respectively.
Amortization of vineyard development costs are included in capitalized crop costs that in turn are included in inventory costs and ultimately become a component of cost of goods sold. For the years ending December 31, 2020 and 2019, approximately $243,760 and $169,452, respectively, was amortized into inventory costs.
Property and equipment – Property and equipment are stated at cost and are depreciated on the straight-line basis over their estimated useful lives. Land improvements are depreciated over 15 years. Winery buildings are depreciated over 30 years. Equipment is depreciated over 3 to 10 years, depending on the classification of the asset. Depreciation is discussed further in Note 4.
Expenditures for repairs and maintenance are charged to operating expense as incurred. Expenditures for additions and betterments are capitalized. When assets are sold or otherwise disposed of, the cost and related accumulated depreciation are removed from the accounts, and any resulting gain or loss is included in operations.
Review of long-lived assets for impairment - The Company evaluates long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset or asset group may not be recoverable. Long-lived assets consist primarily of property and equipment. Circumstances that might cause the Company to evaluate its long-lived assets for impairment could include a significant decline in the prices the Company or the industry can charge for its products, which could be caused by general economic or other factors, changes in laws or regulations that make it difficult or more costly for the Company to distribute its products to its markets at prices which generate adequate returns, natural disasters, significant decrease in demand for the Company’s products or significant increase in the costs to manufacture the Company’s products.
Recoverability of assets is measured by a comparison of the carrying amount of an asset group to future net undiscounted cash flows expected to be generated by the asset group. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets. The Company groups its long-lived assets with other assets and liabilities at the lowest level for which identifiable cash flows are largely independent of the cash flows of other assets and liabilities (or asset group). This would typically be at the winery level. The Company did not recognize any impairment charges associated with long-lived assets during the years ended December 31, 2020 and 2019.
Income taxes – Income taxes are recognized using enacted tax rates and are composed of taxes on financial accounting income that is adjusted for requirements of current tax law, and deferred taxes. Deferred taxes are estimated using the asset and liability approach whereby deferred income taxes are calculated for the expected future tax consequences of temporary differences between the book basis and tax basis of the Company’s assets and liabilities.
The Company had no unrecognized tax benefits as of December 31, 2020 or 2019. The Company recognizes interest assessed by taxing authorities as a component of tax expense. The Company recognizes any penalties assessed by taxing authorities as a component of tax expense. Interest and penalties for the years ended December 31, 2020 and 2019 were not material.
The Company files U.S. federal income tax returns with the Internal Revenue Service (“IRS”) as well as income tax returns in Oregon, California, South Carolina and Connecticut. The Company filed final returns in South Carolina and Connecticut in 2019 as no physical presence in those states. The company is subject to the new Oregon Corporate Activity Tax (OR CAT) beginning in 2020. The Company may be subject to examination by the IRS for tax years 2017 through 2020. Additionally, the Company may be subject to examinations by state taxing jurisdictions for tax years 2017 through 2020. The Company is not aware of any current examinations by the IRS or the state taxing authorities.
Revenue recognition – The Company recognizes revenue once its performance obligation to the customer is completed and control of the product or service is transferred to the customer. Revenue reflects the total amount the Company receives, or expects to receive, from the customer and includes shipping costs that are billed and included in the consideration. Excise taxes that are accrued and paid, as a result of transaction, are accounted for as an offset to sales in the net sales calculation. The Company’s contractual obligations to customers generally have a single point of obligation and are short term in nature.
The cost of price promotions and rebates are treated as reductions of revenue. No products are sold on consignment. Credit sales are recorded as trade accounts receivable and no collateral is required. Revenue from items sold through the Company’s retail locations is recognized at the time of sale. Net revenue reported herein is shown net of sales allowances and excise taxes. If the conditions for revenue recognition are not met, the Company defers the revenue until all conditions are met. As of December 31, 2020, and December 31, 2019, the Company has recorded deferred revenue in the amount of $131,782 and $125,713, respectively, which is included in unearned revenue on the balance sheet.
Distributor Sales Segment – Wholesale wine sales are through distributors and the Company recognizes revenue when the product is shipped, and title passes to the distributor. The Company’s standard terms are ‘FOB’ shipping point, with no customer acceptance provisions. The cost of price promotions and rebates are treated as reductions of revenue. No products are sold on consignment. Credit sales are recorded as trade accounts receivable and no collateral is required.
The Company has price incentive programs with its distributors to encourage product placement and depletions. Sales are reported net of incentive program expenses. Incentive program payments are made when completed incentive program payment requests are received from the customers. For the year ended December 31, 2020 and 2019, the Company recorded incentive program expenses of $1,757,631 and $1,075,764, respectively, as a reduction in sales on the Statement of Income. As of December 31, 2020, and 2019, the Company has recorded an incentive program liability in the amount of $157,044 and $64,952, respectively, which is included in accrued expenses on the balance sheet. Estimates are based on historical and projected experience for each type of program or customer and have historically been in line with actual costs incurred.
Direct Sales Segment – The Company sells wine directly to customers through its tasting rooms, web site and wine club. Additionally, the Company sells merchandise, food and hospitality related services through its tasting rooms.
Tasting room and web site sales are paid for and recognized as revenue at the point of sale. Hospitality sales, that are paid in advance of the event, are accrued as unearned revenue and are subsequently recognized as revenue in the period of the event. Wine club sales are made under an agreement with the customer which specifies the quantity and timing of the wine club shipment. Wine club charges are billed to the customer’s credit card, at the time of shipment, and revenue is then recognized.
The Company periodically sells bulk wine or grapes that either do not meet the Company’s quality standards or are in excess of production requirements. These sales are recognized when ownership transfers to the buyer which occurs at the point of shipment.
Cost of goods sold – Costs of goods sold include costs associated with grape growing, external grape costs, packaging materials, winemaking and production costs, vineyard and production administrative support and overhead costs, purchasing and receiving costs and warehousing costs.
