<PAGE> 1

                    U.S. Securities and Exchange Commission
                             Washington, D.C.  20549


                                   Form 10-QSB


(Mark One)

  [X]     QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
          SECURITIES EXCHANGE ACT OF 1934 
          For the quarterly period ended September 30, 1997
  [  ]    TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
          SECURITIES EXCHANGE ACT OF 1934 
          For the transition period from __________ to ____________ 

          Commission File No.: 0-26276


                                 R.H. PHILLIPS, INC.
                                 -------------------
            (Exact name of small business issuer in its charter)

        California                                   68-0313739
----------------------------------------------------------------------------
(State or other jurisdiction of          (IRS Employer Identification No.)
 incorporation or organization)         

 

                26836 County Road 12A, Esparto, California  95627
---------------------------------------------------------------------------- 

                    (Address of principal executive offices)



                                 (530) 662-3215
----------------------------------------------------------------------------

                            (Issuer's telephone number)




Check whether the issuer (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. 
Yes  X   No    

Number of shares outstanding of each of the issuer's classes of common equity 
as of November 10, 1997: 6,433,182 

Transitional Small Business Disclosure Format:    Yes        No   X  


        This document consists of 16 pages, excluding exhibits.  The Exhibit
        Index is on page 16.
<PAGE> 2


                               R.H. PHILLIPS, INC.
                           
                                      INDEX


Part I.   Financial Information (unaudited)

     Item 1.   Condensed Financial Statements ..............................3

               Balance Sheet ...............................................4

               Statements of Operations ....................................5

               Statements of Cash Flows ....................................6

               Notes to Condensed Financial Statements .....................7

     Item 2.   Management's Discussion and Analysis of Financial 
               Condition and Results of Operations .........................9


Part II.  Other Information

     Item 3.   Defaults Upon Senior Securities ............................14

     Item 6.   Exhibits and Reports on Form 8-K ...........................14


Signatures ................................................................15 

                                       -2-
<PAGE> 3

                       PART I.  FINANCIAL INFORMATION


Item 1.  Financial Statements                                               
<PAGE> 4
<TABLE>
                                R.H. PHILLIPS, INC.
                                   BALANCE SHEET
                                SEPTEMBER 30, 1997
                     (IN THOUSANDS, EXCEPT SHARE INFORMATION)
                                    (UNAUDITED) 
<CAPTION>
                                      ASSETS                                        
<S>                                                            <C>
CURRENT ASSETS:
   Cash                                                        $     22 
   Accounts receivable                                            2,459 
   Inventories                                                   10,050 
   Deferred income taxes and prepaid expenses                       565 
                                                                -------
       Total current assets                                      13,096
                                                              
PROPERTY, PLANT, AND EQUIPMENT - net                             28,888 
                                                                
OTHER ASSETS:
   Note receivable from shareholder                                 223 
   Deferred loan fees and other, net                                350 
                                                                -------
       Total other assets                                           573
                                                                -------
TOTAL ASSETS                                                    $42,557
                                                                =======
                    LIABILITIES AND SHAREHOLDERS' EQUITY

CURRENT LIABILITIES:
   Current maturities of long-term debt                         $ 1,073 
   Notes payable                                                  1,576 
   Accounts payable                                               2,619 
   Accrued liabilities                                              766 
                                                                ------- 
      Total current liabilities                                   6,034
                                                                =======

LONG-TERM DEBT                                                   14,000
DEFERRED INCOME TAXES                                               935 
COMMITMENTS AND CONTINGENCIES                                        --  
DEFERRED GAIN                                                     1,065 
REDEEMABLE PREFERRED STOCK, redeemable at $5,000,000              4,502 
SHAREHOLDERS' EQUITY:
   Non-redeemable preferred stock, no par value, 4,500,000
    shares authorized, none issued and outstanding                   --
   Common stock, no par value, 12,500,000 shares authorized,     14,041 
      6,433,182 shares issued and outstanding
   Additional paid-in capital                                       337 
   Retained earnings                                              1,643 
                                                                -------
      Total shareholders' equity                                 16,021 
                                                                -------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY                      $42,557 
                                                                =======
<FN>
See accompanying notes to financial statements
</TABLE>
                                         -4-
<PAGE> 5
<TABLE>
                                  R.H. PHILLIPS, INC.
                               STATEMENTS OF OPERATIONS 
                       (IN THOUSANDS, EXCEPT SHARE INFORMATION)
                                     (UNAUDITED)

