UNITED STATES
                 SECURITIES AND EXCHANGE COMMISSION
                      Washington, D.C. 20549

                             FORM 10-KSB

[X]      ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                   SECURITIES EXCHANGE ACT OF 1934
             For the fiscal year ended December 31, 2006

                                 OR
[ ]      TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                   SECURITIES EXCHANGE ACT OF 1934


                   Commission File number 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)                   (Zip Code)

Issuer's telephone number, including area code: (503) 588-9463

Securities registered under Section 12(b) of the Exchange Act: None

Securities registered under Section 12(g) of the Exchange Act: Common Stock
                                                             (Title of class)

Check whether the issuer is not required to file reports pursuant to
Section 13 or 15(d) of the Exchange Act.  YES [X] NO [ ]

Check whether the issuer (1)filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and
(2)has been subject to such filing requirements for the past 90 days.
YES [X] NO [ ]

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 registrant'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].

Indicate by check mark whether the registrant is a shell company (as defined
in Rule 12b-2 of the Exchange Act).  YES [ ] NO [X]

Issuer's revenues for its most recent fiscal year:    $14,916,072

Aggregate market value of the voting stock held by non-affiliates of the
Issuer based upon the closing price of such stock as of March 30, 2007:
$33,496,963

Number of shares of Common Stock outstanding as of March 30, 2007: 4,805,877

DOCUMENTS INCORPORATED BY REFERENCE: None


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


ITEM 1.     DESCRIPTION OF BUSINESS.

Introduction

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 $7 to $14, $14 to $20 and over $20 per
750 ml bottle, respectively).  Willamette Valley Vineyards was originally
established as a sole proprietorship by Oregon winegrower Jim Bernau in 1983.
The Company is headquartered in Turner, Oregon, where the Company's Turner
Vineyard and Winery are located on 75 acres of Company-owned land adjacent to
Interstate 5, approximately two miles south of Salem, Oregon.  The Company's
wines are made from grapes grown on the 538 acres of vineyard owned, leased or
contracted by the Company, and from grapes purchased from other nearby
vineyards.  The grapes are crushed, fermented and made into wine at the
Company's Turner winery (the "Winery") and the wines are sold principally
under the Company's Willamette Valley Vineyards label.  Willamette Valley
Vineyards is the owner of Tualatin Estate Vineyards and Winery located on
approximately 120 acres near Forrest Grove, Oregon, and leases an additional
114 acres of vineyard land at the Forest Grove location.

Products

Under its Willamette Valley Vineyards label, the Company produces and sells
the following types of wine in 750 ml bottles: Pinot Noir, the brand's
flagship and its largest selling varietal in 2006, $19 to $50 per bottle;
Chardonnay, $16 to $25 per bottle; Pinot Gris, $16 to $18 per bottle; Riesling
and Oregon Blossom (blush blend), $12 to $10 per bottle (all bottle prices
included herein are the suggested retail prices).  The Company's mission for
this brand is to become the premier producer of Pinot Noir from the Pacific
Northwest.

The Company currently produces and sells small quantities of Oregon's Nog (a
seasonal holiday product), $10 per bottle, and Edelweiss, $10 per bottle,
under a "Made in Oregon Cellars" label.

Under its Tualatin Estate Vineyards label, the Company currently produces and
sells the following types of wine in 750 ml bottles: Pinot Noir, the brand's
flagship, $28 per bottle; Chardonnay, $17 per bottle; Semi-Sparkling Muscat,
$16 per bottle.  The Company's mission for this brand is to be among the
highest quality estate producers of Burgundy and Alsatian varietals in Oregon.

Under its Griffin Creek label, the Company produces and sells the following
types of wine in 750 ml bottles: Syrah, the brand's flagship, $35 per bottle;
Merlot, $30 per bottle; Cabernet Sauvignon, $35 per bottle; Cabernet Franc,
$38 per bottle; The Griffin (a Bordeaux blend), $60 per bottle; and Viognier,
$25 per bottle.  This brand's mission is to be the highest quality producer of
Bordeaux and Rhone varietals in Oregon.

The Company holds U.S. federal and/or Oregon state trademark registrations for
the trademarks material to the business, including but not limited to, the
WILLAMETTE VALLEY VINEYARDS and GRIFFIN CREEK marks.


Market Overview

Wine Consumption Trends:  Beginning in 1994, per capita wine consumption began
to rise.  U.S. wine consumption rose 2.1 percent in 2005, continuing a decade-
long trend of steady growth. Per capita consumption inched up as well,
reaching 2.2 gallons per American, the highest level since 1988.  Total wine
sales in the United States continue to grow in the single digits; research has
shown that much of this sales growth is coming from younger consumers. Data
released by Wine Market Council in 2006, for example, showed younger consumers,
in particular, drinking either less beer and less spirits (or both) but at the
same time drinking more wine.  According to the Nielson Company's Beverage
Alcohol Annual Snapshot, in the 52 weeks ended January 13, 2007, Pinot Noir
sales in particular grew 20.3 percent in dollars, while Pinot Gris and Riesling
grew 17.9 and 25.2 percent, respectively.

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 2006 there were 350 commercial wineries licensed in Oregon and
over 15,600 acres of wine grape vineyards, 12,600 acres of which are currently
producing.  Total production of Oregon wines in 2006 is estimated to be
approximately 2.1 million cases.  Oregon's entire 2006 production has an
estimated retail value of approximately $432.9 million, assuming a retail
price of $200 per case, and a FOB value of approximately one-half of the retail
value, or $216.5 million.

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

Oregon does have certain disadvantages 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 occur just prior to the
autumn grape harvest, the quality of harvested grapes is often materially
diminished, thereby affecting that year's wine quality.

