Document and Entity Information
Document and Entity Information - USD ($) | 12 Months Ended | ||
Dec. 31, 2016 | Mar. 23, 2017 | Jun. 30, 2016 | |
Document And Entity Information | |||
Entity Registrant Name | WILLAMETTE VALLEY VINEYARDS INC | ||
Entity Central Index Key | 838,875 | ||
Document Type | 10-K | ||
Document Period End Date | Dec. 31, 2016 | ||
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 | Smaller Reporting Company | ||
Entity Public Float | $ 30,560,166 | ||
Entity Common Stock, Shares Outstanding | 5,006,255 | ||
Document Fiscal Period Focus | FY | ||
Document Fiscal Year Focus | 2,016 |
BALANCE SHEETS
BALANCE SHEETS - USD ($) | Dec. 31, 2016 | Dec. 31, 2015 |
CURRENT ASSETS | ||
Cash and cash equivalents | $ 5,706,351 | $ 4,010,664 |
Restricted cash | 0 | 1,476,232 |
Accounts receivable, net | 1,871,450 | 1,684,502 |
Inventories (Note 3) | 11,970,656 | 10,632,462 |
Prepaid expenses and other current assets | 399,740 | 131,173 |
Income tax receivable | 0 | 204,513 |
Total current assets | 19,948,197 | 18,139,546 |
Investment in Kore Wine Company | 59,186 | 60,000 |
Vineyard development costs, net | 4,666,794 | 3,699,947 |
Property and equipment, net (Note 4) | 20,196,945 | 16,729,162 |
TOTAL ASSETS | 44,871,122 | 38,628,655 |
CURRENT LIABILITIES | ||
Accounts payable | 505,085 | 386,137 |
Accrued expenses | 995,405 | 604,580 |
Investor deposits for preferred stock | 0 | 1,476,232 |
Current portion of note payable | 245,417 | 245,417 |
Current portion of long-term debt | 380,471 | 349,003 |
Income taxes payable | 389,798 | 0 |
Current portion of deferred revenue-distribution agreement | 142,857 | 142,857 |
Unearned revenue | 213,612 | 73,200 |
Grapes payable | 693,666 | 816,879 |
Total current liabilities | 3,566,311 | 4,094,305 |
Note payable, net of current portion | 0 | 245,417 |
Long-term debt, net of current portion | 4,443,685 | 4,773,794 |
Deferred rent liability | 113,567 | 140,756 |
Deferred revenue-distribution agreement, net of current portion | 95,223 | 238,083 |
Deferred gain | 89,172 | 121,267 |
Deferred income taxes | 1,931,000 | 1,848,000 |
Total liabilities | 10,238,958 | 11,461,622 |
COMMITMENTS AND CONTINGENCIES (Note 12) | ||
SHAREHOLDERS' EQUITY | ||
Redeemable preferred stock, no par value, 10,000,000 shares authorized, 2,396,954 shares, liquidation preference $9,947,359, issued and outstanding at December 31, 2016 and 1,074,338 shares, liquidation preference $4,458,710, issued and outstanding at December 31, 2015, respectively. | 9,061,307 | 3,735,437 |
Common stock, no par value, 10,000,000 shares authorized, 5,016,685 and 4,989,216 shares issued and outstanding at December 31, 2016 and December 31, 2015, respectively. | 8,971,575 | 8,998,760 |
Retained earnings | 16,599,282 | 14,432,836 |
Total shareholder's equity | 34,632,164 | 27,167,033 |
LIABILITIES AND SHAREHOLDERS' EQUITY | $ 44,871,122 | $ 38,628,655 |
BALANCE SHEETS (Parenthetical)
BALANCE SHEETS (Parenthetical) - USD ($) | Dec. 31, 2016 | Dec. 31, 2015 |
SHAREHOLDERS' EQUITY | ||
Preferred stock, authorized shares | 10,000,000 | 10,000,000 |
Preferred stock, issued shares | 2,396,954 | 1,074,338 |
Preferred stock, outstanding shares | 2,396,954 | 1,074,338 |
Liquidation preference | $ 9,947,359 | $ 4,458,710 |
Common stock, par value | $ 0 | $ 0 |
Common stock, authorized shares | 10,000,000 | 10,000,000 |
Common stock, issued shares | 5,016,685 | 4,989,216 |
Common stock, outstanding shares | 5,016,685 | 4,989,216 |
STATEMENTS OF OPERATIONS
STATEMENTS OF OPERATIONS - USD ($) | 12 Months Ended | |
Dec. 31, 2016 | Dec. 31, 2015 | |
Income Statement [Abstract] | ||
SALES, NET | $ 19,425,412 | $ 17,938,872 |
COST OF SALES | 7,204,884 | 7,092,111 |
GROSS PROFIT | 12,220,528 | 10,846,761 |
SELLING GENERAL & ADMINISTRATIVE EXPENSES | 8,053,127 | 7,573,801 |
INCOME FROM OPERATIONS | 4,167,401 | 3,272,960 |
OTHER INCOME (EXPENSE) | ||
Interest income | 9,851 | 2,237 |
Interest expense | (291,370) | (311,188) |
Other income, net | 221,403 | 213,239 |
INCOME BEFORE INCOME TAXES | 4,107,285 | 3,177,248 |
INCOME TAX PROVISION | (1,478,310) | (1,275,416) |
NET INCOME | 2,628,975 | 1,901,832 |
Preferred stock dividends | (462,529) | (57,611) |
INCOME APPLICABLE TO COMMON SHAREHOLDERS | $ 2,166,446 | $ 1,844,221 |
Basic income per common share after preferred dividends | $ 0.43 | $ 0.37 |
Diluted income per common share after preferred dividends | $ 0.43 | $ 0.37 |
Weighted average number of basic common shares outstanding | 4,991,065 | 4,928,712 |
Weighted average number of diluted common shares outstanding | 4,995,343 | 4,963,999 |
STATEMENTS OF SHAREHOLDERS' EQU
STATEMENTS OF SHAREHOLDERS' EQUITY - USD ($) | Redeemable Preferred Stock | Common Stock | Retained Earnings | Total |
Beginning Balance, shares at Dec. 31, 2014 | 0 | 4,869,788 | ||
Beginning Balance, amount at Dec. 31, 2014 | $ 0 | $ 8,601,637 | $ 12,588,615 | $ 21,190,252 |
Issuance of preferred stock, net, shares | 1,074,338 | |||
Issuance of preferred stock, net, amount | $ 3,735,437 | 3,735,437 | ||
Preferred stock dividends declared | (57,611) | (57,611) | ||
Stock based compensation expense | $ 17,685 | 17,685 | ||
Stock issued and options exercised, shares | 155,971 | |||
Stock issued and options exercised, amount | $ 629,938 | 629,938 | ||
Stock repurchased, shares | (36,543) | |||
Stock repurchased, amount | $ (250,500) | (250,500) | ||
Net income | 1,901,832 | 1,901,832 | ||
Ending Balance, shares at Dec. 31, 2015 | 1,074,338 | 4,989,216 | ||
Ending Balance, amount at Dec. 31, 2015 | $ 3,735,437 | $ 8,998,760 | 14,432,836 | 27,167,033 |
Issuance of preferred stock, net, shares | 1,322,616 | |||
Issuance of preferred stock, net, amount | $ 5,325,870 | 5,325,870 | ||
Preferred stock dividends declared | (462,529) | (462,529) | ||
Stock based compensation expense | $ 748 | 748 | ||
Stock issued and options exercised, shares | 97,500 | |||
Stock issued and options exercised, amount | $ 498,927 | 498,927 | ||
Stock repurchased, shares | (70,031) | |||
Stock repurchased, amount | $ (526,860) | (526,860) | ||
Net income | 2,628,975 | 2,628,975 | ||
Ending Balance, shares at Dec. 31, 2016 | 2,396,954 | 5,016,685 | ||
Ending Balance, amount at Dec. 31, 2016 | $ 9,061,307 | $ 8,971,575 | $ 16,599,282 | $ 34,632,164 |
STATEMENTS OF CASH FLOWS
STATEMENTS OF CASH FLOWS - USD ($) | 12 Months Ended | |
Dec. 31, 2016 | Dec. 31, 2015 | |
CASH FLOWS FROM OPERATING ACTIVITIES | ||
Net income | $ 2,628,975 | $ 1,901,832 |
Adjustments to reconcile net income to net cash from operating activities | ||
Depreciation and amortization | 1,335,254 | 1,274,243 |
Gain on disposition of property & equipment | (2,500) | (1,900) |
Stock based compensation expense | 748 | 17,685 |
Non-cash loss from investment in Kore Wine Company | 814 | 0 |
Deferred rent liability | (27,189) | (22,940) |
Deferred income taxes | 472,798 | 431,000 |
Deferred gain | (32,095) | (32,095) |
Change in operating assets and liabilities: | ||
Accounts receivable, net | (186,948) | (72,378) |
