10QSB 1 wvv031q10q.txt SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 ___________________________________________________________ FORM 10-QSB ___________________________________________________________ Quarterly Report Pursuant to Section 13 or 15 (d) of the Securities Exchange Act of 1934 For the Quarter Ended March 31, 2003 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) ___________________________________________________________ Indicate by check mark whether the registrant (1) has filed, all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. [X] YES [ ] NO Number of shares of common stock outstanding as of March 31, 2003 4,474,854 shares, no par value Transitional Small Business Disclosure [ ] YES [X] NO WILLAMETTE VALLEY VINEYARDS, INC. INDEX TO FORM 10-QSB Part I - Financial Information Item 1--Financial Statements Balance Sheet Statement of Operations Statement of Cash Flows Notes to Consolidated Financial Statements Item 2--Management's Discussion and Analysis of Financial Condition and Results of Operations Item 3--Controls and Procedures Part II - Other Information Item 1--Exhibits and Reports of Form 8-K Item 5--Other Information Signatures PART 1 FINANCIAL INFORMATION ITEM 1 Financial Statements WILLAMETTE VALLEY VINEYARDS, INC. Balance Sheet March 31, December 31, 2003 2002 (unaudited) ASSETS. __________ __________ Current Assets: Cash and cash equivalents $ 205,577 $ 632,183 Accounts receivable trade, net 442,877 519,861 Inventories 7,394,949 7,550,291 Prepaid expenses and other current assets 53,826 47,908 Deferred income taxes 148,212 148,212 __________ __________ Total current assets 8,245,441 8,898,455 Vineyard development cost, net 1,689,729 1,707,274 Inventories 520,408 520,408 Property and equipment, net 4,930,133 5,046,893 Notes receivable from officer and other 62,980 61,948 Debt issuance costs, net 72,515 73,628 Other assets 229,214 238,647 __________ __________ Total assets $15,750,420 $16,547,253 ========== ========== LIABILITIES AND SHAREHOLDERS EQUITY Current liabilities Line of credit $ 1,526,657 $ 2,050,171 Current portion of long term debt 237,838 237,838 Accounts payable 428,672 371,253 Accrued commissions and payroll 229,879 214,029 Income taxes payable 68,142 111,837 Grapes payable 587,136 870,058 __________ __________ Total current liabilities 3,078,324 3,855,186 Long-term debt 2,878,128 2,944,511 Distributor obligation 1,500,000 1,500,000 Deferred rent liability 91,901 86,203 Deferred gain 418,481 424,727 Deferred income taxes 209,095 209,095 __________ __________ Total liabilities 8,175,929 9,019,722 __________ __________ Shareholders' equity Common stock, no par value - 10,000,000 shares authorized, 4,474,854 and 4,469,444 shares issued and outstanding at March 31, 2003 and December 31, 2002 7,163,981 7,155,162 Retained earnings 410,510 372,369 __________ __________ Total shareholders' equity 7,574,491 7,527,531 __________ __________ Total liabilities and shareholders' equity $15,750,420 $16,547,253 ========== ========== The accompanying notes are an integral part of this financial statement. WILLAMETTE VALLEY VINEYARDS, INC. Statement of Operations (unaudited) Three months ended March 31, 2003 2002 __________ __________ Net Revenues Case Revenue $ 1,338,186 $ 1,257,640 Custom Crush - Bulk Revenue 155,175 - __________ __________ Total Revenue 1,493,361 1,257,640 Cost of Sales Case 630,457 595,787 Bulk 115,287 - __________ __________ Total Cost of Sales 745,744 595,787 Gross Margin 747,617 661,853 Selling, general and administrative expense 630,410 643,977 __________ __________ Net operating income 117,207 17,876 Other income (expense) Interest income 1,313 1,106 Interest expense (87,121) (88,593) Other income 32,169 6,246 __________ __________ Net income (loss) before income taxes 63,568 (63,365) Income tax (25,427) - __________ __________ Net income (loss) 38,141 (63,365) Retained earnings beginning of period 372,369 235,894 __________ __________ Retained earnings end of period $ 410,510 $ 172,529 ========== ========== Basic income (loss) per common share $ .01 $ (.01) Diluted income (loss) per common share $ .01 $ (.01) Weighted average number of basic common shares outstanding 4,472,459 4,466,981 Weighted average number of diluted common shares outstanding 4,472,459 4,466,981 The accompanying notes are an integral part of this financial statement. WILLAMETTE VALLEY VINEYARDS, INC. Statement of Cash Flows (unaudited) Three months ended March 31, 2003 2002 __________ __________ Cash flows from operating activities: Net income (loss) $ 38,141 $ (63,365) Reconciliation of net income (loss) to net cash provided by (used in) operating activities: Depreciation and amortization 183,765 188,397 Gain on disposal of fixed assets (3,004) - Stock issued for compensation 8,819 - Changes in assets and liabilities: Accounts receivable trade 76,984 28,200 Inventories 155,342 (123,663) Prepaid expenses and other current assets (5,918) 17,574 Note receivable (1,032) 10,223 Other assets 4,323 4,460 Accounts payable 57,419 (100,523) Accrued commissions and payroll