Finally, phylloxera, an aphid-like insect that feeds on the roots of grape-
vines, has been found in several 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.  As of December 31, 2006, the Company has not detected
any phylloxera at its Turner site.  Beginning with the Company's plantings in
May 1992, only phylloxera-resistant rootstock is used.  In 1997, the Company
purchased Tualatin Vineyards, which has phylloxera at its site.  All plantings
are on and all future planting will be on phylloxera resistant rootstock.  The
Company takes all necessary precautions to prevent the spread of phylloxera to
its Turner site.

As a result of these factors, subject to the risks and uncertainties identified
above, 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, one of the largest wineries in Oregon by volume, 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; (3) achieve significant brand recognition for its wines,
first in Oregon and then nationally and internationally; and (4) effectively
distribute and sell its products nationally.  The Company's goal is to
continue as one of Oregon's largest wineries, and establish 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 supports
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,  successful self-distribution, and
life long customer service programs).

To successfully execute this strategy, the Company has assembled a team of
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 and selling 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.

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 Company now owns, leases or contracts for 538 acres of vineyard land.  At
full production, we anticipate these vineyards will enable the Company to grow
approximately 85% of the grapes needed to meet the Winery's ultimate production
capacity of 298,000 gallons (124,000 cases).

The Property. The Company's estate vineyard at the Turner site currently has
48 acres planted and producing, with 24 acres of Pinot Noir and 24 acres of
Pinot Gris and Chardonnay. The oldest grapevines were planted in 1985, with
additional grapevines planted in 1992, 1993, and 1999. Vineyards generally
remain productive for 30 to 100 years, depending on weather conditions,
disease and other factors.  We estimate these vines will continue to produce
for another 35 years under conditions known today.

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
should increase production and improve grape quality over traditional designs.

Beginning in 1997, the Company embarked on a major effort to improve the
quality of its flagship varietal by planting new Pinot Noir clones that
originated directly from the cool climate growing region of Burgundy rather
than the previous source, Napa, California, where winemakers believe the
variety adopted to the warmer climate over the many years it was grown there.

These new French clones are called "Dijon clones" after the University of
Dijon in Burgundy, which assisted in their selection and shipment to a US
government authorized quarantine site, and then seven years later to Oregon
winegrowers.  The most desirable of these new Pinot Noir clones are numbered
113, 114, 115, 667 and 777.  In addition to certain flavor advantages, these
clones ripen up to two weeks earlier, allowing growers to pick before heavy
autumn rains.  Heavy rains can dilute concentrated fruit flavors and promote
bunch rot and spoilage.  These new Pinot Noir clones were planted at the
Tualatin Estate on disease resistant rootstock and the 667 and 777 clones have
been grafted onto 7 acres of self rooted, non-disease resistant vines at the
Company's Estate Vineyard near Turner.

New clones of Chardonnay preceded Pinot Noir into Oregon also arranged by the
University of Dijon, and were planted at the Company's Estate Vineyard on
disease resistant rootstock.

The purchase of Tualatin Vineyards, Inc. in April 1997 (including the
subsequent sale-leasebacks of portions of the property in December 1999 and
2004) added 83 acres of additional producing vineyards and approximately 60
acres of bare land for future plantings.  In 1997, the Company planted 19
acres at the Tualatin site and planted another 41 acres in 1998, the majority
being Pinot Noir.

In 1999, the Company purchased 33 acres of vineyard land adjoining Tualatin
Estate for future plantings and used lot line adjustments to create three
separate land parcels at Tualatin Estate.

Grape Supply.  In 2006, the Company's 48 acres of producing estate vineyard
yielded approximately 162 tons of grapes for the Winery's sixteenth crush.
Tualatin Vineyards produced 551 tons of grapes in 2006.  Belle Provenance
Vineyards produced 151 tons of grapes in 2006.  In 2006, the Company purchased
an additional 624 tons of grapes from other growers. The Winery's 2006 total
wine production was 192,772 gallons (81,081 cases) from its 2005 and 2006
crushes. The Company expects to produce 225,000 gallons in 2007 (94,600 cases).
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
a grape purchase contract with a certain director or their respective
affiliates of the Company.

In 2005, the Company entered into a long-term grape purchase agreement with
one of its Willamette Valley wine grape growers whereby the grower agreed to
plant 40 acres of Pinot Gris and 50 acres of Riesling and the Winery agreed to
purchase the yield at fixed contract prices through 2015, with the first crop
expected in 2007.  In 2006, the Company entered into a long-term grape
purchase agreement with the same Willamette Valley wine grape growers whereby
the grower agreed to plant 100 acres of Pinot Noir, 50 acres of Pinot Gris and
20 acres of Riesling and the Winery agreed to purchase the yield at fixed
contract prices through 2016, with the first crop expected in 2008.  The wine
grape grower must meet strict quality standards for the wine grapes to be
accepted by the Winery at time of harvest and delivery.  The Company is
obligated to purchase 100% of the crop produced within the strict quality
standards and crop loads, equating to maximum payments of approximately
$1,500,000 per year.  We cannot calculate the minimum payment as such a
calculation is dependent in large part on an unknown - the amount of grapes
produced in any given year.  If there are no grapes produced in any given year,
or if the grapes are rejected for failure to meet contractual quality
standards, the Company has no payment obligation for that year.  Failure of
the Grower to comply with the provisions of the contracts would constitute a
default, allowing the Company to recover damages, including expected lost
profits.  The Company has no right to use of the underlying properties.  These
new long-term grape purchase agreements will increase the Company's supply of
high quality wine grapes and provide a long-term grape supply, at fixed prices.

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.  The grapes grown on the Company's vineyards establish
a foundation of quality, through the Company's farming practices, upon which
the quality of the Company's wines 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, 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 (42o-46o 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 in the great wine grape regions of Northern Europe.