Inventories | (1,338,194) | (721,892) |
Prepaid expenses and other current assets | (268,567) | 18,851 |
Income taxes receivable | 204,513 | 118,501 |
Unearned revenue | 140,412 | 38,765 |
Deferred revenue-distribution agreement | (142,860) | (142,860) |
Grapes payable | (123,213) | 118,028 |
Accounts payable | 35,140 | (280,856) |
Accrued expenses | 390,825 | 52,993 |
Net cash from operating activities | 3,087,913 | 2,696,977 |
CASH FLOWS FROM INVESTING ACTIVITIES | ||
Investment in Kore Wine Company | 0 | (60,000) |
Additions to vineyard development | (1,003,115) | (915,091) |
Additions to property and equipment | (4,327,804) | (2,451,705) |
Proceeds from sale of property and equipment | 2,500 | 1,900 |
Net cash from investing activities | (5,328,419) | (3,424,896) |
CASH FLOWS FROM FINANCING ACTIVITIES | ||
Proceeds from investor deposits held as restricted cash | 1,476,232 | (1,476,232) |
Proceeds from investor deposits held as liability | (1,476,232) | 1,476,232 |
Payment on installment note for property purchase | (245,417) | 490,834 |
Payments on long-term debt | (348,923) | (329,276) |
Issuance of preferred stock, net | 5,325,870 | 3,735,437 |
Payment of preferred stock dividend | (462,529) | (57,611) |
Proceeds from stock option exercised | 194,052 | 629,938 |
Repurchase of common stock | (526,860) | (250,500) |
Net cash from financing activities | 3,936,193 | 4,218,822 |
NET CHANGE IN CASH AND CASH EQUIVALENTS | 1,695,687 | 3,490,903 |
CASH AND CASH EQUIVALENTS, beginning of year | 4,010,664 | 519,761 |
CASH AND CASH EQUIVALENTS, end of year | 5,706,351 | 4,010,664 |
NON-CASH INVESTING AND FINANCING ACTIVITIES | ||
Purchase of property with common stock | 304,875 | 0 |
Purchase of equipment with long-term debt | 45,899 | 0 |
Purchases of property and equipment included in accounts payable | 99,896 | 16,088 |
Total Non-Cash and Financing Activities | 450,670 | 16,088 |
Supplemental disclosure of cash flow information: | ||
Cash paid during the year for: Interest paid (net of capitalized interest) | 292,870 | 308,437 |
Cash paid during the year for: Income tax paid | $ 801,250 | $ 719,550 |
1. SUMMARY OF OPERATIONS, BASIS
1. SUMMARY OF OPERATIONS, BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES | 12 Months Ended |
Dec. 31, 2016 | |
Accounting Policies [Abstract] | |
NOTE 1. SUMMARY OF OPERATIONS, BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES | Organization and operations 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. Direct-to-consumer sales, including bulk wine, miscellaneous sales, and grape sales, represented approximately 36.0% and 38.5% of total revenue for 2016 and 2015, respectively. In state sales through distributors represented approximately 19.1% and 18.2% of total revenue for 2016 and 2015, respectively. Out-of-state sales, including foreign sales, represented approximately 44.9% and 43.3% of total revenue for 2016 and 2015, respectively. Foreign sales represent approximately 0.8% of total revenue. Basis of presentation Financial instruments and concentrations of risk Cash and cash equivalents are maintained at four 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 2016, sales to one distributor represented approximately 19.0% of total Company revenue. In 2015, sales to one distributor represented approximately 18.2% of total Company revenue. Other comprehensive income Cash and cash equivalents Accounts receivable – Inventories – 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 market 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 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, 2016 and 2015, approximately $76,417 and $75,669, respectively, was amortized into inventory costs. Property and equipment 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 - 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, 2016 and 2015. Debt issuance costs Unamortized debt issuance costs are recorded as a reduction from the carrying amount of the related debt liability in the Company’s Balance Sheets. Distribution agreement receivable Income taxes – The Company had no unrecognized tax benefits as of December 31, 2016 or 2015. 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, 2016 and 2015 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 and Connecticut. The Company may be subject to examination by the IRS for tax years 2013 through 2016. Additionally, the Company may be subject to examinations by state taxing jurisdictions for tax years 2012 through 2016. The Company is not aware of any current examinations by the IRS or the state taxing authorities. Deferred rent liability Revenue recognition – The Company has price incentive programs with its distributors to encourage product placement and depletions. When recording a sale to the customer, an incentive program liability is recorded to accrued liabilities and sales are reported net of incentive program expenses. Incentive program payments are made when completed incentive program payment requests are received from the customers. Incentive payments to a customer reduce the incentive program accrued liability. For the years ended December 31, 2016 and 2015, the Company recorded incentive program expenses of $503,334 and $449,930, respectively, as a reduction in sales on the income statement. As of December 31, 2016 and 2015, the Company has recorded an incentive program liability in the amount of $46,888 and $42,456, respectively, which is included in accrued expenses on the balance sheet. Cost of goods sold 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, which make up approximately 12% of total 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 The Company provides an allowance to distributors for providing sample of products to potential customers. For the years ended December 31, 2016 and 2015, these costs, which are included in selling, general and administrative expenses, totaled approximately $105,421 and $153,299, respectively. Shipping and handling costs Excise taxes – Stock based compensation – Basic and diluted income per common share after preferred dividends – Options to purchase 7,000 shares of common stock were outstanding at December 31, 2016 and diluted weighted-average shares outstanding at December 31, 2016 include the effect of 4,278 stock options. Options to purchase 67,000 shares of common stock were outstanding at December 31, 2015 and diluted weighted-average shares outstanding at December 31, 2015 include the effect of 35,287 stock options. There were no potentially dilutive shares from stock options included in the computation of dilutive income per share for 2016 and 2015 as their impact would have been anti-dilutive. Reclassifications As a result of the retrospective adoption of ASU 2015-03 (see “Recent accounting pronouncements” below), the Company made certain reclassifications to the prior year's long-term debt to conform to the balance sheet presentation as of December 31, 2016. These reclassifications had no effect on the Company's financial position, shareholders' equity or net cash flows for any of the periods presented. Recently issued accounting standards In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606) Revenue from Contracts with Customers (Topic 606) - Deferral of the Effective Date In January 2016, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2016-01, Recognition and Measurement of Financial Assets and Financial Liabilities The Company has not yet selected a transition method or determined the effect of the standard on its ongoing financial reporting. In February 2016, the FASB issued ASU 2016-02, Leases The accounting standards that have been issued by the FASB or other standards-setting bodies that do not require adoption until a future date are not expected to have a material impact on our financial statements upon adoption. |
