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, 1997
   Commission File No 0-21522


                           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: Common 
Stock

Securities registered pursuant to Section 12(g) of the Act:  None

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, 1997

Issuer's revenues for its most recent fiscal year:      $5,714,132

Aggregate market value of the voting stock held by
non-affiliates of the Issuer based upon the closing
bid price of such stock:                               $6,372,535 

Number of shares of Common Stock outstanding:            4,231,431

Transitional Small Business Disclosure Format:  YES [ ] No [X]

                                           DOCUMENTS INCORPORATED 
BY REFERENCE

Portions of the Company's Proxy Statement for its 1997 Annual 
Meeting are incorporated by reference into Part III of this 
Report.


ITEM 1.	DESCRIPTION OF BUSINESS

     Willamette Valley Vineyards, Inc. (the "Company") was formed 
in May 1988 to produce and sell premium, super premium and ultra 
premium varietal wines (i.e., wine which sells at retail prices of 
$3 to $7, $7 to $14 and over $14 per bottle, respectively).  The 
Company's wines are made from grapes grown at its vineyard (the 
"Vineyard") and from grapes purchased from other nearby vineyards.  
The grapes are crushed, fermented and made into wine at the 
Company's winery (the "Winery") and the wines are sold principally 
under the Company's Willamette Valley Vineyards label.  The 
Company's Vineyard and Winery are located on 75 acres of Company-
owned land adjacent to Interstate 5, approximately two miles south 
of Salem, Oregon.  

     In 1996, the Company owned 50 acres of planted vineyards--39 
acres producing and 11 acres in development.  After the acquistion 
of Tualatin Vineyards, Inc., in 1997 the Company owned 122 acres 
of producing vineyard, 30 acres in development and 41 additional 
plantable acres.  After the long term lease of O'Connor Vineyards, 
the Company controlled 170 producing acres, 38 acres in 
development and 61 plantable acres.

     In April 1997 the Company acquired the net assets of Tualatin 
Vineyards, Inc. (TVI) adding 83 acres of  producing vineyard, 60 
more plantable acres and an additional 20,000 cases of wine making 
capacity.  The purchase price paid by the Company to the Tualatin 
Valley shareholders in exchange  for their shares was $1,824,000 
plus Tualatin Vineyards current assets minus their current and 
long term liabilities as reflected in their balance sheet  dated 
April 15, 1997.  The Company paid 35 percent of the purchase price 
in the form of cash with the balance paid through the issuance of 
shares of the Company's common stock at an agreed price per share.  
The final purchase price was $1,988,601 paid to the Tualatin 
Vineyard, Inc. shareholders.  

     The Company also leased O'Connor  Vineyards on a ten-year 
contract adding an additional 48 producing acres. All of  these 
highly regarded vineyards are within the Willamette Valley 
Appellation.  

Products

     Under its Willamette Valley Vineyards label, the Company 
currently produces and sells the following types of wine in 750 ml 
bottles::  Pinot Noir , the Company's flagship and its largest 
selling varietal in 1997; Chardonnay, Pinot Gris, White Riesling, 
Dry Riesling, Gewurztraminer and Oregon Blossom (blush blend).  As 
a convenience to our restaurant customers the Company produces 
some of our products in larger sized packages.
 
     Under its WVV label, the Company currently produces and sells 
small quantities of the following types of wine in 750 ml bottles:  
Merlot, Cabernet Sauvignon, Edelweiss, and Oregon's Nog -- a 
seasonal holiday product.  

Market Overview

     Wine Consumption Trends.  Wine consumption in the United 
States declined from 1987 to 1994 due to increased consumer health 
concerns and a growing awareness of alcohol abuse.  That decline 
was led by sharp reductions in the low-cost non-varietal ("jug") 
wine and wine cooler segments of the market which, prior to 1987, 
were two of the fastest growing market segments.  Beginning in 
1994, per capita wine consumption once again began to rise.   
Nevertheless, the Company believes that consumption of jug wines 
and wine coolers will continue to decline over the next few years. 
It estimates that premium, super premium and ultra premium wine 
consumption will experience a moderate increase over the same 
period.  Consumers have restricted their drinking of alcoholic 
beverages and view premium, super premium and ultra premium wines 
as a beverage of moderation.  The Company believes this change in 
consumer preference from low quality, inexpensive wines to 
premium, super premium and ultra premium wines reflects, in part, 
a growing emphasis on health and nutrition as a principal element 
of the contemporary lifestyle as well as an increased awareness of 
the risks associated with alcohol abuse.

     The Oregon Wine Industry.  Oregon is a relatively new wine 
producing region in comparison to California and France.  In 1966, 
there were only two commercial wineries licensed in Oregon.  By 
contrast, in 1997, there were 120 commercial wineries licensed in 
Oregon and over 7,800 acres of wine grape vineyards,  6,300 acres 
of which are currently producing.  Total production of Oregon 
wines in 1997 is estimated by the Company to be approximately 
760,000 cases.  Oregon's entire 1997 production would have an 
estimated retail value of approximately $76 million, assuming a 
retail price of $100 per case, and a wholesale value of 
approximately one-half of the retail value, or $38 million.

     Because of climate, soil and other growing conditions, the 
Willamette Valley in western Oregon is ideally suited to the 
growing of superior quality Pinot Noir, Chardonnay, Pinot Gris and 
White Riesling wine grapes.  Some of Oregon's Pinot Noir and 
Chardonnay wines have developed outstanding reputations winning 
numerous national and international awards.

     Oregon wine producers enjoy certain cost advantages over 
their California and French competitors due to lower costs for 
grapes, vineyard land and winery sites.  For example, the average 
cost of unplanted vineyard land in Napa County, California is 
approximately $40,000 per acre as compared to approximately $3,500 
per acre in Oregon.  In the Burgundy region of France, virtually 
no new vineyard land is available for planting.

     Oregon does have certain disadvantages, however.  As a new 
wine producing region, Oregon's wines are relatively little-known 
to consumers worldwide and the total wine production of Oregon 
wineries is small relative to California and French competitors.  
Greater worldwide label recognition and larger production levels 
give Oregon's competitors certain financial, marketing, 
distribution and unit cost advantages.  Furthermore, Oregon's 
Willamette Valley has an unpredictable rainfall pattern in early 
autumn.  If significantly above average rains were to occur just 
prior to the autumn grape harvest, the quality of harvested grapes 
could materially diminish thereby affecting that year's wine 
quality.  Finally, phylloxera, an aphid-like insect that feeds on 
the roots of grapevines, has been found in at least 14 commercial 
vineyards in Oregon.  Contrary to the California experience, most 
Oregon phylloxera infestations have expanded very slowly and done 
only minimal damage.  Nevertheless, phylloxera does constitute a 
significant risk to Oregon vineyards. Prior to the discovery of 
phylloxera in Oregon, all vine plantings in the Company's Vineyard 
were with non-resistant rootstock.  Beginning with the Company's 
plantings in May 1992, only phylloxera-resistant rootstock was 
planted.  As of December 31, 1997, the Company has not detected 
any phylloxera at its Turner site. In 1997, the Company purchased 
Tualatin Vineyards which has phylloxera at its site. The Company 
did plant 19 acres of self rooted vines which are susceptible to 
phylloxera.  Since the change in management in the third quarter,  
all future planting have been and will be on phylloxera resistant 
root stock.  The Company takes all necessary precautions to 
prevent the spread of phylloxera to its Turner site. 

     Several significant developments in the Oregon wine industry 
have taken place over the past ten years.  Robert J. Drouhin, a 
well-known producer of French wines, purchased vineyard land near 
Dundee, Oregon on which he has planted a vineyard and constructed 
a winery.  Napa Valley's Girard and Stag's Leap Wineries have 
formed a partnership and purchased vineyard land in the Willamette 
Valley where they have planted a vineyard and begun harvesting 
Pinot Noir grapes.  Brian Croser (a noted Australian winemaker), 
in partnership with Cal Knudsen (an original investor in Erath 
Vineyards) and the French Champagne firm, Taittinger, established 
the Dundee Wine Company.  Their wines, under the Argyle label, 
have received recognition for sparkling wines, Dry Riesling, 
Chardonnay and Pinot Noir. In 1992, a vineyard consisting of over 
200 acres of Pinot Noir grapes was planted by a California 
vineyard investor across Interstate 5 and within sight of the 
Company's Winery.  

     The largest development in the Oregon wine industry is King 
Estate Winery, which is located 22 miles southwest of Eugene.  The 
facility was completed in 1994 and is approximately 100,000 square 
feet in size surrounded by a 180 acre vineyard.  The Company 
estimated King Estate's wine production in 1996 to be 250,000 
gallons.  King Estate is focused on serving the national market.  
The Company views King Estate as a welcome addition to the Oregon 
wine industry and believes they could have the same positive 
effect on wine exports as St. Michelle Winery has had on the 
Washington wine industry.  The most recent high-profile move in 
Oregon was the Benziger family's purchase of 65 acres, including 
32 producing acres of vineyard, near Scholls.  The Benziger family 
created the huge Glen Ellen wine brand in California, before 
selling it off to Brown-Forman.  The Company believes that further 
investments by other experienced wine producers will continue, 
ultimately benefiting the Company and the Oregon wine industry as 
a whole by bringing increased international recognition to the 
quality of Oregon wines.

     As a result of these factors, the Company believes that long-
term prospects for growth in the Oregon wine industry are 
excellent.  The Company believes that over the next 20 years the 
Oregon wine industry will grow at a faster rate than the overall 
domestic wine industry, and that much of this growth will favor 
producers of premium, super premium and ultra premium wines such 
as the Company's.

Company Strategy

     The Company, as one of the largest wineries in Oregon, 
believes its success is dependent upon its ability to: (1) grow 
and purchase high quality vinifera wine grapes; (2) vinify the 
grapes into premium, super premium and ultra premium wine; and 
(3) achieve significant brand recognition for its wines, first in 
Oregon and then nationally and internationally.  The Company's 
goal is to continue as one of Oregon's largest wineries, gaining a 
reputation for producing some of Oregon's finest, most sought 
after wines.  

     Based upon several highly regarded surveys of the US wine 
industry, the Company believes that successful wineries exhibit 
the following four key attributes:  (i)  focus on production of 
high-quality premium, super premium and ultra premium varietal 
wines;  (ii)  achieve brand positioning that support high bottle 
prices for its high quality wines;  (iii);  build brand 
recognition by emphasizing restaurant sales; and (iv) develop 
strong marketing advantages (such as a highly visible winery 
location and successful self-distribution).

     The Company has designed its strategy to address each of 
these attributes.

     To successfully execute this strategy, the Company grows and 
purchases selected, high-quality varietal wine grapes which can be 
vinified into premium, super premium and ultra premium wine.  To 
produce superior quality wine, the Company has assembled a team of 
well-known, accomplished winemaking professionals, and has 
constructed and equipped a 22,934 square foot state-of-the-art 
Winery and a 12,500 square foot outdoor production area for the 
crushing, pressing and fermentation of wine grapes.

     The Company's marketing strategy is to sell its premium, 
super premium and ultra premium cork finished wine through a 
combination of (i) direct sales at the Winery, (ii) 
self-distribution to local and regional restaurants and retail 
outlets, and (iii) sales through independent distributors and wine 
brokers who market the Company's wine in specific targeted areas 
where self-distribution is not economically feasible.  Most of the 
Company's wines are sold under its Willamette Valley Vineyards 
label.  

     The Company believes the location of its Winery next to 
Interstate 5, Oregon's major north-south freeway, significantly 
increases direct sales to consumers and facilitates self--
distribution of the Company's products.  The Company believes this 
location provides high visibility for the Winery to passing 
motorists, thus enhancing recognition of the Company's products in 
retail outlets and restaurants.  The Company's Hospitality Center 
has further increased the Company's direct sales and enhanced 
public recognition of its wines.

Vineyard

     The Property.  The Company's estate vineyard at the Turner 
site currently has 50 acres planted and 39 acres producing  which 
includes 17 acres of Pinot Noir and 8 acres of White Riesling 
grape vines planted in 1985.  The Company planted 8 acres of Pinot 
Gris vines in May 1992 and 6 acres of Chardonnay (Espiguette 
clone) vines in 1993.  In 1996, the Company planted its remaining 
11 acres in Chardonnay (Dijon clones) and Pinot Gris.  Grapevines 
do not bear commercial quantities until the third growing season 
and do not become fully productive until the fifth to eighth 
growing season.  Vineyards generally remain productive for 30 to 
100 years, depending on weather conditions, disease and other 
factors.

     The Vineyard uses an elaborate trellis design known as the 
Geneva Double Curtain.  The Company has incurred the additional 
expense of constructing this trellis because it doubles the number 
of canes upon which grape clusters grow and spreads these canes 
for additional solar exposure and air circulation.  Research and 
practical applications of this trellis design indicate that it 
will increase production and improve grape quality over 
traditional designs.


     In April of 1997, the Company purchased Tualatin Vineyards, 
Inc. which added 83 acres of additional producing vineyards and 
some 60 acres of bare land for future plantings. In 1997, the 
Company planted 19 acres at the Tualatin site and is preparing to 
plant another 41 acres in 1998. The majority of the new plantings 
will be Pinot Noir which is the Company's flagship varietal. All 
of the new planting will be available to harvest in the next three 
to five years.

     Also in 1997, the Company entered into a 10 year lease with 
O'Connor Vineyards (48 acres) located near Salem to manage and 
obtain the supply of grapes from O'Connor Vineyards. In 1997 the 
Company received only a portion of the grapes produced at O'Connor 
due to the phase out of certain  preexisting grape sales 
contracts. 

     The Company now controls of 243 acres (indluding 41acres 
which will be planted in 1998) of vineyard land.  At full 
production, these vineyards should enable the Company to grow 
approximately 38 % of the grapes needed to meet the Winery's 
ultimate production capacity of 298,000 gallons (124,000 cases).