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 generally 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 are
capable of producing up to 104,000 cases (247,000 gallons) of wine per year,
depending on the type of wine produced.  In 2006, the Winery produced 192,772
gallons (81,081 cases) from its 2005 and 2006 crushes.  The Winery is 12,784
square feet in size and contains areas for processing, fermenting, aging and
bottling wine, as well as an underground wine cellar, a tasting room, a retail
sales room and administrative offices.  There is a 12,500 square foot outside
production area for crushing, pressing and fermenting wine grapes, and a 4,000
square foot insulated storage facility with a capacity of 30,000 cases of wine.
The Company also has a 20,000 square foot storage building to store its
inventory of bottled product.  The production area is equipped with a settling
tank and sprinkler system for disposing of wastewater from the production
process in compliance with environmental regulations.

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 adds 20,000 cases of wine production
capacity to the Company, which the Company felt at the time of purchase was
needed.  To date, production and sales volumes have not expanded enough to
necessitate the utilization of the Tualatin facilities.  The Company decided
to move current production to its Turner site to meet short-term production
requirements.  The capacity at Tualatin is available to the Company to meet
any anticipated future production needs.

Hospitality Facility.  The Company has 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 enable visitors to enjoy the view of the Willamette Valley
and the Company's Vineyard.  The Hospitality Center is 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 1,600
barrels of wine for aging.

Just outside the Hospitality Center, the Company has 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, a
removable fabric top can cover the quadrangle, 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 Hospitality Center and the park and quadrangle 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 in Turner are subject
to one mortgage with a principal balance of $1,489,008 at December 31, 2006.
The mortgage is payable in monthly aggregate installments, including principal
and interest, of approximately $362,000 annually through 2012.

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 current technical
innovations and uses modern laboratory equipment and computers to monitor the
progress of each wine through all stages of the winemaking process.

The Company's recent annual grape harvest and wine production is as follows:

             Tons of
             Grapes      Production               Cases
Crush Year   Crushed        Year                 Produced

2002         1091           2002                 110,063
2003          917           2003                  92,208
2004          994           2004                  73,212
2005         1132           2005                  72,297
2006         1488           2006                  81,081


Sales and Distribution

Marketing Strategy.  The Company markets and sells 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 selling in specific targeted areas outside of the state of
Oregon.  As the Company has increased production volumes and achieved greater
brand recognition, sales to other domestic 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 four 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 and political and other events are also held at the Winery.

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.  For 2006, direct
sales contributed approximately 14% of the Company's revenue.

Self-Distribution.  The Company has established a self-distribution wholesale
system, called Bacchus Fine Wines, to sell its wines to restaurant and retail
accounts located in Oregon.  Eighteen sales representatives, who take wine
orders and make some deliveries primarily on a commission-only basis,
currently carry out the self-distribution program.  Company-provided trucks
and delivery drivers support most of these sales representatives.  The Company
believes this program of self-representation and delivery has allowed its wines
to gain a strong presence in the Oregon market with over 1,200 restaurant and
retail accounts established as of December 31, 2006.

The Company has expended significant resources to establish its self-
distribution system.  The system initially focused on distribution in the
Willamette Valley, but has expanded to the Oregon coast and southern Oregon.
For 2006, approximately 49% of the Company's net revenues 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 knowledge of and a proven ability to market
premium, super premium, and ultra premium wines are utilized.  Outside of
Oregon, the Company's products are distributed in 37 states and the District
of Columbia.

On March 8, 2006 the Company terminated an incentive distribution agreement
with a national wine distributor group (the "distributor") with fourteen
affiliated distributors.  Under the agreement, the Company had agreed to pay
the distributor incentive compensation if certain sales goals were met over a
five year period.  The Company terminated the agreement because the
distributors did not reach these goals in every year since the agreement's
inception.  Following the termination, the Company has continued to do business
with the distributors on terms and conditions generally available to all of the
Company's distributors.

Tourists.  Oregon wineries are experiencing an increase in on-site visits by
consumers.  In California, visiting wineries is a very popular leisure time
activity.  Wineries in Washington are also experiencing strong interest from
tourists.  Chateau Ste. Michelle, located near Woodinville, Washington, for
example attracts approximately 200,000 visitors per year.

The Company believes its convenient location, adjacent to Interstate 5, enables
the Winery to attract a significant number of visitors.  The Winery is located
less than one mile from The Enchanted Forest, which operates from March 15 to
September 30 each year and attracts approximately 130,000 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 recreational vehicle sites.  Many of the visitors to the Enchanted
Forest and RV Park visit the Winery.

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 that 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, price, label recognition, and product supply.  The Company believes
it competes favorably with respect to each of these factors.  The Company has
received "Excellent" to "Recommended" reviews in tastings of its wines and
believes its prices are competitive with other Oregon wineries.  Larger scale
production is necessary to satisfy retailers' and restaurants' demand and the
Company believes that additional production capacity is needed to meet
estimated future 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 U.S.
Department of the Treasury, Alcohol and Tobacco Tax and Trade Bureau 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 150,000 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 are 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 wastewater, by the Oregon Department of Environmental 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.


Employees

As of December 31, 2006 the Company had 96 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 it maintains positive
relations with its employees.

Additional Information

The Company files quarterly and annual reports with the Securities and Exchange
Commission. The public may read and copy any material that the Company files
with the SEC at the SEC's Public Reference Room at 450 Fifth Street, N.W.,
Washington D.C. 20549. The public may also obtain information on the operation
of the Public Reference Room by calling the SEC at 1-800-SEC-0330. As the
Company is an electronic filer, filings may be obtained via the SEC website
at (www.sec.gov.). Also visit the Company's website (www.wvv.com) for links to
stock position and pricing.


ITEM 2.     DESCRIPTION OF PROPERTY.

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

The Company carries Property and Liability insurance coverage in amounts deemed
adequate by Management.