2. ACCOUNTS RECEIVABLE
2. ACCOUNTS RECEIVABLE | 12 Months Ended |
Dec. 31, 2016 | |
Accounts Receivable, Net [Abstract] | |
NOTE 2. ACCOUNTS RECEIVABLE | The Company’s accounts receivable balance is net of an allowance for doubtful accounts of $15,921 and $11,944 at December 31, 2016 and 2015, respectively. Changes in the allowance for doubtful accounts are as follows: Year ended December 31, 2016 2015 Balance at Beginning of Period $ 11,944 $ 11,944 Charged to costs and expenses 3,977 — Charged to other accounts — — Write-offs, net of recoveries — — Balance at End of Period $ 15,921 $ 11,944 |
3. INVENTORIES
3. INVENTORIES | 12 Months Ended |
Dec. 31, 2016 | |
Inventory Disclosure [Abstract] | |
NOTE 3. INVENTORIES | December 31, December 31, 2016 2015 Winemaking and packaging materials $ 817,836 $ 690,292 Work-in-process (costs relating to unprocessed and/or unbottled wine products) 6,634,014 6,058,701 Finished goods (bottled wine and related products) 4,518,806 3,883,469 Current inventories $ 11,970,656 $ 10,632,462 |
4. PROPERTY AND EQUIPMENT
4. PROPERTY AND EQUIPMENT | 12 Months Ended |
Dec. 31, 2016 | |
Property, Plant and Equipment [Abstract] | |
NOTE 4. PROPERTY AND EQUIPMENT | December 31, December 31, 2016 2015 Construction in progress $ 449,409 $ 482,284 Land, improvements and other buildings 8,063,716 5,089,472 Winery buildings and hospitality center 14,458,309 13,756,320 Equipment 10,122,593 9,055,987 33,094,027 28,384,063 Less accumulated depreciation (12,897,082 ) (11,654,901 ) $ 20,196,945 $ 16,729,162 Depreciation expense was $1,254,455 and $1,194,191 during the years ended December 31, 2016 and 2015, respectively. |
5. LINE OF CREDIT FACILITY
5. LINE OF CREDIT FACILITY | 12 Months Ended |
Dec. 31, 2016 | |
Debt Disclosure [Abstract] | |
NOTE 5. 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 receivables and inventories as defined in the agreement. The revolving line bears interest at prime, is payable monthly, and is subject to renewal. The Company renewed the credit agreement in June of 2016 for a period of 12 months. The interest rate was 3.75% at December 31, 2016 and 3.50% at December 31, 2015. At December 31, 2016 and 2015 there were no borrowings 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, 2016, the Company was in compliance with these financial covenants. |
6. NOTE PAYABLE
6. NOTE PAYABLE | 12 Months Ended |
Dec. 31, 2016 | |
Debt Disclosure [Abstract] | |
6. NOTE PAYABLE | In April of 2015 the Company purchased approximately 42 acres of farmland in the Walla Walla AVA under terms that included paying one third of the price upon closing and one third in each of the two subsequent years. As of December 31, 2016 the Company had a balance due of $245,417 on April 1, 2017. No interest accrues under the terms of this note. |
7. LONG TERM DEBT
7. LONG TERM DEBT | 12 Months Ended |
Dec. 31, 2016 | |
Debt Disclosure [Abstract] | |
NOTE 7. LONG TERM DEBT | Long-term debt consists of: December 31, 2016 2015 Northwest Farm Credit Services Loan #1 $ 1,081,296 $ 1,162,073 Northwest Farm Credit Services Loan #2 981,263 1,070,991 Northwest Farm Credit Services Loan #3 1,056,491 1,131,912 Northwest Farm Credit Services Loan #4 1,705,046 1,808,042 Toyota Credit Corporation 45,899 — 4,869,995 5,173,018 Debt issuance costs (45,839 ) (50,221 ) Current portion of long-term debt (380,471 ) (349,003 ) $ 4,443,685 $ 4,773,794 The Company has four agreements with Northwest Farm Credit Services (“FCS”). Loan #1 requires monthly payments of $12,266, bears interest at a rate of 5.90%, is collateralized by real estate and equipment, and matures in 2026. Loan #2 requires monthly payments of $13,232, bears interest at a rate of 6.70%, is collateralized by real estate and equipment, and matures in 2024. Loan #3 requires monthly payments of $12,004, bears interest at a rate of 6.25%, is collateralized by real estate and equipment, and matures in 2026. Loan #4 requires monthly payments of $15,556, bears interest at a rate of 4.75%, is collateralized by real estate and equipment, and matures in 2028. The loan agreements contain covenants, which require the Company to maintain certain financial ratios and balances. At December 31, 2016, 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. Future minimum principal payments of long-term debt mature as follows for the years ending December 31: 2017 380,471 2018 403,659 2019 427,253 2020 452,290 2021 468,341 Thereafter 2,737,981 $ 4,869,995 The weighted-average interest rates on the aforementioned borrowings for the fiscal years ended December 31, 2016 and 2015 was 5.68% and 5.74% respectively. |
8. SHAREHOLDERS' EQUITY
8. SHAREHOLDERS' EQUITY | 12 Months Ended |
Dec. 31, 2016 | |
Equity [Abstract] | |
NOTE 8. 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 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. The Company is current on its dividend obligations. |
9. STOCK INCENTIVE PLAN
9. STOCK INCENTIVE PLAN | 12 Months Ended |
Dec. 31, 2016 | |
Equity [Abstract] | |
NOTE 9. STOCK INCENTIVE PLAN | The Company has 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 have an exercise price that is equal to the fair market value of the Company’s stock on the date the options were granted. Administration of the plan, including determination of the number, term, and type of options granted, resides with the Board of Directors or a duly authorized committee of the Board of Directors. Options were generally granted based on employee performance with vesting periods ranging from date of grant to seven years. At the date of the grant, the maximum term before expiration is ten years. The following table presents information on stock options outstanding for the periods shown: 2016 2015 Weighted Average Exercise Weighted Average Exercise Shares Price Shares Price Outstanding at beginning of period 67,000 $ 3.22 222,971 $ 3.79 Granted — — — — Exercised (60,000 ) 3.23 (155,971 ) 4.04 Forfeited — — — — Outstanding at end of period 7,000 $ 3.09 67,000 $ 3.22 The following table presents information on stock options outstanding for the periods shown: 2016 2015 Intrinsic