Willamette Valley Vineyards (WVVI) 10-Q 13 May 20 2020 Q1 Quarterly report Financial data

Document and Entity Information

Document and Entity Information - shares	3 Months Ended
	Mar. 31, 2020	May 13, 2020
Document And Entity Information
Entity Registrant Name	WILLAMETTE VALLEY VINEYARDS INC
Entity Central Index Key	0000838875
Document Type	10-Q
Document Period End Date	Mar. 31, 2020
Amendment Flag	false
Current Fiscal Year End Date	--12-31
Is Entity's Reporting Status Current?	Yes
Entity Filer Category	Non-accelerated Filer
Entity Emerging Growth Company	false
Entity Small Business	true
Entity Shell Company	false
Entity Interactive Data Current	Yes
Entity Incorporation, State or Country Code	OR
Entity File Number	000-21522
Entity Common Stock, Shares Outstanding		4,964,529
Document Fiscal Period Focus	Q1
Document Fiscal Year Focus	2020

BALANCE SHEETS (Unaudited)

BALANCE SHEETS (Unaudited) - USD ($)	Mar. 31, 2020	Dec. 31, 2019
CURRENT ASSETS
Cash and cash equivalents	$ 5,667,393	$ 7,050,176
Accounts receivable, net	2,347,998	1,814,004
Inventories (Note 2)	16,604,638	17,075,080
Prepaid expenses and other current assets	288,803	202,981
Income tax receivable	329,335	623,568
Total current assets	25,238,167	26,765,809
Other assets	13,824	13,824
Vineyard development costs, net	7,731,687	7,624,646
Property and equipment, net (Note 3)	30,343,776	28,648,301
Operating lease right of use assets	5,162,980	4,862,907
TOTAL ASSETS	68,490,434	67,915,487
CURRENT LIABILITIES
Accounts payable	1,411,056	859,215
Accrued expenses	804,331	1,004,281
Current portion of note payable	1,447,966	1,468,473
Current portion of long-term debt	441,906	438,378
Current portion of lease liabilities	273,670	203,482
Unearned revenue	580,598	604,777
Grapes payable	80,472	792,595
Total current liabilities	5,039,999	5,371,201
Long-term debt, net of current portion and debt issuance costs	5,718,016	5,826,161
Lease liabilities, net of current portion	4,941,625	4,714,413
Deferred income taxes	2,958,606	2,958,606
Total liabilities	18,658,246	18,870,381
COMMITMENTS AND CONTINGENCIES (Notes 8 and 9)
SHAREHOLDERS' EQUITY
Redeemable preferred stock, no par value, 10,000,000 shares authorized, 4,662,768 shares issued and outstanding, liquidation preference $19,606,939, and $19,350,487, at March 31, 2020 and December 31, 2019, respectively.	18,575,554	18,319,102
Common stock, no par value, 10,000,000 shares authorized, 4,964,529 shares issued and outstanding at March 31, 2020 and December 31, 2019, respectively.	8,512,489	8,512,489
Retained earnings	22,744,145	22,213,515
Total shareholder's equity	49,832,188	49,045,106
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY	$ 68,490,434	$ 67,915,487

BALANCE SHEETS (Unaudited) (Par

BALANCE SHEETS (Unaudited) (Parenthetical) - USD ($)	Mar. 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	4,662,768	4,662,768
Preferred stock, outstanding shares	4,662,768	4,662,768
Preferred stock, liquidation preference	$ 19,606,939	$ 19,350,487
Common stock, par value	$ 0	$ 0
Common stock, authorized shares	10,000,000	10,000,000
Common stock, issued shares	4,964,529	4,964,529
Common stock, outstanding shares	4,964,529	4,964,529