     Grape Supply.  In 1997, the Company's 39 acres of producing 
estate vineyard yielded approximately 181 tons of grapes for the 
Winery's ninth crush.  Tualatin Vineyards produced 234 tons of 
grapes in 1997. O'Connor Vineyards produced 127 tons of which 
about 80% were sold to other wineries because of previous 
commitments. An additional 1,112 tons of grapes were purchased 
from other growers in 1997.  However, the Company sold about 228 
tons of the grapes harvested from its vineyards or purchased from 
contracted vineyards in 1997. The Company  realized it could 
optimize inventory levels and improve wine quality by processing 
fewer tons than were initially thought necessary because of overly 
optimistic sales projections, e.g. Chardonnay.  The Company 
expects to produce 202,000 gallons in 1998 (85,011 cases) from its 
1997 crush. In 1998, the Company also anticipates selling excess 
bulk wine to meet revised sales projections  The Winery's 1997 
total wine production was 218,238 gallons (91,793 cases) from its 
1996 crush. The Vineyard cannot and will not provide the sole 
supply of grapes for the Winery's near-term production 
requirements.  The Company has also entered into grape purchase 
contracts with certain  directors of the Company.  See "CERTAIN 
TRANSACTIONS."

     The Company fulfills its remaining grape needs by purchasing 
grapes from other nearby vineyards at competitive prices.  The 
Company believes high quality grapes will be available for 
purchase in sufficient quantity to meet the Company's requirements 
except in the Pinot Noir varietal, where there is increasing 
demand. The grapes grown on the Company's vineyards establish a 
foundation of quality upon which the purchase of additional grapes 
is built.  In addition, wine produced from grapes grown in the 
Company's own vineyards may be labeled as "Estate Bottled" wines.  
These wines traditionally sell at a premium over non-estate 
bottled wines.

     Viticultural Conditions.  Oregon's Willamette Valley is 
recognized as a premier location for growing certain varieties of 
high quality wine grapes, particularly Pinot Noir, Chardonnay, 
White Riesling and Pinot Gris.  The Company believes that the 
Vineyard's growing conditions including its soil, elevation, 
slope, rainfall, evening marine breezes and solar orientation are 
among the most ideal conditions in the United States for growing 
certain varieties of high-quality wine grapes.  The Vineyard's 
grape growing conditions compare favorably to those found in some 
of the famous viticultural regions of France. Western Oregon's 
latitude (42 -46  North) and relationship to the eastern edge of a 
major ocean is very similar to certain centuries-old wine grape 
growing regions of France.  These conditions are unduplicated 
anywhere else in the world except the great wine grape regions of 
Northern Europe.  The Company's property is located at the same 
latitude as the famous Haut Brion vineyards in Bordeaux, France.

     The Vineyard's soil type is Jory/Nekia, a dark reddish-brown 
silky clay loam over basalt bedrock noted for being well drained, 
acidic, of adequate depth, retentive of appropriate levels of 
moisture and particularly suited to growing high quality wine 
grapes.  

     The Vineyard's elevation ranges from 533 feet to 700 feet 
above sea level with slopes from 2 percent to 30 percent 
(predominately 12-20 percent).  The Vineyard's slope is oriented 
to the south, southwest and west.  Average annual precipitation at 
the Vineyard is 41.3 inches, average annual air temperature is 52 
to 54 degrees Fahrenheit, and the length of each year's frost-free 
season averages from 190 to 210 days.  These conditions compare 
favorably with conditions found throughout the Willamette Valley 
viticultural region and other domestic and foreign viticultural 
regions which produce high quality wine grapes.

     In the Willamette Valley, permanent vineyard irrigation is 
not required.  The average annual rainfall provides sufficient 
moisture to avoid the need to irrigate the Vineyard.  However, if 
the need should arise, the Company's property contains one water 
well which can sustain sufficient volume to meet the needs of the 
Winery and to provide auxiliary water to the Vineyard for new 
plantings and unusual drought conditions.  

Winery

     Wine Production Facility.  The Company's Winery and 
production facilities, built at an initial cost of approximately 
$1,500,000, was originally structurally capable of producing up to 
75,000 cases of wine per year, depending on the type of wine 
produced.  In 1996 the Company invested an additional $750,000 to 
increase its capacity from 75,000 cases to its present capacity of 
104,000 cases (250,000 gallons). It added one large press, six 
stainless steel fermenters, and handling equipment to increase its 
capacity to the new level. It also expanded the size of its crush 
pad to meet the needs of the additional tons of grapes crushed. In 
1997, the Winery produced 218,238 gallons (91,793 cases) of wine 
from its 1996 crush.  The Winery is 12,784 square feet in size and 
contains areas for the processing, fermenting, aging and bottling 
of wine, as well as an underground wine cellar, a tasting room, a 
retail sales room and administrative offices.  A 12,500 square 
foot outside production area was added for the crushing, pressing 
and fermentation of wine grapes.  In 1993, a 4,000 square foot 
insulated storage facility with a capacity of 30,000 cases of wine 
was constructed at a cost of approximately $70,000. This facility 
has now been converted to barrel storage in order to accommodate 
an additional 750 barrels for aging wines. This change increases 
our barrel aging capacity a the Turner site. The production area 
is equipped with a settling tank and sprinkler system for 
disposing of waste water from the production process in compliance 
with environmental regulations.  The settling tank and sprinkler 
system were installed at a total cost of approximately $20,000. 

     In 1997, the Company constructed a 20,000 square foot storage 
building to store all of its bottled product  at an approximate 
cost of $729,000. In the past, the Company rented a storage 
facility with an annual rental cost to the Company of $96,000.

     With the purchase of Tualatin Vineyards, Inc., the Company 
added 20,000 square feet of additional production capacity.  
Although the Tualatin facility was constructed over twenty years 
ago, it will add 20,000 gallons of wine production capacity to the 
Company.  However, the facility is not in use at this time because 
the Executive Committee of the Company decided the production 
capacity at Tualatin was not needed at this time to meet short 
term production requirements.

     Construction of Hospitality Facility.  In May 1995, the 
Company completed construction of a large tasting and hospitality 
facility of 19,470 square feet (the "Hospitality Center").  The 
first floor of the Hospitality Center includes retail sales space 
and a "great room" designed to accommodate approximately 400 
persons for gatherings, meetings, weddings and large wine 
tastings.  An observation tower and decking around the Hospitality 
Center will enable visitors to enjoy the view of the Willamette 
Valley and the Company's Vineyard.  The Hospitality Center has 
been joined with the present Winery by an underground cellar 
tunnel.  The facility includes a basement cellar of 10,150 square 
feet (including the 2,460 square foot underground cellar tunnel) 
to expand storage of the Company's wine in a proper environment.  
The cellar provides the Winery with ample space for storing up to 
3,000 barrels of wine for aging.

     Just outside the Hospitality Center, the Company has planned 
a landscaped park setting consisting of one acre of terraced lawn 
for outdoor events and five wooded acres for picnics and social 
gatherings.  The area between the Winery and the Hospitality 
Center forms a 20,000 square foot quadrangle.  As designed, the 
quadrangle can be covered by a removable fabric top making it an 
all-weather outdoor facility to promote sale of the Company's 
wines through outdoor festivals and social events.

     The Company believes the addition of the Hospitality Center 
and the park and quadrangle will make the Winery an attractive 
recreational and social destination for tourists and local 
residents, thereby enhancing the Company's ability to sell its 
wines.

     Mortgages on Properties.  The Company's winery facilities are 
subject to two mortgages. The estate vineyards at Turner has a 
principal balance of $3,062,779 at December 31, 1997.   In 1997, 
the Company entered into a second separate mortgage to fund the 
Tualatin acquisition and development of its vineyards. This 
separate mortgage, secured by Tualatin assets, has a principal 
balance of $982,164 at December 31, 1997. The Company's total 
mortgages have a balance of $4,044,943 at December 31, 1997, as 
compared to the principal balance of $3,170,000 at December 31, 
1996.   These mortgages are payable in annual aggregate 
installments of approximately $480,000 through  2012. After 2012, 
the Company's annual aggregate  mortgage payment will be $96,000 
until the year 2014. 

     Wine Production.  The Company operates on the principle that 
winemaking is a natural but highly technical process requiring the 
attention and dedication of the winemaking staff.  The Company's 
Winery is equipped with the latest technical innovations and uses 
modern laboratory equipment and computers to monitor the progress 
of each wine through all stages of the winemaking process.

     Beginning with the Company's first vintage in 1989, the 
Company's annual grape harvest and wine production are as follows: 

                 
           Tons of            
        Grapes Production                       Case
Crush Year Crushed Year      Gallons Produced    Equivalents

1989       203                                                     
1990       206      1990       31,383             13,200
1991       340      1991       31,900             13,400
1992       565      1992       52,600             22,100
1993       633      1993       90,908             38,237
1994       590      1994       97,822             41,145
1995       885      1995       96,077             40,411
1996      1290      1996      127,655             53,693
1997      1426      1997      199,353             83,850

     The quantity of grapes crushed in 1997 does not include 228 
tons of grapes that were purchased and resold on the open market 
because the Company had contracted for more grapes than were 
needed.  The Company was unable to sell 270 tons of grapes before 
crush, this tonnage converts to 44,000 gallons of bulk wine which 
the Company plans to sell in 1998.


Sales and Distribution 

     Marketing Strategy.  The Company markets its wines through a 
combination of direct sales at the Winery, sales directly and 
indirectly through its shareholders, self-distribution to local 
restaurants and retail outlets in Oregon, directly through mailing 
lists, and through distributors and wine brokers who sell in 
specific targeted areas outside of the state of Oregon.  As the 
Company increases production volumes and achieves greater brand 
recognition, sales to other domestic and foreign markets have 
increased both in terms of absolute dollars and as a percentage of 
total Company sales.

     Direct Sales.  The Company's Winery is located adjacent to 
the state's major north-south freeway (Interstate 5), 
approximately 2 miles south of the state's third largest 
metropolitan area (Salem), and 50 miles in either direction from 
the state's first and second largest metropolitan areas (Portland 
and Eugene, respectively).  The Company believes the Winery's 
unique location along Interstate 5 has resulted in a greater 
amount of wines sold at the Winery as compared to the Oregon 
industry standard.  Direct sales from the Winery are an important 
distribution channel and an effective means of product promotion.  
To increase brand awareness, the Company offers educational Winery 
tours and product presentations by trained personnel.

     The Company holds eight major festivals and events at the 
Winery each year.  In addition, open houses are held at the Winery 
during major holiday weekends such as Memorial Day, Independence 
Day, Labor Day and Thanksgiving, where barrel tastings and cellar 
tours are given.  Numerous private parties, wedding receptions, 
political and other events are also held at the Winery.  Finally, 
the Company participates in many wine and food festivals 
throughout Oregon.  Each of these events results in direct sales 
of the Company's wines and promotion of its label to event 
attendees.

     Direct sales are profitable because the Company is able to 
sell its wine directly to consumers at retail prices rather than 
to distributors  or retailers at wholesale prices.  Sales made 
directly to consumers at retail prices result in an increased 
profit margin equal to the difference between retail prices and 
distributor or  wholesale prices, as the case may be.

     Self-Distribution.  The Company has established a self-
distribution system  to sell its wines to restaurant and retail 
accounts located primarily in Oregon.  The self-distribution 
program currently consists of 18 sales representatives who market 
the Company's wine exclusively, take wine orders and make 
deliveries on a commission-only basis.  The Company believes this 
program of self-representation and delivery has allowed its 
relatively new wines to gain a strong presence in the Oregon 
market with over 1,000 restaurant and retail accounts established 
as of December 31, 1997.  The Company further believes that the 
location of its Winery along Interstate 5 facilitates self-
distribution throughout the entire Willamette Valley where 
approximately 70% of Oregon's population resides.

     The Company has expended significant resources to establish 
its self-distribution system.  The system  initially focused on 
distribution in the Willamette Valley, but then expanded to the 
Oregon coast, and then into southern and central Oregon.  For 
1997, approximately 38% of the Company's total sales were 
attributable to self-distribution.  

     Distributors and Wine Brokers.  The Company uses both 
independent distributors and wine brokers primarily to market the 
Company's wines in specific targeted areas where self-distribution 
is not feasible.  Only those distributors and wine brokers who 
have demonstrated a knowledge of and a proven ability to market 
premium, super premium, and ultra premium wines are utilized.  The 
Company does not rely solely upon any distributor or wine broker 
in a particular geographic area, but rather tries to develop and 
maintain relationships with restaurants and retail outlets 
directly through Winery personnel and the Company's shareholders.

     Shareholders.  As a consumer-owned company, the Company has a 
unique marketing opportunity available to only a few of its 
competitors.  The Company has approximately 3,619 shareholders of 
record as of December 31, 1997, comprised of approximately 5,000 
wine consumers since many shares are held jointly by family 
members.  The Company believes its shareholders, as a group, 
purchase a significant portion of the Company's cork-finished 
wines directly from the Winery.

     The Company encourages its shareholders to consume the 
Winery's products and promote them to their friends and business 
associates.  The Company's shareholders have been very active 
throughout the Winery's operations, providing valuable assistance 
at little or no cost.  Throughout the year, shareholders have 
helped with cellaring duties.  Over 300 shareholders have 
qualified with the Oregon Liquor Control Commission as licensed 
wine servers and have poured wine at various Winery events.  The 
Winery's tasting facilities are often staffed with volunteer 
shareholders.  With their own personalized Company business cards, 
shareholders have made numerous contacts with restaurants and 
retail outlets interested in selling the Company's wines.  The 
Company views its shareholders as an army of volunteer marketers 
promoting the Company's products to their friends and 
acquaintances in both social and business settings.  On an ongoing 
basis, shareholders provide valuable leads and feedback to the 
Company's management and staff.