value of options exercised in the period $ 260,685 $ 427,363 Stock options fully vested and expected to vest 7,000 67,000 Weighted average exercise price $ 3.09 $ 3.22 Aggregate intrinsic value $ 34,440 $ 258,678 Weighted average contractual term of options 4.55 1.37 Stock options vested and currently exercisable 7,000 60,000 Weighted average exercise price $ 3.09 $ 3.23 Aggregate intrinsic value $ 34,440 $ 230,748 Weighted average contractual term of options 4.55 0.89 Weighted-average options outstanding and exercisable at December 31, 2016 are as follows: Options Outstanding Options Exercisable Weighted Number Average Weighted Number Weighted Outstanding at Remaining Average Exercisable at Average Exercise December 31, Contractual Exercise December 31, Exercise Price 2016 Life Price 2016 Price $ 3.09 7,000 4.55 $ 3.09 7,000 $ 3.09 All share-based compensation is measured at the grant date based on the fair value of the award, and is recognized as an expense in earnings over the requisite service period. The fair value of each stock option granted is estimated on the date of grant using the Black-Scholes based stock option valuation model. This model uses the assumptions listed in the table below. Expected volatilities are based on implied volatilities from the Company’s stock, historical volatility of the Company’s stock, and other factors. Expected dividends are based on the Company’s plan not to pay dividends for the foreseeable future. The Company uses historical data to estimate option exercises and employee terminations within the valuation model. The risk-free rate for periods within the contractual life of the option is based on the U.S. Treasury yield curve in effect at the time of grant. There were no stock options granted during the years ended December 31, 2016 and 2015. Stock compensation expense was $748 and $17,685 for the years ended December 31, 2016 and 2015, respectively. As of December 31, 2016, there was no unrecognized compensation expense related to stock options. |
10. INCOME TAXES
10. INCOME TAXES | 12 Months Ended |
Dec. 31, 2016 | |
Notes to Financial Statements | |
NOTE 10. INCOME TAXES | The provision (benefit) for income taxes consists of: Year Ended December 31, 2016 2015 Current tax expense: Federal $ 1,094,647 $ 641,822 State 300,663 202,592 1,395,310 844,414 Deferred tax expense (benefit): Federal 72,452 376,226 State 10,548 54,774 83,000 431,000 Total $ 1,478,310 $ 1,275,414 The effective income tax rate differs from the federal statutory rate as follows: Year Ended December 31, 2016 2015 Federal statutory rate 34.00 % 34.00 % State taxes, net of federal benefit 4.95 % 4.95 % Permanent differences -2.27 % -1.13 % Tax credits 0.00 % -0.23 % Prior year adjustments -0.71 % 1.35 % Changes in tax rates and other 0.02 % 1.20 % 35.99 % 40.14 % Permanent differences for the periods consist primarily of tax deductions for domestic production activities. Net deferred tax assets and (liabilities) at December 31 consist of: 2016 2015 Deferred gain on sale-leaseback 35,000 47,000 Other 110,000 27,000 Prepaids (48,000 ) (49,000 ) Depreciation (1,784,000 ) (1,463,000 ) Inventory (244,000 ) (410,000 ) Net noncurrent deferred tax liability (1,931,000 ) (1,848,000 ) Valuation allowance — — Net deferred tax liability $ (1,931,000 ) $ (1,848,000 ) |
11. RELATED PARTY TRANSACTIONS
11. RELATED PARTY TRANSACTIONS | 12 Months Ended |
Dec. 31, 2016 | |
Notes to Financial Statements | |
NOTE 11. RELATED PARTY TRANSACTIONS | The Company provides living accommodations in a residence on the Company’s premises, at its convenience, for the Company’s President. The President 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 president. 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 and a first right of refusal in the event of the vineyard’s sale. For 2016, the annual costs of this lease, including utility reimbursements, were $121,344. For subsequent years there is an escalation provision tied to the CPI not to exceed 2% per annum. Betty M. O’Brien, a Director of the Company, is a principal owner of Elton Vineyards. |
12. COMMITMENTS AND CONTINGENCI
12. COMMITMENTS AND CONTINGENCIES | 12 Months Ended |
Dec. 31, 2016 | |
Notes to Financial Statements | |
NOTE 12. COMMITMENTS AND CONTINGENCIES | Litigation Operating leases 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 14-year operating lease agreement for the vineyard portion of the property. Approximately $99,000 of the total gain of $176,000 has been deferred and is being amortized over the life of the lease. This property is referred to as the Meadowview Vineyard, and includes approximately 45 acres of producing vineyards. The amortization of the deferred gain totals approximately $25,000 per year for the 1999 sale-leaseback agreement and $7,000 for the 2004 sale-leaseback agreement, and is recorded as an offset to the related lease expense in selling, general and administrative expenses. In February 2007, the Company entered into a lease agreement for 59 acres of vineyard land at Elton Vineyards. This lease is for a 10-year term with four five-year renewals at the Company’s option and a first right of refusal in the event of the vineyard’s sale. For 2016, the annual costs of this lease were $121,344. For subsequent years there is an escalation provision tied to the CPI not to exceed 2% per annum. Betty M. O’Brien, a Director of the Company, is principal owner of Elton Vineyards. The terms of the lease currently call for a monthly payment of $10,112, plus utility costs not to exceed $1,500 per year, with the annual adjustment ending January 2017 unless renewed. In July 2008, the Company entered into a 34-year lease agreement with a property owner in the Eola Hills for approximately 109 acres adjacent to the existing Elton Vineyards site. These 109 acres is being developed into vineyards. Terms of this agreement contain rent escalation that rises as the vineyard is developed. The current terms call for monthly payments of $1,427. In September 2014, the Company entered into a two year lease, with an option to renew for an additional two years, for its McMinnville tasting room. In September 2016 the Company exercised its option to renew the lease until August 31, 2018. The monthly payment for this lease is $3,000 with potential negotiated escalations not to exceed 5%. Grape Purchases As of December 31, 2016, future minimum lease payments are as follows for the years ending December 31: 2017 415,230 2018 405,356 2019 352,861 2020 173,612 2021 171,569 Thereafter 937,061 Total $ 2,455,689 The Company is also committed to lease payments for various pieces of office equipment. Total rental expense for these operating leases amounted to $9,770 and $8,353 in 2016 and 2015, respectively. In addition, payments for the leased vineyards have been included in inventory or vineyard developments costs and aggregate approximately $380,096 and $363,566 for the years ended December 31, 2016 and 2015, respectively. |