Administrative support, purchasing, receiving and most other fixed overhead costs are expensed as selling, general and administrative expenses without regard to inventory units. Warehouse and winery production and facilities costs, are allocated to inventory units on a per gallon basis during the production of wine, prior to bottling the final product. No further costs are allocated to inventory units after bottling.
Selling, general and administrative expenses – Selling, general and administrative expenses consist primarily of non-manufacturing administrative and overhead costs, advertising and other marketing promotions. Advertising costs are expensed as incurred or the first time the advertising takes place. For the years ended December 31, 2020 and 2019, advertising costs incurred were approximately $247,049 and $210,563 respectively.
The Company provides an allowance to distributors for providing sample of products to potential customers. For the years ended December 31, 2020 and 2019, these costs, which are included in selling, general and administrative expenses, totaled approximately $86,605 and $151,553, respectively.
Shipping and handling costs – Amounts paid by customers to the Company for shipping and handling costs are included in the net revenue. Costs incurred for shipping and handling charges are included in selling, general and administrative expense. The Company’s gross margins may not be comparable to other companies in the same industry as other companies may include shipping and handling costs as a cost of goods sold.
Excise taxes – The Company pays alcohol excise taxes based on product sales to both the Oregon Liquor Control Commission and to the U.S. Department of the Treasury, Alcohol and Tobacco Tax and Trade Bureau. The Company is liable for the taxes upon the removal of product from the Company’s warehouse on a per gallon basis. The federal tax rate is affected by a small winery tax credit provision which declines based upon the number of gallons of wine production in a year rather than the quantity sold. The Company also pays taxes on the grape harvest on a per ton basis to the Oregon Liquor Control Commission for the Oregon Wine Advisory. For the years ended December 31, 2020 and 2019, excise taxes incurred were approximately $372,470 and $233,043 respectively.
Income per common share after preferred dividends – Income per share is computed based on the weighted-average number of common shares outstanding each year.
Recently issued accounting standards - Subsequent to the filing of the 2019 Report there were no accounting pronouncements issued by the Financial Accounting Standards Board (“FASB”) that would have a material effect on the Company’s audited financial statements. The following provides an update of accounting pronouncements applicable to the Company that are not yet adopted as of December 31,2020. No new accounting pronouncements were adopted during the year ended December 31, 2020.
Accounting Standard Update (“ASU”) 2019-12, Income Taxes (Topic 740), Update (“ASU”) 2019-12, Income Taxes (Topic 740). This standard simplifies the accounting for income taxes by removing certain Codification exceptions and others to be discussed. Date of adoption is January 1, 2021, and Management does not predict there to be a material impact.
Leases - 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.
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2. ACCOUNTS RECEIVABLE, NET |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Accounts Receivable, after Allowance for Credit Loss [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
ACCOUNTS RECEIVABLE, NET | The Company’s accounts receivable balance is net of an allowance for doubtful accounts of $10,000 and $10,000 at December 31, 2020 and 2019, respectively. Changes in the allowance for doubtful accounts are as follows:
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3. INVENTORIES |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Inventory Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
INVENTORIES |
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4. PROPERTY AND EQUIPMENT |
12 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2020 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Property, Plant and Equipment [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
PROPERTY AND EQUIPMENT |
Depreciation expense was $1,614,665 and $1,597,076 during the years ended December 31, 2020 and 2019, respectively.
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5. LINE OF CREDIT FACILITY |
12 Months Ended |
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Dec. 31, 2020 | |
Debt Disclosure [Abstract] | |
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 less 0.5%, is payable monthly, and is subject to annual renewal. In July of 2019, the Company renewed the credit agreement until July 31, 2021. At December 31, 2020 and 2019 there was no outstanding balance on this revolving line of credit.
The line of credit agreement includes various covenants, which among other things, requires the Company to maintain minimum amounts of tangible net worth, debt-to-equity, and debt service coverage as defined, and limits the level of acquisitions of property and equipment. As of December 31, 2020, the Company was in compliance with these financial covenants.
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6. NOTES PAYABLE |
12 Months Ended |
---|---|
Dec. 31, 2020 | |
Debt Disclosure [Abstract] | |
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 December 31, 2020, the Company had a balance of $1,384,581 due on this note.
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7. LONG TERM DEBT |
12 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2020 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Debt Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
LONG TERM DEBT | Long-term debt consists of:
The Company has two long term debt agreements with Farm Credit Services with an aggregate outstanding balance of $5,984,272 and $6,411,086 as of December 31, 2020 and 2019, respectively. The outstanding loans require monthly principal and interest payments of $62,067 for the life of the loans, at annual fixed interest rates of 4.75% and 5.21%, and with maturity dates of 2028 and 2032. The general purposes of these loans were to make capital improvements to the winery and vineyard facilities.
The loan agreements contain covenants, which require the Company to maintain certain financial ratios and balances. At December 31, 2020, the Company was in compliance with these covenants. In the event of future noncompliance with the Company’s debt covenants, FCS would have the right to declare the Company in default, and at FCS’ option without notice or demand, the unpaid principal balance of the loan, plus all accrued unpaid interest thereon and all other amounts due shall immediately become due and payable.
The Company had an outstanding loan with Toyota Credit Corporation which matured and was paid in full in February 2021, at zero interest, with an outstanding balance of $956 and $12,431 as of December 31, 2020 and 2019, respectively. The purpose of this loan was to purchase a vehicle.
Future minimum principal payments of long-term debt mature as follows for the years ending December 31:
The weighted-average interest rates on the aforementioned borrowings for the fiscal years ended December 31, 2020 and 2019 was 5.11% and 5.09% respectively.
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8. SHAREHOLDERS' EQUITY |
12 Months Ended |
---|---|
Dec. 31, 2020 | |
Equity [Abstract] | |
SHAREHOLDERS' EQUITY | The Company is authorized to issue 10,000,000 shares of its common stock. Each share of common stock is entitled to one vote. At its discretion, the Board of Directors may declare dividends on shares of common stock so long as the Company has paid or set aside funds for all cumulative dividends on its preferred stock. The Board does not anticipate paying dividends on its common stock in the foreseeable future.