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.

There were no matters submitted to a vote of security holders during the
Company's Fourth Quarter ended December 31, 2006.

ITEM 5.     MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.

The Company's Common Stock is traded on the Capital Market (formerly known as
the NASDAQ Small Cap Market) under the symbol "WVVI."  As of December 31,
2006, there were 2,852 stockholders of record of the Common Stock.

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

Quarter Ended

           3/31/06        6/30/06       9/30/06        12/31/06
High        $7.56          $9.17         $8.83           $7.45
Low         $4.97          $5.90         $5.71           $5.71

Quarter Ended

           3/31/05        6/30/05       9/30/05        12/31/05
High        $3.45          $4.53         $5.46           $8.92
Low         $2.74          $3.11         $3.49           $4.44

The Company has not paid any dividends on the Common Stock, and the Company
does not anticipate paying any dividends in the foreseeable future. The Company
intends to use its earnings to grow the distribution of its brands, improve
quality and reduce debt.

Equity Compensation Plan Information
                                                                Number of
                                                                securities
                      Number of                            remaining available
                  Securities to be                         for future issuance
                    issued upon        Weighted-average       under equity
                    exercise of       exercise price of       compensation
                    outstanding          outstanding        plans (excluding
                 options, warrants    options, warrants   securities reflected
                     and rights           and rights         in common (a))
Plan Category           (a)                  (b)                  (c)

Equity compensation
plans approved by     495,000               $3.94               104,476
security holders

Equity compensation
plans not approved         -                $  -                     -
by security holders

Total                 495,000               $3.94               104,476

The Company does not have compensations plans under which equity securities of
the Company are authorized for issuance which were adopted without the
approval of security holders.


ITEM 6.     MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.

Forward Looking Statement

This Management's Discussion and Analysis of Financial Condition and Results
of Operation and other sections of this Form 10KSB contain forward-looking
statements within the meaning of the Private Securities Litigation Reform Act
of 1995.  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.  Such
forward-looking statements include, for example, statements regarding general
market trends, predictions regarding growth and other future trends in the
Oregon wine industry, expected availability of adequate grape supplies,
expected positive impact of the Company's Hospitality Center on direct sales
effort, expected increases in future sales.  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.  Actual outcomes and results may differ
materially from what is expressed or forecasted in such forward-looking
statements due to numerous factors, including, but not limited to:
availability of financing for growth, availability of adequate supply of high
quality grapes, successful performance of internal operations, impact of
competition, changes in wine broker or distributor relations or performance,
impact of possible adverse weather conditions, impact of reduction in grape
quality or supply due to disease, impact of governmental regulatory decisions,
and other risks detailed below as well as those discussed elsewhere in this
Form 10KSB and from time to time in the Company's Securities and Exchange
Commission filing and reports.  In addition, such statements could be affected
by general industry and market conditions and growth rates, and general
domestic economic conditions.


CRITICAL ACCOUNTING POLICIES AND ESTIMATES

Management's Discussion and Analysis of Financial Condition and Results of
Operations discusses Willamette Valley Vineyards' financial statements, which
have been prepared in accordance with generally accepted accounting principles.
As such, management is required to make certain estimates, judgments and
assumptions that are believed to be reasonable based upon the information
available. On an on-going basis, management evaluates its estimates and
judgments, including those related to product returns, bad debts, inventories,
investments, income taxes, financing operations, and contingencies and
litigation. Management bases its estimates and judgments on historical
experience and on various other factors that are believed to be reasonable
under the circumstances, the results of which form the basis for making
judgments about the carrying values of assets and liabilities that are not
readily apparent from other sources. Actual results may differ from these
estimates under different assumptions or conditions.

The Company's principal sources of revenue are derived from sales and
distribution of wine.  Revenue is recognized from wine sales at the time of
shipment and passage of title.  Our payment arrangements with customers
provide primarily 30 day terms and, to a limited extent, 45 or 60 day terms.

The Company values inventories at the lower of actual cost to produce the
inventory or market value.  We regularly review inventory quantities on hand
and adjust our production requirements for the next twelve months based on
estimated forecasts of product demand.  A significant decrease in demand could
result in an increase in the amount of excess inventory quantities on hand.
In the future, if our inventory cost is determined to be greater than the net
realizable value of the inventory upon sale, we would be required to recognize
such excess costs in our cost of goods sold at the time of such determination.
Therefore, although we make every effort to ensure the accuracy of our
forecasts of future product demand, any significant unanticipated changes in
demand could have a significant impact on the ultimate selling price and,
therefore, the carrying value of our inventory and our reported operating
results.

We capitalize internal vineyard development costs prior to the vineyard land
becoming fully productive.  These costs consist primarily of the costs of the
vines and expenditures related to labor and materials to prepare the land and
construct vine trellises.  Amortization of such costs as annual crop costs is
done on a straight-line basis for the estimated economic useful life of the
vineyard, which is estimated to be 30 years.  The Company regularly evaluates
the recoverability of capitalized costs.  Amortization of vineyard development
costs are included in capitalized crop costs that, in turn are included in
inventory costs and ultimately become a component of cost of goods sold.

The Company pays depletion allowances to the Company's distributors based on
their sales to their customers.  The Company sets these allowances on a monthly
basis and the Company's distributors bill them back on a monthly basis.  All
depletion expenses associated with a given month are expensed in that month as
a reduction of revenues. The Company also pays a sample allowance to some of
the Company's distributors in the form of a 1.5% discount applied to invoices
for product sold to the Company's distributors.  The expenses for samples are
expensed at the time of sale in the selling, general and administrative
expense.  The Company's distributors use the allowance to sample product to
prospective customers.