13. EMPLOYEE BENEFIT PLAN
13. EMPLOYEE BENEFIT PLAN | 12 Months Ended |
Dec. 31, 2016 | |
Compensation and Retirement Disclosure [Abstract] | |
NOTE 13. 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, 2016 and 2015 there were $67,090 and $71,609 contributions made by the Company to the 401(k) plan, respectively. |
14. SALE OF PREFERRED STOCK
14. SALE OF PREFERRED STOCK | 12 Months Ended |
Dec. 31, 2016 | |
Equity [Abstract] | |
14. SALE OF PREFERRED STOCK | In August 2015, the Company commenced a public offering of Series A Redeemable Preferred Stock pursuant to a registration statement filed with the Securities and Exchange Commission. The preferred stock under this issue is non-voting and ranks senior in rights and preferences to the Company’s common stock. Shareholders of this issue are entitled to receive dividends, when and as declared by the Company’s Board of Directors, at a rate of $0.22 per share. Dividends accrued but not paid will be added to the liquidation preference of the stock until the dividend is declared and paid. The Company registered this transaction with the securities authorities of the States of Oregon and Washington and, in November 2015, obtained listing status on the NASDAQ stock exchange under the trading symbol WVVIP. The initial issue has 1,445,783 shares registered with an aggregate initial offering price not to exceed $6,000,000 and was fully subscribed as of December 31, 2015. On December 22, 2015 the Company filed a Registration Statement on Form S-3 with the SEC pertaining to the potential future issuance of one or more classes or series of debt, equity or derivative securities. On February 28, 2016 shareholders of the Series A Redeemable Preferred Stock approved an increase in shares designated as Series A Redeemable Preferred Stock, from 1,445,783 to 2,857,548 shares, and amended the certificate of designation for those shares to allow the Company’s Board of Directors to make future increases. On March 10, 2016 the Company filed a Prospectus Supplement to the December 2015 Form S-3, pursuant to which the Company proposed to offer and sell, on a delayed or continuous basis, up to 970,588 additional shares of Series A redeemable Preferred stock having proceeds not to exceed $4,125,000. This stock was established to be sold in four offering periods beginning with an offering price of $4.25 per share and concluding at $4.55 per share. The Company sold substantially all preferred stock, available under this offering, as of June 30, 2016. Under the terms of the offering, proceeds from the sale of preferred stock for the three months ended December 31, 2015 were held in escrow until the stock was subsequently issued effective January 1, 2016. At December 31, 2015 $1,476,232 in stock sale proceeds were held as restricted cash and subsequently released to the Company in January 2016. As of December 31, 2016 the Company had no cash that was considered restricted. |
15. SEGMENT REPORTING
15. SEGMENT REPORTING | 12 Months Ended |
Dec. 31, 2016 | |
Segment Reporting [Abstract] | |
NOTE 15. 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. 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, 2016 and 2015. Sales figures are net of related excise taxes. Twelve Months Ended December 31, Direct Sales Distributor Sales Total 2016 2015 2016 2015 2016 2015 Sales, net $ 7,032,287 $ 6,948,210 $ 12,393,125 $ 10,990,662 $ 19,425,412 $ 17,938,872 Cost of Sales 1,876,751 2,027,451 5,328,133 5,064,660 7,204,884 7,092,111 Gross Margin 5,155,536 4,920,759 7,064,992 5,926,002 12,220,528 10,846,761 Selling Expenses 3,226,831 3,070,473 1,568,433 1,545,944 4,795,264 4,616,417 Contribution Margin $ 1,928,705 $ 1,850,286 $ 5,496,559 $ 4,380,058 $ 7,425,264 $ 6,230,344 Percent of Sales 36.2 % 38.7 % 63.8 % 61.3 % 100.0 % 100.0 % Direct sales include $245,097 and $777,538 of bulk wine and grape sales in the years ended December 31, 2016 and 2015, respectively. Net direct-to-consumer sales, including bulk wine, miscellaneous sales, and grape sales, represented approximately 36.2% and 38.7% of total net revenue for 2016 and 2015, respectively. Net sales through distributors represented approximately 63.8% and 61.3% of total net revenue for 2016 and 2015, respectively. |
16. SUBSEQUENT EVENTS
16. SUBSEQUENT EVENTS | 12 Months Ended |
Dec. 31, 2016 | |
Subsequent Events [Abstract] | |
NOTE 16. SUBSEQUENT EVENTS | Subsequent events are events or transactions that occur after the balance sheet date but before financial statements are issued. The Company recognizes in the financial statements the effects of all subsequent events that provide additional evidence about conditions that existed at the date of the balance sheet, including the estimates inherent in the process of preparing the financial statements. The Company’s financial statements do not recognize subsequent events that provide evidence about conditions that did not exist at the date of the balance sheet but arose after the balance sheet date and before financial statements are issued. In February 2017, the Company completed the purchase of approximately 16 acres in the Dundee Hills AVA. In March 2017, the Company completed the purchase of approximately 45 acres in the Walla Walla AVA. In February 2017, the Board of Directors authorized an increase in funding for the repurchase of common stock of $250,000. In February 2017, the Board of Directors authorized the refinancing of three of the Company’s Northwest Farm Credit loans and securing additional debt against the Estate Winery property. The Company refinanced approximately $3.1 million in debt with a new $5.8 million loan. After fees and prepayment costs, the Company received approximately $2.6 million in cash. This activity is part of the Company’s long-range development plan and takes advantage of the current low interest rate environment. |
1. SUMMARY OF OPERATIONS, BAS23
1. SUMMARY OF OPERATIONS, BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES (Policies) | 12 Months Ended |
Dec. 31, 2016 | |
Summary Of Operations Basis Of Presentation And Significant Accounting Policies Policies | |
Organization and operations | Organization and operations 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. Direct-to-consumer sales, including bulk wine, miscellaneous sales, and grape sales, represented approximately 36.0% and 38.5% of total revenue for 2016 and 2015, respectively. In state sales through distributors represented approximately 19.1% and 18.2% of total revenue for 2016 and 2015, respectively. Out-of-state sales, including foreign sales, represented approximately 44.9% and 43.3% of total revenue for 2016 and 2015, respectively. Foreign sales represent approximately 0.8% of total revenue. |
Basis of presentation | Basis of presentation |
Financial instruments and concentrations of risk | Financial instruments and concentrations of risk Cash and cash equivalents are maintained at four 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 2016, sales to one distributor represented approximately 19.0% of total Company revenue. In 2015, sales to one distributor represented approximately 18.2% of total Company revenue. |
