Table of Contents

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 


 

FORM 10-Q

 


 

x     QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the Quarterly Period Ended June 30, 2008

 

o     TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT

 

Commission File Number 0-21522

 

WILLAMETTE VALLEY VINEYARDS, INC.

(Exact name of registrant as specified in charter)

 

Oregon

 

93-0981021

(State or other jurisdiction of

 

(I.R.S. Employer

incorporation or organization)

 

Identification Number)

 

8800 Enchanted Way, S.E.

Turner, Oregon 97392

(503)-588-9463

(Address, including Zip code, and telephone number,

including area code, of registrant’s principal executive offices)

 


 

Check whether the registrant (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

 

 

 

x YES

o NO

 

Check whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.

 

o Large accelerated filer

 

o Accelerated filer

 

 

 

o Non-accelerated filer

 

x Smaller reporting company

 

Indicate by checkmark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

 

 

 

o YES

x NO

 

Number of shares of common stock outstanding as of June 30, 2008:

4,850,327 shares, no par value

 

 

 



Table of Contents

 

WILLAMETTE VALLEY VINEYARDS, INC.

INDEX TO FORM 10-Q

 

Part I - Financial Information

 

 

 

Item 1 - Financial Statements

 

 

 

Balance Sheet

 

 

 

Statement of Operations

 

 

 

Statement of Cash Flows

 

 

 

Notes to Unaudited Interim Financial Statements

 

 

 

Item 2 - Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

 

 

Item 3 - Quantitative and Qualitative Disclosures About Market Risk

 

 

 

Item 4 - Controls and Procedures

 

 

 

Part II - Other Information

 

 

 

Item 1 - Legal Proceedings

 

 

 

Item 2 - Unregistered Sales of Equity Securities and Use of Proceeds

 

 

 

Item 3 - Defaults Upon Senior Securities

 

 

 

Item 4 - Submission of Matters to a Vote of Security Holders

 

 

 

Item 5 - Other Information

 

 

 

Item 6 - Exhibits

 

 

 

Signatures

 

 

2



Table of Contents

 

Part 1

 

FINANCIAL INFORMATION

 

 

 

Item 1

 

FINANCIAL STATEMENTS

 

WILLAMETTE VALLEY VINEYARDS, INC.

Balance Sheet

 

 

 

June 30,

 

December 31,

 

 

 

2008

 

2007

 

 

 

(unaudited)

 

 

 

ASSETS

 

 

 

 

 

Current assets:

 

 

 

 

 

Cash and cash equivalents

 

$

66,146

 

$

1,083,405

 

Accounts receivable trade, net

 

1,075,099

 

1,804,168

 

Inventories

 

9,734,976

 

7,976,432

 

Prepaid expenses and other current assets

 

315,551

 

91,981

 

Current portion of notes receivable

 

62,415

 

62,415

 

 

 

 

 

 

 

Total current assets

 

11,254,187

 

11,018,401

 

 

 

 

 

 

 

Vineyard development cost, net

 

1,671,138

 

1,690,055

 

Property and equipment, net

 

4,403,540

 

4,200,155

 

Note receivable

 

187,585

 

187,585

 

Debt issuance costs, net

 

17,531

 

21,106

 

Other assets

 

6,424

 

65,893

 

 

 

 

 

 

 

Total assets

 

$

 17,540,405

 

$

 17,183,195

 

 

 

 

 

 

 

LIABILITIES AND SHAREHOLDERS’ EQUITY

 

 

 

 

 

Current liabilities

 

 

 

 

 

Current portion of long term debt

 

$

284,786

 

$

284,786

 

Revolving credit line

 

440,533

 

 

Accounts payable

 

764,633

 

564,494

 

Accrued expenses

 

414,191

 

420,825

 

Income taxes payable

 

138,287

 

76,516

 

Deferred income taxes

 

1,000

 

1,000

 

Grapes payable

 

62,901

 

508,545

 

 

 

 

 

 

 

Total current liabilities

 

2,106,331

 

1,856,166

 

 

 

 

 

 

 

Long-term debt, less current portion

 

805,994

 

946,372

 

Deferred rent liability

 

215,000

 

223,936

 

Deferred gain

 

361,977

 

378,025

 

Deferred income taxes

 

262,000

 

262,000

 

 

 

 

 

 

 

Total liabilities

 

3,751,302

 

3,666,499

 

 

 

 

 

 

 

Shareholders’ equity

 

 

 

 

 

Common stock, no par value - 10,000,000 shares authorized, 4,850,327 and 4,835,902 shares issued and outstanding at June 30, 2008 and December 31, 2007

 

8,480,171

 

8,425,389

 

Retained earnings

 

5,308,932

 

5,091,307

 

 

 

 

 

 

 

Total shareholders’ equity

 

13,789,103

 

13,516,696

 

 

 

 

 

 

 

Total liabilities and shareholders’ equity

 

$

17,540,405

 

$

17,183,195

 

 

The accompanying notes are an integral part of this financial statement.

 

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Table of Contents

 

WILLAMETTE VALLEY VINEYARDS, INC.

Statement of Operations

(unaudited)

 

 

 

Three months ended June 30,

 

Six months ended June 30,

 

 

 

2008

 

2007

 

2008

 

2007

 

Net revenues

 

 

 

 

 

 

 

 

 

Case revenue

 

$

3,884,983

 

$

3,717,426

 

$

7,287,656

 

$

7,303,987

 

Facility Lease

 

 

8,793

 

 

17,586

 

 

 

 

 

 

 

 

 

 

 

Total net revenues

 

3,884,983

 

3,726,219

 

7,287,656

 

7,321,573

 

 

 

 

 

 

 

 

 

 

 

Cost of sales

 

 

 

 

 

 

 

 

 

Case

 

1,973,844

 

1,999,942

 

3,727,678

 

3,896,173

 

Bulk

 

 

986

 

 

986

 

 

 

 

 

 

 

 

 

 

 

Total cost of sales

 

1,973,844

 

2,000,928

 

3,727,678

 

3,897,159

 

 

 

 

 

 

 

 

 

 

 

Gross profit

 

1,911,139

 

1,725,291

 

3,559,978

 

3,424,414

 

 

 

 

 

 

 

 

 

 

 

Selling, general and administrative expenses

 

1,645,963

 

1,266,844

 

3,174,471

 

2,577,017

 

 

 

 

 

 

 

 

 

 

 

Net operating income

 

265,176

 

458,447

 

385,507

 

847,397

 

 

 

 

 

 

 

 

 

 

 

Other income (expense)

 

 

 

 

 

 

 

 

 

Interest income

 

16,222

 

11,053

 

17,193

 

28,111

 

Interest expense

 

(17,715

)

(27,523

)

(40,043

)

(55,760

)

Other income (expense)

 

(1,139

)

 

53

 

12,667

 

 

 

 

 

 

 

 

 

 

 

Net income before income taxes

 

262,544

 

441,977

 

362,710

 

832,415

 

 

 

 

 

 

 

 

 

 

 

Income tax

 

105,017

 

176,800

 

145,085

 

332,975

 

 

 

 

 

 

 

 

 

 

 

Net income

 

157,527

 

265,177

 

217,625

 

499,440

 

 

 

 

 

 

 

 

 

 

 

Retained earnings beginning of period

 

5,151,405

 

3,638,909

 

5,091,307

 

3,404,646

 

 

 

 

 

 

 

 

 

 

 

Retained earnings end of period

 

$

5,308,932

 

$

3,904,086

 

$

5,308,932

 

$

3,904,086

 

 

 

 

 

 

 

 

 

 

 

Basic earnings per common share

 

$

.03

 

$

.06

 

$

.04

 

$

.10

 

 

 

 

 

 

 

 

 

 

 

Diluted earnings per common share

 

$

.03

 

$

.05

 

$

.04

 

$

.10

 

 

 

 

 

 

 

 

 

 

 

Weighted average number of basic common shares outstanding

 

4,844,475

 

4,805,877

 

4,840,882

 

4,803,326

 

 

 

 

 

 

 

 

 

 

 

Weighted average number of diluted common shares  outstanding

 

5,006,888

 

5,014,213

 

4,997,528

 

5,009,580

 

 

The accompanying notes are an integral part of this financial statement.

 

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Table of Contents

 

WILLAMETTE VALLEY VINEYARDS, INC.

Statement of Cash Flows

(unaudited)

 

 

 

Six Months ended June 30,

 

 

 

2008

 

2007

 

Cash flows from operating activities:

 

 

 

 

 

Net income

 

$

217,625

 

$

499,440

 

Reconciliation of net income to net cash provided by (used in) operating activities:

 

 

 

 

 

Depreciation and amortization

 

308,241

 

268,879

 

Bad debt expense

 

 

8,333

 

Stock based compensation expense

 

20,733

 

22,386

 

 

 

 

 

 

 

Changes in operating assets and liabilities:

 

 

 

 

 

Accounts receivable trade

 

729,069

 

567,623

 

Inventories

 

(1,758,542

)

159,483

 

Prepaid expenses and other current assets

 

(223,572

)

(63,702

)

Prepaid income taxes

 

 

 

(23,817

)

Other assets

 

59,469

 

(1,234

)

Accounts payable

 

200,138

 

(360,275

)

Accrued expenses

 

(6,633

)

(9,096

)

Income taxes payable

 

61,771

 

(305,608

)

Grape payables

 

(445,644

)

(387,238

)

Deferred rent liability

 

(8,936

)

16,493

 

Deferred gain

 

(16,048

)

(16,047

)

 

 

 

 

 

 

Net cash used in operating activities

 

(862,329

)

375,620

 

 

 

 

 

 

 

Cash flows from investing activities;

 

 

 

 

 

Additions to property and equipment

 

(489,132

)

(72,446

)

 

 

 

 

 

 

Net cash used in investing activities

 

(489,132

)

(72,446

)

 

 

 

 

 

 

Cash flows from financing activities:

 

 

 

 

 

Proceeds from stock options exercised

 

27,250

 

36,240

 

Revolving line of credit

 

440,533

 

 

Loan to grape producer

 

 

(250,000

)

Repayments of long-term debt

 

(140,379

)

(124,663

)

Excess tax benefit on stock option exercises

 

6,798

 

 

 

 

 

 

 

 

Net cash provided by (used in) financing activities

 

334,202

 

(338,423

)

 

 

 

 

 

 

Net increase (decrease) in cash and cash equivalents

 

(1,017,259

)

(35,249

)

 

 

 

 

 

 

Cash and cash equivalents:

 

 

 

 

 

Beginning of period

 

1,083,405

 

1,612,470

 

 

 

 

 

 

 

 

 

End of period

 

$

66,146

 

$

1,577,221

 

 

The accompanying notes are an integral part of this financial statement.