<CAPTION>
                                    Nine Months Ended      Three Months Ended
                                     September 30,          September 30,
                              ------------------------   ----------------------
                                  1996        1997         1996         1997
                                --------    --------     --------     --------
<S>                            <C>          <C>          <C>          <C>   
NET SALES                      $ 11,121     $ 12,002     $  4,129     $  4,333 

COST OF SALES                     6,212        7,080        2,256        2,625
                               --------     --------     --------     --------
GROSS PROFIT                      4,909        4,922        1,873        1,708 

SELLING, GENERAL 
 AND ADMINISTRATIVE EXPENSES      2,680        2,929          964          935 
                               --------     --------     --------     --------
OPERATING INCOME                  2,229        1,993          909          773 

INTEREST EXPENSE                   (649)        (682)        (137)        (209)

OTHER INCOME (EXPENSE) - NET         61           72           30           66 
                               --------     --------     --------     --------       
INCOME  BEFORE INCOME TAXES       1,641        1,383          802          630 

PROVISION FOR INCOME TAXES         (599)        (498)        (293)        (227)
                               --------     --------     --------     --------
NET INCOME                     $  1,042     $    885     $    509     $    403 
                               ========     ========     ========     ========

NET INCOME                     $  1,042     $    885     $    509     $    403 

DIVIDENDS AND ACCRETION ON
 REDEEMABLE PREFERRED STOCK        (167)        (252)         (83)         (85)
                               --------     --------     --------     --------
NET INCOME APPLICABLE TO
   COMMON STOCK                $    875     $    633     $    426     $    318 
                               ========     ========     ========     ========

NET INCOME PER SHARE           $    .17     $    .10     $    .08     $    .05 
                               ========     ========     ========     ========
COMMON AND COMMON EQUIVALENT 
   SHARES OUTSTANDING         5,045,643    6,281,087    5,620,934    6,433,099 

<FN>
See accompanying notes to financial statements.
</TABLE>
                                       -5-
<PAGE> 6                         
<TABLE>
                                         R.H. PHILLIPS, INC.
                                      STATEMENTS OF CASH FLOWS 
                                         (IN THOUSANDS)
                                           (UNAUDITED)

<CAPTION>                             
                                                           Nine Months Ended   Three Months Ended
                                                             September 30,        September 30,
                                                          -------------------  ------------------
                                                             1996      1997      1996      1997
                                                           --------  --------  --------  --------
<S>                                                        <C>       <C>       <C>       <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
  Net income                                               $  1,042  $    885  $    509  $    403 
  Adjustments to reconcile net income to net cash 
   provided by operating activities:
   Depreciation and amortization                              1,110     1,340       401       461 
   (Gain) loss on disposal of property, plant and equipment      (6)       59        (6)        2 
   Net changes in: 
    Operating assets                                           (771)   (1,247)     (660)   (1,461)
    Operating liabilities                                     1,058       271     1,019     1,248 
                                                           --------  --------  --------  --------
     Net cash provided by operating activities                2,433     1,308     1,263       653

CASH FLOWS FROM INVESTING ACTIVITIES:
 Purchase of property, plant and equipment                  (10,758)   (6,547)   (4,814)   (2,055)
 Proceeds from sale of property and equipment                    49     5,402        49         8
                                                           --------  --------  --------  --------   
     Net cash used in investing activities                  (10,709)   (1,145)   (4,765)   (2,047)

CASH FLOWS FROM FINANCING ACTIVITIES:
 Issuance of (costs of issuing) redeemable preferred stock    4,798       (12)       --        --
 Issuance of common stock                                     4,639        23     4,797         4 
 Payment of cash dividend                                      (150)     (300)     (150)     (150)
 Proceeds from long-term debt and notes payable              11,618    13,523     5,029     4,405 
 Principal payments on long-term debt and notes payable     (12,740)  (13,201)   (6,008)   (2,548)
 Recognition of deferred gain                                    --      (464)       --      (464)
 Other financing activities                                     (19)      (18)       (4)      (74)
                                                           --------  --------  --------  --------
     Net cash provided by (used in) financing activities      8,146      (449)    3,664     1,173
                                                           --------  --------  --------  --------
INCREASE (DECREASE) IN CASH                                    (130)     (286)      162      (221)
CASH AT BEGINNING OF PERIOD                                     317       308        25       243 
                                                           --------  --------  --------  --------
CASH AT END OF PERIOD                                      $    187  $     22  $    187  $     22 
                                                           ========  ========  ========  ========
SUPPLEMENTAL DISCLOSURE OF
 CASH FLOW INFORMATION: 
  Interest paid (including capitalized interest)           $    832  $  1,025  $    235  $    318 
  Income taxes paid                                        $    396  $    551  $     57  $      2 