Amounts paid by customers to the Company for shipping and handling expenses are
included in the net revenue.  Expenses incurred for shipping and handling
charges are included in selling, general and administrative expense.  The
Company's gross margins may not be comparable to other companies in the same
industry as other companies may include shipping and handling expenses as a
cost of goods sold.  Shipping and handling costs are included in general and
administrative expenses.


OVERVIEW

RESULTS OF OPERATIONS

The Company produced its highest annual earnings to date despite significant
constraints on inventory.  Revenues increased by 9% to $14,916,072, net
earnings by 12% to $1,291,774, and diluted earnings per share to 26 cents from
25 cents, compared to the prior year.

These historical results were due principally to production, out-of-state
sales and marketing staffs working closely together to organize preorders and
ship when the wine was ready to release.  The winery continued to receive
distributor orders in excess of its supply of Pinot Noir and Pinot Gris.  In
addition, the gross margins received from the sales of the winery's produced
wines rose to 58% in 2006 compared to 56% for 2005.

Out-of-state distributor sales revenue increased 15% for the year ended
December 31, 2006 as compared to the prior period and generated the lion's
share of the increase in net profit. Retail sales increased 7% and generated
positive contribution to net income growth.  The Oregon Wholesale Department
called Bacchus Fine Wines produced an increase of 18% in the sales of purchased
wine from other wineries but a reduction in sales in winery produced products.
As a result, this Department's contribution to net earnings as compared to the
prior year was lower.  The Board of Directors and Management are taking steps
to improve Oregon wholesale operations by purchasing a state-of-the-art sales
tracking system, strengthening Oregon marketing support and adding a new Oregon
Brand Manager to be focused exclusively on winery produced wines all to be in
place by mid-year 2007.

The Company used $509,190 of the cash generated from net earnings and reduction
in wine inventories to payoff the mortgage on the Tualatin Estates vineyard
and winery.  The winery had a zero credit line balance at December 31, 2006.

Sales

In the year ended December 31, 2006, the Company sold approximately 1,400
cases of Estate Pinot Noir, 28,300 cases of Willamette Valley Pinot Noir
(vintage level), 2,100 cases of Barrel Select Pinot Noir, 12,200 cases of
Whole Cluster Pinot Noir, 16,600 cases of Pinot Gris and 13,800 cases of
Riesling.

The Company has or plans to bottle 2,500 cases of '06 Estate Pinot Noir,
25,000 cases of '06 Willamette Valley Pinot Noir (vintage level), 4,800 cases
of '04 Barrel Select Pinot Noir, 16,500 '06 cases of Whole Cluster Pinot Noir,
21,000 cases of '06 Pinot Gris and 20,000 cases of '06 Riesling in December of
2006 and in 2007.  In December 2006, 2,592 cases of the '06 Whole Cluster
Pinot Noir and 258 cases of the '06 Pinot Gris were sold.

The Company sold a total of 100,280 cases of its own wine in 2006, of which
74,400 were the above listed varieties.  The 2006 harvest produced 1,495 tons
of wine grapes.  Fortunately, the 2006 harvest yielded higher quality and
volumes, approximately 20% more than expected.  The expected '06 vintage yield
is expected to produce approximately 109,667 cases, including a few selected
bulk wine purchases.

Wine Inventory

Management has taken steps to address inventory shortages relative to orders
by increasing production through additional plantings in 2006 of 5 acres,
contracting for an additional 170 new acres of wine grapes on a long-term
basis, and in 2007, providing a loan to a key grower for vineyard establishment
costs and leasing the 60 acre Elton Vineyard in the Eola Hills.  Elton Vineyard
is regarded as one of Oregon's best sources of Pinot Noir wine grapes.  This
lease is for a 10 year term with four 5 year renewals at the Company's option
and a first right of refusal in the event of the vineyard's sale.  Betty M.
O'Brien, a Director of the Company, is a principal owner of Elton Vineyards.

These actions bring to a total of 538 acres of vineyard owned, leased or
contracted by the Company, with 282 of those acres recently planted and not
productive.  The total acres of Pinot Noir are 235, of which 105 are young,
non-productive vines; Pinot Gris 122 and 105; Riesling 95 and 70 respectively.

Management expects to plant an additional 7 acres of Pinot Noir in 2007.  The
Company continues to allocate its Pinot Noir and Pinot Gris to distributors to
fairly apportion available supplies.  Management expects the shortage of these
products to limit the potential for growth until such time as current plantings
mature.

Production Capacity

In addition to securing additional wine grape supplies, Management is expecting
to purchase capital assets at a significantly higher level in 2007 than in
past years.  Purchases will be made to address future production requirements
based on the expected increases in wine grape quantities.   Management is
planning for increasing production capacity with the expectation additional
construction and equipment expenses will be made through 2009.  The Company is
required to install additional water storage capacity on the Turner property
and fire sprinklers in its 20,000 square foot wine warehouse, which will also
require significant capital investment in 2007.

Wine Quality

Continued awareness of the Willamette Valley Vineyards brand, the Company and
the quality of its wines, was enhanced by national and regional media coverage
throughout 2006.

The Willamette Valley Vineyards Pinot Noir was named among the most popular
Pinot Noirs in Wine & Spirits magazine 17th annual restaurant poll in April
and nationally acclaimed wine author and teacher, Kevin Zraly, recommended the
winery's Pinot Noir in his new book "American Wine Guide" as one of his top
picks.  The 2004 Pinot Noir received 88 points in Stephen Tanzer's
International Wine Cellar.  In June, this wine was recommended in the Chicago
Tribune article "Mixed case of wine can give newlyweds years of memories" by
writer Bill Daley.  In addition, it was featured in the December issue of
Instyle magazine as one of Jaime Pressley's (star of My Name Is Earl) "Guilty
Pleasures".