STATEMENTS OF OPERATIONS (Unaud

STATEMENTS OF OPERATIONS (Unaudited) - USD ($)	3 Months Ended
	Mar. 31, 2020	Mar. 31, 2019
Income Statement [Abstract]
SALES, NET	$ 6,521,895	$ 4,998,786
COST OF SALES	2,609,853	1,718,150
GROSS PROFIT	3,912,042	3,280,636
OPERATING EXPENSES:
Sales and marketing	1,748,040	1,775,000
General and administrative	1,081,464	941,198
Total operating expenses	2,829,504	2,716,198
INCOME FROM OPERATIONS	1,082,538	564,438
OTHER INCOME (EXPENSE)
Interest income	9,517	9,446
Interest expense	(105,742)	(110,414)
Other income/(expense), net	95,002	113,009
INCOME BEFORE INCOME TAXES	1,081,315	576,479
INCOME TAX PROVISION	(294,233)	(150,003)
NET INCOME	787,082	426,476
Accrued preferred stock dividends	(256,452)	(256,452)
INCOME APPLICABLE TO COMMON SHAREHOLDERS	$ 530,630	$ 170,024
Earnings per common share after preferred dividends, basic and diluted	$ 0.11	$ 0.03
Weighted average number of common shares outstanding	4,964,529	4,964,529

STATEMENTS OF SHAREHOLDERS' EQU

STATEMENTS OF SHAREHOLDERS' EQUITY (Unaudited) - USD ($)	Redeemable Preferred Stock	Common Stock	Retained Earnings	Total
Beginning balance, shares at Dec. 31, 2018	4,662,768	4,964,529
Beginning balance, amount at Dec. 31, 2018	$ 18,319,102	$ 8,512,489	$ 20,728,677	$ 47,560,268
Preferred stock dividends accrued	$ 256,452		(256,452)	0
Net income			426,476	426,476
Ending balance, shares at Mar. 31, 2019	4,662,768	4,964,529
Ending balance, amount at Mar. 31, 2019	$ 18,575,554	$ 8,512,489	20,898,701	47,986,744
Beginning balance, shares at Dec. 31, 2019	4,662,768	4,964,529
Beginning balance, amount at Dec. 31, 2019	$ 18,319,102	$ 8,512,489	22,213,515	49,045,106
Preferred stock dividends accrued	$ 256,452		(256,452)
Net income			787,082	787,082
Ending balance, shares at Mar. 31, 2020	4,662,768	4,964,529
Ending balance, amount at Mar. 31, 2020	$ 18,575,554	$ 8,512,489	$ 22,744,145	$ 49,832,188

STATEMENTS OF CASH FLOWS (Unaud

STATEMENTS OF CASH FLOWS (Unaudited) - USD ($)	3 Months Ended
	Mar. 31, 2020	Mar. 31, 2019
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$ 787,082	$ 426,476
Adjustments to reconcile net income to net cash from operating activities:
Depreciation and amortization	428,235	487,533
Loss/(gain) on disposition of property & equipment	0	487
Loan fee amortization	3,252	3,252
Deferred rent liability	0	(50,480)
Deferred gain	0	(8,025)
Change in operating assets and liabilities:
Accounts receivable, net	(533,994)	(133,681)
Inventories	470,442	(81,466)
Prepaid expenses and other current assets	(85,822)	(4,676)
Unearned revenue	(24,179)	(48,968)
Grapes payable	(712,123)	(1,019,129)
Accounts payable	(131,060)	(167,282)
Accrued expenses	(199,950)	(211,069)
Income taxes payable	0	150,002
Income taxes receivable	294,233	0
Net cash from operating activities	296,116	(657,026)
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to vineyard development costs	(144,639)	(115,650)
Additions to property and equipment	(1,405,884)	(546,653)
Net cash from investing activities	(1,550,523)	(662,303)
CASH FLOWS FROM FINANCING ACTIVITIES
Payment on installment note for property purchase	(20,507)	(156,988)
Payments on long-term debt	(107,869)	(103,572)
Net cash from financing activities	(128,376)	(260,560)
NET CHANGE IN CASH AND CASH EQUIVALENTS	(1,382,783)	(1,579,889)
CASH AND CASH EQUIVALENTS, beginning of period	7,050,176	9,737,467
CASH AND CASH EQUIVALENTS, end of period	5,667,393	8,157,578
NON-CASH INVESTING AND FINANCING ACTIVITIES
Purchases of property and equipment and vineyard development costs included in accounts payable	737,271	50,525
Accrued preferred stock dividend	$ 256,452	$ 256,452