NONCASH TRANSACTIONS:
  Issuance of notes payable to finance inventory 
      and equipment purchased                              $     70  $    478  $     28  $    396 
  Dividends and accretion on redeemable preferred stock    $    150  $    327  $    150  $    235 
  Conversion of subordinated debt into common stock        $     --  $  1,395  $     --  $  1,395                 
<FN>                                                  
See accompanying notes to financial statements.
</TABLE>
                                                         -6-
<PAGE> 7
R.H. PHILLIPS, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS

1.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

       The interim financial statements as of September 30, 1997
and for each of the nine and three month periods ended September 30,
1996 and 1997 have been prepared by R.H. Phillips, Inc. (the
"Company") without audit.  In the opinion of management, the
financial statements include all adjustments (which include only normal
recurring entries) necessary for a fair presentation.  The operating
results for the nine and three month periods ended September 30, 1996
and 1997 are not necessarily indicative of the results which might be
realized for the full year.

       Certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted. These
statements should be read in conjunction with the financial statements
and notes included in the Company's Annual Report on Form 10-KSB
for the fiscal year ended December 31, 1996.

       Net income per share for the nine and three month periods
ended September 30, 1997 was computed using the weighted average
number of shares of Common Stock and dilutive Common Stock
equivalents outstanding during each period.  Common shares issuable
from stock options and warrants have been excluded from the
computation of net income per share if their inclusion would be anti-
dilutive.  Net income per share and common shares outstanding for the
nine and three month periods ended September 30, 1996 have been
restated to reflect stock dividends of 43,352 shares issued in April 1997
and 39,117 shares issued in September 1997. 

2.  ACCOUNTING PRONOUNCEMENT

       In February 1997, the Financial Accounting Standards Board
issued Statement No. 128, "Earnings Per Share" ("SFAS 128"), which
is required to be adopted by the Company on December 31, 1997.  At
that time, the Company will be required to change the method currently
used to compute earnings per share and to restate all prior periods. 
The impact of SFAS 128 on the calculation of earnings per share is not
expected to be material.

3.  SALE AND LEASEBACK OF VINEYARDS

       In May 1997, the Company sold 371 acres of land being
developed into vineyard to John Hancock Mutual Life Insurance
Company ("Hancock").  In connection with that transaction, the
Company now manages, operates and leases the land and vineyards
from a subtenant of Hancock, Farmland Management Services, for a
term that expires on December 31, 2012.  The Company received
proceeds from the sale of $4,209,000 in May 1997 and $1,175,000 in
June 1997.  The lease provides that the Company will pay rent of
$161,000 per calendar quarter beginning in 1999.  At June 30, 1997,
the Company held an option to repurchase the land and vineyard at the
end of the lease term.  The lease was accounted for as a long-term
capital lease.
                                      -7-
<PAGE> 8
NOTES TO CONDENSED FINANCIAL STATEMENTS - CONTINUED

3.  SALE AND LEASEBACK OF VINEYARDS - CONTINUED 

                                                        
       The Company recognized deferred gain of $1,529,000 at the
time of closing.  The deferred gain consists of the difference between
the actual costs of the property sold and the funds received by the
Company. The Sale and Leaseback agreement with Hancock requires
that the Company complete the vineyards that are still under
development. The Company expended $464,000 between the date of
closing and September 30, 1997 on the development of the vineyards.
Management estimates that the remaining costs to complete the
development will be approximately $652,000 and will be offset against
the deferred gain as incurred. The remainder, of approximately
$413,000, will be amortized to income over the life of the lease.

       Effective September 30, 1997, the Company renegotiated the
lease agreement with Hancock whereby the option to repurchase the
land and vineyard at the end of the lease was given up by the Company
in exchange for a right of first refusal.  Consequently, at September 30,
1997, the lease is accounted for as an operating lease.
       
       
                                       -8-
<PAGE> 9            
Item 2.  Management's Discussion and Analysis of Financial Condition and
Results of Operations
       
      In reviewing the following management's discussion and
analysis, the reader should refer to the historical financial statements of
the Company.  The discussion of the results and trends does not
necessarily imply that these results and trends will continue.  For the
purpose of the following discussion, a "case" means a nine liter case of
wine.  All numbers are approximate.