The '04 Estate Pinot Noir was listed as one of the "Top Oregon Pinots" in the
2006 summer edition of Luxury Living Magazine and received 90 points from
nationally known wine writer Anthony Dias Blue in the March 2007 issue of
Virtuoso Life magazine.  Scott Greenberg of the DC Examiner also recommended
the wine as did Food and Wine Magazine in their 2007 Food and Wine Guide
rating it as "excellent".

The April 2007 issue of Wine Enthusiast magazine recommends the '05 Pinot Noir
88 points and '05 Estate Pinot Noir 89 points.  In her newest book "The Simple
and Savvy Wine Guide" wine expert, Leslie Sbrocco, recommends the winery's
Whole Cluster Pinot Noir as a great wine for Thanksgiving and the 2005 Whole
Cluster Pinot Noir is recommended in the December '06 issue of "Everyday with
Rachael Ray" by acclaimed author Mark Oldman.

The winery's style of Pinot Gris continues to receive rave reviews.  The 2005
Pinot Gris won the Pacific Coast Oyster Wine competition, 5 gold medals and a
platinum award from other key national competitions.  The October '06 issue of
Wine Spectator named it as one of world's top "100 Great Value Wines" and Wine
& Spirits magazine gave it a score of 91 pts in its August '06 issue.  Wine
writer Paul Lukacs named it "wine of the week" in his August 16th Washington
Times column and "the best white" of the Seattle Enological Society Wine
Competition.  The Oregonian called attention to the wine's success with a
photograph of the wine bottle draped in medals on its front page under the
newspaper's banner on March 7, 2007.

The winery's 2006 national wine dinner campaign with McCormick & Schmick's
restaurants was highly successful resulting in many local stories including a
podcast with Tim Elliott of winecast.net and a radio show with Laurie Forster,
"The Wine Coach."   The 2nd annual "Why I Love Oregon Pinot Noir" essay
contest ran in conjunction with these dinners and received 643 written entries.
Together, these campaigns identified a large number of passionate Pinot Noir
enthusiasts.

The winery continues to receive attention from their appearance on Food
Network's "$40 a Day" with Rachael Ray.  The episode featuring the winery
aired throughout 2006 and continues in 2007.  PBS Chef's Caprial and John
matched Willamette Valley Vineyards wines with food on their shows including
in the episode "Lessons from the Wine Cave" taped in the winery's cellar.

The winery's founder and CEO, Jim Bernau presented Oregon Pinot Noirs to the
Smithsonian Institution's wine program in Washington DC.

The winery's sustainable initiatives have garnered much media attention
throughout 2006.  In the December/January 2006 issue of Wine Spectator the
winery's biofuel policy was featured in the article "Want Fries with that
Pinot?" and on February 12th, the Associated Press carried a story that
highlighted the winery's biofuel use.   In September, the winery was featured
on the front page of the Oregonian's business section in the article "Perks
take Greener Shade."  A similar story appeared in the Portland Tribune,
Capital Press and Wines & Vines magazine.   Sierra magazine highlighted WVV's
biofuel policy in their Sept/Oct issue in the section called "Grape Vine."

The company business successes were highlighted by The Oregonian as one of
Oregon's top 50 public companies on the front page of the Oregonian's Business
section July 2nd and featured the Company's stock as the state's highest
performing for the first six months of 2006. The company was also listed as
one of Forbes' magazines "Top 200 Small Businesses in America" in their
November issue. The winery received the "Agri-Business of the Year Award" for
2006 from the Salem Chamber of Commerce and was also voted as the best place
to hold a wedding in Oregon Bride Magazine.

In 2006, Gerry Frank presented CEO Jim Bernau with the Crystal Stem Award at
the Private Bite of Oregon Ceremony for Special Olympics citing the winery's
excellence in wine and public service.  Mr. Bernau was selected as a finalist
for Ernst and Young's "Entrepreneur of the Year" awards program in 2006.

The winery received much attention from local news stations throughout the
year.  In May, both KATU and KGW news teams ran stories on WVV's first
quarter report.    The annual Oregon Grape Stomp Competition was featured on
KATU news and KGW and the 2007 Mo's Crab and Chowder festival was featured on
KGW.com with Drew Carney.

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 during its first quarter and expects the first quarter
to be the weakest of the year, including the first quarter of 2007.  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, excluding excise taxes, from Winery operations for each of the last
eight fiscal quarters:

              Fiscal 2006 Quarter Ended  Fiscal 2005 Quarter Ended
                     (in thousands)          (in thousands)
                  3/31   6/30   9/30   12/31   3/31   6/30   9/30   12/31
Tasting room and
retail sales    $  379 $  429 $  560  $  607 $  334 $  460 $  514  $  535
On-site and off-site
festivals           36     14     38      17     46      2     18       8
In-state sales   1,548  1,719  1,835   2,367  1,237  1,789  1,751   2,298
Bulk/Grape sales     9      9     15       8     90     12      9      10
Out-of-state
sales            1,824  1,352    942   1,569    722  1,311  1,458   1,446
Total winery
revenues        $3,796 $3,523 $3,390  $4,568 $2,429 $3,574 $3,750  $4,297


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)
                                     2006         2005

Tasting room and retail sales     $ 1,975      $ 1,843
On-site and off-site festivals        105           74
In-state sales                      7,469        7,075
Bulk /Grape Sales                      41          121
Out-of-state sales                  5,687        4,937
Revenues from winery operations   $15,277      $14,050

Less Excise Taxes                     361          382

Net  Revenue                      $14,916      $13,668


2006 Compared to 2005

Tasting room and retail sales for the year ended December 31, 2006 increased
$132,498, or 7%, as compared to the corresponding prior year period.  Tasting
room sales increased during the year ended December 31, 2006, due primarily to
increased customer traffic flows at the Company's winery tasting room, and a
12% increase in purchases in the tasting room.  The focus on customers for
life through telephone, mail order and retail sales will continue with the
goal of expanding the customer base and continuing the trend of increasing
revenue generation by the retail department.  The Company experienced an
increase in revenue during 2006 in on-site and off-site festivals revenue of
42%, or $30,902 as compared to the same period in 2005.  This increase is due
primarily to the improved attendance of on-site and off-site events.