The Company is authorized to issue 10,000,000 shares of redeemable preferred stock. Each share of the Company’s currently issued preferred stock is non-voting. The Company’s Series A Redeemable Preferred Stock includes an annual dividend of $0.22 per share and is payable annually. Additionally, the Series A Redeemable Preferred Stock contains a liquidation preference over the Company’s common stock and is subject to optional redemption after June 1, 2021 at the sole discretion of the Company’s Board of Directors. The liquidation preference is calculated at the original issue price of $4.15 per share plus all accrued but unpaid dividends. The optional redemption, if implemented, would be at the original issue price of $4.15 per share plus all accrued but unpaid dividends plus a redemption premium of 3% of the original issue price. In November 2020, the Company declared a dividend on its Series A Redeemable Preferred stock payable to shareholders of record at the close of business on December 7, 2020 and paid the dividend on December 31, 2020. The Company is current on its dividend obligations.
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9. STOCK INCENTIVE PLAN |
12 Months Ended |
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Dec. 31, 2020 | |
Equity [Abstract] | |
STOCK INCENTIVE PLAN | The Company had a stock incentive plan, originally created in 1992, most recently amended in 2001. No additional grants may be made under the plan. All stock options contained an exercise price that was equal to the fair market value of the Company’s stock on the date the options were granted. There were no stock options outstanding or exercisable at December 31, 2020 and 2019.
No stock compensation expense was recognized for the years ended December 31, 2020 and 2019. As of December 31, 2020, there was no unrecognized compensation expense related to stock options.
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10. INCOME TAXES |
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Income Tax Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
INCOME TAXES | The provision for income taxes consists of:
The effective income tax rate differs from the federal statutory rate as follows:
Permanent differences for the periods consist primarily of changes in tax treatment of meals and entertainment as well as political contributions. Changes in tax rate are described above.
Net deferred tax assets and (liabilities) at December 31 consist of:
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11. RELATED PARTY TRANSACTIONS |
12 Months Ended |
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Dec. 31, 2020 | |
Related Party Transactions [Abstract] | |
RELATED PARTY TRANSACTIONS | The Company provides living accommodations in a residence on the Company’s premises, at its convenience, for the Company’s CEO. The CEO provides security and lock-up services and is required to live on premises as a condition of his employment. Over the years the Company has recorded annual expenses less than $12,000, exclusive of depreciation, related to the housing provided for its CEO.
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12. COMMITMENTS AND CONTINGENCIES |
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Commitments and Contingencies Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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.
Operating leases – Vineyard - In December 1999, under a sale-leaseback agreement, the Company sold approximately 79 acres of the Tualatin Vineyards property with a net book value of approximately $1,000,000 for approximately $1,500,000 cash and entered into a 20-year operating lease agreement, with three five-year extension options, and contains an escalation provision of 2.5% per year. The Company extended the lease in January 2019 until January 2025. This property is referred to as the Peter Michael Vineyard and includes approximately 69 acres of producing vineyards.
In December 2004, under a sale-leaseback agreement, the Company sold approximately 75 acres of the Tualatin Vineyards property with a net book value of approximately $551,000 for approximately $727,000 cash and entered into a 15-year operating lease agreement, with three five-year extension options, for the vineyard portion of the property. The first five year extension has been exercised. The lease contains a formula-based escalation provision with a maximum increase of 4% every three years. This property is referred to as the Meadowview Vineyard, and includes approximately 49 acres of producing vineyards.
In February 2007, the Company entered into a lease agreement for 59 acres of vineyard land at Elton Vineyard. 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 0.5% 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 18 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 September 2018, the Company renewed an existing lease for three years, with two one-year renewal options, for its McMinnville tasting room. The lease contains an escalation provision with a cap at 3% per year.
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.
In February 2020, the Company entered into a lease for 5 years, with three five-year renewal options for a retail wine facility in Folsom, California, referred to as Willamette Wineworks. The lease contains an escalation provision tied to the CPI not to exceed 3% per annum with increases not allowed in any year being carried forward to following years.
The following tables provide lease cost and other lease information for the twelve months ended December 31, 2020:
As of December 31, 2020, maturities of lease liabilities were as follows:
Grape Purchases - The Company has entered into a long-term grape purchase agreement with one of its Willamette Valley wine grape growers. This contract amended and extended three separate contracts and allows the Company to purchase fruit through the 2023 harvest year. With this agreement the Company purchases an annually agreed upon quantity of fruit, at pre-determined prices, within strict quality standards and crop loads. The Company cannot calculate the minimum or maximum payment as such a calculation is dependent in large part on unknowns such as the quantity of fruit needed by the Company and the availability of grapes produced that meet the strict quality standards in any given year. If no grapes are produced that meet the contractual quality levels, the grapes may be refused, and no payment would be due. The Company had an outstanding balance due on grape purchase agreements of $1,307,165 and $792,594 as of December 31, 2020 and 2019, respectively.
Bernau Estate - In 2019, the Board of Directors approved the construction of a new tasting room at the Bernau Estate, expected to be mostly completed during the 2021 fiscal year. The total construction costs for the Bernau Estate Tasting Room is expected to be approximately $14.4 million, of which we expect will be funded through a combination of cash on hand as well as debt and/or equity financing. Construction on the Bernau Estate Tasting Room began in July, 2019 and as of December 31, 2020, we had spent approximately $5.3 million on the project from our cash reserves.
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13. EMPLOYEE BENEFIT PLAN |
12 Months Ended |
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Dec. 31, 2020 | |
Retirement Benefits [Abstract] | |
EMPLOYEE BENEFIT PLAN | In February 2006, the Company instituted a 401(k) profit sharing plan (the “Plan”) covering all eligible employees. Employees who participate may elect to make salary deferral contributions to the Plan up to 100% of the employees’ eligible payroll subject to annual Internal Revenue Code maximum limitations. The Company may make a discretionary contribution to the entire qualified employee pool, in accordance with the Plan. For the years ended December 31, 2020 and 2019 there were $138,588 and $129,017 contributions made by the Company to the 401(k) plan, respectively.