     Tourists.  Oregon wineries are experiencing an increase in 
on-site visits by consumers.  In California, visiting wineries is 
a very popular leisure time activity.  Napa Valley is California's 
second-largest tourist attraction with over 2.5 million visitors 
in 1987.  Wineries in Washington are also experiencing strong 
interest from tourists.  Chateau Ste. Michelle, located near 
Woodinville, Washington, attracts approximately 200,000 visitors 
per year.

     The Winery is located less than one mile from The Enchanted 
Forest, a gingerbread village/forest theme park which, in 1985, 
was Oregon's eleventh most visited tourist attraction (fifth among 
those charging admission). The Enchanted Forest, which operates 
from March 15 to September 30 each year, attracts approximately 
200,000 paying visitors per year.  Adjacent to the Enchanted 
Forest is the Thrillville Amusement Park and the Forest Glen 
Recreational Vehicle Park which contains approximately 110 
overnight vehicle sites.  The Company believes that some of the 
visitors to the Enchanted Forest and RV Park do visit the Winery.  
More importantly, the Company believes its convenient location, 
adjacent to Interstate 5, will enable the Winery to attract a 
significant number of visitors.

Competition

     The wine industry is highly competitive.  In a broad sense, 
wines may be considered to compete with all alcoholic and 
nonalcoholic beverages.  Within the wine industry, the Company 
believes that its principal competitors include wineries in 
Oregon, California and Washington, which, like the Company, 
produce premium, super premium, and ultra premium wines.  Wine 
production in the United States is dominated by large California 
wineries which have significantly greater financial, production, 
distribution and marketing resources than the Company.  Currently, 
no Oregon winery dominates the Oregon wine market.  Several Oregon 
wineries, however, are older and better established and have 
greater label recognition than the Company.

     The Company believes that the principal competitive factors 
in the premium, super premium, and ultra premium segment of the 
wine industry are product quality and price, label recognition, 
and product supply.  The Company believes it competes favorably 
with respect to each of these factors.  The Company has received 
good reviews in tastings of its wines and believes its prices are 
competitive with other Oregon wineries.  Large production is 
necessary to satisfy retailers' and restaurants' demand and the 
Company believes that its current level of production is adequate 
to meet that demand.  Furthermore, the Company believes that its 
ultimate forecasted production level of 298,000 gallons (124,000 
cases) per year will give it significant competitive advantages 
over most Oregon wineries in areas such as marketing, distribution 
arrangements, grape purchasing, and access to financing.  The 
current production level of most Oregon wineries is generally much 
smaller than the projected production level of the Company's 
Winery.  With respect to label recognition, the Company believes 
that its unique structure as a consumer-owned company will give it 
a significant advantage in gaining market share in Oregon as well 
as penetrating other wine markets.

Governmental Regulation of the Wine Industry

     The production and sale of wine is subject to extensive 
regulation by the Federal Bureau of Alcohol, Tobacco and Firearms 
and the Oregon Liquor Control Commission.  The Company is licensed 
by and meets the bonding requirements of each of these 
governmental agencies.  Sale of the Company's wine is subject to 
federal alcohol tax, payable at the time wine is removed from the 
bonded area of the Winery for shipment to customers or for sale in 
its tasting room.  The current federal alcohol tax rate is $1.07 
per gallon; however, wineries that produce not more than 250,000 
gallons during the calendar year are allowed a graduated tax 
credit of up to $0.90 per gallon on the first 100,000 gallons of 
wine (other than sparkling wines) removed from the bonded area 
during that year.  The Company also pays the state of Oregon an 
excise tax of $0.67 per gallon on all wine sold in Oregon.  In 
addition, all states in which the Company's wines will be sold 
impose varying excise taxes on the sale of alcoholic beverages.  
As an agricultural processor, the Company is also regulated by the 
Oregon Department of Agriculture and, as a producer of waste 
water, it is regulated by the Oregon Department of Environment 
Quality.  The Company has secured all necessary permits to operate 
its business.

     Prompted by growing government budget shortfalls and public 
reaction against alcohol abuse, Congress and many state 
legislatures are considering various proposals to impose 
additional excise taxes on the production and sale of alcoholic 
beverages, including table wines.  Some of the excise tax rates 
being considered are substantial.  The ultimate effects of such 
legislation, if passed, cannot be assessed accurately since the 
proposals are still in the discussion stage.  Any increase in the 
taxes imposed on table wines can be expected to have a potentially 
adverse impact on overall sales of such products.  However, the 
impact may not be proportionate to that experienced by producers 
of other alcoholic beverages and may not be the same in every 
state.  Recently there have been national efforts to reduce the 
blood alcohol level to .08 to combat driving under the influence.  
The company believes that is such legislation is passed, it may 
discourage wine consumption in restaurants.  Although the .08 rule 
is operative in Oregon, the company's principal sales territory, 
it has not yet affected local restaurant sales although it is 
possible that it will on a national level..

Employees

     As of December 31, 1997 the Company had 31 full-time 
employees and 6 part-time employees.  In addition, the Company 
hires additional employees for seasonal work as required.  The 
Company's employees are not represented by any collective 
bargaining unit.  The Company believes its relations with its 
employees are good.


ITEM 2.	DESCRIPTION OF PROPERTY

     See "DESCRIPTION OF BUSINESS -- Winery" and "-- Vineyard".


ITEM 3.	LEGAL PROCEEDINGS

     There are no material legal proceedings pending to which the 
Company is a party or to which any of its property is subject, and 
the Company's management does not know of any such action being 
contemplated. 


ITEM 4.	SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

     Not applicable.


ITEM 5.	MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER 
MATTERS

     The Company's Common Stock is traded on the Nasdaq Stock 
Market under the symbol "WVVI."  As of December 31, 1997, there 
were 3,619 holders of record of the Common Stock.

     The table below sets forth for the quarters indicated the 
high and low sales prices for the Company's Common Stock as 
reported on the Nasdaq Stock Market.  The Company's Common Stock 
began public trading on September 13, 1994.  

                           
Quarter Ended
                  3/31/97    6/30/97     9/30/97    12/31/97
High               $3.63      $3.50      $3.25       $2.25
Low                $2.25      $2.00      $1.75       $1.19

                   3/31/96   6/30/96     9/30/96    12/31/96
High               $3.75      $3.62      $3.50       $3.50
Low                $2.75      $2.75      $2.00       $2.50

     The Company has not paid any dividends on the Common Stock, 
and it is not anticipated that any dividends will be paid by the 
Company in the foreseeable future.



Forward Looking Statement

     This Management's discussion and Analysis of Financial 
Condition and Results of Operation and other sections of this Form 
10K 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, successful assimilation of 
Tualatin Vineyard Inc.'s business with that of the Comp[any and 
other risks detailed below as well as those discussed elsewhere in 
this Form 0K and from time to time in the Company's Securities and 
Exchange Commission filing and reports.  In addition, such 
statements could be affected general industry and market 
conditions and growth rates, and general domestic economic 
conditions.


ITEM 6.	MANAGEMENT'S DISCUSSION AND ANALYSIS

The Company embarked on an aggressive growth plan in 1997 aimed at 
solving several major issues.  First, sales demand exceeded supply 
of certain varieties, requiring allocation and shortening  the 
time for bottle aging to speed release into the market.  Second, 
sales and production growth made the Company highly dependent upon 
outside sources of grapes which were fetching higher market prices 
and becoming more difficult to secure.  Third, growers were 
linking the sales of high demand grapes like Pinot Noir with low 
demand grapes, requiring the Company to purchase grapes it didn't 
need.  Fourth, management's sales projections indicated  the 
Company needed more winemaking capacity than was available at its 
Turner site and significantly more wine storage.

The Company has experienced over the last several years high 
demand for some of its products as a result of positive reviews by 
national wine writers and critics.  For example, Wine Enthusiast 
Magazine names Willamette Valley Vineyards as "one of America's 
great Pinot Noir producers"; noted wine critic, Robert Parker 
stated,  "Willamette Valley Vineyards' Whole Berry Fermented Pinot 
Noir may be the world's most delicious and accessible Pinot.  It 
has been a knock-out in some vintages."  With the Company's 1996 
Pinot Gris variety, noted Wine Spectator writer Matt Kramer stated 
"In short it's a winner."  As a consequence, the Company has 
experienced shortages in the marketplace, which in the short term, 
is beneficial to brand positioning but, over the long term, can 
threaten placement in critical high profile accounts.  The Company 
has resorted to allocating the wines, this has not been entirely 
effective in resolving the problem. 

Facing these conditions,  the Board of Directors adopted a 1997 
Budget which called for dramatically higher production levels, 
construction of a wine storage facility, and authorized the 
purchase of Tualatin Vineyards and Winery and the leasing, on a 
long term basis, of O'Connor Vineyards.

For the first nine months of 1997, the Company failed to achieve 
its sales projections.  In addition, the Company incurred expenses 
greater than the Board authorized budget.  The combination of 
these two factors, despite record sales growth, produced record 
losses for the first three quarters.  The Board of Directors 
formed an Executive Committee at its April 28th meeting to work 
closely with the General Manager to address operational management 
issues.  Following the resignation of the Company's General 
Manager in the third quarter, the Executive Committee assumed 
management responsibilities for the winery until Company Founder & 
President/CEO, Jim Bernau returned to operate the Company on a 
full-time basis beginning in mid-September of 1997.  The Executive 
Committee consists of the President and Chair of the Board Jim 
Bernau, Director Jim Ellis and Director Stan Turel.

The Executive Committee of the Board of Directors determined the 
Company's performance was adversely affected by the following:

Sales Projections  -  The 1997 sales projections for the 
Willamette Valley Vineyard Brands were established solely on a 
percentage increase from the prior year dollar sales without 
surveying distributors, sales agents and representatives for 
projected case depletion by variety.  The projections did not 
provide detail for the Executive Committee to determine in what 
products or markets the Company was not meeting projections.  This 
is the first time in the Company's history it has not met its 
sales projections.  Additionally, the actual sales of the newly 
acquired Tualatin Brand were only a small fraction of its 
projected sales.   The Company has returned to a strict policy of 
developing detailed sales projections in which each sales manager, 
agent and representative is directly responsible for his or her 
projections.  Sales against projections are measured by product 
each month in each market by wholesalers, agents and sales 
representatives. 

Budgets and Spending  -  Since the 1997 Budget was based upon the  
flawed sales projections, expenditures were not adequately covered 
by the resulting sales.  In addition, actual spending exceeded the 
Board authorized budget.  The acquisition of Tualatin Vineyards 
magnified this problem, since Tualatin was losing money at the 
time it was purchased by the Company.  Adequate measures were not 
taken to eliminate these losses or adjust spending downward to 
match the lower than expected sales.  In 1997, the acquisition of 
Tualatin Vineyards  adversely affected the Company's net income by 
$14,000.  Since the capacity at the Tualatin facility was not 
immediately needed, the Executive Committee shifted wine 
production of Tualatin wine to its Turner facility and mothballed 
the Tualatin facilities, mitigating further Tualatin related 
losses.  The Company did, however, reopen the Tualatin tasting 
room to generate additional retail sales and interest in the 
Tualatin brand. The Company has returned to its policy of limiting 
spending to monthly budgets and has instituted a "real time" 
Purchase Order system, where managers can input proposed expenses, 
measure them against the funds available in the budget and seek 
approval from the CEO for spending above pre-determined limits.  
The Executive Committee developed an expenditure reduction plan 
that resulted in General and Administrative expenses to be lower 
in the 4th Quarter of 1997 than in the same quarter of the 
previous year.  The expenses that were dramatically over budget 
were targeted for strict controls included legal, travel, 
printing, advertising, outside contractors and memberships.  
Competitive bidding processes have been instituted for all major 
purchases, services and supplies.

Personnel  -  The labor costs experienced in the first nine months 
of 1997 exceeded the Budget.  In addition, staff reductions were 
not made  when sales projections were not achieved.  The Executive 
Committee reorganized the workforce and eliminated, through 
attrition or termination, 19 full and part-time positions 
(principally mid-level managers) and 2 consultants. An in-state 
sales manager position and an additional staff accountant were 
added.  These personnel actions resulted in considerable savings 
to the Company.  The personnel requisition and compensation 
process requiring Human Resource Director and CEO approval has 
been reinstituted to prevent hirings or compensation increases at 
department levels that are outside the budget.

Pricing  -  Pricing has not kept up with contracted grape prices 
and production cost increases reducing gross margins.  The Company 
has now phased out a lower price tier Willamette Valley Vineyard 
Branded  "Lot 27 and Lot 28" Pinot Noir and Chardonnay and 
replaced it with a higher quality and higher priced  "Vintage 
Series" in grocery stores.  The promotional pricing in which the 
Company engaged to reduce its excess inventories is now being 
phased out.  Promotional sales were limited to markets that would 
minimize potential harm to the positioning of the Company's brand.  
A high end  "Vineyard Designated" series is now being produced to 
match the quality and cost of grapes from prestige vineyards.

Interest Expense  -  Higher than necessary inventories have 
required additional borrowings against the Company's line of 
credit.  As management works to optimize inventory levels, these 
related interest costs will decline relative to sales.  The 
inventory build in 1997 was based upon what the Company has now 
determined to be unrealistic sales projections with some varieties 
like Chardonnay where 19,478 case equivalents were crushed when in 
the same year only 10,537 cases of Chardonnay were sold..  In 
addition, the  method used to calculate production needs was 
flawed which overstated necessary inventory levels.  Production 
and Depletion forecasting has now been corrected and the Company 
believes it will eliminate surplus inventories by the end of 1999.  
The Tualatin purchase was financed with borrowed funds, increasing 
interest expense.  This cost (as well as related depreciation) 
will not be offset until the Company can generate net revenue from 
its currently mothballed Tualatin production facilities.  Custom 
crushing and leasing the facility are being explored until such 
time as the Company needs the capacity for its own use.  The 
additional plantings at Tualatin are financed  entirely with 
borrowed funds and the interest costs will not be directly offset 
until the new plantings become fully productive in 5 years.  