 

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NOTES TO UNAUDITED INTERIM FINANCIAL STATEMENTS

 

1)   BASIS OF PRESENTATION

 

The accompanying unaudited financial statements for the three and six months ended June 30, 2008 and 2007, have been prepared in conformity with accounting principles generally accepted in the United States (“GAAP”). The financial information as of December 31, 2007 is derived from the audited financial statements presented in the Willamette Valley Vineyards, Inc. (the “Company”) Annual Report on Form 10-KSB for the year ended December 31, 2007. Certain information or footnote disclosures normally included in financial statements prepared in accordance with 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, 2007, as presented in the Company’s Annual Report on Form 10-KSB.

 

Operating results for the three and six months ended June 30, 2008 are not necessarily indicative of the results that may be expected for the entire year ending December 31, 2008, or any portion thereof.

 

The Company historically has reported as a single operating segment consisting of the retail, in-state self-distribution and out-of-state sales departments.  These departments have mostly similar economic characteristics, offer comparable products to customers, and utilize similar processes for production and distribution. The in-state self-distribution business known as Bacchus Fine Wines has the unique characteristic of selling wholesale purchased wines in addition to Company produced wines and glassware. The Company now reports limited financial information for two operating segments as follows: Bacchus Distribution and Produced Wines. Discrete financial information was not available to allow for segment reporting in prior year periods, however, the addition of a new order fulfillment and accounting system now provides this additional information.

 

Basic earnings per share are computed based on the weighted-average number of common shares outstanding each period. Diluted earnings per share are computed using the weighted average number of shares of common stock and potentially dilutive common shares outstanding during the year.  Potentially dilutive shares from stock options and other potentially dilutive shares are excluded from the computation when their effect is anti-dilutive. There were no potentially dilutive shares excluded from the computation for the six months ended June 30, 2008. 162,413 and 156,647 potentially dilutive shares are included in the computation of dilutive earnings per share for the three and six months ended June 30, 2008. 208,336 and 206,254 p otentially dilutive shares are included in the computation of dilutive earnings per share for the three and six months ended June 30, 2007 .

 

2)   STOCK BASED COMPENSATION

 

The Company has two stock option plans, the 1992 Stock Incentive Plan (“1992 Plan”) and 2001 Stock Option Plan (“2001 Plan”).  No additional grants may be made under the 1992 Plan.  The 2001 Plan, which was approved by the shareholders, permits the grant of stock options and restricted stock awards for up to 900,000 shares.  All stock options have an exercise price that is equal to the fair market value of the Company’s stock on the date the options were granted.  Administration of the plan, including determination of the number, term, and type of options to be granted, lies with the Board of Directors or a duly authorized committee of the Board of Directors.  Options are generally granted based on employee performance with vesting periods ranging from date of grant to seven years.  The maximum term before expiration for all grants is ten years.

 

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The following table presents information related to the value of outstanding stock options for the periods shown:

 

 

 

Three months ended

 

Six months ended

 

 

 

June 30, 2008

 

June 30, 2008

 

 

 

 

 

Weighted

 

 

 

Weighted

 

 

 

 

 

average

 

 

 

average

 

 

 

 

 

exercise

 

 

 

exercise

 

 

 

Shares

 

price

 

Shares

 

price

 

Outstanding at beginning of period

 

432,700

 

$

3.91

 

434,200

 

$

3.90

 

Granted

 

 

 

 

 

 

 

Exercised

 

(12,500

)

$

4.99

 

(14,000

)

$

4.62

 

Forfeited

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Outstanding at end of Period

 

420,200

 

$

3.87

 

420,200

 

$

3.87

 

 

At January 1, 2006, the Company began recognizing compensation expense for stock options with the adoption of Statement of Financial Accounting Standards (“SFAS”) No. 123 (Revised), “Share-Based Payment,” (“SFAS 123R”). The fair value of each stock option granted is estimated on the date of grant using the Black-Scholes 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.

 

 Black-Scholes assumptions

 

 

 

June 30, 2008

 

 

 

 

 

Risk Free interest rates

 

3.99

%

Expected dividend

 

0

%

Expected lives, in years

 

5-10

 

Expected volatility

 

44.2

%

 

The Company expenses stock options on a straight-line basis over the options’ related vesting term.  For the three months ended June 30, 2008 and 2007, the Company recognized pretax compensation expense related to stock options and restricted stock grants of $8,143 and $8,325, respectively; and for the six months ended June 30, 2008 and 2007, the Company recognized pretax compensation expense related to stock options of $20,733 and $22,386, respectively.

 

During the six months ended June 30, 2008, the following transactions related to stock option exercise occurred:

 

 

 

 

 

Exercise

 

 

 

Shares

 

Price

 

 

 

 

 

 

 

Stock Options Exercised

 

1,500

 

$

1.50

 

 

 

5,000

 

$

5.00

 

 

 

5,000

 

$

4.98

 

 

 

2,500

 

$

5.00

 

 

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The exercise of the aforementioned options resulted in a reduction of $6,798 in the Company’s tax liability.  Since the deduction exceeds the compensation costs recognized in the financial statements, the excess tax benefit is recognized as additional paid in capital.

 

3)    INVENTORIES

 

The Company’s inventories, by major classification, are summarized as follows, as of the dates shown:

 

 

 

June 30,

 

December 31,

 

 

 

2008

 

2007

 

 

 

(unaudited)

 

 

 

Winemaking and packaging materials

 

$

227,735

 

$

283,200

 

Work-in-progress (costs relating to unprocessed and/or bulk  wine products)

 

3,099,487

 

2,710,399

 

Finished goods (bottled wines and related products)

 

6,407,754

 

4,982,833

 

 

 

 

 

 

 

Current inventories

 

$

9,734,976

 

$

7,976,432

 

 

4)    PROPERTY AND EQUIPMENT

 

The Company’s property and equipment consists of the following, as of the dates shown:

 

 

 

June 30,

 

December 31,

 

 

 

2008

 

2007

 

 

 

(unaudited)

 

 

 

Land and improvements

 

$

1,027,310

 

$

959,064

 

Winery building and hospitality center

 

4,975,002

 

4,848,249

 

Equipment

 

4,946,446

 

4,617,040

 

 

 

 

 

 

 

 

 

10,948,758

 

10,424,353

 

 

 

 

 

 

 

Less accumulated depreciation

 

(6,545,218

)

(6,224,198

)

 

 

 

 

 

 

 

 

$

4,403,540

 

$

4,200,155

 

 

5)    INTEREST AND TAXES PAID

 

During the second quarter ended June 30, 2008, the Company paid $0 in Federal, State and Local income taxes and $81,238 in Payroll tax. Additionally, $17,715 was paid in interest on the long-term debt and revolving credit line for the same period. For the six month period ended June 30, 2008, the Company paid $314,300 in Federal, State and Local income taxes and $172,871 in Payroll tax. Additionally, $40,043 was paid in interest on the long-term debt and revolving credit line for the same period.

 

6)    SEGMENT REPORTING

 

The Company has identified two operating segments, Produced Wine and Bacchus Distribution. Bacchus Distribution (dba Bacchus Fine Wines), is the company’s in-state distribution department. Bacchus distributes produced wine, purchased wine and glassware at wholesale prices to in-state customers. Produced wine

 

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represents all Willamette Valley Vineyard branded wine which is produced at the winery.  Purchased wines and glassware are brands purchased from other wine distributors and wineries for sale to in-state customers. For segment reporting, the produced wines distributed by Bacchus are consolidated with Retail and Out-of-State sales and shown as Produced Wines.

 

Discrete financial information for these operating segments was not available in prior periods, which resulted in the segments being aggregated and reflected as a single segment.  Effective for the three months ended March 31, 2008, certain discrete financial information became available with the implementation of new accounting and inventory tracking software.  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 segment.  Sales, 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 inventory, is not available and that information continues to be aggregated.

 

The following tables outline the sales, cost of sales and gross profit, for the three and six month periods ended June 30, 2008 by operating segment:

 

 

 

Three months ended June 30, 2008

 

 

 

Bacchus

 

Produced

 

 

 

 

 

Distribution

 

Wine

 

Total

 

 

 

 

 

 

 

 

 

Net Sales

 

$

1,157,831

 

$

2,727,152

 

$

3,884,983

 

 

 

 

 

 

 

 

 

Cost of Sales

 

$

858,033

 

$

1,115,811

 

$

1,973,844

 

 

 

 

 

 

 

 

 

Gross Profit

 

$

299,798

 

$

1,611,341

 

$

1,911,139

 

 

 

 

 

 

 

 

 

% of sales

 

25.9

%

59.1

%

49.2

%

 

 

 

 

Six months ended June 30, 2008

 

 

 

Bacchus

 

Produced

 

 

 

 

 

Distribution

 

Wine

 

Total

 

 

 

 

 

 

 

 

 

Net Sales

 

$

2,229,097

 

$

5,058,559

 

$

7,287,656

 

 

 

 

 

 

 

 

 

Cost of Sales

 

$

1,619,374

 

$

2,108,304

 

$

3,727,678

 

 

 

 

 

 

 

 

 

Gross Profit

 

$

609,723

 

$

2,950,255

 

$

3,559,978

 

 

 

 

 

 

 

 

 

% of sales

 

27.4

%

58.3

%

48.8

%

 

Total inventory for Bacchus Distribution was $2,230,858 of purchased wines and $257,485 of non-wine merchandise at period end June 30, 2008.  This compares to Produced Wine wine inventory of $6,333,354 and $913,279 of non-wine merchandise and work-in-process for the same period.