Other comprehensive income | Other comprehensive income |
Cash and cash equivalents | Cash and cash equivalents |
Accounts receivable | Accounts receivable – |
Inventories | Inventories – 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 market 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 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, 2016 and 2015, approximately $76,417 and $75,669, respectively, was amortized into inventory costs. |
Property and equipment | Property and equipment 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 | Review of long-lived assets for impairment - 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, 2016 and 2015. |
Debt issuance costs | Debt issuance costs Unamortized debt issuance costs are recorded as a reduction from the carrying amount of the related debt liability in the Company’s Balance Sheets. |
Distribution agreement receivable | Distribution agreement receivable |
Income taxes | Income taxes – The Company had no unrecognized tax benefits as of December 31, 2016 or 2015. 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, 2016 and 2015 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 and Connecticut. The Company may be subject to examination by the IRS for tax years 2013 through 2016. Additionally, the Company may be subject to examinations by state taxing jurisdictions for tax years 2012 through 2016. The Company is not aware of any current examinations by the IRS or the state taxing authorities. |
Deferred rent liability | Deferred rent liability |
Revenue recognition | Revenue recognition – The Company has price incentive programs with its distributors to encourage product placement and depletions. When recording a sale to the customer, an incentive program liability is recorded to accrued liabilities and sales are reported net of incentive program expenses. Incentive program payments are made when completed incentive program payment requests are received from the customers. Incentive payments to a customer reduce the incentive program accrued liability. For the years ended December 31, 2016 and 2015, the Company recorded incentive program expenses of $503,334 and $449,930, respectively, as a reduction in sales on the income statement. As of December 31, 2016 and 2015, the Company has recorded an incentive program liability in the amount of $46,888 and $42,456, respectively, which is included in accrued expenses on the balance sheet. |
Cost of goods sold | Cost of goods sold 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, which make up approximately 12% of total 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 The Company provides an allowance to distributors for providing sample of products to potential customers. For the years ended December 31, 2016 and 2015, these costs, which are included in selling, general and administrative expenses, totaled approximately $105,421 and $153,299, respectively. |
Shipping and handling costs | Shipping and handling costs |
Excise taxes | Excise taxes – |
Stock based compensation | Stock based compensation – |
Basic and diluted income per common share after preferred | Basic and diluted income per common share after preferred dividends – Options to purchase 7,000 shares of common stock were outstanding at December 31, 2016 and diluted weighted-average shares outstanding at December 31, 2016 include the effect of 4,278 stock options. Options to purchase 67,000 shares of common stock were outstanding at December 31, 2015 and diluted weighted-average shares outstanding at December 31, 2015 include the effect of 35,287 stock options. There were no potentially dilutive shares from stock options included in the computation of dilutive income per share for 2016 and 2015 as their impact would have been anti-dilutive. |
Reclassifications | Reclassifications As a result of the retrospective adoption of ASU 2015-03 (see “Recent accounting pronouncements” below), the Company made certain reclassifications to the prior year's long-term debt to conform to the balance sheet presentation as of December 31, 2016. These reclassifications had no effect on the Company's financial position, shareholders' equity or net cash flows for any of the periods presented. |
Recently issued accounting standards | Recently issued accounting standards In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606) Revenue from Contracts with Customers (Topic 606) - Deferral of the Effective Date In January 2016, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2016-01, Recognition and Measurement of Financial Assets and Financial Liabilities The Company has not yet selected a transition method or determined the effect of the standard on its ongoing financial reporting. In February 2016, the FASB issued ASU 2016-02, Leases The accounting standards that have been issued by the FASB or other standards-setting bodies that do not require adoption until a future date are not expected to have a material impact on our financial statements upon adoption. |
2. ACCOUNTS RECEIVABLE (Tables)
2. ACCOUNTS RECEIVABLE (Tables) | 12 Months Ended |
Dec. 31, 2016 | |
Accounts Receivable Tables | |
Changes in the allowance for doubtful accounts | Year ended December 31, 2016 2015 Balance at Beginning of Period $ 11,944 $ 11,944 Charged to costs and expenses 3,977 — Charged to other accounts — — Write-offs, net of recoveries — — Balance at End of Period $ 15,921 $ 11,944 |
3. INVENTORIES (Tables)
3. INVENTORIES (Tables) | 12 Months Ended |
Dec. 31, 2016 | |
Inventories Tables | |
Inventories | December 31, December 31, 2016 2015 Winemaking and packaging materials $ 817,836 $ 690,292 Work-in-process (costs relating to unprocessed and/or unbottled wine products) 6,634,014 6,058,701 Finished goods (bottled wine and related products) 4,518,806 3,883,469 Current inventories $ 11,970,656 $ 10,632,462 |
4. PROPERTY AND EQUIPMENT (Tabl
4. PROPERTY AND EQUIPMENT (Tables) | 12 Months Ended |
Dec. 31, 2016 | |
Property And Equipment Tables | |
Property and Equipment | December 31, December 31, 2016 2015 Construction in progress $ 449,409 $ 482,284 Land, improvements and other buildings 8,063,716 5,089,472 Winery buildings and hospitality center 14,458,309 13,756,320 Equipment 10,122,593 9,055,987 33,094,027 28,384,063 Less accumulated depreciation (12,897,082 ) (11,654,901 ) $ 20,196,945 $ 16,729,162 |
7. LONG TERM DEBT (Tables)
7. LONG TERM DEBT (Tables) | 12 Months Ended |
Dec. 31, 2016 | |
Long Term Debt Tables | |
Long-term debt | December 31, 2016 2015 Northwest Farm Credit Services Loan #1 $ 1,081,296 $ 1,162,073 Northwest Farm Credit Services Loan #2 981,263 1,070,991 Northwest Farm Credit Services Loan #3 1,056,491 1,131,912 Northwest Farm Credit Services Loan #4 1,705,046 1,808,042 Toyota Credit Corporation 45,899 — 4,869,995 5,173,018 Debt issuance costs (45,839 ) (50,221 ) Current portion of long-term debt (380,471 ) (349,003 ) $ 4,443,685 $ 4,773,794 |