Additional interest cost is being incurred due to how the Company 
obtains its grapes.  When grapes are purchased from other growers,  
they are paid in installments after crush and into the following 
year. However, growing grapes instead of purchasing them requires 
cash to cover ongoing agricultural expenses. The Company is now 
responsible for farming expenses at the Tualatin and O'Connor 
sites.  Additionally, the O'Connor Vineyard lease requires annual 
cash lease payment at the beginning of the year before the grapes 
are harvested.  In general, the Company's costs of growing its own 
grapes is less than purchasing on the open market.  This benefit, 
however, will not be realized until the wine made from those 
grapes is sold.  

The change in warehousing has increased interest expense as well.  
The Company previously stored most of its case goods off-site and 
paid by the month for storage and handling. The new warehouse was 
constructed with borrowed funds and is being used for storage, 
eliminating these outside storage charges.  Since the new 
warehouse has excess capacity, management is actively seeking 
contract wine storage opportunities.  The cost of renting outside 
storage on an annual basis was costing the Company $96,000.  The 
Company believes that it will realize savings in operating its own 
storage facility.  

The Winery posted net profits of $182,385 for the 4th quarter of 
1997 after the year-end adjustments or 4 cents per share compared 
with net profits of $35,808 or 1 cent per share for the fourth 
quarter of 1996.  The year-end adjustments were (1) the allowance 
for doubtful accounts receivable was adjusted to $30,000 from 
$10,000 in 1996, (2) the Company wrote off $9,500 of marketing 
expenses, incurred in 1996, associated with its distributor in the 
United Kingdom, (3) the Company wrote off approximately $14,000 in 
receivables from its former affiliated companies, (4) $7,000 in 
vaious year-end adjustments..  A portion of the revenue resulted  
from the sale of certain varieties of grapes for which the company 
had contracted early in 1997, but did not need at crush time in 
the fall.  The fourth quarter increase reverses the disappointing  
performance of the Company in the first, second and third quarters 
of 1997 where losses totaled $113,523.

Although the Company experienced a dramatic turnaround and enjoyed 
a strong fourth quarter,  profits per share fell due to overall 
1997 performance and the dilution resulting from new shares issued 
to Tualatin shareholders in partial payment for the purchase of 
Tualatin Vineyards and Winery.


Results of Operations

     Seasonal and Quarterly Results.  The Company has historically 
experienced and expects to continue experiencing seasonal 
fluctuations in its revenues and net income.  In the past, the 
Company has reported a net loss or modest net income during its 
first quarter and expects this trend to continue in future first 
quarters, including the first quarter of 1998.  Sales volumes  
increase progressively beginning in the second quarter through the 
fourth quarter because of consumer buying habits.

     The following table sets forth certain information regarding 
the Company's revenues from Winery operations for each of the last 
eight fiscal quarters:

                     Fiscal 1997 Quarter Ended    
                                      (in thousands)
Fiscal 1996 Quarter Ended
     (in thousands)
                                 3/31   6/30    9/30   12/31         
3/31   6/30   9/30  12/31
Tasting room and retail sales  $140    $212    $244    $151                 
$151   $213    $251    $367
On-site and off-site festivals   86      92     145     177                     
76      116     128     154
In-state sales                  317     462     552     827                   
307     403     415     640
In-state sales                           38      19     408
Out-of-state sales              298     510     400     727                   
169     239     358     347
Total winery revenues           841   1,314   1,360   2,411            
703     971   1,152   1,508


Period to Period Comparisons

     Revenue.  The following table sets forth, for the periods 
indicated, select revenue data from Company operations:

                                 Year Ended December 31
                                              (in thousands)
                                    1997        1996          1995
Tasting room and retail sales     $ 868       $  982         $ 940
On-site and off-site festivals      500          474           528
In-state sales                    2,158        1,765         1,394
Bulk /Grape Sales                   465
Out-of-state sales                1,935        1,113           776
Revenues from winery operations  $5,926       $4,334        $3,638

Less Excise Taxes                   212           99             0

  Net Revenue                    $5,714       $4,235        $3,638


1997 Compared to 1996.  Tasting room sales for the year ended 
December 31, 1997 decreased  12% to $868,531 from $981,804 for the 
same period in 1996. The Company has seen a drop in the average 
tasting room "ring" which means that the customer is purchasing 
the wine elsewhere as witnessed by increased sales in the in-state 
sales category. In the last part of 1997, management has begun to 
track the buying habits of the customers who visit the tasting 
room. In the past several years, the Company did not track 
customers buying habits which means the tasting room did not focus 
on a targeted group of customers to increase its sales. In the 
past year, the Company has allowed the Wholesale Division to sell 
wine that in previous years has been exclusively sold in the 
tasting room. In 1998, the Company will return to the practice of 
selling certain exclusive wines in the tasting room at higher 
profit margins.  The Company experienced an increase in revenue 
during 1997 in Hospitality rental income over the same period in 
1996. The total of rental income and related wine sales was 
$187,257 in 1997 as compared to $159,741 in 1996. This rental 
income comes primarily through weddings, business meetings and 
educational conferences held at the Winery's Hospitality Center.  

     On-site and off-site festival sales for the year ended 
December 31, 1997 increased 5% to $500,199  from $474,405 for the 
same period in 1996. One off-site event, "The Bite of Salem", had 
an increase in revenue of $11,500 over last year's event, but it 
had a sponsor's fee of $8,000 which made the event unprofitable. 
The Company has reinstituted a strict policy of requiring a 
cost/benefit analysis for each event before the decision is made 
to participate in the event. The Company plans to reduce its 
overhead in the Retail Department by only participating in events 
that return to the Company a positive cash flow.

     Wholesale sales in the state of Oregon for the year ended 
December 31, 1997, through the Company's independent sales force, 
increased  22% to  $2,157,896 from $1,765,340 for the same period 
in 1996.  PriceCostco, a large retailer, placed the Company's 
products in several new locations in 1997 which resulted in 
$277,000 additional sales to that chain. The Company has seen a 
significant increase in the sales of its White Riesling product 
line which nearly doubled in sales in 1997, resulting in an 
increase of  approximately $235,000 in sales over 1996,  most of 
which was sold to the above mentioned chain store. During the last 
part of 1997, the Company added an in-state sales manager whose 
main focus was to increase in-state sales.  This increased focus 
by the Company resulted in record breaking sales in the fourth 
quarter of 1997. 

     The Company contracted in early 1997 for more grapes than 
what was needed to meet the revised sales forecasts in the next 
few years.  The Company sold some of its own grapes and some of 
its contracted grapes for $465,030 and generated a small profit in 
doing so.  Because of certain multi-year contracts, the Company 
intends to sell additional grapes in 1998 without incurring a 
loss. 

     Out-of-state sales for the year ended December 31, 1997, 
increased 74% to $1,934,877 from $1,112,690 for the same period in 
1996. The Company now sells wine in 39 states as compared to 28 
states in 1996.  The Pinot Noir variety led the way in increased 
sales in 1997. The vintage and whole berry Pinot Noir product 
lines sold 6,097 more cases in 1997 resulting in a $439,000  
increase in sales.  


     Pinot Noir, which now constitutes about one-third of the 
Company's production, is among the fastest growing wine varietals.  
New consumers are coming into the wine category.  Positive press, 
regarding the healthful use of wine, continues to stimulate 
demand.  The Company expects demand for its wines to continue to 
increase.  However, the Company notes that  new formidable entries 
into the Oregon wine industry from out of state will increase 
competition and put additional pressure on  Pinot Noir grape 
supplies.  In addition, the industry in Oregon, Washington, and 
California has experienced crush volumes in 1997 higher than 
annual consumption rate increases, thus potentially putting 
pressure on prices and margins. 

       The Company reclassified its income statement to subtract 
excise taxes from its gross revenue to equal a net revenue. Since 
the Company only collects the excise tax on behalf of the Bureau 
of Alcohol, Tobacco, and Firearms, and Oregon Liquor Control 
Board, these taxes should not be considered as a legitimate 
expense for the Company. The total excise taxes collected in 1997 
were $212,402 as compared to $99,219 in 1996. Before 1996, excise 
taxes were included in the "selling, general, and administrative 
expenses". 

     As a percentage of net revenue after removing the excise 
taxes, gross margin for all winery operations was  51% for fiscal 
year 1997 as compared to 56% for 1996. The sales of bulk juice and 
grapes at harvest at a slim margin reduced the gross margin in 
1997.  After adjusting for these sales, the gross margin would be 
54% as compared to 56% in 1996. The sales of existing Tualatin 
product at lower margins reduced the margin in 1997, as well as, 
promotional pricing of certain Willamette Valley products to 
reduce inventory.
 
     Selling, general, and administrative expenses for the year 
ended December 31, 1997, increased  25% to $2,434,867 compared to 
$1,951,120 for the same period in 1996. As a percentage of revenue 
from winery operations, the selling, general, and administrative 
expenses were 43% in 1997 as compared to 46% in 1996. 

     During the year of 1997, increased sales revenues over 1996 
resulted in increased commissions paid to our independent sales 
force. Commissions are paid to the sales force on a specified 
percentage of revenue resulting in  no adverse affect on the 
income. The commissions paid in 1997 amounted to $642,709 as 
compared to $521,832 in 1996. The Company has experienced 
increased expenses relating to samples, travel,  point-of-sale 
expenses, and shipping charges for the development of new markets 
and the expansion of sales outside of the state. The out-of-state 
sales representatives are allowed a set percentage of revenue for 
wine samples and point of sale material. Thus, as the gross 
revenues increase, the actual dollar expenditures for wine 
samples and  point-of-sale material increases, as well.



     Other income for the year ended December 31, 1997 was $19,471 
as compared to $28,241 for the year ended December 31, 1996.  
Interest income increased to $31,296 in fiscal year 1997 from 
$25,145 in fiscal year 1996.  Interest expense increased to 
$396,118 in fiscal year 1997 from $214,380 in fiscal year 1996.  
The increase in the interest expense was the result of the Company 
taking on more long term debt to finance the purchase of Tualatin 
Vineyards, Inc., plant additional land at Tualatin, and fund 
increases in inventory.

     The provision for income taxes and the Company's effective 
tax rate were $52,288 and 44% in fiscal year 1997 with $98,685 or 
37% of pre-tax income recorded for fiscal year 1996. 

     As a result of the above factors, net  income decreased 60% 
to $67,862 in fiscal 1997 from $170,430 for the fiscal year of 
1996.  Earnings per share were $.02, $.05 and $.002 in fiscal 
years 1997, 1996 and 1995, respectively. 


     1996 Compared to 1995.  Tasting room sales for the year ended 
December 31, 1996 increased 4% to $981,804 from $940,327 for the 
same period in 1995. The most significant increase in revenue 
during 1996 was in the Hospitality rental income over the same 
period in 1995. The total of rental income was $159,741 in 1996 as 
compared to $80,857 in 1995. This rental income comes primarily 
through weddings, business meeting and educational conferences 
held at the Winery's Hospitality Center. This increase in rental 
days results in increased foot traffic in the tasting room. Many 
rental visitors introduced to our winery and tasting room facility 
return later to purchase wine at the tasting room. 

     On-site and off-site festival sales for the year ended 
December 31, 1996 decreased 10% to $474,405 from $528,158 for the 
same period in 1995. The major reason for a decrease in revenue 
was the elimination of a retail booth at the Oregon State Fair. 
The company decided to eliminate this event along with several 
smaller off-site events because the events proved to not be 
profitable. The Company has been able to replace these lost 
revenues with increased sales in other divisions with lower 
operating costs. The net result has contributed to improved 
Company-wide profit.  

     Wholesales sales in the state of Oregon for the year ended 
December 31, 1996, through the Company's independent sales force, 
increased 27% to $1,765,340 from $1,393,429 for the same period in 
1995.  The increase in sales is primarily attributable to the 
focus on new wine accounts, better point-of-sale information, 
improved sales management and targeting sales of higher margin 
wines.  Because the Company is one of the largest producers of 
wine in Oregon, the Company has secured significant additional and 
better positioned shelf space in several chain stores over this 
time the previous year. PriceCostco placed the Company's products 
in several new locations in 1996 which resulted in $90,000 
additional sales in that chain.

     Out-of-state sales for the year ended December 31, 1996 
increased 43% to $1,112,690 from $775,808 for the same period in 
1995. The Company now sells wine in 28 states as compared to 22 
states in 1995. In the third quarter of 1996, the Company obtained 
a license to distribute its product in Connecticut for the first 
time. Revenue in the state of Connecticut for 1996 was $186,000. 

     Pinot Noir, which now constitutes about one-third of the 
Company's production, is among the fastest growing wine varietals. 
According to InfoScan reports, Pinot Noir sales in American retail 
stores have grown 47% over the past 52 weeks.  In comparison, 
Chardonnay sales (the number one varietal wine) grew about 19% in 
the same time period.  New consumers are coming into the wine 
category.  Positive press regarding the healthful use of wine 
continues to stimulate demand.  The Company expects demand for its 
wines to remain strong for the foreseeable future. 

     For the first time in 1996, the Company has restated its 
income statement to subtract its excise taxes from  gross revenue 
to arrive at net revenue. Since the Company only collects the 
excise tax for payment to the Bureau of Alcohol, Tobacco, and 
Firearms, and Oregon Liquor Control Board, these taxes should not 
be considered as a legitimate expense for the Company. The total 
excise taxes collected in 1996 were $99,219 as compared to $87,599 
in 1995. The 1995 excise taxes were included in "selling, general, 
and administrative expenses" in the 1995 Company audit. 