costs 15,850 (18,630) Income taxes payable (43,695) - Grape payables (282,922) (323,131) Deferred rent liability 5,698 6,453 Deferred gain (6,246) (6,246) __________ __________ Net cash provided by (used in) operating activities 203,524 (380,251) __________ __________ Cash flows from investing activities; Additions to property and equipment (49,401) (11,534) Vineyard development expenditures - (21,870) Proceeds from the sale of property and equipment 15,128 - __________ __________ Net cash used in investing activities (34,273) (33,404) __________ __________ Cash flows from financing activities: Debt issuance costs (5,960) - Net (decrease) increase in line of Credit balance (523,514) 147,500 Proceeds from stocks options exercised - 10,575 Repayments of long-term debt (66,383) (63,738) __________ __________ Net cash (used in) provided by financing activities (595,857) 94,337 __________ __________ Net decrease in cash and cash equivalents (426,606) (319,318) Cash and cash equivalents: Beginning of period 632,183 504,510 __________ __________ End of period $ 205,577 $ 185,192 ========== ========== The accompanying notes are an integral part of this financial statement. NOTES TO CONSOLIDATED FINANCIAL STATEMENT 1) BASIS OF PRESENTATION The interim financial statements have been prepared by the Company, without audit and subject to year-end adjustment, in accordance with generally accepted accounting principles, except that certain information and footnote disclosure made in the latest annual report have been condensed or omitted for the interim statements. Certain costs are estimated for the full year and are allocated to interim periods based on estimates of operating time expired, benefit received, or activity associated with the interim period. The financial statements reflect all adjustments, which are, in the opinion of management, necessary for fair presentation. Basic and diluted net income per share and 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 dilutive common equivalent shares outstanding during the year. Common equivalent shares from stock options and other common stock equivalents are excluded from the computation when their effect is antidilutive. Options to purchase shares of common stock outstanding at March 31, 2003 were not included in the computation of diluted earnings per share because the exercise prices were greater than fair value. Options to purchase shares of common stock outstanding at March 31,2002 were not included in the computation of diluted earnings per share because inclusion of such shares would be antidilutive. 2) 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 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. 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 quarter ended March 31: March 31, March 31, 2003 2002 (unaudited) __________ __________ Net income (loss), as reported $ 38,141 $ (62,365) Add Stock-based employee compensation expense included in reported net income, net of related tax effects - - Deduct total stock based employee compensation expense determined under fair value based method for all awards, Net of related tax effects (5,948) (5,882) __________ __________ Pro forma net income (loss) $ 32,193 $ (68,247) Earnings per share: Basic - as reported $ 0.01 $ (0.01) Basic - pro forma $ 0.01 $ (0.02) Diluted - as reported $ 0.01 $ (0.01) Diluted - pro forma $ 0.01 $ (0.02) For purposes of disclosure, the Black-Scholes option pricing model was used to calculate fair values for stock options granted. The estimated fair value of the options is amortized to expense over the options' vesting period. 3) INVENTORIES BY MAJOR CLASSIFICATION ARE SUMMARIZED AS FOLLOW: March 31, December 31, 2003 2002 (unaudited) __________ __________ Winemaking and packaging materials $ 138,071 $ 96,123 Work-in-progress (costs relating to unprocessed and/or bulk wine products) 2,844,125 2,773,750 Finished goods (bottled wines 4,933,161 5,200,826 and related products) __________ __________ $ 7,915,357 $ 8,070,699 Less: amounts designated for distributor (520,408) (520,408) __________ __________ Current inventories $ 7,394,949 $ 7,550,291 ========== ========== 4) PROPERTY AND EQUIPMENT CONSIST OF THE FOLLOWING: March 31, December 31, 2003 2002 (unaudited) __________ __________ Land and improvements $ 976,838 $ 984,954 Winery building and hospitality center 4,567,076 4,567,076 Equipment 4,719,908 4,670,506 __________ __________ 10,263,822 10,222,536 Less accumulated depreciation (5,333,689) (5,175,643) __________ __________ $ 4,930,133 $ 5,046,893 ========== ========== 5) RECENT ACCOUNTING PRONOUNCEMENTS: In December 2002, the FASB issued SFAS 148, "Accounting for Stock-Based Compensation - Transition and Disclosure." This statement provides alternative methods of transition for a voluntary change to the fair value method of accounting for stock-based employee compensation. In addition, it amends the disclosure requirements of SFAS 123 to require prominent disclosure in both annual and interim financial statements about the method of accounting for stock-based employee compensation and the effect of the method used on reporting results. This statement is effective for fiscal years ending after December 15, 2002 and for the interim periods beginning after December 15, 2002. As we continue to report stock-based employee compensation costs using the intrinsic value method as defined by APB 25, adoption of the provisions of the new statement affects only our disclosure of these costs, which is presented in Note 2. 