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14. SALE OF PREFERRED STOCK |
12 Months Ended |
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Dec. 31, 2020 | |
Equity [Abstract] | |
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. 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 shelf 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 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 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.
On January 24, 2020, the Company filed a shelf 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. The maximum aggregate offering amount of securities sold pursuant to the January 2020 Form S-3 is not to exceed $20,000,000. On June 10, 2020, the Company filed with the SEC a Prospectus Supplement to the January 2020 Form S-3, pursuant to which the Company proposed to offer and sell, on a delayed or continuous basis, up to 1,917,525 additional shares of Series A Redeemable Preferred Stock having proceeds not to exceed $9,300,000. This stock was established to be sold in four offering periods beginning with an offering price of $4.85 per share and concluding at $5.15 per share. Proceeds from the sale of preferred stock for 2020, were received by the Company and included as unrestricted cash. As of December 31, 2020, the Company concluded $8,008,839 in stock sales, net of acquisition costs, under this agreement and recorded $7,498,203 as Preferred Stock Issued and $510,636 as a current liability, “Investor deposits for preferred stock”. Proceeds received will convert from a liability to equity when preferred stock is issued to investors.
Dividends accrued but not paid will be added to the liquidation preference of the stock until the dividend is declared and paid. At any time after June 1, 2021, the Company has the option, but not the obligation, to redeem all of the outstanding preferred stock in an amount equal to the original issue price plus accrued but unpaid dividends and a redemption premium equal to 3% of the original issue price.
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15. SEGMENT REPORTING |
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Segment Reporting [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
SEGMENT REPORTING | The Company has identified two operating segments, Direct Sales and Distributor Sales, based upon their different distribution channels, margins and selling strategies. Direct Sales include retail sales in the tasting room and remote sites, wine club sales, internet sales, on-site events, kitchen and catering sales and other sales made directly to the consumer without the use of an intermediary, including sales of bulk wine or grapes. Distributor Sales include all sales through a third party where prices are given at a wholesale rate.
The two segments reflect how the Company’s operations are evaluated by senior management and the structure of its internal financial reporting. The Company evaluates performance based on the gross profit of the respective business segments. Selling expenses that can be directly attributable to the segment, including depreciation of segment specific assets, are included, however, centralized selling expenses and general and administrative expenses are not allocated between operating segments. Therefore, net income 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 twelve-month periods ending December 31, 2020 and 2019. Sales figures are net of related excise taxes.
Direct sales include $103,958 and $156,768 of bulk wine and grape sales in the years ended December 31, 2020 and 2019, respectively.
Net direct-to-consumer sales, including bulk wine, miscellaneous sales, and grape sales, represented approximately 38.6% and 38.2% of total net revenue for 2020 and 2019, respectively.
Net sales through distributors represented approximately 61.4% and 61.8% of total net revenue for 2020 and 2019, respectively.
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16. SUBSEQUENT EVENTS |
12 Months Ended |
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Dec. 31, 2020 | |
Subsequent Events [Abstract] | |
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. The Company has not identified any material subsequent events.
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1. SUMMARY OF OPERATIONS, BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES (Policies) |
12 Months Ended |
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Dec. 31, 2020 | |
Accounting Policies [Abstract] | |
Organization and operations | Organization and operations – Willamette Valley Vineyards, Inc. (the “Company”) owns and operates vineyards and a winery located in the state of Oregon, and produces and distributes premium, super premium, and ultra-premium wines, primarily Pinot Noir, Pinot Gris, Chardonnay, and Riesling.
The Company has direct-to-consumer sales and national sales to distributors. These sales channels offer comparable products to customers and utilize similar processes and share resources for production, selling and distribution. Direct-to-consumer sales generate a higher gross profit margin than national sales to distributors due to differentiated pricing between these segments.
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Basis of presentation | Basis of presentation – The accompanying financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America, which require management to make certain estimates and assumptions. These estimates and assumptions affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities as of the date of the financial statements, and the reported amounts of revenue and expenses during the reporting period. The Company bases its estimates on historical experience and on various assumptions that are believed to be reasonable under the circumstances at the time. Actual results could differ from those estimates under different assumptions or conditions.
The COVID-19 pandemic and restrictions imposed by federal, state, and local governments in response to the outbreak have disrupted and will continue to disrupt the business. In the State of Oregon where the Company operates the Winery and most of the vineyards, individuals are being encouraged to practice social distancing, are restricted from gathering in groups and, in some areas, have previously been mandated to stay home except for essential activities. In response to the COVID-19 pandemic and government restrictions, the Company has at various times closed the tasting rooms and have launched curbside pick-ups and complimentary shipping specials with minimum purchase. The Company believes the ongoing restrictions and the sudden increase in unemployment caused by the closure of businesses in response to the COVID-19 pandemic may adversely affect sales revenues, which would adversely impact liquidity, financial condition, and results of operations. Even after any stay-at-home orders are loosened or lifted, the impact of lost wages due to COVID-19 related unemployment may dampen consumer spending for some time in the future.
The Company’s operations could be further disrupted if a significant number of employees are unable or unwilling to work, whether because of illness, quarantine, restrictions on travel or fear of contracting COVID-19, which could further materially adversely affect liquidity, financial position and results of operations. To support employees and protect the health and safety of employees and customers, the Company may offer enhanced health and welfare benefits, provide bonuses to employees, and purchase additional sanitation supplies and personal protective materials. These measures will likely increase operating costs and adversely affect our liquidity.
The COVID-19 pandemic may also adversely affect the ability of the Company’s grape suppliers to fulfill their obligations, which may negatively affect operations. If suppliers are unable to fulfill their obligation, the Company could face shortages of grapes, and operations and sales could be adversely impacted.
