10KSB/A 1 wvv0310ksbamend.txt UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-KSB ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2003 Commission File No WILLAMETTE VALLEY VINEYARDS, INC. (Name of Small Business Issuer in Its Charter) OREGON 93-0981021 (State or other jurisdiction of (I.R.S. employer incorporation or organization) identification number) 8800 Enchanted Way, S.E. Turner, OR 97392 (Address of principal executive offices, including zip code) (503) 588-9463 (Issuer's telephone number, including area code) _______________________________________ Securities registered pursuant to Section 12(b) of the Act: None Securities registered pursuant to Section 12(g) of the Act: Common Stock Check whether the Issuer (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past 12 months (or for such shorter period that the Issuer was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES [X] NO [ ] Check if there is no disclosure of delinquent filers pursuant to Item 405 of Regulation S-B is not contained in this form, and no disclosure will be contained, to the best of the Issuer's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this form 10-KSB or any amendment to this Form 10-KSB [X]. As of December 31, 2003 Issuer's revenues for its most recent fiscal year: $7,438,981 Aggregate market value of the voting stock held by non-affiliates of the Issuer based upon the closing bid price of such stock: $9,496,493 Number of shares of Common Stock outstanding: 4,479,478 Transitional Small Business Disclosure Format: YES [ ] No [X] DOCUMENTS INCORPORATED BY REFERENCE SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. WILLAMETTE VALLEY VINEYARDS, INC. (Registrant) Date: April 14, 2004. By:______/s/_________________________ James W. Bernau, Chairperson of the Board, President Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. Signature Title Date __/s/________________ Chairperson of the Board, April 14, 2004 James W. Bernau President (Principal Executive Officer) __/s/________________ Controller April 14, 2004 Sean M. Cary (Principal Accounting Officer) __/s/________________ Director and Vice-President April 14, 2004 James L. Ellis and Secretary __/s/________________ Director April 14, 2004 Terry W. Emmert __/s/________________ Director April 14, 2004 Betty M. O'Brien __/s/________________ Director April 14, 2004 Stan G. Turel Report of Independent Accountants To the Board of Directors and Shareholders of Willamette Valley Vineyards, Inc. In our opinion, the accompanying balance sheets and the related statements of operations, of shareholders' equity and of cash flows present fairly, in all material respects, the financial position of Willamette Valley Vineyards, Inc. (the "Company") at December 31, 2003 and 2002, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2003, in conformity with accounting principles generally accepted in the United States of America. These financial statements are the responsibility of the Company's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with auditing standards generally accepted in the United States of America, which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. PricewaterhouseCoopers LLP Portland, Oregon March 24, 2004 F-1 Willamette Valley Vineyards, Inc. Statements of Operations For the Years Ended December 31, 2003, 2002 and 2001 2003 2002 2001 Net revenues $ 7,301,781 $ 5,989,456 $ 7,030,791 Cost of goods sold 3,827,526 2,754,824 3,560,853 ------------ ------------ ------------ Gross margin 3,474,255 3,234,632 3,469,938 Selling, general and administrative expenses 3,018,164 2,660,039 2,953,815 ------------ ------------ ------------ Income from operations 456,091 574,593 516,123 ------------ ------------ ------------ Other income (expenses): Interest income 5,070 4,469 4,811 Interest expense (341,177) (357,444) (441,629) Other income 122,501 5,694 33,555 ------------ ------------ ------------ (213,606) (347,281) (403,263) ------------ ------------ ------------ Income before income taxes 242,485 227,312 112,860 Income tax provision (Note 9) 104,265 90,837 54,015 ------------ ------------ ------------ Net income $ 138,220 $ 136,475 $ 58,845 ____________ ____________ ____________ Basic net income per common share $ 0.03 $ 0.03 $ 0.01 ____________ ____________ ____________ Diluted net income per common share $ 0.03 $ 0.03 $ 0.01 ____________ ____________ ____________ The accompanying notes are an integral part of the financial statements. F-3. Willamette Valley Vineyards, Inc. Statements of Cash Flows For the Years Ended December 31, 2003, 2002 and 2001 2003 2002 2001 Cash flows from operating activities: Net income $138,220 $136,475 $ 58,845 Reconciliation of net income to net cash (used in) provided by operating activities: Depreciation and amortization 713,817 763,077 778,752 Gain on disposal of fixed assets (3,003) - (3,043) Loss on disposal of vines - 35,465 - Deferred income taxes (12,382) 75,001 36,046 Bad debt expense 6,198 8,303 19,260 Stock issued for compensation 