Overview

      During the first nine months of 1997, the Company
experienced an increase in its cost of goods due to adverse weather
conditions during the 1996 growing season, which caused below
average crop yields in 1996.  Many other California vineyards suffered
similar or greater reductions of their grape crops.  The reduction in the
Company's grape supply compelled the Company to increase its grape
and bulk wine purchases to meet consumer demand for the Company's
wines.  At the same time, the market price of bulk wines and grapes
increased substantially during the past two years due to below average
California grape harvests.  

       The Company realized above average yields from the 1997
crop.  The Company's vineyards produced 5,100 tons of grapes in
1997, compared with 2,400 in 1996, primarily due to above average
yields per acre due to favorable growing conditions and production
from new vineyards.  The increased 1997 grape tonnage reduced the
percentage of wine produced from grapes purchased from outside
growers and reduced the cost per gallon of wine produced from
Company vineyards.  In addition, the percentage of wines purchased
from other wineries was reduced in 1997.  Consequently, management
believes that the Company's cost of goods will likely decline in 1998,
and that the Company will have more wine available for sale.  The
Company has expanded the size of its vineyards to lessen its
dependence on outside sources of bulk wines and grapes and further
reduce its cost of goods.  The full benefit of the vineyard expansion
will continue to be realized over the next several years as the vines
mature. 

Results of Operations

      Net Sales

      Net sales for the nine month period ended September 30, 1997
were $12,002,000, an increase of 8% over net sales of $11,121,000
during the same period in 1996.  Excluding the sales of bulk wines and
other items, net sales were $11,106,000 for the nine month period
ended September 30, 1997, an increase of 5% over sales of
$10,554,000 during the corresponding period  in 1996.  The average
selling price per case increased from $38.93 during the nine month
period ended September 30, 1996 to $43.16 for the corresponding
period in 1997.  During the first nine months of 1997, 257,000 cases
were sold, a decrease of 5% from 271,000 cases sold in the
comparable period of the prior year.  

      Gross profit

      Gross profit was substantially unchanged from the comparable
period of the prior year, totaling $4,922,000 for the nine month period
ended September 30, 1997.  Excluding the sales of bulk wines and
other items, gross profit was $4,754,000 for the first nine months of
1997, compared to $4,766,000 in the corresponding period of 1996. 
Gross margins were 41% during the first nine
                                    -9-
<PAGE> 10
months of 1997, compared to 44% during the same period in 1996.  The average
cost per case sold in the first nine months of 1997 increased by 16% over
the same period in 1996, from $21.34 per case to $24.69 per case. 
The decrease in gross margin percentage and increase in cost per case
are attributable primarily to the higher prices of bulk wines and grapes
purchased from outside parties and to the below average harvest
experienced by the Company in 1996.  The Company implemented
price increases during 1997 to help compensate.  

      Selling, General and Administrative Expenses

      Selling, general and administrative expenses were $2,929,000,
or 24% of sales, for the nine month period ended September 30, 1997,
an increase from $2,680,000, or 24% of sales, for the same period in
1996.  The $249,000 increase is primarily due to a $155,000 increase
in selling expenses, primarily due to higher sales labor expenses.  In
addition, general and administrative expenses increased $94,000,
primarily due to increased public relations costs.

      Interest Expense

      Interest expense for the nine month period ended September
30, 1997 was $682,000, compared to $649,000 for the same period in
1996.  The Company capitalized $450,000 of additional interest
pertaining to vineyard and winery development during the nine month
period ended September 30, 1997, and $434,000 during the
corresponding period in 1996.  The interest is attributable to the
Company's borrowings on its bank lines of credit and other debt
obligations.

      Net Income

      The Company generated net income of $885,000 for the nine
month period ended September 30, 1997, compared to net income of
$1,042,000 for the nine month period ended September 30, 1996. 
The $157,000 decrease was primarily due to increases in selling,
general, and administrative expenses, partially offset by a $101,000
decrease in income taxes.

      Seasonality

      The Company usually experiences substantial seasonal
fluctuations in revenues and expenditures.  Sales volumes generally
increase during the holiday season, which causes a large percentage of
revenue to be recorded during the last three months of each year.  The
Company's expenditures fluctuate throughout the year based on
vineyard and winery activities.  Expenditures typically peak during the
summer and early autumn due to harvest activities and capital
expenditures.  Consequently, the Company's financial results during
the first nine months of the year are not necessarily indicative of the
financial performance for the entire year.