     As a percentage of net revenue after removing the excise 
taxes, gross profit for all winery operations was 56% for fiscal 
year 1996 as compared to 52% for 1995. In the first half of 1996, 
the Company increased its prices in all sales venues. This 
resulted in an increase in the gross margin percentage over the 
same period in 1995. Also, in 1996, the Company sold 2,000 cases 
more Chardonnay and Pinot Noir than it did in 1995. The margin on 
these two wines are significantly higher than the margins of the 
remaining wines.


     Selling, general, and administrative expenses for the year 
ended December 31, 1996 increased 8% to $1,951,120 compared to 
$1,807,430 for the same period in 1995. As a percentage of revenue 
from winery operations, the selling, general, and administrative 
expenses were 46% in 1996 as compared to 50% in 1995. The excise 
taxes paid in 1995 are included in the Company's selling, general, 
and administrative cost, whereas, in 1996, the excise taxes are 
netted against the Company's revenue. The Company has initiated a 
strong cost control policy whereas each month each department 
manager meets with the Company's Controller to go over the 
previous month's expenses. All of the monthly expenditures are 
explained to the manager along with a comparison of the manager's 
operating budget. After which the department manager is required 
to develop a plan to control the expense accounts that exceed his 
budget.

     During the year of 1996, increased sales revenues over 1995 
resulted in increased commissions paid to our independent sales 
force. Commissions are paid to the sales force on a specified 
percentage of revenue resulting  in no adverse affect on the net 
income. The commissions paid in 1996 amounted to $504,125 as 
compared to $401,449.

     In the Retail operations, the Company added an additional 
person to help with the growing room rentals it experienced in 
1996. Other expenses like supplies, advertising, and services 
increased proportionately to the increase in the number of days 
the Hospitality Center was rented. In 1996, it was the first full 
year of depreciation of the new Hospitality Center. The 
depreciation expense for the Retail operation increased from 
$34,379 in 1995 to $90,522 in 1996.

     Other income for the year ended December 31, 1996 was $28,241 
as compared to $2,408 for the year ended December 31, 1995.  
Interest income increased from $18,648 in fiscal year 1995 to 
$25,145 in fiscal year 1996.  Interest expense increased from 
$128,168 in fiscal year 1995 to $214,380 in fiscal year 1996.  The 
increase in the interest expense was the result of the Company 
taking on more long term debt.

     The provision for income taxes and the Company's effective 
tax rate were $98,685 and 37% in fiscal year 1996 with $29,768 or 
82% of pre-tax income recorded for fiscal year 1995. 

     As a result of the above factors, net income increased  to 
$170,430 in fiscal 1996 from $6,324 for the fiscal year of 1995.  
Earnings per share were $.05 and $.002 in fiscal year 1996 and 
1995, respectively. 




Liquidity and Capital Resources

     The Company was organized on May 2, 1988, and sold its first 
wine in late April 1990.  Prior to April 1990, the Company's 
working capital and Vineyard development and Winery construction 
costs were principally funded by cash contributed by James Bernau 
and Donald Voorhies, the Company's co-founders, and by $1,301,354 
in net proceeds received from the Company's first public stock 
offering, which began in September 1988 and was completed in June 
1989 with the sale of 882,352 shares at a price of $1.70 per share 
pursuant to Federal Regulation A.  

     Since April 1990, the Company has operated on revenues from 
the sale of its wine and related products and the net proceeds 
from three additional stock offerings.  The Company's second 
public stock offering began in July 1990 and was completed in July 
1991 with the sale of 731,234 shares at prices of $2.65 and $2.72 
per share exclusively to Oregon residents, resulting in net 
proceeds to the Company of $1,647,233.

     In 1992, the Company conducted two stock offerings pursuant 
to Federal Regulation A.  The Company commenced an offering on 
July 18, 1992 which was completed on September 30, 1992, with the 
sale of 428,216 shares of Common Stock at a price of $3.42 per 
share and net proceeds to the Company of $1,290,364.  On 
October 2, 1992, as a result of the oversubscription of the first 
offering in 1992, the Company commenced another offering of Common 
Stock which was completed on October 31, 1992 with the sale of 
258,309 shares at a price of $3.42 per share, resulting in net 
proceeds to the Company of $775,726.  

     Cash and cash equivalents decreased to $13,541 at 
December 31, 1997 from $794,885 at December 31, 1996.  This change 
was principally attributable to spending nearly $650,000 of funds 
borrowed in 1996 from Farm Credit Services to construct a storage 
facility on site.

     Inventories increased 47% as of December 31, 1997, to 
$4,171,027 from the December 31, 1996 level of $2,843,053.  The 
increase is the result of significant increases in production to 
meet the projections used by previous management.  

     Property, plant and equipment, net, increased 26% as of 
December 31, 1997, to $6,859,835 from $5,421,016 as of 
December 31, 1996.  The increase was attributable to the 
construction of a 20,000 square foot storage facility plus the 
addition of the production facility purchased from Tualatin 
Vineyards. 

     Long term debt increased to $4,044,943 as of December 31, 
1997, from $3,170,000 as of December 31, 1996.  The increase in 
debt was the result  of cash borrowings for the purchase and 
vineyard expansion of Tualatin Vineyards,

     The Company has a line of credit from Farm Credit Services 
with a limit of $2,000,000.  As of December 31, 1997 the 
outstanding  balance of the line was $1,517,297 as compared to 
$479,625 in 1996. These funds were used to meet operational 
expenditures primarily to fund the increase in the inventory. 





ITEM 7.	FINANCIAL STATEMENTS

     The financial statements required by this item are presented 
at page F-1.


ITEM 8.	CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON 
ACCOUNTING AND FINANCIAL DISCLOSURE

     Not applicable.


ITEM 9.	DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL  
PERSONS

Directors,' nominees for election as a director, and each such 
person's age at June 30, 1998 and position with the Company.  

Name                    Position(s) with the Company          Age
James W. Bernau ***     Chairperson of the Board, President 
                                    and Director               44
James L. Ellis ***      Secretary and Director                 53
Betty M. O'Brien*       Director                               55
Daniel S. Smith         Director                               58
Delna L. Jones**  ****  Director                               58
Stan G. Turel * **  ***    ****  Director                      50
William H. Malkmus *    Director                               63
___________________                                                  
*Member of the Compensation Committee  
**Member of the Audit Committee
***Executive Committee 
****Affiliated Transaction Committee

All directors hold office until the next annual meeting of 
Shareholders or until their successors have been elected and 
qualified.  Executive officers are appointed by the Board of 
Directors and serve at the pleasure of the Board of Directors.  
Set forth below is additional information as to each director and 
executive officer of the Company.

James W. Bernau.  Mr. Bernau has been President and Chairperson of 
the Board of Directors of the Company since its inception in May 
1988. Mr. Bernau began to develop the vineyard in 1983, and co-
founded the Company in 1988 with Salem grape grower, Donald 
Voorhies.  From 1981 to September 1989, Mr. Bernau was Director of 
the Oregon Chapter of the National Federation of Independent 
Businesses ("NFIB"), an association of 15,000 independent 
businesses in Oregon. After founding and serving as President  and  
Chairman of  several regional brewing companies (See "Certain 
Relationships and Related Transactions") between 1992 and 1997, 
Mr. Bernau elected in September of 1997  to turn his full time 
attention and effort to the Company.

James L. Ellis.  Mr. Ellis has served as a Director since July 
1991 and Secretary since June 1997.  Mr. Ellis  has served as the 
Company's Director of Human Resources from January 1993. From 1993 
to 1997 he also served the Director of Human Resources for  
several regional brewing companies (see "Certain Relationships and 
Related Transactions) founded by Mr. Bernau.  Mr. Ellis returned 
full time to the Company in September of 1997.  From 1990 to 1992, 
Mr. Ellis was a partner in Kenneth L. Fisher, Ph.D. & Associates, 
a management consulting firm.  From 1980 to 1990, Mr. Ellis was 
Vice President and General Manager of R.A. Kevane & Associates, a 
Pacific Northwest personnel consulting firm.  From 1962 to 1979, 
Mr. Ellis was a member of and administrator for the Christian 
Brothers of California, owner of Mont La Salle Vineyards and 
producer of  Christian Brothers wines and brandy.

Betty M. O'Brien.  Ms. O'Brien has served as a Director since July 
1991.  Ms. O'Brien has been employed by Willamette University as 
its Director of News and Publications since 1988.  Ms. O'Brien is 
a partner in Elton Vineyards, a commercial vineyard located in 
Eola Hills in Yamhill County, Oregon.  She is a member of the 
Oregon Winegrowers Association having previously served as its 
President and Treasurer as well as a director.

Daniel S. Smith.  Mr. Smith has served as a Director since July 
1991.  Since 1973, Mr. Smith has been an owner in and the manager 
of Danco Company, a commercial refrigeration business.  Mr. Smith 
owns 65-acres of commercial vineyards near Eugene, Oregon.

Delna L. Jones.  Ms. Jones has served as a Director since November 
1994.  Since 1990, Ms. Jones has served as project director for 
the CAPITAL Center, an education and business consortium.  From 
1985 to 1990, Ms. Jones served as Director of Economic Development 
with US West Communications.  Beginning in 1982, she was elected 
six times to the Oregon House as the State Representative for 
District 6.  During her tenure, she served as the Assistant 
Majority Leader; she also chaired the Revenue and School Finance 
committee, and served on the Legislative Rules and Reorganization 
committee and the Business and Consumer Affairs committee.  In 
addition, Ms. Jones presently serves on many community and 
business boards and advisory panels.

Stan G. Turel.  Mr. Turel has served as a Director since November 
of 1994.  Mr. Turel is part owner and the CEO of Columbia Turel, 
Inc., (formerly Columbia Bookkeeping, Inc.) a position he has held 
since 1974.  Columbia Turel, Inc. has sixteen offices in Oregon 
and Washington, servicing 4,000 small business and 26,000 tax 
clients annually.  Mr. Turel is a licensed tax consultant, a 
member of the National Association of Public Accountants, a 
private pilot, and a former delegate to the White House Conference 
on Small Business.  In addition, Mr. Turel serves his community on 
a number of advisory boards and panels.

William H. Malkmus. Mr. Malkmus has served as a Director since 
April of 1997. Mr. Malkmus spent over 20 years as an investment 
banker in San Francisco. For six years, following his banking 
career and until his retirement in 1995, Mr. Malkmus was the Chief 
Financial Officer of Vivea Inc., a healthcare service company 
listed on the New York Stock Exchange. In 1973, Mr. Malkmus co-
founded Tualatin Vineyards, one of Oregon's original wineries, and 
was President/Treasurer until Tualatin merged with Willamette 
Valley Vineyards, Inc. in 1997.

Board of Directors Committees.  The Board of Directors acts as a 
nominating committee for selecting nominees for election as 
directors.  The Board of Directors has appointed a standing Audit 
Committee which, during the year ended December 31, 1997, 
conducted one meeting. The newly elected members of the Audit 
Committee are Delna L. Jones and Stan G. Turel. The Audit 
Committee reviews the scope of the independent annual audit, the 
independent public accountants' letter to the Board of Directors 
concerning the effectiveness of the Company's internal financial 
and accounting controls and the Board of Directors' response to 
that letter, if deemed necessary.  The Board of Directors also has 
appointed a Compensation Committee which reviews executive 
compensation and makes recommendations to the full Board regarding 
changes in compensation, and also administers the Company's 1992 
Stock Incentive Plan.  During the fiscal year ended December 31, 
1997, the Compensation Committee held  one meeting.  The members 
of the Compensation Committee currently are  Betty M. O'Brien, 
Chair,  Stan Turel,  and William Malkmus. In 1994, the Board of 
Directors created an Affiliated Transactions Committee that 
reviewed transactions deemed to involve a conflict of interest 
between the Company and its  former affiliates, current members  
of the Affiliated Transaction Committee are Delna Jones and Stan 
Turel.  The Committee held no meetings in 1997.   In 1997 the 
Board appointed an Executive Committee,  members are: James 
Bernau, James Ellis, and Stan Turel.  The Executive Committee met 
ten times during 1997.

During 1997 the Company's Board of Directors held  nine meetings. 
All incumbent directors attended more than 75% of the aggregate of 
the total number of meetings held by the Board of Directors and 
the total number of meetings held by all committees of the Board 
on which he or she served during 1997.  See "Management - 
Executive Compensation" for certain information regarding 
compensation of Directors.



ITEM 10.  EXECUTIVE COMPENSATION

Summary of Cash and Certain Other Compensation

The following table provides certain summary information 
concerning compensation paid or accrued by the Company, to or on 
behalf of the Company's Chief Executive Officer, James W. Bernau 
(the "named executive officer") for the years ending December 31, 
1995, 1996, and 1997.

Name and Principle Position        Year      Annual Compensation     
                                            Salary ($)    Bonus

James W. Bernau                    1995   $   3,040         -
President and Chairperson of       1996       6,500         -
the Board of Directors             1997      19,385         -

As discussed under "Election of Directors", Mr. Bernau previously 
served as President of certain affiliates of the Company.    Each 
of these companies paid a pro rata portion of Mr. Bernau's monthly 
salary based on the amount of time that Mr. Bernau  devoted to the 
respective company's business in that month.  However, Mr. Bernau 
has now turned his full time attention and effort to the Company's 
business.  In addition to his salary, Mr. Bernau may receive an 
annual bonus from the Company based on the Company's performance 
and Mr. Bernau's contribution to the  Company as determined solely 
by the company's Board of Directors.

Bernau Employment Agreement
The Company and Mr. Bernau are parties to an employment agreement 
dated August 3, 1988 and amended in February, 1997 and again 
amended in January of 1998. Under the amended agreement, Mr. 
Bernau is paid an annual salary of $75,000 with annual increases 
tied to increases in the consumer price index.   Pursuant to the 
terms of the employment agreement, the Company must use its best 
efforts to provide Mr. Bernau with housing on the Company's 
property.  Mr. Bernau and his family will live in the house free 
of rent and must continue to reside there for the duration of his 
employment in order to provide additional security and lock-up 
services for late evening events at the Winery and Vineyard. The 
employment agreement provides that Mr. Bernau's employment may be 
terminated only for cause which is defined as non-performance of 
his duties or conviction of a crime.