1. BASIS OF PRESENTATION

1. BASIS OF PRESENTATION	3 Months Ended
	Mar. 31, 2020
Organization, Consolidation and Presentation of Financial Statements [Abstract]
NOTE 1. BASIS OF PRESENTATION	The accompanying unaudited interim financial statements as of March 31, 2020 and for the three months ended March 31, 2020 and 2019 have been prepared in conformity with accounting principles generally accepted in the United States (“U.S. GAAP”) for interim financial statements. The financial information as of December 31, 2019 is derived from the audited financial statements presented in the Willamette Valley Vineyards, Inc. (the “Company”) Annual Report on Form 10-K for the year ended December 31, 2019. Certain information or footnote disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission. In the opinion of management, the accompanying financial statements include all adjustments necessary (which are of a normal recurring nature) for the fair statement of the results of the interim periods presented. The accompanying financial statements should be read in conjunction with the Company’s audited financial statements for the year ended December 31, 2019, as presented in the Company’s Annual Report on Form 10-K. Operating results for the three months ended March 31, 2020 are not necessarily indicative of the results that may be expected for the entire year ending December 31, 2020, or any portion thereof. 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 Company’s 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, are mandated to stay home except for essential activities. In response to the COVID-19 pandemic and government restrictions, the Company closed all tasting rooms and launched curbside pick-ups, complimentary shipping specials with minimum purchase and a new wine delivery service for local residents. The Company expects the stay-at-home orders and the sudden increase in unemployment caused by the closure of businesses in response to the COVID-19 pandemic to adversely affect sales revenues, which adversely impacts liquidity, financial condition and results of operations. Even after 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 increase operating costs and adversely affect liquidity. The COVID-19 pandemic may also adversely affect the ability of 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. The Company’s revenues include direct to consumer sales and national sales to distributors. These sales channels utilize shared resources for production, selling, and distribution. Basic earnings per share after preferred stock dividends are computed based on the weighted-average number of common shares outstanding each period. The following table presents the earnings per share after preferred stock dividends calculation for the periods shown: Three months ended March 31, 2020 2019 Numerator Net income $ 787,082 $ 426,476 Accrued preferred stock dividends (256,452 ) (256,452 ) Net income applicable to common shares $ 530,630 $ 170,024 Denominator Weighted-average common shares 4,964,529 4,964,529 Income per common share after preferred dividends $ 0.11 $ 0.03 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 unaudited interim condensed financial statements. The following provides an update of accounting pronouncements applicable to the Company that are not yet adopted as of March 31, 2020. No new accounting pronouncements were adopted during the quarter ended March 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, early adoption is permitted for the Company. Management is currently evaluating the potential impact of this guidance on the Company’s unaudited interim condensed financial statements and does not predict there to be a material impact.

2. INVENTORIES

2. INVENTORIES	3 Months Ended
	Mar. 31, 2020
Inventory Disclosure [Abstract]
NOTE 2. INVENTORIES	The Company’s inventories, by major classification, are summarized as follows, as of the dates shown: March 31, 2020 December 31, 2019 Winemaking and packaging materials $ 912,457 $ 704,736 Work-in-process (costs relating to unprocessed and/or unbottled wine products) 7,063,053 8,313,313 Finished goods (bottled wine and related products) 8,629,128 8,057,031 Total inventories $ 16,604,638 $ 17,075,080

3. PROPERTY AND EQUIPMENT

3. PROPERTY AND EQUIPMENT	3 Months Ended
	Mar. 31, 2020
Property, Plant and Equipment [Abstract]
NOTE 3. PROPERTY AND EQUIPMENT	The Company’s property and equipment consists of the following, as of the dates shown: March 31, 2020 December 31, 2019 Construction in progress $ 5,196,680 $ 4,193,467 Land, improvements and other buildings 11,764,811 11,764,811 Winery, tasting room buildings and hospitality center 17,356,837 16,319,704 Equipment 13,799,763 13,751,324 48,118,091 46,029,306 Accumulated depreciation (17,774,315 ) (17,381,005 ) Property and equipment, net $ 30,343,776 $ 28,648,301