Liquidity and Capital Resources

      The Company has financed its working capital and capital
expansion needs through internally generated funds, outside credit
facilities, equity financing, and the sale and leaseback of certain assets. 
The Company has made substantial capital expenditures to expand its
vineyards and winery facilities to obtain production efficiencies through
vertical integration and increased product sales.  The Company's cash
flows from operations have not been sufficient to satisfy all of the
working capital and capital expenditure requirements needed to keep
pace with its growth.  Consequently, the
                                      -10-
<PAGE> 11
Company has depended upon debt, equity and lease financing for its working
capital and capitalexpansion needs. 

      As of September 30, 1997, the Company had cash totaling
$22,000, a decrease from $308,000 on December 31, 1996.  Sources
of cash during the nine month period ended September 30, 1997
included cash from operations of $1,308,000, proceeds from notes
payable of $2,450,000, proceeds from long-term debt of $11,073,000,
and proceeds from the sale of property and vineyards of $5,402,000. 
Cash used during that period included $6,547,000 invested in property,
plant and equipment, $1,713,000 used to repay notes payable, and
$11,488,000 used to repay long-term debt.

      Current assets increased by $1,377,000 during the nine month
period ended September 30, 1997, primarily due to an increase in
inventories from $7,808,000 on December 31, 1996 to $10,050,000
on September 30, 1997.  This increase in inventories is indicative of
the seasonality of the Company's business, as inventories typically
increase after harvest.  

      Current liabilities increased by $1,331,000 during the nine
month period ended September 30, 1997, primarily due to an increase
in notes payable used to fund harvest and expansion costs.  Notes
payable increased from $440,000 on December 31, 1996 to
$1,576,000 on September 30, 1997.  
  
      Net working capital increased $46,000 from $7,016,000 on
December 31, 1996 to $7,062,000 on September 30, 1997, primarily
due to the changes in inventories and notes payable discussed above. 
      
      The Company has several long-term loans.  The largest of these
loans was obtained from Metropolitan Life Insurance Company
("Metropolitan") in January 1995.  This loan, pursuant to which the
Company borrowed $7,500,000, has a term of 10 years.  Interest and
principal on the loan are paid in monthly installments, with eight
percent of the outstanding principal paid per annum and all remaining
principal after such monthly payments to be paid at the end of the
loan's term.  At September 30, 1997, $6,500,000 was outstanding on
the loan.  The annual interest rate on the loan is presently 9.05% as to
$3,987,000 of the principal amount, 8.1% as to $1,300,000 of the
principal amount, and 8.55% as to $1,213,000 of the principal amount.

      The Company has three lines of credit totaling $8,900,000 with
U.S. Bank of California ("U.S. Bank") to finance its working capital
requirements.  The credit facility consists of an operating line of credit
of $6,000,000,  a crop line of $1,400,000, and a bridge line of
$1,500,000.  The operating and bridge lines of credit are secured by
accounts receivable and inventory.  The operating line matures in April
1999, and the bridge line matures in December 1997.  The crop line is
secured by the grape crop and other farm assets, and matures in
December 1997.    The annual interest rate on the credit facility is
either U.S. Bank's prime rate or IBOR plus 200 basis points, at the
Company's option.  The balance on the credit facility as of September
30, 1997 was $7,180,000.

      Both the Metropolitan loan and the U.S. Bank credit facility
contain various covenants, including requirements as to the Company's
working capital and current ratio.  The Company was not in
compliance with these covenants as of September 30, 1997.  The
Company has obtained waivers of these covenant requirements
through December 31, 1997 from Metropolitan and until December
31, 1997 from U.S. Bank.  The Company is currently obtaining a new
term loan from Metropolitan.  Proceeds from the loan will be used to
repay the existing Metropolitan loan and provide the Company with
additional cash resources.  Management believes that the new loan
with Metropolitan will close before December 31, 1997, and that the
loan proceeds will bring the
                                      -11-
<PAGE> 12
Company back into compliance with its financial covenants.  However, there
can be no assurance that the loan will close, or that it will close before 
December 31, 1997.  If the loan is delayed it will be necessary to extend 
the financial covenant waivers.  There can be no assurance that the waivers
will be extended by Metropolitan and U.S. Bank.