Stock Options
In order to reward performance and retain high-quality employees, 
the Company often grants stock options to its employees. The 
Company does not ordinarily grant shares of stock to its 
employees. Options are typically issued at a per share exercise 
price equal to the closing price as reported by NASDAQ at the time 
the option is granted. The options vest to the employee over time. 
Three months following termination of the employee's employment 
with the Company, any and all unexercised options return to the 
Company. No stock options were granted to the named executive 
officer during the year ended December 31, 1997 under the 
Company's 1992 Stock Incentive Plan.

Option Exercises and Holdings
The following table provides information, with respect to the 
named executive officer, concerning exercised options during the 
last fiscal year and unexercised options held as of December 31, 
1997.

                      Options Exercised
                  in the last fiscal year 
                  Number           Value 
Name             of shares       Realized(1)

James W. Bernau      -0-         -0 -

                    Number of Securities       
                   Underlying Unexercised
                    Options at FY-End
Name              Exercisable  Unexercisable

James W. Bernau   15,000(3)          -0-


                     Value of Unexercised 
                     In-the-Money Options 
                       at FY-End(2)
Name              Exercisable  Unexercisable

James W. Bernau      -0-           -0-
______________________________
(1) The value realized is based on the difference between the 
market price at the time of exercise of the options and the 
applicable exercise price.

(2) Options are "in the money" at the fiscal year-end if the fair 
market value of the underlying securities on such date exceeds the 
exercise price of the option.  The amounts set forth represent the 
difference between the fair market value of the securities 
underlying the options on December 31, 1997 ($2.75 per share based 
on the NASDAQ closing price for the Company's Common Stock on that 
date), and the exercise price of the option ($3.42 per share), 
multiplied by the applicable number of options.

(3) Represents a 15,000 share warrant exercisable at $3.42 per 
share issued to Mr. Bernau in 1992.  See "Certain Transactions".

Director Compensation
The members of the Company's Board of Directors do not receive 
cash compensation for their service on the Board, but are  
reimbursed for out-of-pocket and travel expenses incurred in 
attending Board meetings. Under the Company's Stock Incentive Plan 
adopted by the shareholders in 1992 and further amended by the 
shareholders in 1996, beginning in 1997 an option to purchase 
1,500 shares of Common Stock is granted to each Director for 
service on the Board during the year. In addition, each director 
receives 50  shares of Common Stock for each Board or committee 
meeting attended. 

Section 16 Reports
Section 16(a) of the Securities Exchange Act of 1934, as amended 
(the "1934 Act") requires the Company's directors and officers, 
and persons who own more than 10% of a registered class of the 
Company's equity securities, to file initial reports of ownership 
and reports of changes in ownership with the Securities and 
Exchange Commission.  Such persons also are required to furnish 
the Company with copies of all Section 16(a) reports they file. 
The Company believes that all filing requirements applicable to 
its directors, officers and persons who own more than 10% of the 
Company's Common Stock have been complied with for 1997.

ITEM 11.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND 
MANAGEMENT

     The following table sets forth certain information with 
respect to beneficial ownership of the Company's Common Stock as 
of December 31, 1997, by (i) each person who beneficially owns 
more than 5% of the Company's Common Stock  (ii)  each Director of 
the Company (iii) each of the Company's named executive officers, 
and (iv) all directors and executive officers as a group.

                                       Shares Beneficially Owned  
                                    Number of      Percent of
                                     Shares      Outstanding Stock


James W. Bernau    President/CEO, Chair of the Board
2545 Cloverdale Road               1,121,967.5(1)            26.5%
Turner, OR  97392                                                 

James L. Ellis     Secretary, Director
7850 S.E. King Road                    10,214                   **
Milwaukie, OR  97222

Delna L. Jones     Director
PO Box 5969                               200                   **
Aloha, OR  97006                                                  

Betty M. O'Brien   Director
22500 Ingram Lane NW                    3,900                   **
Salem, OR  97304                                                  

Daniel S. Smith    Director
26978 Briggs Hill Road                 28,734                   **
Eugene, OR  97405                                                 

Stan G. Turel      Director
13909 S.E. Stark Street                17,629                   **
Portland, OR  97233                                               

William H. Malkmus  Director
415 Manzanita Way                     171,178                  4.0
Woodside, CA  94062 

Donald Voorhies
1715 Wickshire Court S.E.             261,617                  6.2
Salem, OR  97302                

All Directors and executive       1,353,822.5
officers as a group (7 persons)
_________________________
**         Less than one percent.

(1)       Includes 15,000 shares issuable upon the exercise of an 
outstanding warrant.


ITEM 12.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS


During 1997 and 1996, the Company purchased grapes from Elton 
Vineyards for $95,594and $88,364, respectively.  Betty M. O'Brien, 
a Director of the Company, is a principle owner of Elton 
Vineyards.  Also during 1997 and 1996, the Company purchased 
grapes from Sweet Cheeks Vineyards owned by Director, Daniel S. 
Smith, for $128,460 and $50,292.

On June 1, 1992, the Company granted Mr. Bernau a warrant to 
purchase 15,000 shares of the Company's Common Stock as 
consideration for his personal guarantee of the Real Estate Loan 
and the Line of Credit from Farm Credit Services pursuant to which 
the Company borrowed $1.2 million.  The warrant is exercisable 
anytime through June 1, 2012, at an exercise price of $3.42 per 
share.

Each of the following companies--Nor'Wester Brewing, Willamette 
Valley Inc,-Microbreweries across America (WVIMAA), Aviator Ales, 
Mile High Brewing, Bayhawk Ales and North Country Brewing was 
affiliated with the Company in that James W. Bernau, the Company's 
founder, President and Chairperson of the Board of Directors, was 
also President and Chairperson of the Board of Directors of each 
such affiliated company.  Mr. Bernau was also a significant 
shareholder in Nor'Wester and WVIMAA.

During 1993 and  through June 1994, the Company provided 
management services to Nor'Wester and WVI. The management services 
consisted of secretarial, accounting, marketing, administrative, 
stock transfer and warehousing services which were provided on a 
cost-plus-fees basis. Beginning in July 1994, such services were 
performed primarily by WVI employees. The Company provided 
services to the affiliated companies on a limited basis. For the 
years ended December 31, 1995 and 1994, charges to the Company for 
such management services aggregated approximately $230,000 and 
$58,000, respectively, and are included in selling, general and 
administrative expenses in the accompanying statement of 
operations. In addition, the Company entered  into a beer sale and 
distribution contract with Nor'Wester. No sales were made under 
the terms of this contract in 1996 or 1995.

In 1996, the Company began contracting for these services with 
Nor'Wester under a general services agreement. Nor'Wester, WVI, 
and the Company each provided various administrative and stock 
offering services to the affiliated companies. During 1996, total 
amounts charged to the Company by Nor'Wester and WVI aggregated 
$47,025; amounts charged by the Company to the various affiliated 
companies aggregated $86,450. As a result of these and other 
transactions, the Company aggregate payable balance of $7,221 is 
netted against other receivables in the accompanying balance 
sheet.  During 1997, charges to the Company aggregated $164,716; 
amounts charged by the Company aggregated $92,600.  The charges to 
the Company were composed of reimbursements for combined purchases 
of health insurance and telephone services which were paid through 
the former affiliates.  In the fall of 1997, the Company ceased 
all transactions with these affiliated companies due to the fact 
that these affiliated companies ceased doing business or were no 
longer providing services. At December 31, 1997, the Company has 
no receivables or payables from the former affiliates.  In 1997, 
the Company wrote off  $14,000 of receivables from the former 
affiliates.  The Company will continue its efforts to collect 
these receivables.
 
On December 3, 1992, James W. Bernau borrowed $100,000 from the 
Company.  The loan is secured by Mr. Bernau's stock in the 
Company, and is payable, together with interest at a rate of 7.35% 
per annum, on March 14, 2009.  At December 31, 1996, the 
outstanding balance of the loan was $148,448.

The Company believes that the transactions set forth above were 
made on terms no less favorable to the Company than could have 
been obtained from unaffiliated third parties.  All future 
transactions between the Company and its officers, directors,  and 
principal shareholders will be approved by a disinterested 
majority of the members of the Affiliated Transactions Committee 
of the Company's Board of Directors, and will be on terms no less 
favorable to the Company than could be obtained from unaffiliated 
third parties.

ITEM 13.                 EXHIBITS AND REPORTS ON FORM 8-K

      (a)    Exhibits

          (3)       Articles of Incorporation and Bylaws:

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

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


         (10)       Material Contracts

              (a)   Employment Agreement between Willamette Valley 
Vineyards, Inc. and James W. Bernau dated 
August 3, 1988 (incorporated by reference 
from the Company's Regulation A Offering 
Statement on Form 1-A [File No. 24S-2996])

              (b)   Indemnity Agreement between Willamette Valley 
Vineyards, Inc. and James W. Bernau dated 
May 2, 1988 (incorporated by reference from 
the Company's Regulation A Offering Statement 
on Form 1-A [File No. 24S-2996])

              (c)   Indemnity Agreement between Willamette Valley 
Vineyards, Inc. and Donald E. Voorhies dated 
May 2, 1988 (incorporated by reference from 
the Company's Regulation A Offering Statement 
on Form 1-A [File No. 24S-2996])

              (d)   Shareholders Agreement among Willamette Valley 
Vineyards, Inc. and its founders, James 
Bernau and Donald Voorhies, dated May 2, 1988 
(incorporated by reference from the Company's 
Regulation A Offering Statement on Form 1-A 
[File No. 24S-2996])

              (h)   Revolving Note and Loan Agreement dated 
May 28, 1992 by and between Northwest Farm 
Credit Services, Willamette Valley Vineyards, 
Inc. and James W. and Cathy Bernau 
(incorporated by reference from the Company's 
Regulation A Offering Statement on Form 1-A 
[File No. 24S-2996])

              (i)   Founders' Escrow Agreement among Willamette 
Valley Vineyards, Inc., James W. Bernau, 
Donald Voorhies and First Interstate Bank of 
Oregon, N.A. dated September 20, 1988 
(incorporated by reference from the Company's 
Regulation A Offering Statement on Form 1-A 
[File No. 24S-2996])

              (j)   Amendment to Founders' Escrow Agreement dated 
September 20, 1988 (incorporated by reference 
from the Company's Regulation A Offering 
Statement on Form 1-A [File No. 24S-2996])

              (k)   Stock Escrow Agreement among Willamette Valley 
Vineyards, Inc., Betty M. O'Brien and Charter 
Investment Group, Inc. dated July 7, 1992 
(incorporated by reference from the Company's 
Regulation A Offering Statement on Form 1-A 
[File No. 24S-2996])

              (l)   Stock Escrow Agreement among Willamette Valley 
Vineyards, Inc., Daniel S. Smith and Piper 
Jaffray & Hopwood, Inc. dated July 7, 1992 
(incorporated by reference from the Company's 
Regulation A Offering Statement on Form 1-A 
[File No. 24S-2996])

              (m)   Acquisition of Tualatin Vineyards, Inc. dated 
April 15, 1997. (File No. 


     (b)           Reports on Form 8-K

                             Not applicable.


                                            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: March      , 1998.   By: ___________________                 
                               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       


___________________ Chairperson of the Board,     March     , 
1998
James W. Bernau      President 
                    (Principal Executive Officer)

_________________   Controller                    March     , 
1998
John E. Moore      (Principal Accounting Officer)


______________      Director and Vice-President   March     , 
1998
James L. Ellis      and Secretary

________________    Director                      March     , 
1998
Betty M. O'Brien

_________________   Director                      March     , 
1998
Daniel S. Smith

_____________       Director                      March     , 
1998
Stan G. Turel

_________________   Director                      March     , 
1998
William H. Malkmus

_________________   Director                      March     , 
1998
Delna Jones




Willamette Valley
Vineyards, Inc.
Report and Financial Statements
December 31, 1997, 1996 and 1995


Willamette Valley Vineyards, Inc.

Index to Financial Statements




Report of Independent Accountants                           F-1-2

Balance Sheet                                               F-3-4

Statement of Operations                                       F-5

Statement of Shareholders= Equity                             F-6

Statement of Cash Flows                                     F-7-8

Notes to Financial Statements                              F-9-26





           Report of Independent Accountants


To the Board of Directors and Shareholders of
Willamette Valley Vineyards, Inc.


In our opinion, the accompanying balance sheet 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. at December 31, 1997 and 1996, and the 
results of its operations and its cash flows for each of 
the three years in the period ended December 31, 1997, in 
conformity with generally accepted accounting principles.  
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 generally accepted auditing standards 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 the opinion expressed 
above.