 

Item 2

 

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

Forward Looking Statements

 

This Management’s Discussion and Analysis of Financial Condition and Results of Operation and other sections of this Form 10-Q contain forward-looking

 

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statements within the meaning of the Private Securities Litigation Reform Act of 1995.  These forward-looking statements involve risks and uncertainties that are based on current expectations, estimates and projections about the Company’s business, and beliefs and assumptions made by management.  Words such as “expects,” “anticipates,” “intends,” “plans,” “believes,” “seeks,” “estimates” and variations of such words and similar expressions are intended to identify such forward-looking statements.  Therefore, actual outcomes and results may differ materially from what is expressed or forecasted in such forward-looking statements due to numerous factors, including, but not limited to:  availability of financing for growth, availability of adequate supply of high quality grapes, successful performance of internal operations, impact of competition, changes in wine broker or distributor relations or performance, impact of possible adverse weather conditions, impact of reduction in grape quality or supply due to disease, impact of governmental regulatory decisions, and other risks detailed below as well as those discussed elsewhere in this Form 10-Q and from time to time in the Company’s Securities and Exchange Commission filings and reports.  In addition, such statements could be affected by general industry and market conditions and growth rates, and general domestic economic conditions.  The Company undertakes no obligation to revise forward-looking statements to reflect events or changes after the date of this discussion or to reflect the occurrence of unanticipated events.

 

Critical Accounting Policies

 

The foregoing discussion and analysis of our financial condition and results of operations are based upon our financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America.  The preparation of these financial statements requires the Company’s management to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities.  On an on-going basis, we evaluate our estimates, including those related to revenue recognition, collection of accounts receivable, valuation of inventories, and amortization of vineyard development costs.  We base our estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances.  Actual results may differ from these estimates under different assumptions or conditions.  A description of our critical accounting policies and related judgments and estimates that affect the preparation of our financial statements is set forth in our Annual Report on Form 10-KSB for the year ended December 31, 2007.  Such policies were unchanged during the three months ended June 30, 2008.

 

Overview

 

Sales revenue for the three months ended June 30, 2008 increased $158,764 or 4.3% from the comparable prior year period.  Sales revenue for the six months ended June 30, 2008 decreased $33,917 or -0.5% for the comparable prior year period.

 

Sales revenue growth for the first six months of 2008 versus 2007 is being constrained principally due to three Pinot Noir products being out of stock.  These products will be available for sale sometime in the 4th Quarter of 2008.

 

Taken as a whole, the three sales departments: National Sales, Oregon Wholesale (Bacchus Fine Wines) and Retail improved on their net contribution for the three months ended June 30, 2008 versus the comparable prior year period.

 

Net operating income performance versus for the quarter and year ended June 30, 2008 was less mainly due to one-time audit and legal fees resulting from the implementation problems of the new Oregon Wholesale order fulfillment and accounting system. Additionally, incremental shipping charges due to higher fuel costs, sales salaries and overall inflationary general and administrative expenses led to decreased net operating income versus prior year.

 

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As a result, the Company generated $0.03 and $0.04 basic earnings per share during the three and six months ended June 30, 2008, a decrease of $0.03 and $0.06 basic earnings per share versus the comparable prior year periods.

 

The winery bottled approximately 32,000 cases in the second quarter, mainly 2007 vintage Pinot Gris, Riesling and Oregon Blossom.

 

The Company has an asset-based loan agreement with Umpqua Bank that allows it to borrow up to $2,000,000.  The maturity date on this note is January, 5, 2009.  At June 30, 2008, the Company had a credit line balance of $440,533 and $1,559,467 of available credit. The interest rate in the quarter was 5.0%. The interest rate on this note is a variable interest rate and is subject to change from time to time based on changes in an independent index which is the Prime Rate as published in the Wall Street Journal (the “Index”).  The index rate at June 30, 2008 is 5.00%. The loan agreement contains, among other things, certain restrictive financial covenants with respect to total equity, debt-to-equity and debt coverage that must be maintained by the Company on a quarterly basis.  As of June 30, 2008, the Company was in compliance with all of the financial covenants.

 

One of the nation’s leading wine consumer magazines, Wine Enthusiast recently issued high marks for the Company’s 2006 vintage Pinot Noirs as follows:

 

91 pts. for Signature Cuvée Pinot Noir

90 pts. for Estate Vineyard Pinot Noir

90 pts. for Tualatin Estate Vineyard Pinot Noir

89 pts. for Hannah Vineyard Pinot Noir

88 pts. for Willamette Valley Pinot Noir

 

The newly released 2007 Pinot Gris earned gold medals at the 2008 Los Angeles International Wine & Spirits Awards, the 2008 National Women’s Wine Competition and was selected as a winner at the Pacific Coast Oyster Wine Competition for the third consecutive year.

 

Oregon’s leading industry organization dedicated to sustainable environmental practice, LIVE, Inc. (Low Input Viticulture and Enology) presented winery founder and CEO Jim Bernau with the organization’s first Founder’s Award at its Annual Meeting held April 3, 2008.

 

RESULTS OF OPERATIONS

 

Revenue

 

Net revenue for the three and six months ended June 30, 2008 increased $158,764 or 4.3% and decreased $33,917 or -0.5%, respectively, versus the corresponding periods in the preceding year. The increase in the quarter is primarily due to increased order activity from out-of-state distributors and increased retail wine club sales. This is slightly offset by the decrease in in-state wholesale sales due to outages of certain core Pinot Noir products.  The decrease for the first six months is primarily due to out-of-state distributors ordering less in the first five months of 2008 and the in-state wholesale lost placements previously mentioned.

 

Our revenues from winery operations are summarized as follows:

 

 

 

Three months ended June 30, 

 

Six months ended June 30,

 

 

 

2008

 

2007

 

2008

 

2007

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Tasting Room Sales and Rental Income

 

$

567,321

 

$

517,080

 

$

1,058,371

 

$

962,544

 

On-site and off-site Festivals

 

25,356

 

14,634

 

62,887

 

64,739

 

In-state sales

 

1,864,762

 

1,877,754

 

3,577,877

 

3,644,981

 

Out-of-state sales

 

1,505,630

 

1,420,283

 

2,758,066

 

2,829,140

 

Bulk wine/Misc. sales

 

 

8,793

 

 

17,586

 

 

 

 

 

 

 

 

 

 

 

Total Revenue

 

3,963,069

 

3,838,544

 

7,457,201

 

7,518,990

 

 

 

 

 

 

 

 

 

 

 

Less excise taxes

 

(78,086

)

(112,325

)

(169,545

)

(197,417

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Revenue

 

$

3,884,983

 

$

3,726,219

 

$

7,287,656

 

$

7,321,573

 

 

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Tasting room sales and rental income for the three and six months ended June 30, 2008 increased $50,241 or 9.7% and $95,827 or 10.0%, respectively, compared to the corresponding prior year periods.  The incremental revenue is primarily due to a higher volume of cases sold in the tasting room and mail order sales offset slightly by a reduced number of on-site room rentals versus prior year.

 

Sales in the state of Oregon, through our wholesale department, Bacchus Fine Wines, decreased $12,992 or -0.7% and $67,104
or -1.8% in the three and six months ended June 30, 2008, respectively, compared to the corresponding prior year periods.  In the three and six months ended June 30, 2008, our direct in-state sales to our largest customer decreased $58,919 or -25.0% and $260,056
or -45.3%, respectively, over the comparable prior year periods.  The decrease is largely the result of reduced order activity with a key customer due to the outage of specific Willamette Valley Vineyard brand Pinot Noir varietal.  This was mostly offset by the increased product placements and development of the wholesale department’s portfolio of brands produced by wineries outside of Oregon. It is anticipated that the key customer reduced order activity will be renewed in 2008 once the release of the 2007 harvest Pinot Noir is complete later this year.

 

Out-of-state sales in the three and six months ended June 30, 2008 increased $85,347 or 6.0% and decreased $71,074 or -2.5%, respectively, versus the comparable prior year periods. The decrease in the year is primarily due to reduced order activity by distributors whom are reducing their inventory levels even though sales to end consumers are up over last year.  In June order activity was greatly improved and resulted in a 6.0% increase in the quarter versus prior year.

 

Gross Profit

 

Gross profits for the three and six months ended June 30, 2008 increased $185,848 or 10.8% and $135,564 or 4.0%, respectively, versus the comparable prior year periods.

 

As a percentage of net revenue, gross profit from winery operations was 49.2% and 48.8% in the three and six months ended June 30, 2008, respectively, as compared to 46.3% and 46.8% in the comparable prior year periods.  The improvement in gross profit as a percentage of net revenue is mainly due to the impact of Retail which, for this year, represents a higher percentage of total gross profit and the mix of out of state sales towards higher margin products.  The Company continues to focus on improved distribution of higher margin Willamette Valley Vineyards brand products as well as continuing our efforts to reduce grape and production costs.  Our increased representation of brands other than our own through our Oregon Wholesale sales force and increases in cost of production may erode future gross margin as a percentage of sales due to the lower margins associated with selling those brands.