      In May 1997, the Company sold 371 acres of land being
developed into vineyard to John Hancock Mutual Life Insurance
Company ("Hancock").  In connection with that transaction, the
Company now manages, operates and leases the land and vineyards
from a subtenant of Hancock, Farmland Management Services, for a
term that expires on December 31, 2012.  The Company received
proceeds from the sale of $4,209,000 in May 1997 and $1,175,000 in
June 1997.  The lease provides that the Company will pay rent of
$161,000 per calendar quarter beginning in 1999.  The lease is
accounted for as an operating lease.
      

      In March 1996, the Company sold 500,000 shares of Senior
Redeemable Preferred Stock (the "Senior Preferred Stock") and
warrants to purchase up to 1,346,788 shares of Common Stock to
Hancock.  The net proceeds the Company derived from the sale of the
Senior Preferred Stock and the warrants, after payment of offering
expenses, were $4,785,000. The Senior Preferred Stock bears a
cumulative annual dividend of $1.20 per share, payable semiannually. 
During the first four years after issuance, 50% of the dividend is
payable in cash and 50% of the dividend is payable in shares of
Common Stock at a price equal to the lower of the market price at the
dividend payment date or $4.00 per share.  The Company is required
to redeem one-third of the Senior Preferred Stock eight years after
issuance, and one-third in each of the succeeding years at a price of
$10.00 per share.

      In April 1997, the Company converted subordinated
promissory notes in the aggregate amount of $1,500,000 into 387,077
shares of Common Stock. The notes became automatically convertible
into Common Stock at a price of $3.875 when the average of the
closing bid and ask price for the Common Stock exceeded $3.50 for
five consecutive trading days subsequent to December 6, 1996. 
      
      During the nine month period ended September 30, 1997, the
Company expanded its winery  by enlarging its case goods warehouse,
increasing its stainless steel tank storage and fermentation capacity, and
purchasing barrels and other support equipment.  The cost of the
winery expansion through September 30, 1997 was $2,396,000.  The
Company currently plans to add a tasting room and conference facility
building in late 1997 or early 1998, and estimates the cost will be
$500,000.  Additional winery expansion projects are expected in the
future as the Company's newly planted vineyards become productive. 
The Company planted 347 acres of new vineyard in 1997, which
included 115 acres of vineyard sold to Hancock.  Management
estimates that the cost of the 1997 vineyard expansion, including acres
previously planted but not yet fully productive, will be $3,400,000. 
The Company financed 1997 capital projects with funds from the
recently completed sale of land and vineyards to Hancock.  The
Company plans to fund future capital projects with internally generated
funds and long-term debt.

      Phylloxera infestation may have a negative impact on the
Company's future grape production.  Phylloxera is a root louse which
feeds on the roots of grapes, causing reduced production and eventual
vine death.  Of the Company's 1,548 acres of vineyard, 289 acres
have root stock which is susceptible to Phylloxera.  Management
estimates these vineyards will be commercially productive for ten years
(until 2004), as compared with twenty-five years generally estimated
for vineyards without Phylloxera.  The reduction in the useful life of
vineyards causes an increase in depreciation and maintenance expense. 
The increased expenses are added to the cost of grapes harvested, thus
                                       -12-
<PAGE> 13
increasing cost of sales.  The Company plans to remove and replace
all Phylloxera-infested or susceptible vines with rootstock believed to
be resistant to Phylloxera. 

      The above discussion concerning future financing needs,
vineyard and winery expansion, the impact of Phylloxera and factors
affecting liquidity are forward looking statements.  Although
management believes that these statements are reasonable in view of
the facts available to them, the Company's past experience, and trends
in the wine industry, there can be no assurance that any of these
statements will prove to be true.  There are many factors which could
have a material impact upon whether these projections will be realized
or whether these trends will continue.  Among these factors are the
following:

      Availability of Future Financing.  The Company may continue
to heavily depend upon its ability to raise additional debt or equity
financing for its working capital and capital expansion needs.  The
ability to raise financing is in turn dependent upon a variety of factors,
some of which are outside the control of the Company.  These factors
include, but are not limited to, interest rates, the availability of sources
of financing and the exercise of warrants issued in the Company's
initial public offering.  If all of the warrants are not exercised, interest
rates increase, or other financing becomes unavailable or more costly
to obtain, the Company may not be able to raise sufficient capital to
supply its needs.