PRICE WATERHOUSE LLP

Portland, Oregon
March 10, 1998




Willamette Valley Vineyards, Inc.
Balance Sheet
December 31, 1997 and 1996


                                            1997          1996     
             Assets
Current assets
    Cash and cash equivalents           $   13,541   $    794,885
    Accounts receivable, net (Note 3)      820,526        288,905
    Income taxes receivable (Note 12)       24,436              -
    Other receivables                        3,122         12,388
    Inventories (Note 4)                 4,171,027      2,843,053
    Prepaid expenses and other
           current assets                   75,171         94,790
    Deferred income taxes (Note 11)         94,813        111,438

          Total current assets           5,202,636      4,145,459

Vineyard development costs, net 
  (Notes 1 and 2)                        1,506,906        386,605
Property and equipment, net 
  (Notes 2 and 5)                        6,859,835      5,421,016
Investments (Note 6)                       105,040        115,218
Note receivable (Note 12)                  148,448        138,511
Debt issuance costs                        122,870         56,896
                                      $ 13,945,735   $ 10,263,705

                           Liabilities and Shareholders' Equity
Current liabilities:
    Line of credit (Note 7)           $  1,517,297   $    479,626
    Current portion of long-term 
      debt (Note 8)                        124,192         97,819
    Accounts payable                       363,419        117,428
    Accrued commissions and payroll costs  225,297        122,745
    Other accrued liabilities                   -          51,511
    Income taxes payable                        -          29,148
    Grape payables (Note 12)               501,238        551,014

               Total current liabilities 2,731,443      1,449,291

Long-term debt (Note 8)                  3,920,751      3,072,181
Deferred income taxes (Note 11)            188,275        114,028

               Total liabilities         6,840,469      4,635,500

Commitments and contingencies (Note 13)     
Shareholders' equity (Note 9):
     Common stock, no par value - 10,000,000 shares authorized,
     4,231,431 and 3,785,356 shares issued and outstanding at   
     December 31, 1997 and 1996           6,779,067     5,369,868
     Retained earnings                      326,199       258,337

               Total shareholders' equity 7,105,266     5,628,205
                                        $13,945,735   $10,263,705



Willamette Valley Vineyards, Inc.
Statement of Operations
Years Ended December 31, 1997, 1996 and 1995


                                1997          1996          1995  
Net revenues:
     Winery operations       5,714,132   $  4,235,020 $  3,637,721

Cost of goods sold:
     Winery operations       2,813,764      1,853,791    1,687,086
          Gross margin       2,900,368      2,381,229    1,950,635

Selling, general and 
  administrative expenses    2,434,867      1,951,120    1,807,430

Income from operations         465,501        430,109      143,205

Other income (expenses): 
     Interest income            31,296          25,145      18,648
     Interest expense (Note 1)(396,118)       (214,380)   (128,169)
     Other income               19,471          28,241       2,408 

                              (345,351)       (160,994)   (107,113)

Income before income taxes     120,150         269,115      36,092

Income taxes (Note 10)          52,288          98,685      29,768

Net income              $       67,862   $     170,430  $    6,324

Basic net income per 
  common share (Note 1) $          .02   $         .05  $        -

Diluted net income per
   common share (Note 1)$          .02   $         .04  $        -



Willamette Valley Vineyards, Inc.
Statement of Shareholders' Equity
Years Ended December 31, 1997, 1996 and 1995


                                                Retained
                           Common stock         earnings
                        Shares       Dollars    (deficit)       Total

Balances at 
  December 31, 1994  3,785,356  $   5,369,868  $  81,583   $ 5,451,451

Net income                 -                -      6,324         6,324

Balances at 
  December 31, 1995  3,785,356      5,369,868    87,907      5,457,775

Net income                   -              -    170,430       170,430

Balances at 
  December 31, 1996  3,785,356      5,369,868    258,337     5,628,205

Stock issuance for 
  purchase of Tualatin
  Valley Vineyard      444,825      1,406,699         -      1,406,699

Stock issuance 
  for compensation       1,250          2,500          -         2,500

Net income                   -              -     67,862        67,862

Balances at 
  December 31, 1997  4,231,431     6,779,067     326,199     7,105,266




Willamette Valley Vineyards, Inc.
Statement of Cash Flows
Years Ended December 31, 1997, 1996 and 1995

                             1997           1996            1995  
Cash flows from 
  operating activities
Net income               $   67,862     $  170,430        $  6,324
Reconciliation of net 
income to net cash (used for)
provided by operating activities
  Depreciation and 
    amortization            533,444        377,855         302,971
  Deferred income taxes      90,872         39,524         (32,427)
Bad debt expense             44,384         27,382           7,890
Loss on disposition 
  of assets                     895              -               - 
Changes in assets and   liabilities                                   
Accounts receivable        (519,198)      (184,215)         (3,614)
Other receivables             9,266          6,339          (6,219)
Inventories                (953,956)      (953,005)       (356,423)
Prepaid expenses and
  other current assets       19,775        (30,579)        (18,148)
Notes receivable             (9,937)        (9,509)          2,127
Accounts payable             90,133        (18,541)           (628)
Accrued liabilities          45,741         64,684          (1,783)
Income taxes receivable     (24,436)             -               -
Income taxes payable        (29,148)        29,148         (49,602)
Grape payables              (49,776)       206,372         133,243   
Net cash (used for) 
  operating activities     (684,079)      (274,115)        (16,289) 
Cash flows from investing activities
Additions to property 
  and equipment          (1,101,354)      (931,110)     (1,067,024)
Vineyard development 
  expenditures             (165,794)       (31,943)        (31,755)
Cash received (paid) 
  for investments            10,178         38,675         (38,017)
Payments to acquire 
  Tualatin Valley Vineyards(684,624)            -                - 
Proceeds from sale of
  property and equipment      6,000              -               - 
Net cash used for 
  investing activities   (1,935,594)      (924,378)     (1,136,796)
Cash flows from financing activities
Debt issuance costs         (74,285)       (20,477)        (21,068)
Net increase in line 
  of credit balance       1,037,671        318,326         161,300
Issuance of long-term debt  982,164      1,162,127        1,185,561
Repayments of long-term debt (107,221)     (66,493)        (21,613)
 
Net cash provided by 
  financing activities      1,838,329    1,393,483        1,304,180

Net (decrease) increase in 
  cash and cash equivalents  (781,344)     194,990          151,095

Cash and cash equivalents 
    Beginning of year         794,885      599,895          448,800
    End of year          $     13,541  $   794,885    $     599,895







Willamette Valley Vineyards, Inc.
Notes to Financial Statements
December 31, 1997, 1996 and 1995


1.     Summary of Operations, Basis of Presentation and 
Significant Accounting Policies

Organization and operations
Willamette Valley Vineyards, Inc. (the Company) owns and 
operates vineyards and a winery located in the state of 
Oregon, and produces and distributes premium and super premium 
wines, primarily pinot noir, chardonnay, and white riesling.  
The majority of the Company's wine is sold to grocery stores 
and restaurants in the state of Oregon through the Company's 
sales force.  Out-of-state and foreign sales represented 
approximately 33% of revenues.  The Company also sells its 
wine from the hospitality room at its winery.

Basis of presentation
The accompanying financial statements have been prepared in 
accordance with generally accepted accounting principles which 
require management to make certain estimates and assumptions.  
These estimates and assumptions affect the reported amounts of 
assets and liabilities and the disclosure of contingent assets 
and liabilities as of the date of the financial statements, 
and the reported amounts of revenues and expenses during the 
reporting period.  Actual results could differ from those 
estimates.

Cash and cash equivalents
Cash and cash equivalents include short-term investments with 
an original maturity of less than ninety days.

Revenue recognition
The Company recognized revenue upon the delivery of its 
products to its customers.  Sales are recorded as trade 
accounts receivable and no collateral is required.

Inventories
After a portion of the vineyard becomes commercially 
productive, the annual crop and production costs relating to 
such portion are recognized as work-in-progress inventories.  
Such costs are accumulated with related direct and indirect 
harvest, wine processing and production costs, and 
are transferred to finished goods inventories when the wine is 
produced, bottled, and ready for sale.  The cost of finished 
goods is recognized as cost of sales when the wine product is 
sold.  Inventories are stated at the lower of cost or market 
using the average cost method by variety and vintage to 
determine the first-in, first-out (FIFO) cost of inventories.  
In accordance with general practices in the wine industry, 
wine inventories are included in current assets in the 
accompanying balance sheet, although a portion of such 
inventories may be aged for more than one year.

Vineyard development costs
Vineyard development costs consist primarily of the costs of 
the vines and expenditures related to labor and materials to 
prepare the land and construct vine trellises.  The costs are 
capitalized until the vineyard becomes commercially 
productive, at which time annual amortization is recognized 
using the straight-line method over the estimated economic 
useful life of the vineyard, which is estimated to be 30 
years.  Accumulated amortization of vineyard development costs 
aggregated $116,193 and $74,700 at December 31, 1997 and 1996, 
respectively.





1.     Summary of Operations, Basis of Presentation and 
Significant Accounting Policies (Continued)

Property and equipment
Property and equipment are stated at cost or the historical 
cost basis of the contributing shareholders, as applicable, 
and are depreciated on the straight-line basis over their 
estimated useful lives as follows:

     Land improvements                      15 years
     Winery building                        30 years
     Equipment                             5-7 years

Expenditures for repairs and maintenance are charged to 
operating expense as incurred.  Expenditures for additions and 
betterments are capitalized.  When assets are sold or 
otherwise disposed of, the cost and related accumulated 
depreciation are removed from the accounts, and any resulting 
gain or loss is included in operations.

In March 1995, the Financial Accounting Standards Board issued 
Statement of Financial Accounting Standards No. 121, 
"Accounting for the Impairment of Long-Lived Assets and for 
Long-Lived Assets to Be Disposed Of."  The Company adopted the 
statement in 1996; however, the adoption does not have a 
significant impact on the Company's financial position or 
results of operations.

Debt issuance costs
Debt issuance costs are amortized on a straight-line basis, 
which approximates the effective interest method, over the 
life of the debt.

Income taxes
The Company accounts for income taxes using the asset and 
liability approach prescribed by Statement of Financial 
Accounting Standards No. 109, "Accounting for Income Taxes."  
Under this approach, deferred income taxes are calculated for 
the expected future tax consequences of temporary differences 
between the book basis and tax basis of the Company's assets 
and liabilities.  The Company files stand-alone federal and 
state income tax returns.

Basic and diluted net income per share
     The Company adopted Statement of Financial Accounting 
Standards No. 128 (SFAS 128), "Earnings Per Share," in 1997.  
SFAS 128 requires disclosure of basic and diluted earnings per 
share.  All prior years have been restated to reflect the 
adoption of SFAS 128.  Basic earnings per share are computed 
based on the weighted average number of common shares 
outstanding each year.  Escrowed shares have been included in 
the weighted average number of common shares outstanding for 
1995.  Diluted earnings per common share take into account all 
dilutive equity instruments.

                            1997     
                          Weighted 
                           average
                            shares        Earnings
             Income       outstanding    per share
Basic       $67,862        4,103,669     $     .02
Options                          638
Warrants
            _______        __________    _________
Diluted     $67,862        4,104,307     $     .02


                            1996     
                          Weighted 
                           average
                            shares        Earnings
             Income       outstanding    per share
Basic       $170,430       3,785,356    $      .05 
Options                       20,532
Warrants
            _______        __________    _________
Diluted     $170,430       3,805,888     $     .04


                            1995     
                          Weighted 
                           average
                            shares        Earnings
             Income       outstanding    per share
Basic      $   6,324       3,785,356    $        -
Options                        4,938     
Warrants                       3,600
              ______        __________    _________
Diluted    $   6,324       3,793,894     $       -  

1.     Summary of Operations, Basis of Presentation and 
Significant Accounting Policies (Continued)

Basic and diluted net income per share (continued)
Options to purchase 161,500, 92,000 and 5,000 shares of common 
stock were outstanding at December 31, 1997, 1996 and 1995, 
respectively, but were not included in the computation of 
diluted earnings per share because the options' exercise price 
was greater than the average market price of the common 
shares.  In addition, the warrant outstanding since 1992 (see 
Note 9) was not included in the computation of diluted 
earnings per share in 1997 or 1996 because the exercise price 
of $3.42 was greater than the average market price of the 
common shares during those two years.

Statement of cash flows

Supplemental disclosure of cash flow information:
                               1997         1996        1995 
Interest paid            $   321,000  $   197,000  $   166,000
Income taxes paid             15,000       28,000      112,000
Supplemental schedule of noncash investing
  and financing activities    
Assets transferred from 
  related companies            19,279      48,189
Issuance of common stock 
  awards to employees           2,500
Acquisition of Tualatin Valley, Inc.:
  Common stock issued in connection with acquisition
    Issued to stockholders 
      of TVI                1,292,591
    Fee to Acquisitions
      Northwest, Inc.         114,108
  Tangible assets acquired, net of cash paid
     Fixed assets             143,376
     Vineyard development     996,000
Other assets acquired, net of cash acquired
  Accounts receivable          56,807
  Inventory                   371,518
  Prepaids                        156
Liabilities assumed
  Accounts payable            269,966
  Accrued liabilities           5,300


During the year ended December 31, 1995, the Company 
capitalized approximately $38,000 of interest related to the 
construction of its hospitality center. 

Fair market value of financial instruments
The fair market values of the Company's recorded financial 
instruments approximate their respective recorded balances, as 
the recorded assets and liabilities are stated at amounts 
expected to be realized or paid, or carry interest rates 
commensurate with current rates for instruments with a similar 
duration and degree of risk.


2.     Acquisition

      On April 15, 1997, Willamette Valley Vineyards, Inc. (WVV) 
acquired the assets of Tualatin Vineyards, Inc. (TVI), a 
winery located in Oregon, for a purchase price of $1,824,000, 
plus TVI's net current assets of $164,601 as of the closing 
date.  The acquisition was accounted for using the purchase 
method of accounting, and the results of operations include 
the revenues and expenses generated with the TVI assets from 
the acquisition date through December 31, 1997.  WVV paid 35 
percent of the purchase price in cash and the balance was paid 
through the issuance of WVV common stock. 

      The following unaudited pro forma information represents 
the results of operations of the Company as if the acquisition 
had occurred as of January 1, 1996, after giving effect to 
increased interest expense for debt issued related to the 
acquisition, depreciation based on current costs, and the 
effect of the (benefit from) provision for income taxes.