4. DEBT

4. DEBT	3 Months Ended
	Mar. 31, 2020
Debt Disclosure [Abstract]
NOTE 4. DEBT	Line of Credit Facility – The line of credit agreement includes various covenants, which among other things; require the Company to maintain minimum amounts of tangible net worth, debt/worth ratio, and debt service coverage as defined. As of March 31, 2020, the Company was in compliance with these financial covenants. In February 2017, the Company purchased property, including vineyard land, bare land and structures in the Dundee Hills American Viticultural Area (AVA) under terms that included a 15 year note payable with quarterly payments of $42,534 at 6%. The note may be called by the owner, up to the outstanding balance, with 180 days written notice. As of March 31, 2020, the Company had a balance of $1,447,966 due on this note. As of December 31, 2019 the Company had a balance of $1,468,473 due on this note. Long-Term Debt The loan agreements contain covenants, which require the Company to maintain certain financial ratios and balances. At March 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 has an outstanding loan with Toyota Credit Corporation maturing in February 2021, at zero interest, with an outstanding balance of $9,562 and $12,431 as of March 31, 2020 and December 31, 2019, respectively. The purpose of this loan was to purchase a vehicle. As of March 31, 2020 the Company had unamortized debt issuance costs of $155,666. As of December 31, 2019 the Company had unamortized debt issuance costs of $158,978.

5. INTEREST AND TAXES PAID

5. INTEREST AND TAXES PAID	3 Months Ended
	Mar. 31, 2020
Other Income and Expenses [Abstract]
NOTE 5. INTEREST AND TAXES PAID	Income Taxes Interest

6. SEGMENT REPORTING

6. SEGMENT REPORTING	3 Months Ended
	Mar. 31, 2020
Segment Reporting [Abstract]
NOTE 6. SEGMENT REPORTING	The Company has identified two operating segments, Direct Sales and Distributor Sales, based upon their different distribution channels, margins and selling strategies. Direct Sales includes retail sales in the tasting room and remote sites, Wine Club sales, on-site events, kitchen and catering sales and other sales made directly to the consumer without the use of an intermediary, including sales of bulk wine or grapes. Distributor Sales include all sales through a third party where prices are given at a wholesale rate. The two segments reflect how the Company’s operations are evaluated by senior management and the structure of its internal financial reporting. The Company evaluates performance based on the gross profit of the respective business segments. Selling expenses that can be directly attributable to the segment, including depreciation of segment specific assets, are included, however, centralized selling expenses and general and administrative expenses are not allocated between operating segments. Therefore, net income information for the respective segments is not available. Discrete financial information related to segment assets, other than segment specific depreciation associated with selling, is not available and that information continues to be aggregated. The following table outlines the sales, cost of sales, gross margin, directly attributable selling expenses, and contribution margin of the segments for the three month periods ending March 31, 2020 and 2019. Sales figures are net of related excise taxes. Three Months Ended March 31, Direct Sales Distributor Sales Total 2020 2019 2020 2019 2020 2019 Sales, net $ 1,952,312 $ 1,720,177 $ 4,569,583 $ 3,278,609 $ 6,521,895 $ 4,998,786 Cost of Sales 477,632 343,439 2,132,221 1,374,711 2,609,853 1,718,150 Gross Margin 1,474,680 1,376,738 2,437,362 1,903,898 3,912,042 3,280,636 Selling Expenses 1,130,547 1,074,371 486,396 552,668 1,616,943 1,627,039 Contribution Margin $ 344,133 $ 302,367 $ 1,950,966 $ 1,351,230 $ 2,295,099 $ 1,653,597 Percent of Sales 29.9 % 34.4 % 70.1 % 65.6 % 100.0 % 100.0 % Direct sales include $28,734 and $42,763 of bulk wine sales in the three months ended March 31, 2020 and 2019, respectively.