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Financial instruments and concentrations of risk | Financial instruments and concentrations of risk – The Company has the following financial instruments: cash and cash equivalents, accounts receivable, accounts payable, accrued liabilities, grapes payable and long-term debt.
Cash and cash equivalents are maintained at five financial institutions. Deposits held with these financial institutions may exceed the amount of insurance provided on such deposits. Generally, these deposits may be redeemed upon demand and are maintained with a financial institution of reputable credit and therefore bear minimal credit risk.
In 2020, sales to one distributor represented approximately 24.0% of total Company revenue. In 2019, sales to one distributor represented approximately 14.1% of total Company revenue.
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Other comprehensive income | Other comprehensive income – The nature of the Company’s business and related transactions do not give rise to other comprehensive income.
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Cash and cash equivalents | Cash and cash equivalents – Cash and cash equivalents include money market funds.
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Accounts receivable | Accounts receivable – The Company performs ongoing credit evaluations of its customers and does not require collateral. A reserve is maintained for potential credit losses. The allowance for doubtful accounts is based on an assessment of the collectability of customer accounts. The Company regularly reviews the allowance by considering factors such as historical experience, credit quality, the age of the accounts receivable balances, and current economic conditions that may affect a customer’s ability to pay. The Company has credit risk associated with uncollateralized trade accounts receivable from all operations totaling $2,671,576 and $1,814,004 as of December 31, 2020 and 2019 inclusive of the allowance for doubtful accounts. The allowance for doubtful accounts is further discussed in Note 2.
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Inventories | Inventories – For Company produced wines, after a portion of the vineyard becomes commercially productive, the annual crop and production costs relating to such portion are recognized as work-in-process inventories. Such costs are accumulated with related direct and indirect harvest costs, wine processing and production costs, and are transferred to finished goods inventories when the wine is produced, bottled, and ready for sale.
The cost of finished goods is recognized as cost of sales when the wine product is sold. Inventories are stated at the lower of first-in, first-out (“FIFO”) cost or net realizable value by variety.
In accordance with general practices in the wine industry, wine inventories are generally included in current assets in the accompanying balance sheets, although a portion of such inventories may be aged for more than one year (Note 3).
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Vineyard development costs | Vineyard development costs – Vineyard development costs consist primarily of the costs of the vines and expenditures related to labor and materials to prepare the land and construct vine trellises. The costs are capitalized until the vineyard becomes commercially productive, at which time annual amortization is recognized using the straight-line method over the estimated economic useful life of the vineyard, which is estimated to be 30 years. Accumulated amortization of vineyard development costs aggregated $1,824,610 and $1,626,881 at December 31, 2020 and 2019, respectively.
Amortization of vineyard development costs are included in capitalized crop costs that in turn are included in inventory costs and ultimately become a component of cost of goods sold. For the years ending December 31, 2020 and 2019, approximately $243,760 and $169,452, respectively, was amortized into inventory costs.
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Property and equipment | Property and equipment – Property and equipment are stated at cost and are depreciated on the straight-line basis over their estimated useful lives. Land improvements are depreciated over 15 years. Winery buildings are depreciated over 30 years. Equipment is depreciated over 3 to 10 years, depending on the classification of the asset. Depreciation is discussed further in Note 4.
Expenditures for repairs and maintenance are charged to operating expense as incurred. Expenditures for additions and betterments are capitalized. When assets are sold or otherwise disposed of, the cost and related accumulated depreciation are removed from the accounts, and any resulting gain or loss is included in operations.
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Review of long-lived assets for impairment | Review of long-lived assets for impairment - The Company evaluates long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset or asset group may not be recoverable. Long-lived assets consist primarily of property and equipment. Circumstances that might cause the Company to evaluate its long-lived assets for impairment could include a significant decline in the prices the Company or the industry can charge for its products, which could be caused by general economic or other factors, changes in laws or regulations that make it difficult or more costly for the Company to distribute its products to its markets at prices which generate adequate returns, natural disasters, significant decrease in demand for the Company’s products or significant increase in the costs to manufacture the Company’s products.
Recoverability of assets is measured by a comparison of the carrying amount of an asset group to future net undiscounted cash flows expected to be generated by the asset group. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets. The Company groups its long-lived assets with other assets and liabilities at the lowest level for which identifiable cash flows are largely independent of the cash flows of other assets and liabilities (or asset group). This would typically be at the winery level. The Company did not recognize any impairment charges associated with long-lived assets during the years ended December 31, 2020 and 2019.
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Income taxes | Income taxes – Income taxes are recognized using enacted tax rates and are composed of taxes on financial accounting income that is adjusted for requirements of current tax law, and deferred taxes. Deferred taxes are estimated using the asset and liability approach whereby deferred income taxes are calculated for the expected future tax consequences of temporary differences between the book basis and tax basis of the Company’s assets and liabilities.
The Company had no unrecognized tax benefits as of December 31, 2020 or 2019. The Company recognizes interest assessed by taxing authorities as a component of tax expense. The Company recognizes any penalties assessed by taxing authorities as a component of tax expense. Interest and penalties for the years ended December 31, 2020 and 2019 were not material.
The Company files U.S. federal income tax returns with the Internal Revenue Service (“IRS”) as well as income tax returns in Oregon, California, South Carolina and Connecticut. The Company filed final returns in South Carolina and Connecticut in 2019 as no physical presence in those states. The company is subject to the new Oregon Corporate Activity Tax (OR CAT) beginning in 2020. The Company may be subject to examination by the IRS for tax years 2017 through 2020. Additionally, the Company may be subject to examinations by state taxing jurisdictions for tax years 2017 through 2020. The Company is not aware of any current examinations by the IRS or the state taxing authorities.
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Revenue recognition | Revenue recognition – The Company recognizes revenue once its performance obligation to the customer is completed and control of the product or service is transferred to the customer. Revenue reflects the total amount the Company receives, or expects to receive, from the customer and includes shipping costs that are billed and included in the consideration. Excise taxes that are accrued and paid, as a result of transaction, are accounted for as an offset to sales in the net sales calculation. The Company’s contractual obligations to customers generally have a single point of obligation and are short term in nature.