6) SUBSEQUENT EVENTS: None. ITEM 2 Management's Discussion and Analysis of Financial Condition and Results of Operations Forward Looking Statement: This Management's Discussion and Analysis of Financial Condition and Results of Operation and other sections of this Form 10-QSB contain forward-looking 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-QSB 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. Management's Discussion and Analysis of Financial Condition and Results of Operations The first quarter, the weakest in the industry, has historically been the weakest for the Company generating a net loss in all previous first quarters. This profitable first quarter of 2003 is the Company's first resulting from the following operating factors: - Higher sales to out-of-state distributors, - lower costs of operating the winery's retail operation, and - a 15% reduction in general and administrative expenses. Additionally, the Company received an interest rebate from one of its lenders and made a profitable custom crush sale. Absent these events, the Company would have broken even in its first quarter. The Company's wine products continued to receive numerous accolades during this first quarter. The Griffin Creek 2000 Viognier and 2001 Tualatin Estate Semi-Sparkling Muscat received gold medals at the McMinnville Wine Classic, while the Tualatin Estate 2001 Gewurztraminer received a silver medal. The Company's Griffin Creek Pinot Gris 2001 received the honor of Top Pinot Gris at the Ray's Boathouse 16th Annual Retrospective of Northwest Wines in Seattle and the Griffin Creek Merlot 1999 received a silver medal at the Dallas Morning News National Wine Competition. At the Wine Appreciation Guild's 13th Annual Wine Literary Award Banquet in San Francisco, the Company had the distinction of presenting Willamette Valley Vineyards Pinot Noir 1999, Pinot Noir Karina Vineyard 1999 and Griffin Creek Syrah 2000 at the excluse press- only tasting. In April, Lufthansa selected Willamette Valley Vineyards Signature Cuvee 1998 for the first class cabin on all international flights to and from Portland International Airport. Company president Jim Bernau and Oregon Governor Ted Kulongoski presented Lufthansa CEO Wolfgang Mayrhuber with a specially-engraved 5-liter bottle of Oregon Pinot Noir at a press conference that received wide press coverage. Griffin Creek Syrah 2000 received a rating of 90 from Wine Spectator Magazine and Willamette Valley Vineyards Pinot Gris 2001 was named a Smart Buy. Willamette Valley Vineyards Whole Cluster Pinot Noir 2001 was served at the "Oregon Salutes James Beard" journalism awards dinner sponsored by the James Beard Foundation at the New York Marriott Marquis. Willamette Valley Vineyards Pinot Noir Whole Cluster 2001 was rated a Best Buy by Wine Enthusiast Magazine. Willamette Valley Vineyards Pinot Noir 1999 was named Wine of the Week on MSNBC.com. The company's Griffin Creek Viognier 2000 received a Platinum designation from Wine Press Northwest; Tualatin Estate Semi-Sparkling Muscat 2001 and Willamette Valley Vineyards Founders' Reserve Pinot Gris were rated Double Gold. Griffin Creek Cabernet Sauvignon 1999 was named Gold in the same tasting, the annual Platinum Awards. RESULTS OF OPERATIONS Revenue Winery Operations The Company's revenues from winery operations are summarized as follows: Three months ended March 31, 2003 2002 __________ __________ Tasting Room sales & Rental Income $ 295,667 $ 340,062 On-site and off-site festivals 43,170 45,826 In state sales 554,345 540,008 Out of state sales 484,224 367,878 Custom crush /bulk wine /misc sales 155,175 - __________ __________ Gross Revenue 1,532,581 1,293,774 Less Excise Taxes 39,220 36,134 __________ __________ Net Revenues $ 1,493,361 $ 1,257,640 ========== ========== Tasting room and retail sales, and rental income for the three months ending March 31, decreased 13% to $295,667 in 2003 from $340,062 for the same period in 2002. Tasting room and retail sales decreased during the first quarter of 2003 due in part to turnover of personnel in the Key Customer Service program. On-site and off-site festival sales for the first quarter of 2003 decreased 6% to $43,170 from $45,826 over the first quarter of 2002. This decrease is due primarily to the continuing focus away from on-site and off-site events, and towards telephone, mail order and retail sales. Sales in the state of Oregon, through the Company's independent sales force and through direct sales from the winery, increased 3% to $554,345 in the first quarter of 2003 from $540,008 in the first quarter of 2002. Sales through the