 

Selling, General and Administrative Expense

 

Selling, general and administrative expenses for the three and six months ended June 30, 2008 increased $379,119 or 29.9% and $597,454 or 23.2%, respectively, compared to the corresponding prior year periods.  These increases are due primarily to one-time incremental professional service fees

 

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for Accounting audit services and legal services. Additionally, inflationary shipping costs have had an unfavorable impact for the quarter and year versus prior year.  As a percentage of net revenues from winery operations, selling, general and administrative expenses increased to 42.4% and 43.6% for the three and six months ended June 30, 2008, respectively, as compared to 34.0% and 35.2% for the comparable prior year periods.

 

Interest Income, Interest Expense

 

Interest income increased $5,169 or 46.8% and decreased $10,918 or -38.8% for the three and six months ended June 30, 2008, respectively, compared to the comparable prior year periods.  Interest expense for the three and six months ended June 30, 2008 decreased $9,808 or -35.6% and $15,717 or -28.2%, respectively, compared to the corresponding prior year periods.  The average interest rate paid for the three and six months ended June 30, 2008 was 5.0% and 6.0%, respectively.

 

Income Taxes

 

Income tax expense was $105,017 and $145,085, respectively, for the three and six months ended June 30, 2008, compared to $176,800 and $332,975, respectively, for the prior year periods.  Our estimated tax rate for the three and six months ended June 30, 2008 and 2007 was 40% and 40% respectively.  As a result of taking a tax deduction for exercises of stock options in the year the current tax liability was reduced by $6,798.  This benefit increases additional paid in capital in stockholders equity and is reflected on the statement of cash flows as excess tax benefits on stock option exercises.

 

Net Income and Earnings per Share

 

As a result of the factors listed above, net income for the three and six months ended June 30, 2008 was $157,527 and $217,625, respectively compared to net income of $265,177 and $499,440 in the comparable prior year periods. Diluted earnings per share were $0.03 and $0.04 for the quarter and year-to date ended June 30, 2008, respectively, compared to $0.05 and $0.10 per diluted share, in the comparable prior year periods.

 

Liquidity and Capital Resources

 

At June 30, 2008, we had a working capital balance of $9.1 million and a current ratio of 5.34:1.  At December 31, 2007, we had a working capital balance of $9.1 million and a current ratio of 5.91:1.  We had a cash balance of $66,146 at June 30, 2008, compared to a cash balance of $1,083,405 at December 31, 2007.  The decrease in cash was primarily due to the build-up of inventory required to support 2008 anticipated higher sales volume and capital expenditures for property, plant and equipment.

 

Total cash used in operating activities in the six months ended June 30, 2008 was ($862,329) compared to cash provided by operating activities of $375,620 for the same period in the prior year.  The increase in cash used in operating activities versus prior year was primarily due to the significant build-up of inventory required to support 2008 anticipated higher sales volume.

 

Total cash used in investing activities in the six months ended June 30, 2008 was ($489,132), compared to ($72,446) in the prior year period.  The decrease was mainly due to construction expenditures required to improve the Tualatin production facility, a five acre real estate acquisition also at Tualatin, two new replacement vehicles added for executive staff and an added delivery vehicle for Bacchus Fine Wines.

 

Total cash provided by financing activities in the six months ended June 30, 2008 was $334,202 compared to ($338,423) used in financing activities in the prior year period.  Cash provided by financing activities primarily consisted

 

13



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of revolving credit line advances needed to support working capital requirements. This is offset somewhat by cash used to repay long-term debt.

 

At June 30, 2008, the line of credit balance was $440,533, on a maximum borrowing amount of $2,000,000.  We have a loan agreement with Umpqua Bank that contains, among other things, certain restrictive financial covenants with respect to total equity, debt-to-equity and debt coverage that must be maintained by us on a quarterly basis.  As of June 30, 2008, we were in compliance with all of the financial covenants.

 

As of June 30, 2008, we had a total long-term debt balance of $1,090,780, including the portion due in the next year, owed to Farm Credit Services. There was no new long-term debt incurred in the three months ended June 30, 2008. The debt balance remaining represents the debt service with Farm Credit Services which was used to finance our Hospitality Center, invest in new winery equipment to increase our winemaking capacity and complete a larger storage facility.

 

At June 30, 2008, we owed $62,901 on grape contracts.  This amount is owed to a single grape grower, which will be paid as the wine made from those grapes is sold. For the 2008 harvest, there are grape purchase contracts in place with local growers that will be accrued when the grapes are received, typically in October.

 

We believe that cash flow from operations and funds available under our existing credit facilities will be sufficient to meet our foreseeable short and long term needs.

 

Segment Reporting

 

The Company’s in-state self-distribution business know as Bacchus Fine Wines sells wholesale purchased wines from other wineries and glassware in addition to Company produced wines. The sale of purchased wines and glassware is a unique characteristic versus the Retail and Out-Of-State sales organizations of the Company and therefore warrants segment discussion.  The purchased wine and glassware segment is shown below as Bacchus Distribution. For purposes of segment reporting the produced wines sold by Bacchus are consolidated with Retail and Out-of-State sales and shown below as Produced Wines.  Sales, general and administrative expenses are not allocated between operating segments, therefore net income information for the respective segments is not available.  This quarter is only the second quarter that specific segment information for purchased wines and non-wine has been disclosed.

 

The following table outlines the sales, cost of sales and gross profit, for the three and six month periods ended June 30, 2008 by operating segment:

 

 

 

Three months ended June 30, 2008

 

 

 

Bacchus
Distribution

 

Produced
Wine

 

Total

 

Net Sales

 

$

1,157,831

 

$

2,727,152

 

$

3,884,983

 

 

 

 

 

 

 

 

 

 

 

 

Cost of Sales

 

$

858,033

 

$

1,115,811

 

$

1,973,844

 

 

 

 

 

 

 

 

 

 

 

 

Gross Profit

 

$

299,798

 

$

1,611,341

 

$

1,911,139

 

 

 

 

 

 

 

 

 

 

 

 

% of sales

 

25.9

%

59.1

%

49.2

 

 

 

 

Six months ended June 30, 2008

 

 

 

Bacchus
Distribution

 

Produced
Wine

 

Total

 

Net Sales

 

$

2,229,097

 

$

5,058,559

 

$

7,287,656

 

 

 

 

 

 

 

 

 

 

 

 

Cost of Sales

 

$

1,619,374

 

$

2,108,304

 

$

3,727,678

 

 

 

 

 

 

 

 

 

 

 

 

Gross Profit

 

$

609,723

 

$

2,950,255

 

$

3,559,978

 

 

 

 

 

 

 

 

 

 

 

 

% of sales

 

27.4

%

58.3

%

48.8

%

 

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Total inventory for Bacchus Distribution was $2,230,858 of purchased wines and $257,485 of non-wine merchandise at period end June 30, 2008.  This compares to Produced Wine wine inventory of $6,333,354 and $913,279 of non-wine merchandise and work-in-process for the same period.

 

Item 3

 

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

 

As a smaller reporting company we are not required to provide the information required by this item.

 

Item 4

 

CONTROLS AND PROCEDURES

 

Disclosure Controls and Procedures

 

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to management, including our Chief Executive Officer, as appropriate, to allow timely decisions regarding required disclosure.  For the period ended June 30, 2008, the Company performed an evaluation, under the supervision and with the participation of the Chief Executive Officer, Chief Financial Officer and other management personnel, of the effectiveness of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) of the Securities and Exchange Act of 1934. Management, including our Chief Executive Officer and Chief Financial Officer, has concluded that the disclosure controls and procedures as of June 30, 2008 were effective at the assurance level as of the end of the period covered by this report.

 

The Company does not expect that its disclosure controls and procedures will prevent all error and instances of fraud. A control procedure, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control procedure are met. Because of the inherent limitations in all control procedures, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the control. The Company considered these limitations during the development of its disclosure controls and procedures, and will continually reevaluate them to ensure they provide reasonable assurance that such controls and procedures are effective.

 

Internal Control over Financial Reporting

 

In our Management’s Report on Internal Control Over Financial Reporting included in the Company’s Form 10-KSB for the year ended December 31, 2007, management concluded that our internal control over financial reporting was

 

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not effective due to the existence of certain material weaknesses as of December 31, 2007.

 

Beginning during the fourth quarter of fiscal 2007 and in the first and second quarters of fiscal year 2008, we formulated a remediation plan and initiated remedial action to address those material weaknesses. The elements of the remediation plan were as follows:

 

·               Inadequate segregation of duties within a significant account or process. We commenced a thorough review of our accounting staff’s duties and where necessary we have been segregating such duties with other personnel.

 

·               Inadequate documentation of the components of internal control. We commenced a thorough review of our documentation and where necessary we have put into place policies and procedures to document such evidence to comply with our internal control requirements. We also retained a financial consultant to assist us in further reviewing and improving our internal control processes.

 

We believe that these measures, which were effectively implemented and maintained, have not completely remediated the material weaknesses identified above.

 

The above remedial measures initiated during the fourth quarter of fiscal year 2007 and pursued in the six months ended June 30, 2008, have materially affected our internal control over financial reporting.

 

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PART II.                                  OTHER INFORMATION

                                                 

Item 1.             Legal Proceedings.

                        

                         None.

                        

Item 2.             Unregistered Sales of Equity Securities and Use of Proceeds.

                        

                         None.

                        

Item 3.             Defaults Upon Senior Securities.

                        

                         None.

                        

Item 4.             Submission of Matters to a Vote of Security Holders.

                        

                         None.

                        

Item 5.             Other Information

                        

                         None.

 

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Item 6.             Exhibits

 

Exhibit No.