12,427 3,941 3,985 Changes in assets and liabilities: Accounts receivable (283,173) 218,514 (201,918) Inventories 182,907 (579,909) (569,776) Prepaid expenses and other current assets 1,343 39,604 (41,558) Note receivable (4,186) 15,430 (7,169) Other assets 18,389 (32,763) (15,291) Accounts payable 380,966 (631,248) 154,618 Accrued commissions and payroll costs 245,190 75,543 (5,176) Income taxes receivable/payable (115.475) 15,836 17,969 Grape payables (200,344) (266,429) 222,121 Deferred rent liability 22,792 25,811 28,758 Deferred gain (24,984) (24,984) (24,984) ------------ ------------ ------------ Net cash provided by (used for) operating activities 1,078,702 (122,333) 451,439 ------------ ------------ ------------ Cash flows from investing activities: Additions to property and equipment (273,214) (77,087) (379,953) Vineyard development expenditures (63,275) (114,443) (153,930) Proceeds on sale of fixed assets 15,128 - - ------------ ------------ ------------ Net cash used in investing activities (321,361) (191,530) (533,883) ------------ ------------ ------------ Cash flows from financing activities: Debt issuance costs (17,237) (20,378) (22,000) Net increase (decrease) in line of credit balance (919,655) 697,671 (1,264,049) Proceeds from distributor obligation - - 1,500,000 Proceeds from common stock issued and stock options exercised - 8,574 321,049 Issuance of long-term debt - - 33,909 Repayments of long-term debt (238,951) (244,331) (234,831) ------------ ------------ ------------ Net cash (use in) provided by financing activities (1,175,843) 441,536 334,078 ------------ ------------ ------------ Net (decrease) increase in cash and cash equivalents (418,502) 127,673 251,634 Cash and cash equivalents: Beginning of year 632,183 504,510 252,876 ------------ ------------ ------------ End of year $ 213,681 $ 632,183 $ 504,510 ____________ ____________ ____________ The accompanying notes are an integral part of the financial statements. F-5 Willamette Valley Vineyards, Inc. Notes to Financial Statements, Continued Liquor Control Commission for the Oregon Wine Advisory. Excise taxes incurred approximated $340,000 in 2003, $191,000 in 2002 and $200,000 in 2001. Stock Based Compensation The Company accounts for the employee and director stock options in accordance with provisions of Accounting Principles Board ("APB") Opinion No. 25, Accounting for Stock Issued to Employees. Pro forma disclosures as required under Statement of Financial Accounting Standards ("SFAS") No. 123, Accounting for Stock Based Compensation, and as amended by SFAS No. 148, Accounting for Stock Based Compensation - Transition and Disclosure, are presented below (Note 8). Had compensation cost for the Company's stock option plans been determined based on the fair value at the grant date for awards consistent with the provisions of SFAS No. 123, the Company's net earnings would have been reduced to the pro forma amounts indicated as follows for the year ended December 31 (Note 8 for certain assumptions with respect to this computation): 2003 2002 2001 Net income, as reported $ 138,220 $ 136,475 $ 58,845 Add: Stock-based compensation expense inlcuded in reported net income, net of tax 7,463 2,365 2,391 Deduct: Total stock-based employee compensation expense under fair value based method for all awards, net of tax (31,213) (25,892) (70,060) ------------ ------------ ------------ Pro Forma net income (loss) $ 114,470 $ 112,948 $ (8,824) ____________ ____________ ____________ Earnings per share: Basic - as reported $ 0.03 $ 0.03 $ 0.01 Basic - pro forma 0.03 0.03 - Diluted - as reported 0.03 0.03 0.01 Diluted - pro forma 0.03 0.03 - Basic and Diluted Net Income per Share Basic earnings per share are computed based on the weighted-average number of common shares outstanding each year. Diluted earnings per share are computed using the weighted average number of shares of common stock and potentially dilutive securities assumed to be outstanding during the year. Potentially dilutive shares from stock options and other common stock equivalents are excluded from the computation when their effect is antidilutive. Options to purchase 288,600 shares of common stock were outstanding at December 31, 2003 and diluted weighted-average shares outstanding at December 31, 2003 include the effect of 5,298 stock options. Options to purchase 421,670 shares of common stock were outstanding at December 31, 2002 and diluted weighted-average shares outstanding at December 31, 2002 include the effect of 2,745 stock options. Options to purchase 475,170 shares of common stock were outstanding at December 31, 2001 and diluted weighted-average shares outstanding at December 31, 2001 include the effect of 47,903 stock options. In addition, the warrant outstanding since 1992 was not included in the computation of diluted earnings per share in 2003, 2002 or 2001 because the exercise price of $3.42 was greater than the average market price of the common shares during all three years. F-10