Company's independent sales force alone for the first quarter of 2003 increased 5% to $496,476 from $471,727 over the first quarter of 2002. Out-of-state sales in the first quarter of 2003 increased 32% to $484,224 from $367,878 in the first quarter of 2002. The Company's distributors experienced higher depletions during the first quarter of 2003, after working through much of their excess inventories in the prior year. Excise taxes The Company's excise taxes increased in the first quarter of 2003 to $39,220 from $36,134 the same period in 2002. This was due in part to the increased sales in the first quarter of 2003, increasing overall sales volumes and taxes paid by volume. Gross Profit Winery Operations As a percentage of revenue, gross profit for the winery operations decreased to 50% in the first quarter of 2003 as compared to 53% in the first quarter of 2002. After adjusting for the sale of bulk wines and custom crush fees in the first quarter of 2003, the gross margin would be 53% in the first quarter of 2003. We believe this non-GAAP disclosure provides a useful comparison to the first quarter of 2002. The Company is continuing its focus on, and improved distribution of, higher margin products, as well as continuing to reduce grape and production costs. The Company finalized an agreement with one of its grape growers to perform custom crush and winemaking services for excess grapes delivered in 2001. The agreement required the customer to pay the Company a set fee for the services provided. The Company agreed to take partial payment in the form of two stainless steel tanks the customer had previously purchased in 2001 and stored at the Turner site. These tanks were valued at the initial purchase price for the credit as a partial payment by the customer. Selling, General and Administrative Expense Selling, general and administrative expenses decreased 2% to $630,410 in the first quarter of 2003 from $643,977 in the first quarter of 2002. As a percentage of revenue from winery operations, selling, general and administrative expenses decreased to 42% in the first quarter of 2003 from 51% in the first quarter of 2002. In a continued effort to reduce overhead and reliance on credit, the Company elected not to fill several positions vacated by employee turnover, and continued to manage sales expenditures to produce quantifiable increases in revenues. Interest Income, Other Income and Expense Interest income increased to $1,313 for the first quarter of 2003 from $1,106 for the first quarter of 2002. Interest expense decreased to $87,121 in the first quarter of 2003 from $88,593 in 2002. Interest costs were lower because the Company paid a lower interest rate on its line of credit. The Company's other income is summarized as follows: Three months ended March 31, 2003 2002 __________ __________ Amortization of deferred gain on 1999 Tualatin sale-lease back $ 6,246 $ 6,246 Gain on Tualatin bare land sale 3,004 - Farm Credit interest rebate 22,617 - Miscellaneous rebates 302 - __________ __________ Other income 32,169 6,246 Other income increased to $32,169 for the first quarter 2003 from $6,246 for the first quarter of 2002. The Company received an interest rebate from Farm Credit Services for interest paid on the Company's long-term debt and line of credit in 2002, in the amount of $22,617. The Company also sold 4.67 acres of bare land at the Tualatin location for a gain of $3,004. In accordance with the 1999 sale-lease back at the Tualatin site, the Company recognized a gain of $6,246. The Company also received various rebate checks totaling $302. Income Taxes As the Company experienced a net profit for the first three months in 2003 a $25,427 income tax expense was accrued. Liquidity and Capital Resources At March 31, 2003, the Company had a working capital balance of $5.2 million and a current ratio of 2.7:1. At December 31, 2002, the Company had a working capital balance of $5.0 million and a current ratio of 2.3:1. The Company had a cash balance of $205,577 at March 31, 2003. At March 31, 2003, the line of credit balance was $1,526,657. The Company has a loan agreement with GE Commercial Distribution Finance Corporation 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 the Company on a quarterly basis. As of March 31, 2003, the Company was in compliance with all of the financial covenants. As of March 31, 2003, the Company had a total long-term debt balance of $3,115,966 owed to Farm Credit Services. This debt was used to finance the Hospitality Center, invest in winery equipment to increase the Company's winemaking capacity, complete the storage facility, and purchase Tualatin Vineyards. At December 31, 2002, the Company was in violation of 1 of 5 of its debt coverage covenants. Farm Credit Services has signed a waiver letter to the Company for this covenant. At March 31, 2003, the Company owed $587,136 on grape contracts. A large portion is owed to a single grape grower, which will be paid as the wine made from those grapes is sold. The Company believes that cash flow from operations and