7. SALE OF PREFERRED STOCK

7. SALE OF PREFERRED STOCK	3 Months Ended
	Mar. 31, 2020
Equity [Abstract]
NOTE 7. 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 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 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 aggregate initial offering price is not to exceed $20,000,000. Dividends accrued but not paid will be added to the liquidation preference of the stock until the dividend is declared and paid. At any time after June 1, 2021, the Company has the option, but not the obligation, to redeem all of the outstanding preferred stock in an amount equal to the original issue price plus accrued but unpaid dividends and a redemption premium equal to 3% of the original issue price.

8. LEASES

8. LEASES	3 Months Ended
	Mar. 31, 2020
Leases [Abstract]
NOTE 8. 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 (ROU), Current portion of lease liabilities and Lease liabilities, net of current portion. The Company does not currently have any finance leases. ROU assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at the commencement date based on the present value of lease payments over the lease term. For leases that do not provide an implicit rate, we use our incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. We use the implicit rate when readily determinable. Lease expense for lease payments is recognized on a straight-line basis over the lease term. Significant judgment may be required when determining whether a contract contains a lease, the length of the lease term, the allocation of the consideration in a contract between lease and non-lease components, and the determination of the discount rate included in our leases. We review the underlying objective of each contract, the terms of the contract, and consider our current and future business conditions when making these judgments. Operating Lease – Vineyard 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. In February 2007, the Company entered into a lease agreement for 59 acres of vineyard land at Elton Vineyards. This lease is for a 10-year term with four five-year renewals at the Company’s option. The lease contains an escalation provision tied to the CPI not to exceed 2% per annum. In 2017 the Company exercised its option to renew the lease until December 31, 2022. In July 2008, the Company entered into a 34-year lease agreement with a property owner in the Eola Hills for approximately 110 acres adjacent to the existing Elton Vineyards site. These 110 acres are being developed into vineyards. Terms of this agreement contain rent increases, that rises as the vineyard is developed, and contains an escalation provision of CPI plus 0.5% per year capped at 4%. 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. Operating Leases – Non-Vineyard In January 2018, the Company assumed a lease, with four remaining years, for its Maison Bleue tasting room in Walla Walla, Washington. The lease contains fixed payments that increase over the term of the agreement. 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: Three Months Ended March 31, 2020 Lease Cost Operating Lease cost - Vineyards $ 113,685 Operating Lease cost - Other 24,461 Short-term lease cost 8,388 Total Lease Cost $ 146,534 Other Information Cash paid for amounts included in the measurement of lease liabilities Operating cash flows from operating leases - Vineyard 107,632 Operating cash flows from operating leases - Other 25,301 Weighted-average remaining lease term - operating leases in years 17.00 Weighted-average discount rate - operating leases 6.21 % As of March 31, 2020, maturities of lease liabilities were as follows: Operating Years Ended December 31, Leases 2020 $ 449,475 2021 578,438 2022 553,777 2023 534,954 2024 540,365 Thereafter 5,962,188 Total minimal lease payments 8,619,196 Less present value adjustment (3,403,901 ) Operating lease liabilities 5,215,295 Less current lease liabilities (273,670 ) Lease liabilities net of current portion $ 4,941,625

9. COMMITMENTS AND CONTINGENCIE

9. COMMITMENTS AND CONTINGENCIES	3 Months Ended
	Mar. 31, 2020
Commitments and Contingencies Disclosure [Abstract]
NOTE 9. COMMITMENTS AND CONTINGENCIES	Litigation Grape Purchases

1. BASIS OF PRESENTATION (Table

1. BASIS OF PRESENTATION (Tables)	3 Months Ended
	Mar. 31, 2020
Organization, Consolidation and Presentation of Financial Statements [Abstract]
Earnings per share	Three months ended March 31, 2020 2019 Numerator Net income $ 787,082 $ 426,476 Accrued preferred stock dividends (256,452 ) (256,452 ) Net income applicable to common shares $ 530,630 $ 170,024 Denominator Weighted-average common shares 4,964,529 4,964,529 Income per common share after preferred dividends $ 0.11 $ 0.03