Future minimum principal payments of long-term debt mature | 2017 380,471 2018 403,659 2019 427,253 2020 452,290 2021 468,341 Thereafter 2,737,981 $ 4,869,995 |
9. STOCK INCENTIVE PLAN (Tables
9. STOCK INCENTIVE PLAN (Tables) | 12 Months Ended |
Dec. 31, 2016 | |
Stock Incentive Plan Tables | |
Stock options outstanding | 2016 2015 Weighted Average Exercise Weighted Average Exercise Shares Price Shares Price Outstanding at beginning of period 67,000 $ 3.22 222,971 $ 3.79 Granted — — — — Exercised (60,000 ) 3.23 (155,971 ) 4.04 Forfeited — — — — Outstanding at end of period 7,000 $ 3.09 67,000 $ 3.22 |
Stock options outstanding vested and expected to vest | 2016 2015 Intrinsic value of options exercised in the period $ 260,685 $ 427,363 Stock options fully vested and expected to vest 7,000 67,000 Weighted average exercise price $ 3.09 $ 3.22 Aggregate intrinsic value $ 34,440 $ 258,678 Weighted average contractual term of options 4.55 1.37 Stock options vested and currently exercisable 7,000 60,000 Weighted average exercise price $ 3.09 $ 3.23 Aggregate intrinsic value $ 34,440 $ 230,748 Weighted average contractual term of options 4.55 0.89 |
Weighted-average options outstanding and exercisable | Options Outstanding Options Exercisable Weighted Number Average Weighted Number Weighted Outstanding at Remaining Average Exercisable at Average Exercise December 31, Contractual Exercise December 31, Exercise Price 2016 Life Price 2016 Price $ 3.09 7,000 4.55 $ 3.09 7,000 $ 3.09 |
10. INCOME TAXES (Tables)
10. INCOME TAXES (Tables) | 12 Months Ended |
Dec. 31, 2016 | |
Income Taxes Tables | |
Provision for income taxes | Year Ended December 31, 2016 2015 Current tax expense: Federal $ 1,094,647 $ 641,822 State 300,663 202,592 1,395,310 844,414 Deferred tax expense (benefit): Federal 72,452 376,226 State 10,548 54,774 83,000 431,000 Total $ 1,478,310 $ 1,275,414 |
Effective income tax rate differs from the federal statutory rate | Year Ended December 31, 2016 2015 Federal statutory rate 34.00 % 34.00 % State taxes, net of federal benefit 4.95 % 4.95 % Permanent differences -2.27 % -1.13 % Tax credits 0.00 % -0.23 % Prior year adjustments -0.71 % 1.35 % Changes in tax rates and other 0.02 % 1.20 % 35.99 % 40.14 % |
Deferred tax assets and (liabilities) | 2016 2015 Deferred gain on sale-leaseback 35,000 47,000 Other 110,000 27,000 Prepaids (48,000 ) (49,000 ) Depreciation (1,784,000 ) (1,463,000 ) Inventory (244,000 ) (410,000 ) Net noncurrent deferred tax liability (1,931,000 ) (1,848,000 ) Valuation allowance — — Net deferred tax liability $ (1,931,000 ) $ (1,848,000 ) |
12. COMMITMENTS AND CONTINGEN30
12. COMMITMENTS AND CONTINGENCIES (Tables) | 12 Months Ended |
Dec. 31, 2016 | |
Commitments And Contingencies Tables | |
Future minimum lease payments | 2017 415,230 2018 405,356 2019 352,861 2020 173,612 2021 171,569 Thereafter 937,061 Total $ 2,455,689 |
15. SEGMENT REPORTING (Tables)
15. SEGMENT REPORTING (Tables) | 12 Months Ended |
Dec. 31, 2016 | |
Segment Reporting Tables | |
Segment reporting | Twelve Months Ended December 31, Direct Sales Distributor Sales Total 2016 2015 2016 2015 2016 2015 Sales, net $ 7,032,287 $ 6,948,210 $ 12,393,125 $ 10,990,662 $ 19,425,412 $ 17,938,872 Cost of Sales 1,876,751 2,027,451 5,328,133 5,064,660 7,204,884 7,092,111 Gross Margin 5,155,536 4,920,759 7,064,992 5,926,002 12,220,528 10,846,761 Selling Expenses 3,226,831 3,070,473 1,568,433 1,545,944 4,795,264 4,616,417 Contribution Margin $ 1,928,705 $ 1,850,286 $ 5,496,559 $ 4,380,058 $ 7,425,264 $ 6,230,344 Percent of Sales 36.2 % 38.7 % 63.8 % 61.3 % 100.0 % 100.0 % |
1. SUMMARY OF OPERATIONS, BAS32
1. SUMMARY OF OPERATIONS, BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2016 | Dec. 31, 2015 | |
Accumulated amortization of vineyard development costs | $ 1,185,823 | $ 1,109,406 |
Amortization of debt issuance costs | 4,383 | 4,383 |
Distribution agreement revenue | 142,860 | 142,860 |
Rent costs paid in excess | 27,189 | 22,940 |
Incentive program expenses | 503,334 | 449,930 |
Incentive program liabilities | 46,888 | 42,456 |
Advertising costs | 182,008 | 152,867 |
Allowance to distributors | 105,421 | 153,299 |
Shipping and handling costs | 412,331 | 421,617 |
Excise taxes incurred | 500,048 | 420,729 |
Stock based compensation | $ 748 | $ 17,685 |
Dilutive securities included in computation of earnings per share | 4,278 | 35,287 |
Sales | In State | ||
Concentration risk | 19.10% | 18.20% |
Sales | Out-of-State | ||
Concentration risk | 44.90% | 43.30% |
Direct-To-Consumer | Sales | ||
Concentration risk | 36.00% | 38.50% |
One Distributor | Revenue | ||
Concentration risk | 19.00% | 18.20% |
2. ACCOUNTS RECEIVABLE (Details
2. ACCOUNTS RECEIVABLE (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2016 | Dec. 31, 2015 | |
Accounts Receivable Tables | ||
Balance at Beginning of Period | $ 11,944 | $ 11,944 |
Charged to costs and expenses | 3,977 | 0 |
Charged to other accounts | 0 | 0 |
Write-offs, net of recoveries | 0 | 0 |
Balance at End of Period | $ 15,921 | $ 11,944 |
2. ACCOUNTS RECEIVABLE (Detai34
2. ACCOUNTS RECEIVABLE (Details Narrative) - USD ($) | Dec. 31, 2016 | Dec. 31, 2015 | Dec. 31, 2014 |
Accounts Receivable Details Narrative | |||
Allowance for doubtful accounts | $ 15,921 | $ 11,944 | $ 11,944 |
3. INVENTORIES (Details)
3. INVENTORIES (Details) - USD ($) | Dec. 31, 2016 | Dec. 31, 2015 |
Inventory Disclosure [Abstract] | ||
Winemaking and packaging materials | $ 817,836 | $ 690,292 |
Work-in-progress (costs relating to unprocessed and/or unbottled wine products) | 6,634,014 | 6,058,701 |
Finished goods (bottled wine and related products) | 4,518,806 | 3,883,469 |
Current inventories | $ 11,970,656 | $ 10,632,462 |
4. PROPERTY AND EQUIPMENT (Deta
4. PROPERTY AND EQUIPMENT (Details) - USD ($) | Dec. 31, 2016 | Dec. 31, 2015 |
Property, Plant and Equipment [Abstract] | ||
Construction in progress | $ 449,409 | $ 482,284 |
Land, improvements and other buildings | 8,063,716 | 5,089,472 |
Winery building and hospitality center | 14,458,309 | 13,756,320 |
Equipment | 10,122,593 | 9,055,987 |
Total Property and Equipment | 33,094,027 | 28,384,063 |
Less accumulated depreciation | (12,897,082) | (11,654,901) |
Net Property and Equipment | $ 20,196,945 | $ 16,729,162 |
4. PROPERTY AND EQUIPMENT (De37
4. PROPERTY AND EQUIPMENT (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2016 | Dec. 31, 2015 | |
Property And Equipment Details Narrative | ||
Depreciation expense | $ 1,254,455 | $ 1,194,191 |
5. LINE OF CREDIT FACILITY (Det
5. LINE OF CREDIT FACILITY (Details Narrative) - USD ($) | Dec. 31, 2016 | Dec. 31, 2015 |
Line Of Credit Facility Details Narrative | ||
Interest rate | 3.75% | 3.50% |
Borrowings on revolving line of credit | $ 0 | $ 0 |
6. NOTE PAYABLE (Details Narrat
6. NOTE PAYABLE (Details Narrative) - USD ($) | Dec. 31, 2016 | Dec. 31, 2015 |