funds available under credit facilities will be sufficient to meet the Company's liquidity requirements for the next 12 months. Critical Accounting Policies: The 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 us 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-K for the year ended December 31, 2002. Recent Accounting Pronouncements In December 2002, the FASB issued SFAS 148, "Accounting for Stock-Based Compensation - Transition and Disclosure." This statement provides alternative methods of transition for a voluntary change to the fair value method of accounting for stock-based employee compensation. In addition, it amends the disclosure requirements of SFAS 123 to require prominent disclosure in both annual and interim financial statements about the method of accounting for stock-based employee compensation and the effect of the method used on reporting results. This statement is effective for fiscal years ending after December 15, 2002 and for the interim periods beginning after December 15, 2002. As we continue to report stock-based employee compensation costs using the intrinsic value method as defined by APB 25, adoption of the provisions of the new statement affects only our disclosure of these costs, which is presented in Note 2. ITEM 3 Controls and Procedures a) Within the 90-day period prior to the date of this report, we carried out an evaluation, under the supervision and with the participation of the Company's management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures pursuant to Rule 13a-14 of the Securities Exchange Act of 1934 (the "Exchange Act"). Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures are effective in timely alerting them to material information relating to the Company (including its consolidated subsidiaries) required to be included in our Exchange Act filings. b) There have been no significant changes in our internal controls or in other factors which could significantly affect internal controls subsequent to the date we carried out our evaluation. PART II. OTHER INFORMATION Item 1 Exhibits and Reports on Form 8-K. (a) No Exhibits ITEM 5 Other Information Non-Audit Fees: The Audit Committee of the Board Of Directors has approved the following non-audit services, which are being performed by PricewaterhouseCoopers, our independent accountants, during the calendar year ending December 31, 2003: - Income tax advisory services related to: income tax returns; acquisitions; and formation and liquidation of foreign subsidiaries 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: May 15, 2003 By /s/ James W. Bernau James W. Bernau President Date: May 15, 2003 By /s/ Sean M. Cary Sean M. Cary Controller CERTIFICATION OF CHIEF EXECUTIVE OFFICER AND 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, 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-QSB for the quarterly period ended March 31, 2003 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. By: /s/ James W. Bernau Name: James W. Bernau Title: Chief Executive Officer I, Sean M. Cary, 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-QSB for the quarterly period ended March 31, 2003 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. By: /s/ Sean M. Cary Name: Sean M. Cary Title: Chief Financial Officer CERTIFICATION OF CHIEF EXECUTIVE OFFICER AND CHIEF FINANCIAL OFFICER AS ADOPTED PURSUANT TO SECTION 302 (a) OF THE SARBANES-OXLEY ACT OF 2002 I, James W. Bernau, certify that: 1. I have reviewed this quarterly report on Form 10-QSB of Willamette Valley Vineyards Incorporated. 2. Based on my knowledge, this quarterly 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 quarterly report; 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly 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 quarterly report; 4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have: a) designed such disclosure controls and procedures 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 quarterly report is being prepared; b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function): a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officer and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date: May 15, 2003 /s/ James W. Bernau James W. Bernau Chief Executive Officer I, Sean M. Cary, certify that: 1. I have reviewed this quarterly report on Form 10-QSB of Willamette Valley Vineyards Incorporated. 2. Based on my knowledge, this quarterly 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 quarterly report; 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly 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 quarterly report; 4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have: a) designed such disclosure controls and procedures 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 quarterly report is being prepared; b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function): a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officer and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date: May 15, 2003 /s/ Sean M. Cary Sean M. Cary Chief Financial Officer