2. INVENTORIES (Tables)

2. INVENTORIES (Tables)	3 Months Ended
	Mar. 31, 2020
Inventory Disclosure [Abstract]
Inventories	March 31, 2020 December 31, 2019 Winemaking and packaging materials $ 912,457 $ 704,736 Work-in-process (costs relating to unprocessed and/or unbottled wine products) 7,063,053 8,313,313 Finished goods (bottled wine and related products) 8,629,128 8,057,031 Total inventories $ 16,604,638 $ 17,075,080

3. PROPERTY AND EQUIPMENT (Tabl

3. PROPERTY AND EQUIPMENT (Tables)	3 Months Ended
	Mar. 31, 2020
Property, Plant and Equipment [Abstract]
Property and equipment	March 31, 2020 December 31, 2019 Construction in progress $ 5,196,680 $ 4,193,467 Land, improvements and other buildings 11,764,811 11,764,811 Winery, tasting Room buildings and hospitality center 17,356,837 16,319,704 Equipment 13,799,763 13,751,324 48,118,091 46,029,306 Accumulated depreciation (17,774,315 ) (17,381,005 ) Property and equipment, net $ 30,343,776 $ 28,648,301

6. SEGMENT REPORTING (Tables)

6. SEGMENT REPORTING (Tables)	3 Months Ended
	Mar. 31, 2020
Segment Reporting [Abstract]
Segment reporting	Three Months Ended March 31, Direct Sales Distributor Sales Total 2020 2019 2020 2019 2020 2019 Sales, net $ 1,952,312 $ 1,720,177 $ 4,569,583 $ 3,278,609 $ 6,521,895 $ 4,998,786 Cost of Sales 477,632 343,439 2,132,221 1,374,711 2,609,853 1,718,150 Gross Margin 1,474,680 1,376,738 2,437,362 1,903,898 3,912,042 3,280,636 Selling Expenses 1,130,547 1,074,371 486,396 552,668 1,616,943 1,627,039 Contribution Margin $ 344,133 $ 302,367 $ 1,950,966 $ 1,351,230 $ 2,295,099 $ 1,653,597 Percent of Sales 29.9 % 34.4 % 70.1 % 65.6 % 100.0 % 100.0 %

8. LEASES (Tables)

8. LEASES (Tables)	3 Months Ended
	Mar. 31, 2020
Leases [Abstract]
Lease cost and other lease information	Three Months Ended March 31, 2020 Lease Cost Operating Lease cost - Vineyards $ 113,685 Operating Lease cost - Other 24,461 Short-term lease cost 8,388 Total Lease Cost $ 146,534 Other Information Cash paid for amounts included in the measurement of lease liabilities Operating cash flows from operating leases - Vineyard 107,632 Operating cash flows from operating leases - Other 25,301 Weighted-average remaining lease term - operating leases in years 17.00 Weighted-average discount rate - operating leases 6.21 %
Maturities of lease liabilities	Operating Years Ended December 31, Leases 2020 $ 449,475 2021 578,438 2022 553,777 2023 534,954 2024 540,365 Thereafter 5,962,188 Total minimal lease payments 8,619,196 Less present value adjustment (3,403,901 ) Operating lease liabilities 5,215,295 Less current lease liabilities (273,670 ) Lease liabilities net of current portion $ 4,941,625

1. BASIS OF PRESENTATION (Detai

1. BASIS OF PRESENTATION (Details) - USD ($)	3 Months Ended
	Mar. 31, 2020	Mar. 31, 2019
Numerator
Net income	$ 787,082	$ 426,476
Accrued preferred stock dividends	(256,452)	(256,452)
Net income applicable to common shares	$ 530,630	$ 170,024
Denominator
Weighted average common shares	4,964,529	4,964,529
Income per common share after preferred dividends	$ 0.11	$ 0.03

2. INVENTORIES (Details)

2. INVENTORIES (Details) - USD ($)	Mar. 31, 2020	Dec. 31, 2019
Inventory Disclosure [Abstract]
Winemaking and packaging materials	$ 912,457	$ 704,736
Work-in-progress (costs relating to unprocessed and/or unbottled wine products)	7,063,053	8,313,313
Finished goods (bottled wine and related products)	8,629,128	8,057,031
Total inventories	$ 16,604,638	$ 17,075,080