 

Description

 

 

 

3.1

 

Articles of Incorporation of Willamette Valley Vineyards, Inc. (incorporated by reference from the Company’s Regulation A Offering Statement on Form 1-A, (Commission File No. 24S-2996)

 

 

 

3.2

 

Plan of Merger and Articles of Merger, dated April 15, 1997 (incorporated herein by reference to Exhibit 99 to the Company’s Form 10QSB, filed May 15, 1997 (File No. 000-21522)

 

 

 

3.3

 

Plan of Merger and Articles of Merger, dated April 15, 1997 (incorporated herein by reference to Exhibit 99.1 to the Company’s Form 10QSB, filed May 15, 1997 (File No. 000-21522)

 

 

 

*3.4

 

Articles of Amendment, dated August 22, 2000

 

 

 

*3.5

 

Bylaws of Willamette Valley Vineyards, Inc. (incorporated by reference from the Company’s Regulation A Offering Statement on Form 1-A (Commission File No. 24S-2996)

 

 

 

*31.1

 

Certification by James W. Bernau pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934

 

 

 

*31.2

 

Certification by Jeffrey J. Fox pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934

 

 

 

*32.1

 

Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

 

 

 

*32.2

 

Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

 


* Filed herewith

 

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Table of Contents

 

SIGNATURES

 

Pursuant to the requirements of the Security Exchange Act of 1934, as amended, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

 

WILLAMETTE VALLEY VINEYARDS, INC.

 

 

 

 

Date: August 14, 2008

By

/s/  James W. Bernau

 

 

    James W. Bernau

 

 

    President

 

 

 

 

 

 

Date: August 14, 2008

By

/s/  Jeffrey J. Fox

 

 

    Jeffrey J. Fox

 

 

    Controller

 

19


Exhibit 3.4

 

ARTICLES OF AMENDMENT

OF

WILLAMETTE VALLEY VINEYARDS, INC.

 

Registry No. 108800-86

 

1.                The name of the corporation prior to amendment is Willamette Valley Vineyards, Inc.

 

2.                ARTICLE II shall be amended to read:

 

A.            Authorized Shares. The aggregate number of shares which the Corporation shall have the authority to issue is 20,000,000, of which 10,000,000 shall be designated Common Stock and 10,000,000 shall be designated Series A Preferred Stock.

 

B.              Preferred Stock. The Board of Directors is authorized, subject to limitations prescribed by the Oregon Business Corporation Act, as amended from time to time (the “Act”), and by the provisions of this Article, and with the approval of a majority of the outside directors, to provide for the issurance of shared of Preferred Stock in series, to establish from time to time the number of shares to be included in each series and to determine the designations, relative rights, preferences and limitations of the shares of each series. The authority of the Board of Directors with respect to each series includes determination of the following:

 

1.     The number of shares in and the distinguishing designation of that series;

 

2.     Whether shares of that series shall have full, special, conditional, limited or no voting rights, except to the extent otherwise provided by the Act;

 

3.     Whether shares of that series shall be convertible and the terms and conditions of the conversion, including provision for adjustment of the conversion rate in circumstances determined by the Board of Directors;

 

4.     Whether shares of that series shall be redeemable and the terms and conditions of redemption, including the date or dates upon or after which they shall be redeemable and the amount per share payable in case of redemption, which amount may vary under different conditions or at different redemption dates;

 

5.     The divided rate, if any, on shares of that series, the manner of calculating any dividends and the preference of any dividends;

 



 

6.     The rights of shares of that series in the event of voluntary or involuntary dissolution of the Corporation and the rights of priority of that series relative to the Common Stock and any other series of Preferred Stock on the distribution of assets on dissolution; and

 

7.     Any other rights, preferences and limitations of that series that are permitted by law to vary.

 

3.     The amendment was adopted on May 28, 2000.

 

4.     Check the Appropriate Statement

 

x    Shareholder action was required to adopt the amendment. The shareholder vote was as follows:

 

Class or 
Series of 
Shares

 

Number of
Shares
Outstanding

 

Number of
Votes
Entitled to
be Cast

 

Number of
Votes Cast
For

 

Number of
Votes Cast
Against

 

Number of
Votes
Abstaining

 

Common

 

4,253,431

 

2,672,874

 

1,389,606

 

180,843

 

141,202

 

 

o     Shareholder action was not required to adopt the amendment(s). The amendment(s) was adopted by the board of directors without shareholder action.

 

o     The corporation has not issued any shares of stock. Shareholder action was not required to adopt the amendment(s). The amendment(s) was adopted by the incorporators or by the board of directors.

 

 

 

/s/ Jim Ellis

 

Jim Ellis, Secretary

 


Exhibit 3.5

 

BYLAWS

OF

WILLAMETTE VALLEY VINEYARDS, INC.

 

I

 

OFFICES

 

.1                                       Principal Office .   The principal office of the corporation shall be located at 8800 Enchanted Way, S.E., Turner, Oregon 97392.  The corporation may have such other offices as the Board of Directors may designate or as the business of the corporation may from time to time require.

 

.2                                       Registered Office .   The registered office of the corporation required by the Oregon Business Corporation Act to be maintained in the State of Oregon may be, but need not be, identical with the principal office in the State of Oregon, and the address of the registered office may be changed from time to time by the Board of Directors.

 

II

 

SHAREHOLDERS

 

.1                                       Annual Meeting .   The annual meeting of the shareholders shall be held on the third Sunday in the month of July in each year beginning in 1989 at the hour of 1:00 p.m., unless a different date and time are fixed by the Board of Directors and stated in the notice of the meeting.  If the day fixed for the annual meeting is a legal holiday, the meeting shall be held on the next succeeding Sunday.  The failure to hold an annual meeting at the time stated herein shall not affect the validity of any corporate action.

 

.2                                       Special Meetings .   Special meetings of the shareholders may be called by the Chairman/CEO or by the Board of Directors and shall be called by the Chairman/CEO (or in the event of absence, incapacity, or refusal of the Chairman/CEO, by the Board of Directors) at the request of the holders of not less than one-tenth of all the outstanding shares of the corporation entitled to vote at the meeting.  The requesting shareholders shall sign, date, and deliver to the Secretary a written demand describing the purpose or purposes for holding the special meeting.

 

.3                                       Place of Meetings .   Meetings of the shareholders shall be held at the principal business office of the corporation or at such other place, within or without the State of Oregon, as may be determined by the Board of Directors.

 

.4                                       Notice of Meetings .  Written notice stating the date, time, and place of the meeting and, in the case of a special meeting, the purpose or purposes for which the meeting is called shall be mailed to each shareholder entitled to vote at the meeting at the shareholder’s address shown in the corporation’s

 

1



 

current record of shareholders, with postage thereon prepaid, not less than 10 nor more than 60 days before the date of the meeting.

 

.5                                       Waiver of Notice .   A shareholder may at any time waive any notice required by law, the Articles of Incorporation, or these Bylaws.  The waiver must be in writing, be signed by the shareholder entitled to the notice, and be delivered to the corporation for inclusion in the minutes for filing with the corporate records.  A shareholder’s attendance at a meeting waives objection to lack of notice or defective notice of the meeting, unless the shareholder at the beginning of the meeting objects to holding the meeting or transacting business at the meeting.  The shareholder’s attendance also waives objection to consideration of a particular matter at the meeting that is not within the purpose or purposes described in the meeting notice, unless the shareholder objects to considering the matter when it is presented.

 

.6                                       Record Date .

 

(a)                                   For the purpose of determining shareholders entitled to notice of a shareholders’ meeting, to demand a special meeting, or to vote or to take any other action, the Board of Directors of the corporation may fix a future date as the record date for any such determination of shareholders, such date in any case to be not more than 70 days before the meeting or action requiring a determination of shareholders.  The record date shall be the same for all voting groups.

 

(b)                                  A determination of shareholders entitled to notice of or to vote at a shareholders’ meeting is effective for any adjournment of the meeting unless the Board of Directors fixes a new record date, which it must do if the meeting is adjourned to a date more than 120 days after the date fixed for the original meeting.

 

(c)                                   If a court orders a meeting adjourned to a date more than 120 days after the date fixed for the original meeting, it may provide that the original record date continue in effect or it may fix a new record date.

 

.7                                       Shareholders’ List for Meeting .   After the record date for a shareholders’ meeting is fixed by the Board of Directors, the Secretary of the corporation shall prepare an alphabetical list of the names of all its shareholders entitled to notice of the shareholders’ meeting.  The list must be arranged by voting group and within each voting group by class or series of shares and show the address of and number of shares held by each shareholder.  The shareholders’ list must be available for inspection by any shareholder, beginning two business days after notice of the meeting is given for which the list was prepared and continuing through the meeting, at the corporation’s principal office or at a place identified in the meeting notice in the city where the meeting will be held.  The corporation shall make the shareholders’ list available at the meeting, and any shareholder or the shareholder’s agent or attorney is entitled to inspect the list at any time during the meeting or any adjournment.  Refusal or failure to prepare or make available the shareholders’ list does not affect the validity of action taken at the meeting.

 

.8                                       Quorum; Adjournment .   Shares entitled to vote as a separate voting group may take action on a matter at a meeting only if a quorum of those shares exists with respect to that matter.  A majority of the votes entitled to be cast on the matter by the voting group constitutes a quorum of that voting

 

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group for action in that matter.  A majority of shares represented at the meeting, although less than a quorum, may adjourn the meeting from time to time to a different time and place without further notice to any shareholder of any adjournment.  At such adjourned meeting at which a quorum is present, any business may be transacted that might have been transacted at the meeting originally held.  Once a share is represented for any purpose at a meeting, it shall be deemed present for quorum purposes for the remainder of the meeting and for any adjournment of that meeting unless a new record date is set for the adjourned meeting.