Note Payable Details Narrative | ||
Note payable | $ 245,417 | $ 245,417 |
7. LONG TERM DEBT (Details)
7. LONG TERM DEBT (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2016 | Dec. 31, 2015 | |
Long term debt | $ 4,869,995 | $ 5,173,018 |
Debt issuance costs | (45,839) | (50,221) |
Current portion | (380,471) | (349,003) |
Long term debt net | 4,443,685 | 4,773,794 |
Northwest Farm Credit Services Loan 1 [Member] | ||
Long term debt | 1,081,296 | 1,162,073 |
Monthly payments | $ 12,266 | |
Interest rate | 5.90% | |
Northwest Farm Credit Services Loan 2 [Member] | ||
Long term debt | $ 981,263 | 1,070,991 |
Monthly payments | $ 13,232 | |
Interest rate | 6.70% | |
Northwest Farm Credit Services Loan 3 [Member] | ||
Long term debt | $ 1,056,491 | 1,131,912 |
Monthly payments | $ 12,004 | |
Interest rate | 6.25% | |
Northwest Farm Credit Services Loan 4 [Member] | ||
Long term debt | $ 1,705,046 | 1,808,042 |
Monthly payments | $ 15,556 | |
Interest rate | 4.75% | |
Toyota Credit Corporation [Member] | ||
Long term debt | $ 45,899 | $ 0 |
7. LONG TERM DEBT (Details 1)
7. LONG TERM DEBT (Details 1) | Dec. 31, 2016USD ($) |
Debt Disclosure [Abstract] | |
2,017 | $ 380,471 |
2,018 | 403,659 |
2,019 | 427,253 |
2,020 | 452,290 |
2,021 | 468,341 |
Thereafter | 2,737,981 |
Future minimum principal payments of long-term debt total | $ 4,869,995 |
7. LONG TERM DEBT (Details Narr
7. LONG TERM DEBT (Details Narrative) | Dec. 31, 2016 | Dec. 31, 2015 |
Long Term Debt Details Narrative | ||
Weighted-average interest rates | 5.68% | 5.74% |
9. STOCK INCENTIVE PLAN (Detail
9. STOCK INCENTIVE PLAN (Details) - Options - $ / shares | 12 Months Ended | |
Dec. 31, 2016 | Dec. 31, 2015 | |
Number of options | ||
Outstanding at beginning of period | 67,000 | 222,971 |
Granted | 0 | 0 |
Exercised | (60,000) | (155,971) |
Forfeited | 0 | 0 |
Outstanding at end of period | 7,000 | 67,000 |
Weighted average Price | ||
Outstanding at beginning of period | $ 3.22 | $ 3.79 |
Granted | 0 | 0 |
Exercised | 3.23 | 4.04 |
Forfeited | 0 | 0 |
Outstanding at end of period | $ 3.09 | $ 3.22 |
9. STOCK INCENTIVE PLAN (Deta44
9. STOCK INCENTIVE PLAN (Details 1) - USD ($) | 12 Months Ended | |
Dec. 31, 2016 | Dec. 31, 2015 | |
Stock Incentive Plan Details 1 | ||
Intrinsic value of options exercised in the period | $ 260,685 | $ 427,363 |
Stock options fully vested and expected to vest | 7,000 | 67,000 |
Weighted average exercise price | $ 3.09 | $ 3.22 |
Aggregate intrinsic value | $ 34,440 | $ 258,678 |
Weighted average contractual term of options | 4 years 6 months 18 days | 1 year 4 months 13 days |
Stock options vested and currently exercisable | 7,000 | 60,000 |
Weighted average exercise price | $ 3.09 | $ 3.23 |
Aggregate intrinsic value | $ 34,440 | $ 230,748 |
Weighted average contractual term of options | 4 years 6 months 18 days | 10 months 20 days |
9. STOCK INCENTIVE PLAN (Deta45
9. STOCK INCENTIVE PLAN (Details 2) - $ / shares | 12 Months Ended | |
Dec. 31, 2016 | Dec. 31, 2015 | |
Number Exercisable | 7,000 | 60,000 |
Weighted average exercise price | $ 3.09 | $ 3.23 |
$ 3.09 | ||
Number Outstanding | 7,000 | |
Weighted average remaining contractual life | 4 years 6 months 18 days | |
Weighted average exercise price | $ 3.09 | |
Number Exercisable | 7,000 | |
Weighted average exercise price | $ 3.09 |
9. STOCK INCENTIVE PLAN (Deta46
9. STOCK INCENTIVE PLAN (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2016 | Dec. 31, 2015 | |
Stock Incentive Plan Details Narrative | ||
Stock compensation expense | $ 748 | $ 17,685 |
10. INCOME TAXES (Details)
10. INCOME TAXES (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2016 | Dec. 31, 2015 | |
Current tax expense | ||
Federal | $ 1,094,647 | $ 641,822 |
State | 300,663 | 202,592 |
Total current tax expense | 1,395,310 | 844,414 |
Deferred tax expense (benefit) | ||
Federal | 72,452 | 376,226 |
State | 10,548 | 54,774 |
Total deferred tax expense (benefit) | 83,000 | 431,000 |
Total | $ 1,478,310 | $ 1,275,416 |
10. INCOME TAXES (Details 1)
10. INCOME TAXES (Details 1) | 12 Months Ended | |
Dec. 31, 2016 | Dec. 31, 2015 | |
Income Taxes Details 1 | ||
Federal statutory rate | 34.00% | 34.00% |
State taxes, net of federal benefit | 4.95% | 4.95% |
Permanent differences | (2.27%) | (1.13%) |
Tax credits | (0.00%) | (0.23%) |
Prior period adjustment | (0.71%) | 1.35% |
Changes in tax rates and other | 0.02% | 1.20% |
Total | 35.99% | 40.14% |
10. INCOME TAXES (Details 2)
10. INCOME TAXES (Details 2) - USD ($) | Dec. 31, 2016 | Dec. 31, 2015 |
Income Taxes Details 2 | ||
Deferred gain on sale-leaseback | $ 35,000 | $ 47,000 |
Other | 110,000 | 27,000 |
Prepaids | (48,000) | (49,000) |
Depreciation | (1,784,000) | (1,463,000) |
Inventory | (244,000) | (410,000) |
Net noncurrent deferred tax liability | (1,931,000) | (1,848,000) |
Valuation allowance | 0 | 0 |
Net deferred tax liability | $ (1,931,000) | $ (1,848,000) |
12. COMMITMENTS AND CONTINGEN50
12. COMMITMENTS AND CONTINGENCIES (Details) | Dec. 31, 2016USD ($) |
Commitments And Contingencies Details | |
2,017 | $ 415,230 |
2,018 | 405,356 |
2,019 | 352,861 |
2,020 | 173,612 |
2,021 | 171,569 |
Thereafter | 937,061 |
Total | $ 2,455,689 |
12. COMMITMENTS AND CONTINGEN51
12. COMMITMENTS AND CONTINGENCIES (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2016 | Dec. 31, 2015 | |
Commitments And Contingencies Details Narrative | ||
Grapes receivable under long-term contracts | $ 233,122 | $ 959,446 |
Rental expense | 9,770 | 8,353 |
Vineyard developments costs | $ 380,096 | $ 363,566 |
13. EMPLOYEE BENEFIT PLAN (Deta
13. EMPLOYEE BENEFIT PLAN (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2016 | Dec. 31, 2015 | |
Employee Benefit Plan Details Narrative | ||
Employer contribution | $ 67,090 | $ 71,609 |
15. SEGMENT REPORTING (Details)
15. SEGMENT REPORTING (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2016 | Dec. 31, 2015 | |
Sales, net | $ 19,425,412 | $ 17,938,872 |
Cost of Sales | 7,204,884 | 7,092,111 |
Gross Margin | 12,220,528 | 10,846,761 |
Selling Expenses | 4,795,264 | 4,616,417 |
Contribution Margin | $ 7,425,264 | $ 6,230,344 |
Percent of Sales | 100.00% | 100.00% |
Direct Sales | ||
Sales, net | $ 7,032,287 | $ 6,948,210 |
Cost of Sales | 1,876,751 | 2,027,451 |
Gross Margin | 5,155,536 | 4,920,759 |
Selling Expenses | 3,226,831 | 3,070,473 |
Contribution Margin | $ 1,928,705 | $ 1,850,286 |
Percent of Sales | 36.20% | 38.70% |
Distributor Sales | ||
Sales, net | $ 12,393,125 | $ 10,990,662 |
Cost of Sales | 5,328,133 | 5,064,660 |
Gross Margin | 7,064,992 | 5,926,002 |
Selling Expenses | 1,568,433 | 1,545,944 |
Contribution Margin | $ 5,496,559 | $ 4,380,058 |
Percent of Sales | 63.80% | 61.30% |
15. SEGMENT REPORTING (Details
15. SEGMENT REPORTING (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2016 | Dec. 31, 2015 | |
Bulk wine and grape sales inculded in direct sales | $ 245,097 | $ 777,538 |
Distributors | Revenue | ||
Concentration risk | 63.80% | 61.30% |