Sales in the state of Oregon, through the Company's independent sales force and
through direct sales from the winery increased $393,386, or 6%, in the year
ended December 31, 2006, as compared to the corresponding prior year period.
Sales through the Company's independent sales force alone for the year ended
December 31, 2006 increased $379,511, or 6%, as compared to the prior year
period.  The Company's direct instate sales to its largest customer increased
$13,875, or 1%, in the year ended December 31, 2006, as compared to the prior
year period.  These increases are largely the result of the broader product
lines presented and increased product placements through the development of
Bacchus Fine Wines.

Out-of-state sales in the year ended December 31, 2006 increased $750,316, or
15%, as compared to the prior year period.  The higher sales are primarily a
result of strong demand for the Company's varietals, significant sales efforts
undertaken by the Company's out-of-state sales force and depletion allowances
on particular products, resulting in significant by-the-glass restaurant
placements.  The Pinot Noir variety led sales in 2006.

The Company pays alcohol excise taxes to both the Oregon Liquor Control
Commission and to the U.S. Department of the Treasury, Alcohol and Tobacco Tax
and Trade Bureau.  These taxes are based on product sales volumes.  The Company
is liable for the taxes upon the removal of product from the Company's
warehouse on a per gallon basis.  The Company also pays taxes on the grape
harvest on a per ton basis to the Oregon Liquor Control Commission for the
Oregon Wine Board.  The Company's excise taxes for the year ended December 31,
2006 decreased 6% as compared to the prior year period.  This was due primarily
to the decreased sales, by volume, in the year ended December 31, 2006 as
compared to the prior year period, thereby decreasing overall sales volumes
and taxes calculated based on volume.  Sales data in the discussion above is
quoted before the exclusion of excise taxes.

As a percentage of net revenue, gross profit remained 47% in the year ended
December 31, 2006, the same as in the prior year period.  While the Company is
continuing its focus on improved distribution of higher margin products as
well as continuing to reduce grape and production costs, we anticipate that
our increased representation of brands other than our own through our Oregon
sales force will further erode the gross margins due to the lower margins
associated with selling those brands.  While the gross margin may erode due to
such representation, the Company does not anticipate that net income will
follow that trend.

Amortization of vineyard development costs is included in capitalized crop
costs that, in turn, are included in inventory costs and ultimately become a
component of cost of goods sold.  For the years ending December 31, 2006 and
2005, approximately $83,000 and $79,000, respectively, were amortized into
inventory costs.

Selling, general and administrative expenses for the year ended December 31,
2006 increased 7% compared to the prior year period.  This increase is due
primarily to increased staffing and employee benefit expenses.  As a percentage
of net revenue from winery operations, however, selling, general and
administrative expenses decreased to 31% for the year ended December 31, 2006,
as compared to 32% for the prior year period, primarily as a result of
increased revenues.

The Company's other income (expense) is summarized as follows:

                                                Year Ended December 31
                                                 2006          2005
                                              __________    __________

Farm Credit interest
 rebate                                           16,895        17,336
                                              __________    __________
Other income
 (expense)                                   $    16,895   $    17,336


Interest expense decreased 27% or $64,093 in the year ended December 31, 2006
as compared to the prior year period.  Interest costs were lower primarily
due to less debt outstanding during the period.

The provision for income taxes and the Company's effective tax rate were
$889,621 and 41% of pre-tax income in the year ended December 31, 2006 with
$628,261 or 35% of pre-tax income recorded for the prior year period.

As a result of the above factors, net income increased to $1,291,774 in the
year ended December 31, 2006 from $1,156,939 for the prior year period.
Earnings per share were $0.27 and $0.26, in the years ended December 31, 2006
and 2005, respectively.


Liquidity and Capital Resources

At December 31, 2006, the Company had a working capital balance of $7.8 million
and a current ratio of 4.28:1.  At December 31, 2005, the Company had a working
capital balance of $6.8 million and a current ratio of 4.00:1.  The Company had
a cash balance of $1,612,470 at December 31, 2006 compared to a cash balance of
$415,591 at December 31, 2005.  The increase in cash was primarily due to the
decreased use of cash for debt reduction.

Total cash provided by operating activities in the year ended December 31, 2006
was $2,192,986, compared to $2,570,841 for the prior year period, primarily
as a result of the change in the conversion of inventory to cash through sales
in the year ended December 31, 2006 compared to the prior year period.

Total cash used in investing activities in the year ended December 31, 2006 was
$495,145, compared to $371,073 in the prior year period.  Cash used in
investing activities consisted of property and equipment additions and vineyard
development costs.

Total cash used in financing activities in the year ended December 31, 2006 was
$500,962, compared to $2,635,669 in the prior year period.  Cash used in
financing activities primarily consisted of payments on the long-term debt,
offset by the proceeds of stock option exercises.

At December 31, 2006, the line of credit balance was $0, on a maximum borrowing
amount of $2,000,000.  The Company has a loan agreement with Umpqua Bank that
contains, among other things, certain restrictive financial covenants with
respect to total equity, debt-to-equity and debt coverage, that must be
maintained by the Company on a quarterly basis.  As of December 31, 2006, the
Company was in compliance with all of the financial covenants.

As of December 31, 2006, the Company had a total long-term debt balance of
$1,489,008 owed to Farm Credit Services. The debt with Farm Credit Services was
used to finance the Hospitality Center, invest in winery equipment to increase
the Company's winemaking capacity, and complete the storage facility.