The cost of price promotions and rebates are treated as reductions of revenue. No products are sold on consignment. Credit sales are recorded as trade accounts receivable and no collateral is required. Revenue from items sold through the Company’s retail locations is recognized at the time of sale. Net revenue reported herein is shown net of sales allowances and excise taxes. If the conditions for revenue recognition are not met, the Company defers the revenue until all conditions are met. As of December 31, 2020, and December 31, 2019, the Company has recorded deferred revenue in the amount of $131,782 and $125,713, respectively, which is included in unearned revenue on the balance sheet.
Distributor Sales Segment – Wholesale wine sales are through distributors and the Company recognizes revenue when the product is shipped, and title passes to the distributor. The Company’s standard terms are ‘FOB’ shipping point, with no customer acceptance provisions. The cost of price promotions and rebates are treated as reductions of revenue. No products are sold on consignment. Credit sales are recorded as trade accounts receivable and no collateral is required.
The Company has price incentive programs with its distributors to encourage product placement and depletions. Sales are reported net of incentive program expenses. Incentive program payments are made when completed incentive program payment requests are received from the customers. For the year ended December 31, 2020 and 2019, the Company recorded incentive program expenses of $1,757,631 and $1,075,764, respectively, as a reduction in sales on the Statement of Income. As of December 31, 2020, and 2019, the Company has recorded an incentive program liability in the amount of $157,044 and $64,952, respectively, which is included in accrued expenses on the balance sheet. Estimates are based on historical and projected experience for each type of program or customer and have historically been in line with actual costs incurred.
Direct Sales Segment – The Company sells wine directly to customers through its tasting rooms, web site and wine club. Additionally, the Company sells merchandise, food and hospitality related services through its tasting rooms.
Tasting room and web site sales are paid for and recognized as revenue at the point of sale. Hospitality sales, that are paid in advance of the event, are accrued as unearned revenue and are subsequently recognized as revenue in the period of the event. Wine club sales are made under an agreement with the customer which specifies the quantity and timing of the wine club shipment. Wine club charges are billed to the customer’s credit card, at the time of shipment, and revenue is then recognized.
The Company periodically sells bulk wine or grapes that either do not meet the Company’s quality standards or are in excess of production requirements. These sales are recognized when ownership transfers to the buyer which occurs at the point of shipment.
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Cost of goods sold | Cost of goods sold – Costs of goods sold include costs associated with grape growing, external grape costs, packaging materials, winemaking and production costs, vineyard and production administrative support and overhead costs, purchasing and receiving costs and warehousing costs.
Administrative support, purchasing, receiving and most other fixed overhead costs are expensed as selling, general and administrative expenses without regard to inventory units. Warehouse and winery production and facilities costs, are allocated to inventory units on a per gallon basis during the production of wine, prior to bottling the final product. No further costs are allocated to inventory units after bottling.
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Selling, general and administrative expenses | Selling, general and administrative expenses – Selling, general and administrative expenses consist primarily of non-manufacturing administrative and overhead costs, advertising and other marketing promotions. Advertising costs are expensed as incurred or the first time the advertising takes place. For the years ended December 31, 2020 and 2019, advertising costs incurred were approximately $247,049 and $210,563 respectively.
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Shipping and handling costs | Shipping and handling costs – Amounts paid by customers to the Company for shipping and handling costs are included in the net revenue. Costs incurred for shipping and handling charges are included in selling, general and administrative expense. The Company’s gross margins may not be comparable to other companies in the same industry as other companies may include shipping and handling costs as a cost of goods sold.
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Excise taxes | Excise taxes – The Company pays alcohol excise taxes based on product sales to both the Oregon Liquor Control Commission and to the U.S. Department of the Treasury, Alcohol and Tobacco Tax and Trade Bureau. The Company is liable for the taxes upon the removal of product from the Company’s warehouse on a per gallon basis. The federal tax rate is affected by a small winery tax credit provision which declines based upon the number of gallons of wine production in a year rather than the quantity sold. The Company also pays taxes on the grape harvest on a per ton basis to the Oregon Liquor Control Commission for the Oregon Wine Advisory. For the years ended December 31, 2020 and 2019, excise taxes incurred were approximately $372,470 and $233,043 respectively.
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Income per common share after preferred dividends | Income per common share after preferred dividends – Income per share is computed based on the weighted-average number of common shares outstanding each year.
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Recently issued accounting standards | Recently issued accounting standards - Subsequent to the filing of the 2019 Report there were no accounting pronouncements issued by the Financial Accounting Standards Board (“FASB”) that would have a material effect on the Company’s audited financial statements. The following provides an update of accounting pronouncements applicable to the Company that are not yet adopted as of December 31,2020. No new accounting pronouncements were adopted during the year ended December 31, 2020.
Accounting Standard Update (“ASU”) 2019-12, Income Taxes (Topic 740), Update (“ASU”) 2019-12, Income Taxes (Topic 740). This standard simplifies the accounting for income taxes by removing certain Codification exceptions and others to be discussed. Date of adoption is January 1, 2021, and Management does not predict there to be a material impact.
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Leases | Leases - 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.