 

.9                                       Voting Requirements; Action Without Meeting .   Unless otherwise provided in the Articles of Incorporation, each outstanding share entitled to vote shall be entitled to one vote upon each matter submitted to a vote at a meeting of shareholders.  If a quorum exists, action on a matter, other than the election of directors, is approved if the votes cast by the shares entitled to vote favoring the action exceed the votes cast opposing the action, unless a greater number of affirmative votes is required by law or the Articles of Incorporation.  If a quorum exists, directors are elected by a plurality of the votes cast by the shares entitled to vote unless otherwise provided in the Articles of Incorporation; no cumulative voting for directors shall be permitted unless the Articles of Incorporation so provide.  Action required or permitted by law to be taken at a shareholders’ meeting may be taken without a meeting if the action is taken by all the shareholders entitled to vote on the action.  The action must be evidenced by one or more written consents describing the action taken, signed by all the shareholders entitled to vote on the action and delivered to the corporation for inclusion in the minutes for filing with the corporate records.  Action taken under this section is effective when the last shareholder signs the consent, unless the consent specifies an earlier or later effective date.  If the law requires that notice of proposed action be given to nonvoting shareholders and the action is to be taken by unanimous consent of the voting shareholders, the corporation must give its nonvoting shareholders written notice of the proposed action at least 10 days before the action is taken.  The notice must contain or be accompanied by the same material that, under the Oregon Business Corporation Act, would have been required to be sent to nonvoting shareholders in a notice of meeting at which the proposed action would have been submitted to the shareholders for action.

 

.10                                Proxies .

 

(a)                                   A shareholder may vote shares in person or by proxy by signing an appointment, either personally or by the shareholder’s attorney-in-fact.  An appointment of a proxy shall be effective when received by the Secretary or other officer of the corporation authorized to tabulate votes.  An appointment is valid for 11 months unless a longer period is provided in the appointment form.  An appointment is revocable by the shareholder unless the appointment form conspicuously states that it is irrevocable and the appointment is coupled with an interest that has not been extinguished.

 

(b)                                  The death or incapacity of a shareholder appointing a proxy shall not affect the right of the corporation to accept the proxy’s authority unless notice of the death or incapacity is received by the Secretary or other officer authorized to tabulate votes before the proxy exercises the proxy’s authority under the appointment.

 

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.11                                Corporation’s Acceptance of Votes .

 

(a)                                   If the name signed on a vote, consent, waiver, or proxy appointment corresponds to the name of a shareholder, the corporation, if acting in good faith, is entitled to accept the vote, consent, waiver, or proxy appointment and give it effect as the act of the shareholder.

 

(b)                                  If the name signed on a vote, consent, waiver, or proxy appointment does not correspond to the name of a shareholder, the corporation, if acting in good faith, is nevertheless entitled to accept the vote, consent, waiver, or proxy appointment and give it effect as the act of the shareholder if:

 

(i) The shareholder is an entity and the name signed purports to be that of an officer or agent of the entity;

 

(ii) The name signed purports to be that of an administrator, executor, guardian, or conservator representing the shareholder and, if the corporation requests, evidence of fiduciary status acceptable to the corporation has been presented with respect to the vote, consent, waiver, or proxy appointment;

 

(iii) The name signed purports to be that of a receiver or trustee in bankruptcy of the shareholder and, if the corporation requests, evidence of this status acceptable to the corporation has been presented with respect to the vote, consent, waiver, or proxy appointment;

 

(iv) The name signed purports to be that of a pledge, beneficial owner, or attorney-in-fact of the shareholder and, if the corporation requests, evidence acceptable to the corporation of the signatory’s authority to sign for the shareholder has been presented with respect to the vote, consent, waiver, or proxy appointment; or

 

(v) Two or more persons are the shareholder as co-tenants or fiduciaries and the name signed purports to be the name of at least one of the co-owners and the person signing appears to be acting on behalf of all co-owners.

 

(c)                                   The corporation is entitled to reject a vote, consent, waiver, or proxy appointment if the Secretary or other officer or agent authorized to tabulate votes, acting in good faith, has reasonable basis for doubt about the validity of the signature on it or about the signatory’s authority to sign for the shareholder.

 

(d)                                  The shares of a corporation are not entitled to vote if they are owned, directly or indirectly, by a second corporation, and the first corporation owns, directly or indirectly, a majority of the shares entitled to vote for directors of the second corporation; provided, however, a corporation may vote any shares, including its own shares, held by it in a fiduciary capacity.

 

(e)                                   The corporation and its officer or agent who accepts or rejects a vote, consent, waiver, or proxy appointment in good faith and in accordance with the standards of this provision are not liable in damages to the shareholder for the consequences of the acceptance or rejection.  Corporate action based on the acceptance or rejection of a vote, consent, waiver, or proxy appointment under this provision is valid unless a court of competent jurisdiction determines otherwise.

 

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III

 

BOARD OF DIRECTORS

 

.1                                       Duties .   All corporate powers shall be exercised by or under the authority of the Board of Directors and the business and affairs of the corporation shall be managed by or under the direction of the Board of Directors. In addition the principle duties will include:  (1) authorizing distributions; (2) approving and proposing shareholder actions; (3) filling vacancies and approving all appointment of all President(s) and Vice-President(s); (4) authorizing or approving reacquisition of shares; (5) authorizing or approving sales of shares.  The Board of Directors shall require Management to::

 

-Prepare and submit an annual budget for board review and  approval

-Submit annually a long range plan for board review and  approval

-Submit an annual assessment on performance of company relative to its budget and long range plan

-Submit for review and consideration any actions that would significantly affect or alter brand strategy or established trademarks

-Submit an annual assessment of legal and other risks, as well as, insurance coverages.

-Seek Board  approval to enter into any  indebtedness that exceeds $100,000 limit

-Inform the Board of any possibility of a potential or actual  deviation from debt convenants

-Manage personnel according to Board approved personnel  policies which shall be in conformity with public policy where applicable.

 

The Board will conduct an annual self evaluation.  One of the objectives of this self-evaluation will be to  give clear direction to the Nominating committee in the discharge of its periodic recruiting duties for new members and assessment of current members.

 

.2                                       Number, Election, and Qualification .  The number of directors of the corporation shall be at least two (2) and no more than eleven (11). The shareholders or Board of Directors may fix or change from time to time the number of directors within such minimum and maximum number of directors.  If the Articles of Incorporation establish the number of directors, then, after shares are issued, only the shareholders may change the number of directors. The directors shall hold office until the next annual meeting of shareholder. Directors need not be residents of the State of Oregon or shareholders of the corporation.  The number of directors may be increased or decreased from time to time by amendment of the Bylaws, but no decrease shall have the effect of shortening the term of any incumbent director.

 

.3                                       Regular Meetings .   A regular meeting of the Board of Directors shall be held without other notice than this Section 3.3 immediately after, and at the same place as, the annual meeting of shareholders.  The Board of Directors may provide, by resolution, the time and place, either within or without the State of Oregon, for the holding of additional regular meetings without other notice than the resolution.

 

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.4                                       Special Meetings .   Special meetings of the Board of Directors may be called by or at the request of the Chairman/CEO or any director.  The Chairman/CEO may fix any place, either within or without the State of Oregon, as the place for holding any special meeting of the Board of Directors called by them.

 

.5                                       Notice .   Notice of the date, time, and place of any special meeting of the Board of Directors shall-be given at least two days prior to the meeting by any means provided by law.  If mailed, notice shall be deemed to be given three days after being deposited in the United States mail addressed to the director at the director’s business address, with postage thereon prepaid.  If by telegram, notice shall be deemed to be given when the telegram is delivered to the telegraph company.  Notice by all other means shall be deemed to be given when received by the director or a person at the director’s business or residential address whom the person giving notice reasonably believes will deliver or report the notice to the director within 24 hours.  The attendance of a director at a meeting shall constitute a waiver of notice of such meeting, except where a director attends a meeting for the express purpose of objecting to the transaction of any business because the meeting is not lawfully called or convened.  Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the Board of Directors need be specified in the notice or waiver of notice of such meeting.

 

.6                                       Waiver of Notice .   A director may at any time waive any notice required by law, the Articles of Incorporation, or these Bylaws.  Unless a director attends or participates in a meeting, a waiver must be in writing, must be signed by the director entitled to notice, must specify the meeting for which notice is waived, and must be filed with the minutes or corporate records.

 

.7                                       Quorum .   A majority of the number of directors fixed by Section 3.2 shall constitute a quorum for the transaction of business at any meeting of the Board of Directors.

 

.8                                       Manner of Acting .

 

(a)                                   The act of the majority of the directors present at a meeting at which a quorum is present shall be the act of the Board of Directors, unless a different number is provided by law, the Articles of Incorporation, or these Bylaws.

 

(b)                                  Members of the Board of Directors may hold a board meeting by conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other.  Participation in such a meeting shall constitute presence in person at the meeting.

 

(c)                                   Any action that is required or permitted to be taken by the directors at a meeting may be taken without a meeting if a consent in writing setting forth the action so taken shall be signed by all of the directors entitled to vote on the matter.  The action shall be effective on the date when the last signature is placed on the consent or at such earlier or later time as is set forth therein.  Such consent, which shall have the same effect as a unanimous vote of the directors, shall be filed with the minutes of the corporation.

 

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.9                                       Vacancies .   Any vacancy, including a vacancy resulting from an increase in the number of directors, occurring on the Board of Directors may be filled by the shareholders, the Board of Directors, or the affirmative vote of a majority of the remaining directors if less than a quorum of the Board of Directors, or by a sole remaining director.  If the vacant office is filled by the shareholders and was held by a director elected by a voting group of shareholders, then only the holders of shares of that voting group are entitled to vote to fill the vacancy.  Any directorship not so filled by the directors shall be filled by election at an annual meeting or at a special meeting of shareholders called for that purpose.  A director elected to fill a vacancy shall be elected to serve until the next annual meeting of shareholders and until a successor shall be elected and qualified.  A vacancy that will occur at a specific later date, by reason of a resignation or otherwise, may be filled before the vacancy occurs, and the new director shall take office when the vacancy occurs.

 

.10                                Compensation .   By resolution of the Board of Directors, the directors  will be paid their expenses, if any, of attendance at each meeting of the Board of Directors and may be paid a fixed sum for attendance at each meeting of the Board of Directors or a stated salary as director.  No such payment shall preclude any director from serving the corporation in any other capacity and receiving compensation therefor.  Each active director shall be granted 50 shares for each meeting attended and 1500 options on an annual basis for service performed, these options and grants will be granted at year end at fair market value.   Said grants and options will  commence January 1. 1997.