                                     1997               1996 
                                  (unaudited)       (unaudited) 
Net revenues                       5,874,733         4,944,635
Gross margin                       2,972,077         2,645,337
Net income                           (53,395)           38,488


3.     Accounts Receivable

Oregon law prohibits the sale of wine in Oregon on credit; 
therefore, the Company's accounts receivable balances are the 
result of sales to out-of-state and foreign distributors.  
Accounts receivable include an outstanding balance of 
approximately $185,200 and $80,000 at December 31, 1997 and 
1996, respectively, from a European customer to which extended 
credit terms have been granted.  At December 31, 1997 and 
1996, the Company's accounts receivable balance is net of an 
allowance for doubtful accounts of $30,000 and $10,000, 
respectively.


4.     Inventories



Inventories consist of:
                                          1997            1996
Winemaking and packaging materials   $   189,062  $     87,321
Work-in-process (costs relating 
to unprocessed                         1,725,910     1,559,612
and/or unbottled wine products)                              
Finished goods (bottled wine and
 related products)                     2,256,055     1,196,120 
                                    $  4,171,027  $  2,843,053     





5.     Property and Equipment
                                      1997                 1996 
Land and improvements          $  1,031,115        $     563,077
Winery building and hospitality 
  center                          4,506,344            3,718,733
Equipment                         3,263,633            2,576,748
Construction in progress          ______ -_               27,913
                                  8,801,092            6,886,471
Less accumulated depreciation    (1,941,257)          (1,465,455)
                               $  6,859,835         $  5,421,016

Construction in progress related to the addition of a new 
storage tasting and cellaring facility at the Company's winery 
which was completed in the Fall of 1997.


6.     Investments

Investments consist of:
                                          1997          1996
Oregon Liquor Control Commissions and Bureau 
  of Alcohol, Tobacco and Firearms  $    88,066   $    85,163
Farm Credit Securities                   15,000        30,055
Other                                     1,974       ______-
                                  $     105,040   $   115,218

The Oregon Liquor Control Commission and the Bureau of 
Alcohol, Tobacco and Firearms investments require restricted 
short-term investments to cover future excise tax payments.  
Farm Credit Securities investments are required as a condition 
of the Northwest Farm Credit Service loan and line of credit 
facility (see Note 7).  These investments are classified as 
held-to-maturity investments and are recorded at historical 
cost.


7.     Line of Credit Facility

The Company has a $2,000,000 credit facility with Northwest 
Farm Credit Services.  Borrowings under this facility bear 
interest at 8.5%.  At December 31, 1997 and 1996, $1,517,297 
and $479,626 were outstanding under this facility, 
respectively.




8.     Long-Term Debt

Long-term debt consists of:
                                        1997             1996     
Northwest Farm Credit Services Loan  $  4,044,943  $3,170,000
Less current portion                     (124,192)    (97,819)
                                     $  3,920,751  $ 3,072,181

The Company entered into an agreement with Northwest Farm 
Credit Services (NWFCS) in 1997 containing two separate notes 
bearing interest at a rate of 7.96%.  These notes require 
monthly payments ranging from $10,364 to $16,488 until the 
notes are fully repaid in 2014.  The loan agreements contain 
covenants which require the Company to maintain certain 
financial ratios and balances.  At December 31, 1997, the 
Company was not in compliance with these covenants. However, 
the Company has obtained a letter dated March 24, 1998 waiving 
the debt covenants until December 31, 1998.

Future minimum principal payments of long-term debt mature as 
follows:
Year ending
December 31,
     1998                               $     124,192      
     1999                                     180,978
     2000                                     195,763 
     2001                                     211,754    
     2002                                     229,052  
     Thereafter                             3,103,204 
                                         $  4,044,943

9.     Shareholders' Equity

The Company is authorized to issue 10,000,000 shares of its 
common stock.  Each share of common stock is entitled to one 
vote.  At its discretion, the Board of Directors may declare 
dividends on shares of common stock, although the Board does 
not anticipate paying dividends in the foreseeable future.

In addition, in connection with the Company's initial stock 
offering, the founding shareholders agreed to place in escrow 
certain shares of common stock.  All of these shares have been 
released as of December 31, 1995.


9.     Shareholders' Equity (Continued)

On June 1, 1992, the Company granted its president a warrant 
to purchase 15,000 shares of common stock as consideration for 
his personal guarantee of the real estate loans and the line 
of credit with Northwest Farm Credit Services (see Notes 7 and 
8).  The warrant is exercisable through June 1, 2012 at an 
exercise price of $3.42 per share.    As the warrant exercise 
price equaled the stock price at the date of grant, no expense 
was recorded as a result of this transaction.  As of December 
31, 1997, no warrants had been exercised.




10.	Stock Incentive Plan

In 1992, the Board of Directors adopted a stock incentive plan 
and reserved 175,000 shares of common stock for issuance to 
employees, consultants, and directors of the Company under the 
plan.  In 1996, the Board of Directors reserved an additional 
150,000 shares.  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.  

At December 31, 1997, 1996 and 1995, the following 
transactions related to stock options occurred:

                            1997          1996           1995  
                             Wtd..       Wtd..           Wtd
                             Avg         Avg             Avg
                          Exercise      Exercise      Exercise
                   Shares   Price  Shares  Price Shares  Price
Outstanding at
beginning of year 246,500   $2.87   45,000 $3.72  84,100 $4.58
Granted           100,000    2.63  248,500  2.81  25,000  3.80
Exercised           -      -             -    -       -     -
Forfeited        (173,500)   2.66  (47,000) 3.38 (64,100) 4.88
 Outstanding at 
end of year       173,000   $2.94  246,500 $2.87  45,000 $3.72
Weighted average fair value of options granted 
during the year           $  1.47       $   1.87        $ 2.35

Weighted average options outstanding and exercisable at December 
31, 1997 are as follows:
                                                                  
Options outstanding                                                   
Options exercisable 
                      Weighted
           Number     average     Weighted   Number     Weighted
       outstanding at remaining  average  exercisable at average
Exercise December 31, contractual exercise December 31, exercise
  price      1997       life       price     1997          price
$ 2.50       13,500      8.66    $  2.50      1,350        2.50 
  2.75       72,500      6.95       2.75      9,500        2.75  
  3.00       72,000      5.16       3.00     10,760        3.00 
  3.62       10,000      2.56       3.62      4,000        3.62 
  4.50        5,000      2.08       4.50      2,000        4.50
$2.50-4.50  173,000      5.94       2.94     27,610        3.09

10.	Stock Incentive Plan (Continued)

The Company adopted Statement of Financial Accounting 
Standards No. 123 (SFAS 123) in 1996 and has elected to 
account for its stock-based compensation under Accounting 
Principles Board Opinion 25.  As required by SFAS 123, the 
Company has computed for pro forma disclosure purposes the 
value of options granted during each of the three years ended 
December 31, 1997 using the Black-Scholes option-pricing model 
with the following weighted-average assumptions used for the 
grants in 1997, 1996 and 1995:

1997         1996         1995  
Risk-free interest rate        6.31 %       6.33 %       6.56 %
Expected dividend yield           -            -            -
Expected lives                    5 years   8.15 years   7.25 years
Expected volatility              57 %         57%         55%

Options were assumed to be exercised upon vesting for purposes of 
this valuation.  Adjustments are made for options forfeited prior 
to vesting.  For the years ended December 31, 1997, 1996 and 1995, 
the total value of the options granted was computed to be $146,700, 
$371,034 and $58,825, respectively, which would be amortized on a 
straight-line basis over the vesting period of the options.

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 123, the Company's net 
earnings would have been reduced to the pro forma amounts indicated 
as follows:
                                1997         1996         1995 
Net income - as reported    $  67,862   $  170,430   $    6,324
Per share:                       
    Basic                        0.02         0.05         0.00  
    Diluted                      0.02         0.04         0.00

Net income (loss) - pro forma               
                               41,838      116,786       (1,794)
Per share:
     Basic                       0.01         0.03         0.00
     Diluted                     0.01         0.03         0.00

      The effects of applying SFAS 123 for providing pro forma 
disclosures for the three years ended December 31, 1997 are not 
likely to be representative of the effects on reported net income 
and earnings per share for future years, because options vest over 
several years and additional awards generally are made each year.


11.	Income Taxes

The provision for income taxes consists of:
                              1997         1996         1995 
 Current tax expense (benefit)                  
   Federal               $       -   $    47,197   $    (2,300)  

   State                         -        11,964         (359)  
                                 -        59,161       (2,659) 
   Deferred tax (expense):                  
     Federal                46,530        35,032        26,545     
     
     State                   5,758         4,492         5,882
                            52,288        39,524        32,427 

 Total                   $  52,288   $    98,685   $    29,768    

During the year ended December 31, 1996, the Company utilized 
its net operating loss carryforwards of approximately $28,000 
to reduce its taxable income.

The effective income tax rate differs from the federal 
statutory rate as follows:
                                       Year ended December 31     
                                       1997     1996    1995   
Federal statutory rate                 34.0 %   34.0 %  34.0 %  
State taxes, net of federal benefit     4.4      4.9     5.9 
Utilization of fully reserve 
net operating loss carryforwards          -        -       -    
Permanent differences                   3.8      0.6    41.9
Benefit of federal rate bracket           -     (2.9)      -     
Other                                   1.3      0.1     0.7  
                                       43.5 %   36.7 %  82.5% 

Deferred tax assets and (liabilities) consist of:
                                                 December 31,
                                           1997             1996   
Accounts receivable                   $    11,508      $   3,836  
Inventory                                  34,538        103,522
Net operating loss carryforwards           37,888             -
Other                                     10,879           4,080
          Gross deferred tax assets        94,813        111,438
    Capital assets                       (188,275)      (114,028)
          Gross deferred tax liability   (188,275)      (114,028)
    Net deferred tax (liability) asset $  (93,462)   $    (2,590)

12.	Related Parties

      In 1996, the Company began contracting for management 
services with Nor'Wester Brewing Company (Nor'Wester) and 
Willamette Valley, Inc. (WVI), companies formerly controlled 
by the Company's president, under a general services 
agreement.  Nor'Wester, WVI, and the Company each provided 
various administrative services, including design and print 
work, and stock offering services to the affiliated companies, 
subsidiaries of WVI: Aviator Ales, Inc. (AAI); Mile High 
Brewing Company (MHBC); Bayhawk Ales, Inc. (BAI); and North 
Country Brewing Company, Inc. (NCBCI).  During 1996, total 
amounts charged to the Company by Nor'Wester and WVI 
aggregated $47,025; amounts charged by the Company to the 
various affiliated companies aggregated $86,450.  As a result 
of these and other transactions, the Company had an aggregate 
payable balance of $7,221 which is netted against other 
receivables in the accompanying balance sheet.  During 1997, 
charges to the Company aggregated $164,716; amounts charged by 
the Company aggregated $92,601.  Prior to December 31, 1997, 
all intercompany transactions ceased and as of December 31, 
1997 all balances are zero.

      The Company and one of its two founding shareholders have 
entered into a grape purchase contract.  Under the terms of 
such contract, the founding shareholder agreed to sell, and 
the Company agreed to buy, the entire production of pinot 
noir, chardonnay, and white riesling wine grapes from the 
founding shareholder's separately owned vineyard to supplement 
grapes provided by the Company's vineyard.  The contract 
commenced with the Fall 1989 vineyard harvest and continued 
through the 1995 harvest. The contract stipulated certain 
standards of quality.  The purchase price of the grapes 
equaled the average price paid for each variety of grapes in 
the Willamette Valley market region each season, as set 
forth by certain market surveys.  The terms of the contract 
also provided for a bonus payable to the founding shareholder 
if, and only if, the finished bottle price of wine produced 
from the purchased grapes exceeded the Oregon average bottle 
price as measured by certain market surveys.  In  1995, the 
Company purchased grapes for $33,347, pursuant to the terms of 
the contract.  The founding shareholder sold his vineyards in 
November of 1995.

      During 1997, 1996 and 1995, the Company purchased grapes 
from other shareholders, at an aggregate price of $262,795, 
$138,656 and $142,003, respectively.  At December 31, 1997, 
1996 and 1995, grape payables included $130,893, $92,706 and 
$67,161, respectively, owed to these shareholders. 

      On December 3, 1992, the Company issued a loan to its 
president in the amount of $100,000.  The loan was due on 
December 3, 1993, bearing interest at 7.35%.  On March 14, 
1994, the loan was extended to March 14, 2009.  The loan is 
secured by the common stock of the Company held by its 
president.  This note, including the related interest 
receivable, is classified as a long-term note receivable in 
the accompanying balance sheet.



13.	Commitments and Contingencies

      Litigation
      From time to time, in the normal course of business, the 
Company is a party to legal proceedings.  The Company is also 
a party, as defendant to one lawsuit arising out of its 
primary business operations.  Management, after review, and 
consultation with counsel, believe that the Company has 
meritorious defenses to the allegations and plans to defend 
itself vigorously.  Management believes that these matters 
will not have a material adverse effect of the Company's 
financial position or results of operations, but due to the 
nature of the litigation, the ultimate outcome cannot 
presently be determined.

       Operating leases
       The Company entered into a lease agreement for 
approximately 45 acres of vineyards and related equipment in 
1997.  The Company is also committed to lease payments for 
various office equipment.  As of December 31, 1997, the 
Company was obligated under various long-term operating leases 
requiring future minimum lease payments as follows:

Year ending
December 31
     1998                          $       90,519    
     1999                                  92,984
     2000                                  92,702   
     2001                                  83,827
     2002                                  83,827   
     Thereafter                           335,308
     Total minimum payments required  $   779,167   

Total rental expense for all operating leases amounted to $94,827 
in 1997.

Susceptibility of vineyards to disease
The Tualatin vineyard purchased during 1997 is known to be 
infested with phylloxera, an aphid-like insect which can 
destroy vines.  Although management has begun planting with 
phylloxera-resistant rootstock, a portion of the vines at the 
Tualatin vineyard are susceptible to phylloxera.  The Company 
has not detected any phylloxera at its Turner vineyard.





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