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2. ACCOUNTS RECEIVABLE, NET (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Accounts Receivable, after Allowance for Credit Loss [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Changes in the allowance for doubtful accounts |
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3. INVENTORIES (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Inventory Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Inventories |
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4. PROPERTY AND EQUIPMENT (Tables) |
12 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2020 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Property, Plant and Equipment [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Property and equipment |
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7. LONG TERM DEBT (Tables) |
12 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2020 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Debt Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Long-term debt |
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Future minimum principal payments of long-term debt mature |
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10. INCOME TAXES (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Income Tax Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Provision for income taxes |
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Effective income tax rate differs from the federal statutory rate |
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Deferred tax assets and (liabilities) |
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12. COMMITMENTS AND CONTINGENCIES (Tables) |
12 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2020 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Commitments and Contingencies Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Lease cost and other lease information |
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Maturities of lease liabilities |
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15. SEGMENT REPORTING (Tables) |
12 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2020 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Segment Reporting [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Segment reporting |
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1. SUMMARY OF OPERATIONS, BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES (Details Narrative) - USD ($) |
12 Months Ended | |
---|---|---|
Dec. 31, 2020 |
Dec. 31, 2019 |
|
Concentration risk | 100.00% | 100.00% |
Accounts receivable, net | $ 2,671,576 | $ 1,814,004 |
Accumulated amortization of vineyard development costs | 1,824,610 | 1,626,881 |
Amortization of capitalized crop costs | 243,760 | 169,542 |
Deferred revenue | 131,782 | 125,713 |
Incentive program expenses | 1,757,631 | 1,075,764 |
Incentive program liabilities | 157,044 | 64,952 |
Advertising costs | 247,049 | 210,563 |
Allowance to distributors | 86,605 | 151,553 |
Excise taxes incurred | $ 372,470 | $ 233,043 |
One Distributor | Revenue | ||
Concentration risk | 24.00% | 14.10% |
2. ACCOUNTS RECEIVABLE (Details) - USD ($) |
12 Months Ended | |
---|---|---|
Dec. 31, 2020 |
Dec. 31, 2019 |
|
Accounts Receivable, after Allowance for Credit Loss [Abstract] | ||
Allowance for doubtful accounts, beginning | $ 10,000 | $ 10,000 |
Charged to costs and expenses | 0 | 0 |
Write-offs, net of recoveries | 0 | 0 |
Allowance for doubtful accounts, ending | $ 10,000 | $ 10,000 |
2. ACCOUNTS RECEIVABLE, NET (Details Narrative) - USD ($) |
Dec. 31, 2020 |
Dec. 31, 2019 |
Dec. 31, 2018 |
---|---|---|---|
Accounts Receivable, after Allowance for Credit Loss [Abstract] | |||
Allowance for doubtful accounts | $ 10,000 | $ 10,000 | $ 10,000 |
3. INVENTORIES (Details) - USD ($) |
Dec. 31, 2020 |
Dec. 31, 2019 |
---|---|---|
Inventory Disclosure [Abstract] | ||
Winemaking and packaging materials | $ 690,114 | $ 704,736 |
Work-in-progress (costs relating to unprocessed and/or unbottled wine products) | 9,066,782 | 8,313,313 |
Finished goods (bottled wine and related products) | 7,931,077 | 8,057,031 |
Total inventories | $ 17,687,973 | $ 17,075,080 |
4. PROPERTY AND EQUIPMENT (Details) - USD ($) |
Dec. 31, 2020 |
Dec. 31, 2019 |
---|---|---|
Property, Plant and Equipment [Abstract] | ||
Construction in progress | $ 6,553,803 | $ 4,193,467 |
Land, improvements and other buildings | 11,787,334 | 11,764,811 |
Winery tasting room building and hospitality center | 17,694,466 | 16,319,704 |
Equipment | 14,392,923 | 13,751,324 |
Property and equipment, gross | 50,428,526 | 46,029,306 |
Accumulated depreciation | (18,941,670) | (17,381,005) |
Property and equipment, net | $ 31,486,856 | $ 28,648,301 |
4. PROPERTY AND EQUIPMENT (Details Narrative) - USD ($) |
12 Months Ended | |
---|---|---|
Dec. 31, 2020 |
Dec. 31, 2019 |
|
Property, Plant and Equipment [Abstract] | ||
Depreciation expense | $ 1,614,665 | $ 1,597,076 |
5. LINE OF CREDIT FACILITY (Details Narrative) - USD ($) |
Dec. 31, 2020 |
Dec. 31, 2019 |
---|---|---|
Debt Disclosure [Abstract] | ||
Interest rate | 0.50% | 0.50% |
Borrowings on revolving line of credit | $ 0 | $ 0 |
6. NOTES PAYABLE (Details Narrative) - USD ($) |
Dec. 31, 2020 |
Dec. 31, 2019 |
---|---|---|
Debt Disclosure [Abstract] | ||
Note payable | $ 1,384,581 | $ 1,468,473 |
7. LONG TERM DEBT (Details) - USD ($) |
Dec. 31, 2020 |
Dec. 31, 2019 |
---|---|---|
Long term debt | $ 5,985,228 | $ 6,423,517 |
Debt issuance costs | (145,731) | (158,978) |