 

.11                                Presumption of Assent .   A director of the corporation who is present at a meeting of the Board of Directors or a committee of the Board of Directors shall be presumed to have assented to the action taken (a) unless the director’s dissent to the action is entered in the minutes of the meeting, (b) unless a written dissent to the action is filed with the person acting as the secretary of the meeting before the adjournment thereof or forwarded by certified or registered mail to the Secretary of the corporation immediately after the adjournment of the meeting or (c) unless the director objects at the meeting to the holding of the meeting or transacting business at the meeting.  The right to dissent shall not apply to a director who voted in favor of the action.

 

.12                                Director Conflict of Interest .

 

(a)                                   A transaction in which a director of the corporation has a direct or indirect interest shall be valid notwithstanding the director’s interest in the transaction if the material facts of the transaction and the director’s interest are disclosed or known to the Board of Directors or a committee thereof and it authorizes, approves, or ratifies the transaction by a vote or consent sufficient for the purpose without counting the votes or consents of directors with a direct or indirect interest in the transaction; or the material facts of the transaction and the director’s interest are disclosed or known to shareholders entitled to vote and they, voting as a single group, authorize, approve, or ratify the transaction by a majority vote; or the transaction is fair to the corporation.

 

(b)                                  A conflict of interest transaction may be authorized, approved, or ratified if it receives the affirmative vote of a majority of directors on the Board of Directors or a committee thereof who have no direct or indirect interest in the transaction.  If a majority of such directors vote to authorize, approve, or ratify the transaction, a quorum is present for the purpose of taking action.

 

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(c)                                   A conflict of interest transaction may be authorized, approved, or ratified by a majority vote of shareholders entitled to vote thereon.  Shares owned by or voted under the control of a director or an entity controlled by a director who has a direct or indirect interest in the transaction are entitled to vote with respect to a conflict of interest transaction.  A majority of the shares, whether or not present, that are entitled to be counted in a vote on the transaction constitutes a quorum for the purpose of authorizing, approving, or ratifying the transactions.

 

(d)                                  A director has an indirect interest in a transaction if (i) another entity in which the director has a material financial interest or in which the director is a general partner is a party to the transaction or (ii) another entity of which the director is a director, officer, or trustee is a party to the transaction and the transaction is or should be considered by the board of directors of the corporation.

 

.13                                Removal .   The shareholders may remove one or more directors with or without cause at a meeting called expressly for that purpose, unless the Articles of Incorporation provide for removal for cause only.  If a director is elected by a voting group of shareholders, only those shareholders may participate in the vote to remove the director.

 

.14                                Resignation .   Any director may resign by delivering written notice to the Board of Directors, its chairperson, or the corporation.  Such resignation shall be effective (a) on receipt, (b) five days after its deposit in the United States mails, if mailed postpaid and correctly addressed, or (c) on the date shown on the return receipt, if sent by registered or certified mail, return receipt requested, and the receipt is signed by addressee, unless the notice specifies a later effective date.  Once delivered, a notice of resignation is irrevocable unless revocation is permitted by the Board of Directors.

 

.15                                Advisory Committee.   The Board of Directors may form an advisory committee consisting of such persons as the Board of Directors may select.  The advisory committee shall convene at the request of the Board of Directors, consider such matters as the Board of Directors directs, and make recommendations concerning such matters to the Board of Directors as appropriate.  Members of the advisory committee shall serve at the pleasure of the Board of Directors and shall not have any of the rights or obligations belonging to the members of the Board of Directors.  The Board of Directors shall be responsible for considering recommendations made by the advisory committee and taking whatever action the Board deems appropriate, and shall not be bound to follow any recommendation made by the advisory committee.

 

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IV

 

EXECUTIVE COMMITTEE AND OTHER COMMITTEES

 

.1                                       Designation of Executive Committee .   The Board of Directors shall designate two or more directors to constitute an executive committee.  The designation of an executive committee, and the delegation of authority to it, shall not operate to relieve the Board of Directors, or any member thereof, of any responsibility imposed by law.  No member of the executive committee shall continue to be a member thereof after ceasing to be a director of the corporation.  The Board of Directors shall have the power at any time to increase or decrease the number of members of the executive committee, to fill vacancies thereon, to change any member thereof, and to change the functions or terminate the existence thereof.  The creation of the executive committee and the appointment of members to it shall be approved by a majority of the directors in office when the action is taken, unless a greater number is required by the Articles of Incorporation or these Bylaws.

 

.2                                       Powers of Executive Committee .   During the interval between meetings of the Board of Directors, and subject to such limitations as may be imposed by resolution of the Board of Directors, the executive committee may have and may exercise all the authority of the Board of Directors in the management of the corporation, provided that the committee shall not have the authority of the Board of Directors with respect to the following matters: authorizing distributions; approving or proposing to the shareholders actions that are required to be approved by the shareholders under the Articles of Incorporation or these Bylaws or by law; filling vacancies on the Board of Directors or any committee thereof; amending the Articles of Incorporation; adopting, amending, or repealing bylaws; approving a plan of merger not requiring shareholder approval; authorizing or approving a reacquisition of shares, except according to a formula or method prescribed by the Board of Directors; authorizing or approving the issuance or sale or contract for sale of shares or determining the designation and relative rights, preferences, and limitations of a class or series of shares except within limits specifically prescribed by the Board of Directors.  The duties of the Executive Committee shall be (a) to review the monthly income statement, balance sheet,  operating reports, sales projections, wholesaler depletion reports, and production plans; (b) cooperatively develop with management, annual budgets and their periodic revision particularly as they relate to return on equity, return on assets and price to earnings ratios.  Management will seek the advice, counsel, and approval of the Executive Committee regarding implementation of the Company’s business plan, cash flow projections, capital expenditures, key personnel issues, and items affecting company image and marketing presence (labels, brands, styles etc.) and product line. Consider management’s submission of expenditure or contract proposals not contained in the annual approved budget or that exceed spending authority limits. The Committee will  review for approval capital expenditures exceeding $20,000 and annual purchases in excessive of $100,000.  In addition, the Executive Committee shall establish written job descriptions and general work plans for Officers and will review their performance at least semi-annually.

 

The Chairman/CEO shall be the chair of the Executive Committee. The Executive Committee will report to the full Board of Directors concerning its activities at each meeting of the Board.

 

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.3                                       Procedures; Meetings, Quorum.

 

(a)                                   Regular meetings of the executive committee, of which no notice shall be necessary, shall be held on such days and at such places as shall be fixed by resolution adopted by the executive committee.  Special meetings of the executive committee shall be called at the request any company officer or of any member of the executive committee, and shall be held upon such notice as is required by these Bylaws for special meetings of the Board of Directors.

 

(b)                                  Attendance of any member of the executive committee at a meeting shall constitute a waiver of notice of the meeting.  A majority of the executive committee, from time to time, shall be necessary to constitute a quorum for the transaction of any business, and the act of a majority of the members present at a meeting at which a quorum is present shall be the act of the executive committee.  Members of the executive committee may hold a meeting of such committee by conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other, and participation in such meeting shall constitute presence in person at the meeting.

 

(c)                                   Any action that is required or permitted to be taken at a meeting of the executive committee may be taken without a meeting if a consent in writing setting forth the action so taken shall be signed by all members of the executive committee entitled to vote on the matter.  The action shall be effective on the date when the last signature is placed on the consent or at such earlier or later time as is set forth therein.  Such consent, which shall have the same effect as a unanimous vote of the members of the executive committee, shall be filed with the minutes of the corporation.

 

(d)                                  The Board of Directors may approve a reasonable fee for the members of the executive committee as compensation for attendance at meetings of the executive committee.

 

.4                                       Other Committees and Officers

 

(a)                                   The Board of Directors shall designate two or more members (two of which must be a disinterested members) to constitute an Audit committee. The Audit committee will recommend the annual employment of the company’s auditor and will review the scope of audit and non audit assignments, related fees, accounting principles used by WVV in financial reporting, internal financial auditing procedures and the adequacy of WVV’s internal control procedures. The board shall designate the Executive Committee to function as the Compensation committee. The Compensation committee will determine officers salaries and bonuses and will administer WVV’s stock option plan. From time to time, the Board shall form a Nominating Committee.  The Committee will include at least two members of the Board, any shareholder holding 5% (five) or more outstanding shares shall automatically be appointed to the Committee and may contain upto three additional members at least one from each of the following categories: management, shareholders, and the community at large. The duties  of the Nominating committee shall include recommending  persons to fill any vacancies on the board and to recommend annually to the Board of Directors candidates for the Board.  By the approval of a majority of the directors when the action is taken (unless a greater number is required by the Articles of Incorporation), the Board of Directors, by resolution,

 

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may create one or more additional committees, appoint directors to serve on them, and define the duties of such committee or committees.  Each such committee shall have two or more members, who shall serve at the pleasure of the Board of Directors.  Such additional committee or committees shall not have the powers proscribed by Section 4.2.

 

V

 

OFFICERS

 

.1                                       Number .   The officers of the corporation shall be a Chairman/CEO, a President/COO,  and a Secretary.  Such other officers and assistant officers as are deemed necessary or desirable may be appointed by the Board of Directors and shall have such powers and duties prescribed by the Board of Directors or the officer authorized by the Board of Directors to prescribe the duties of other officers.  A duly appointed officer may appoint one or more officers or assistant officers if such appointment is authorized by the Board of Directors.  Any two or more offices may be held by the same person.

 

.2                                       Appointment and Term of Office .   The officers of the corporation shall be appointed annually by the Board of Directors at the first meeting of the Board of Directors held after the annual meeting of the shareholders.  If the officers shall not be appointed at the meeting, a meeting shall be held as soon thereafter as is convenient for such appointment of officers.  Each officer shall hold office until a successor shall have been duly appointed and shall have qualified or until the officer’s death, resignation, or removal.