      Costs of Expansion.  Management has based its assumptions
concerning the costs of expansion on estimates which it believes are
reasonable.  However, there can be no assurance that the Company's
estimates will prove to be correct.  If these costs are higher than
anticipated, the Company may be required to raise an even greater
amount of financing or reduce the rate of expansion of its facilities.

      Costs of Production.  Statements with respect to the general
decline in the Company's cost of production are based on
management's assumptions concerning the likely levels of future sales
by the Company, projected yields from the Company's vineyards and
the cost and availability of bulk wine and grapes from the spot market. 
For example, if the Company's sales increase at a faster rate than
anticipated or the Company's grape production is lower than
projected, the Company could be forced to make additional purchases
of grapes and wine on the spot market.  Management believes that
such events could increase the Company's costs of production.

      Market Conditions.  Assumptions as to the desirability of
expansion are based to a great extent on management's beliefs
concerning the current status of and trends within the wine industry. 
Market conditions in the wine industry have changed substantially
from time to time.  To the extent that market conditions change
substantially in the future, the rate at which the Company deems it
advisable to expand its vineyard and winery facilities may be adjusted.
                                     -13-
<PAGE> 14                                      
                                   PART II

Item 3.  Defaults Upon Senior Securities

      The Company has several long-term loans.  The largest of
these loans was obtained from Metropolitan Life Insurance Company
("Metropolitan") in January 1995.  This loan, pursuant to which the
Company borrowed $7,500,000, has a term of 10 years.  As of
September 30, 1997, $6,500,000 was outstanding on the loan.

      The Company has three lines of credit totaling $8,900,000 with
U.S. Bank of California ("U.S. Bank") to finance its working capital
requirements.  The credit facility consists of an operating line of credit
of $6,000,000,  a crop line of $1,400,000, and a bridge line of
$1,500,000.  The operating line matures in April 1999, and the crop
and bridge lines mature in December 1997.  The balance on the credit
facility as of September 30, 1997 was $7,180,000.

      Both the Metropolitan loan and the U.S. Bank credit facility
contain various covenants, including requirements as to the Company's
working capital and current ratio.  The Company was not in
compliance with these covenants as of September 30, 1997.  The
Company has obtained waivers of these covenant requirements until
December 31, 1997 from Metropolitan and until December 31, 1997
from U.S. Bank.  The Company is currently obtaining a new term loan
from Metropolitan.  Proceeds from the loan will be used to repay the
existing Metropolitan loan and provide the Company with additional
cash resources.  Management believes that the new loan with
Metropolitan will close before December 31, 1997, and that the loan
proceeds will bring the Company back into compliance with its
financial covenants.  However, there can be no assurance that the loan
will close, or that it will close before December 31, 1997.  If the loan
is delayed it will be necessary to extend the financial covenant waivers. 
There can be no assurance that the waivers will be extended by
Metropolitan and U.S. Bank.

      
Item 6.  Exhibits and Reports on Form 8-K

      (a) Exhibits
      
Exhibit No.         Description
-----------         -----------

10.1                Loan Agreements between the Company and U.S. Bank, 
                    dated September 15,1997
10.2                Right of First Offer to Lease and Right of First Refusal
                    to Purchase and Termination of Option Agreement between
                    the Company and Hancock, dated September 30, 1997
27.1                Financial Data Schedules


     (b) Reports on Form 8-K

            None
                                         -14- 
<PAGE> 15
SIGNATURES

      Pursuant to the requirements of the Securities Exchange Act
of 1934, the registrant has duly caused this report to the signed on its
behalf by the undersigned, thereunto duly authorized.

                                                                            
                                             R.H.PHILLIPS, INC.
                                             (Registrant)
                                                                             
                                             Date: November 14, 1997

                                             //s// John. E Giguiere        
                                             Co-President
                                             Co-Chief Executive Officer

                                             //s// Michael J. Motroni
                                             Michael J. Motroni, Chief
                                             Financial Officer
                                             Principal Financial Officer

                                       -15-
<PAGE> 16
                                   EXHIBIT INDEX


Exhibit No.                     Description                     Page No.        
                           

10.1     Loan Agreements between the Company and U.S. Bank,
         dated September 15, 1997.
10.2     Right of First Offer to Lease and Right of First Refusal
         to Purchase and Termination of Option Agreement between
         the Company and Hancock, dated September 30, 1997
27.1     Financial Data Schedules
                                      -16-