Current portion | (450,040) | (438,378) |
Long term debt, net | 5,389,457 | 5,826,161 |
Northwest Farm Credit Services Loan | ||
Long term debt | 1,240,453 | 1,364,964 |
Northwest Farm Credit Services Loan | ||
Long term debt | 4,743,819 | 5,046,122 |
Toyota Credit Corporation | ||
Long term debt | $ 956 | $ 12,431 |
7. LONG TERM DEBT (Details 1) |
Dec. 31, 2020
USD ($)
|
---|---|
Debt Disclosure [Abstract] | |
2021 | $ 450,040 |
2022 | 472,415 |
2023 | 496,965 |
2024 | 522,793 |
2025 | 549,965 |
Thereafter | 3,493,050 |
Future minimum principal payments of long-term debt total | $ 5,985,228 |
7. LONG TERM DEBT (Details Narrative) - USD ($) |
Dec. 31, 2020 |
Dec. 31, 2019 |
---|---|---|
Aggregate outstanding balance | $ 5,985,228 | |
Weighted-average interest rates | 5.11% | 5.09% |
Farm Credit Services | ||
Aggregate outstanding balance | $ 5,984,272 | $ 6,411,086 |
Toyota Credit Corporation | ||
Aggregate outstanding balance | $ 956 | $ 12,431 |
9. STOCK INCENTIVE PLAN (Details Narrative) - USD ($) |
12 Months Ended | |
---|---|---|
Dec. 31, 2020 |
Dec. 31, 2019 |
|
Equity [Abstract] | ||
Stock options outstanding | 0 | 0 |
Stock options exercisable | 0 | 0 |
Stock compensation expense | $ 0 | $ 0 |
Unrecognized compensation expense | $ 0 |
10. INCOME TAXES (Details) - USD ($) |
12 Months Ended | |
---|---|---|
Dec. 31, 2020 |
Dec. 31, 2019 |
|
Current tax expense: | ||
Federal | $ 719,341 | $ 130,248 |
State | 367,819 | 63,496 |
Total current tax expense | 1,087,160 | 193,744 |
Deferred tax expense (benefit): | ||
Federal | 227,248 | 591,493 |
State | 65,247 | 166,886 |
Total deferred tax expense | 292,495 | 758,379 |
Total | $ 1,379,654 | $ 952,123 |
10. INCOME TAXES (Details 1) |
12 Months Ended | |
---|---|---|
Dec. 31, 2020 |
Dec. 31, 2019 |
|
Income Tax Disclosure [Abstract] | ||
Federal statutory rate | 21.00% | 21.00% |
State taxes, net of federal benefit | 6.79% | 5.93% |
Permanent differences | 0.26% | 0.47% |
Tax credits | (0.00%) | (0.00%) |
Prior period adjustment | 0.76% | (0.01%) |
Changes in tax rates and other | 0.09% | 0.11% |
Total | 28.90% | 27.50% |
10. INCOME TAXES (Details 2) - USD ($) |
Dec. 31, 2020 |
Dec. 31, 2019 |
---|---|---|
Income Tax Disclosure [Abstract] | ||
Deferred gain on sale-leaseback | $ 0 | $ 0 |
Various accruals and deferred timing differences | 145,195 | 61,319 |
Prepaids | (29,404) | (52,309) |
Depreciation | (2,744,921) | (2,493,973) |
Inventory | (621,969) | (473,643) |
Net noncurrent deferred tax liability | (3,251,099) | (2,958,606) |
Valuation allowance | 0 | 0 |
Net deferred tax liability | $ (3,251,099) | $ (2,958,606) |
12. COMMITMENTS AND CONTINGENCIES (Details) |
12 Months Ended |
---|---|
Dec. 31, 2020
USD ($)
| |
Lease Cost | |
Operating lease cost - vineyards | $ 454,740 |
Operating lease cost - other | 139,133 |
Short-term lease cost | 33,492 |
Total lease cost | 627,365 |
Other Information | |
Operating cash flows from operating leases - vineyard | 431,702 |
Operating cash flows from operating leases - other | $ 139,655 |
Weighted-average remaining lease term - operating leases | 16 years 6 months 18 days |
Weighted-average discount rate - operating leases | 6.22% |
12. COMMITMENTS AND CONTINGENCIES (Details 1) - USD ($) |
Dec. 31, 2020 |
Dec. 31, 2019 |
---|---|---|
Commitments and Contingencies Disclosure [Abstract] | ||
2021 | $ 578,438 | |
2022 | 553,777 | |
2023 | 534,954 | |
2024 | 540,365 | |
2025 | 472,372 | |
Thereafter | 5,489,815 | |
Total minimal lease payments | 8,169,721 | |
Less present value adjustment | (3,167,691) | |
Operating lease liabilities | 5,002,030 | |
Less current lease liabilities | (277,686) | $ (203,482) |
Lease liabilities net of current portion | $ 4,724,344 | $ 4,714,413 |
12. COMMITMENTS AND CONTINGENCIES (Details Narrative) - USD ($) |
Dec. 31, 2020 |
Dec. 31, 2019 |
---|---|---|
Commitments and Contingencies Disclosure [Abstract] | ||
Grape purchase agreements | $ 1,307,165 | $ 792,594 |
13. EMPLOYEE BENEFIT PLAN (Details Narrative) - USD ($) |
12 Months Ended | |
---|---|---|
Dec. 31, 2020 |
Dec. 31, 2019 |
|
Retirement Benefits [Abstract] | ||
Employer contribution | $ 138,588 | $ 129,017 |
15. SEGMENT REPORTING (Details) - USD ($) |
12 Months Ended | |
---|---|---|
Dec. 31, 2020 |
Dec. 31, 2019 |
|
Sales, net | $ 27,314,852 | $ 24,749,263 |
Cost of sales | 10,585,076 | 9,454,681 |
Gross margin | 16,729,776 | 15,294,582 |
Selling expenses | 6,893,801 | 6,860,634 |
Contribution margin | $ 9,835,975 | $ 8,433,948 |
Percentage of sales | 100.00% | 100.00% |
Direct Sales | ||
Sales, net | $ 10,533,070 | $ 9,463,481 |
Cost of sales | 2,646,706 | 2,521,094 |
Gross margin | 7,886,364 | 6,942,387 |
Selling expenses | 5,180,431 | 4,659,543 |
Contribution margin | $ 2,705,933 | $ 2,282,844 |
Percentage of sales | 38.60% | 38.20% |
Distributor Sales | ||
Sales, net | $ 16,781,782 | $ 15,285,782 |
Cost of sales | 7,938,370 | 6,933,587 |
Gross margin | 8,843,412 | 8,352,195 |
Selling expenses | 1,713,370 | 2,201,091 |
Contribution margin | $ 7,130,042 | $ 6,151,104 |
Percentage of sales | 61.40% | 61.80% |
15. SEGMENT REPORTING (Details Narrative) - USD ($) |
12 Months Ended | |
---|---|---|
Dec. 31, 2020 |
Dec. 31, 2019 |
|
Bulk wine and grape sales inculded in direct sales | $ 103,958 | $ 156,768 |
Percentage of sales | 100.00% | 100.00% |
Direct-To-Consumer | Revenue | ||
Percentage of sales | 38.60% | 38.20% |
Distributors | Revenue | ||
Percentage of sales | 61.40% | 61.80% |
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