 

.3                                       Qualification .   An officer need not be a director, shareholder, or Oregon resident other than the Chairman.

 

.4                                       Resignation and Removal .   An officer may resign at any time by delivering notice to the corporation.  A resignation is effective on receipt unless the notice specifies a later effective date.  If the corporation accepts a specified later effective date, the Board of Directors may fill the pending vacancy before the effective date, but the successor may not take office until the effective date.  Once delivered, a notice of resignation is irrevocable unless revocation is permitted by the Board of Directors.  Any officer appointed by the Board of Directors may be removed at any time with or without cause.  Appointment of an officer shall not of itself create contract rights.  Removal or resignation of an officer shall not affect the contract rights, if any, of the corporation or the officer.

 

.5                                       Vacancies .   A vacancy in any office because of death, resignation, removal, disqualification, or otherwise may be filled by the Board of Directors for the unexpired portion of the term.

 

.6                                       Officers.

 

(a)                                   Chairman/CEO shall be the Chief Executive Officer of the corporation and shall be in general charge of its business and affairs, subject to the control of the Board of Directors. The

 

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chairman/CEO shall report to the Board of Directors. The Chairman will  execute  on behalf of the corporation all contracts, agreements, stock certificates, and other instruments. The Chairman/CEO shall preside over all Executive committee meetings, Board of Directors meetings, and Stockholder meetings. The Chairman/CEO shall be responsible for strategic planning, development, Board of Directors communication and such other duties as designated by the Board.  The  Chairman/CEO shall from time to time report to the Board of Directors all matters within the Chairman/CEO’s knowledge affecting the corporation that should be brought to the attention of the Board of Directors.  The Chairman/CEO shall vote all shares of stock in other corporations owned by the corporation and is empowered to execute proxies, waivers of notice, consents, and other instruments in the name of the corporation with respect to such stock.  The Chairman/CEO shall perform other duties assigned by the Board of Directors.   In the event of the incapacity of the Chairman/CEO or his refusal to act,  the Board shall appoint an acting Chairman to fulfill Board duties, and the President with the approval of the Board will fulfill executive duties until the Chairman resumes duties or is replaced.

 

(b)                                   President/COO The President shall be the Chief Operating Officer of the corporation and shall be in general charge of its daily  business operations and affairs within the approved budget. The President/COO shall report to the Executive Committee of the Board.

 

(c)                                   Secretary The Secretary shall prepare the minutes of all meetings of the directors and shareholders, shall have custody of the minute books and other records pertaining-to the corporate business, and shall be responsible for authenticating the records of the corporation.  The Secretary shall countersign all instruments requiring the seal of the corporation  and shall perform other duties assigned by the Board of Directors.

 

.7                                       Salaries .   The salaries of the officers shall be fixed from time to time by the Board of Directors, and no officer shall be prevented from receiving such salary because the officer is also a director of the corporation.

 

VI

 

ISSUANCE OF SHARES

 

.1                                       Certificates for Shares .

 

(a)                                   Certificates representing shares of the corporation shall be in a form determined by the Board of Directors.  Such certificates shall be signed, either manually or in facsimile, by two officers of the corporation- the Chairman/CEO and the Secretary and may be sealed with the seal of the corporation or a facsimile thereof.  All certificates for shares shall be consecutively numbered or otherwise identified.

 

(b)                                  Every certificate for shares of stock that are subject to any restriction on transfer pursuant to the Articles of Incorporation, the Bylaws, applicable securities laws, agreements among

 

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or between shareholders, or any agreement to which the corporation is a party shall have conspicuously noted on the face or back of the certificate either (i) the full text of the restriction or (ii) a statement of the existence of such restriction and that the corporation retains a copy of the restriction.  Every certificate issued when the corporation is authorized to issue more than one class or series of stock shall set forth on its face or back either (i) the full text of the designations, relative rights, preferences, and limitations of the shares of each class and series authorized to be issued and the authority of the Board of Directors to determine variations for future series or (ii) a statement of the existence of such designations, relative rights, preferences, and limitations and a statement that the corporation will furnish a copy thereof to the holder of such certificate upon written request and without charge.

 

(c)                                   The name and mailing address of the person to whom the shares represented thereby are issued, with the number of shares and date of issue, shall be entered on the stock transfer books of the corporation.  Each shareholder shall have the duty to notify the corporation of his or her mailing address.  All certificates surrendered to the corporation for transfer shall be canceled, and no new certificate shall be issued until the former certificate for a like number of shares shall have been surrendered and canceled, except that in case of a lost, destroyed, or mutilated certificate a new one may be issued therefor upon such terms and indemnity to the corporation as the Board of Directors prescribes.

 

.2                                       Transfer of Shares .   A transfer of shares of the corporation shall be made only on the stock transfer books of the corporation by the holder of record thereof or by the holder’s legal representative, who shall furnish proper evidence of authority to transfer, or by the holder’s attorney thereunto authorized by power of attorney duly executed and filed with the Secretary of the corporation.  The person in whose name shares stand on the books of the corporation shall be deemed by the corporation to be the owner thereof for all purposes.

 

.3                                       Transfer Agent and Registrar .   The Board of Directors may from time to time appoint one or more transfer agents and one or more registrars for the shares of the corporation, with such powers and duties as the Board of Directors determines by resolution.  The signatures of officers upon a certificate may be facsimiles if the certificate is manually signed on behalf of a transfer agent or by a registrar other than the corporation itself or an employee of the corporation.

 

.4                                       Officer Ceasing to Act .   If the person who signed a share certificate, either manually or in facsimile, no longer holds office when the certificate is issued, the certificate is nevertheless valid.

 

VII

 

CONTRACTS, LOANS, CHECKS, AND OTHER INSTRUMENTS

 

.1                                       Contracts .   The Board of Directors may authorize any officer or officers and agent or agents to enter into any contract or execute and deliver any instrument in the name of and on behalf of the corporation, and such authority may be general or confined to specific instances.

 

13



 

.2                                       Loans .   No loans shall be contracted on behalf of the corporation and no evidence of indebtedness shall be issued in its name unless authorized by a resolution of the Board of Directors.  Such authority may be general or confined to specific instances.

 

.3                                       Checks; Drafts .   All checks, drafts, or other orders for the payment of money and notes or other evidences of indebtedness issued in the name of the corporation shall be signed by such officer or officers and agent or agents of the corporation and in such manner as shall from time to time be determined by resolution of the Board of Directors.

 

.4                                       Deposits .   All funds of the corporation not otherwise employed shall be deposited from time to time to the credit of the corporation in such banks, trust companies, or other depositories as the Board of Directors may select.

 

VIII

 

MISCELLANEOUS PROVISIONS

 

.1                                       Seal .   The Board of Directors from time to time may provide for a seal of the corporation, which shall be circular in form and shall have inscribed thereon the name of the corporation and the state of incorporation and the words “Corporate Seal.”

 

.2                                       Severability .   Any determination that any provision of these Bylaws is for any reason inapplicable, invalid, illegal, or otherwise ineffective shall not affect or invalidate any other provision of these Bylaws.

 

IX

 

AMENDMENTS

 

These Bylaws may be altered, amended, or repealed and new bylaws may be adopted by the Board of Directors at any regular or special meeting, subject to repeal or change by action of the shareholders of the corporation.

 

This revision of the Company’s Bylaws was adopted unanimously by the Board of Directors,  June 16 th , 1997.

 

 

 

/s/ James L. Ellis

 

James L. Ellis, Secretary

 

 

 

 

 

Date: July 29 th , 1997

 

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Exhibit 31.1

 

CERTIFICATION OF CHIEF EXECUTIVE OFFICER PURSUANT TO RULE 13a-14(a) OF THE SECURITIES EXCHANGE ACT OF 1934

 

I, James W. Bernau, certify that:

 

1. I have reviewed this quarterly report on Form 10-Q of Willamette Valley Vineyards, Inc.;

 

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

 

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

 

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; and

 

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

d)  Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

 

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

 

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

 

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 

Date: August 14, 2008

 

/s/

James W. Bernau

 

 

James W. Bernau,

 

 

Chief Executive Officer

 

 


Exhibit 31.2

 

CERTIFICATION OF CHIEF FINANCIAL OFFICER PURSUANT TO RULE 13a-14(a) OF THE SECURITIES EXCHANGE ACT OF 1934

 

I, Jeffrey J. Fox, certify that:

 

1. I have reviewed this quarterly report on Form 10-Q of Willamette Valley Vineyards, Inc.;

 

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

 

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

 

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; and

 

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

d)  Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

 

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

 

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

 

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 

Date: August 14, 2008

 

/s/

Jeffrey J. Fox

 

 

Jeffrey J. Fox

 

 

Controller

 

 


Exhibit 32.1

 

CERTIFICATION OF CHIEF EXECUTIVE OFFICER PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

 

I, James W. Bernau, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that the Quarterly Report of Willamette Valley Vineyards, Inc. on Form 10-Q for the quarterly period ended June 30, 2008 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that information contained in such 10-Q fairly presents in all material respects the financial condition and results of operations of Willamette Valley Vineyards Inc.

 

Date: August 14, 2008

 

By:

/s/ James W. Bernau

 

Name:

James W. Bernau

 

Title:

Chief Executive Officer

 

 


Exhibit 32.2

 

CERTIFICATION OF CHIEF FINANCIAL OFFICER PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

 

I, Jeffrey J. Fox, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that the Quarterly Report of Willamette Valley Vineyards, Inc. on Form 10-Q for the quarterly period ended June 30, 2008 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that information contained in such 10-Q fairly presents in all material respects the financial condition and results of operations of Willamette Valley Vineyards Inc.

 

Date: August 14, 2008

 

By:

/s/ Jeffrey J. Fox

 

Name:

Jeffrey J. Fox

 

Title:

Controller