3. PROPERTY AND EQUIPMENT (Deta

3. PROPERTY AND EQUIPMENT (Details) - USD ($)	Mar. 31, 2020	Dec. 31, 2019
Property, Plant and Equipment [Abstract]
Construction in progress	$ 5,196,680	$ 4,193,467
Land, improvements and other buildings	11,764,811	11,764,811
Winery tasting room building and hospitality center	17,356,837	16,319,704
Equipment	13,799,763	13,751,324
Property and equipment, gross	48,118,091	46,029,306
Accumulated depreciation	(17,774,315)	(17,381,005)
Property and equipment, net	$ 30,343,776	$ 28,648,301

4. DEBT (Details Narrative)

4. DEBT (Details Narrative) - USD ($)	Mar. 31, 2020	Dec. 31, 2019
Unamortized debt issuance costs	$ 155,666	$ 158,978
Umpqua Bank
Aggregate outstanding balance	0	0
Dundee Hills
Aggregate outstanding balance	1,447,966	1,468,473
Farm Credit Services
Aggregate outstanding balance	6,306,026	6,411,086
Toyota Credit Corporation
Aggregate outstanding balance	$ 9,562	$ 12,431

5. INTEREST AND TAXES PAID (Det

5. INTEREST AND TAXES PAID (Details Narrative) - USD ($)	3 Months Ended
	Mar. 31, 2020	Mar. 31, 2019
Other Income and Expenses [Abstract]
Income taxes paid	$ 0	$ 0
Interest paid	$ 105,472	$ 109,828

6. SEGMENT REPORTING (Details)

6. SEGMENT REPORTING (Details) - USD ($)	3 Months Ended
	Mar. 31, 2020	Mar. 31, 2019
Sales, net	$ 6,521,895	$ 4,998,786
Cost of sales	2,609,853	1,718,150
Gross margin	3,912,042	3,280,636
Selling expenses	1,616,943	1,627,039
Contribution margin	$ 2,295,099	$ 1,653,597
Percent of sales	100.00%	100.00%
Direct Sales
Sales, net	$ 1,952,312	$ 1,720,177
Cost of sales	477,632	343,439
Gross margin	1,474,680	1,376,738
Selling expenses	1,130,547	1,074,371
Contribution margin	$ 344,133	$ 302,367
Percent of sales	29.90%	34.40%
Distributor Sales
Sales, net	$ 4,569,583	$ 3,278,609
Cost of sales	2,132,221	1,374,711
Gross margin	2,437,362	1,903,898
Selling expenses	486,396	552,668
Contribution margin	$ 1,950,966	$ 1,351,230
Percent of sales	70.10%	65.60%

6. SEGMENT REPORTING (Details N

6. SEGMENT REPORTING (Details Narrative) - USD ($)	3 Months Ended
	Mar. 31, 2020	Mar. 31, 2019
Segment Reporting [Abstract]
Bulk wine sales	$ 28,734	$ 42,763

8. LEASES (Details)

8. LEASES (Details)	3 Months Ended
	Mar. 31, 2020USD ($)
Lease Cost
Operating lease cost - vineyards	$ 113,685
Operating lease cost - other	24,461
Short-term lease cost	8,388
Total lease cost	146,534
Other Information
Operating cash flows from operating leases - vineyard	107,632
Operating cash flows from operating leases - other	$ 25,301
Weighted-average remaining lease term - operating leases	17 years
Weighted-average discount rate - operating leases	6.21%

8. LEASES (Details 1)

8. LEASES (Details 1) - USD ($)	Mar. 31, 2020	Dec. 31, 2019
Leases [Abstract]
2020	$ 449,475
2021	578,438
2022	553,777
2023	534,954
2024	540,365
Thereafter	5,962,188
Total minimal lease payments	8,619,196
Less present value adjustment	(3,403,901)
Operating lease liabilities	5,215,295
Less current lease liabilities	(273,670)	$ (203,482)
Lease liabilities net of current portion	$ 4,941,625	$ 4,714,413