The Company believes that cash flow from operations and funds available under
its existing credit facilities will be sufficient to meet the Company's
foreseeable short and long-term needs.

The Company's contractual obligations as of December 31, 2006 including long-
term debt, grape payables and commitments for future payments under non-
cancelable lease arrangements are summarized below:

                                     Payments Due by Period
                   __________________________________________________________
                      Total    Less than   1-3 years   4-5 years     After 5
                                 1 year                               years
                   __________  __________  __________  __________  __________

Long-term debt and
 capital lease
 obligations      $ 1,489,008 $   251,437 $   565,929 $   661,817 $     9,825
Grape Payables        481,590     445,706      35,884           -           -
Operating Leases    2,526,412     158,083     360,547     375,203   1,632,579
                   __________  __________  __________  __________  __________
Total Contractual
 Obligations      $ 4,497,010 $   855,226 $   962,360 $ 1,037,020 $ 1,642,404
                   ==========  ==========  ==========  ==========  ==========


Risk Factors

The following disclosures should be read in conjunction with Management's
Discussion and Analysis of Financial Condition and Results of Operations.
These disclosures are intended to discuss certain material risks of the
Company's business as they appear to Management at this time.  However, this
list is not exhaustive.  Other risks may, and likely will, arise from time to
time.

Agricultural Risks Could Adversely Affect Our Business

Winemaking and grape growing are subject to a variety of agricultural risks.
Various diseases, pests, fungi, viruses, drought, frost and certain other
weather conditions can affect the quantity of grapes available to the Company,
decreasing the supply of the Company's products and negatively impacting
profitability.  In particular, certain of the Company's vines are not
resistant to phylloxera; accordingly, those vines are particularly at risk to
the effects from an infestation of phylloxera.

We May Not Be Able to Grow or Acquire Enough Quality Fruit for Our Wines

The adequacy of our grape supply is influenced by consumer demand for wine in
relation to industry-wide production levels.  While we believe that we can
secure sufficient supplies of grapes from a combination of our own production
and from grape supply contracts with independent growers, we cannot be certain
that grape supply shortages will not occur.  A shortage in the supply of wine
grapes could result in an increase in the price of some or all grape varieties
and a corresponding increase in our wine production costs.

Loss of Key Employees Could Harm Our Reputation and Business

Our success depends to some degree upon the continued service of a number of
key employees.  The loss of the services of one or more of our key employees,
including the President, Winemaker, Controller and the Bacchus General Manager,
could harm our business and our reputation and negatively impact our
profitability.

Adverse Public Opinion Regarding Our Bacchus Portfolio May Harm Our Business

The Company has invested heavily in products for resale through our Bacchus
Fine Wines department.  The Company believes that having these products for
sale will make it easier to sell additional Company product to the same buyers.
If this strategy proves to be unsuccessful, the Company will have substantial
inventory of non-Company products to sell at prices that may not cover our
costs of such inventory and may result in our selling less Company product than
anticipated.  Either or both effects could adversely affect our profitability
and shareholder value.

The Company's Ability to Operate Requires Utilization of the Line of Credit

The Company's cash flow from operations historically has not been sufficient to
provide all funds necessary for the Company's Operations. The Company has
entered into a line of credit agreement to provide such funds and entered into
a term loan arrangement, the proceeds of which were used to acquire the
Tualatin operations and to construct the Hospitality Center.  There is no
assurance that the Company will be able to comply with all conditions under
its credit facilities in the future or that the amount available under the
line of credit facility will be adequate for the Company's future needs.
Failure to comply with all conditions of the credit facilities or to have
sufficient funds for operations could adversely affect the Company's results
of operations and shareholder value.

Costs of being a publicly-held company may put us at a competitive disadvantage

As a public company, we incur substantial costs that are not incurred by our
competitors that are privately-held.   These compliance costs may result in
our wines being more expensive than those produced by our competitors and/or
may reduce our profitability compared to such competitors.



ITEM 7.     FINANCIAL STATEMENTS.

Willamette Valley Vineyards, Inc.
Index to Financial Statements

Reports of Independent Registered Public Accounting Firms............. 21

Financial Statements

Balance Sheet ........................................................ 22

Statements of Operations ............................................. 23

Statements of Shareholders' Equity.................................... 24

Statements of Cash Flows.............................................. 25

Notes to Financial Statements ........................................ 26



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

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


We have audited the accompanying balance sheet of Willamette Valley Vineyards,
Inc., as of December 31, 2006, and the related statements of operations,
shareholders' equity, and cash flows for the two years then ended. 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 in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we
plan and perform the audits to obtain reasonable assurance about whether the
financial statements are free of material misstatement. The Company is not
required to have, nor were we engaged to perform, an audit of its internal
control over financial reporting. Our audit included consideration of internal
control over financial reporting as a basis for designing audit procedures
that are appropriate in the circumstances, but not for the purpose of
expressing an opinion on the effectiveness of the Company's internal control
over financial reporting. Accordingly, we express no such opinion. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe
our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Willamette Valley Vineyards,
Inc., as of December 31, 2006, and the results of its operations and cash
flows for the two years then ended, in conformity with accounting principles
generally accepted in the United States of America.

As described in Note 8 to the financial statements, effective January 1, 2006,
the Company changed the manner in which it accounts for share-based
compensation.

/s/ Moss Adams LLP

Santa Rosa, California
April 2, 2007





                       Willamette Valley Vineyards, Inc.
                                 Balance Sheet
                                              December 31,
                                                  2006
         ASSETS
Current assets:
  Cash and cash equivalents                  $  1,612,470
  Accounts receivable, net (Note 2)             1,609,697
  Inventories (Note 3)                          6,751,927
  Prepaid expenses and other current assets       107,743
  Deferred income taxes (Note 9)                  107,000
                                               -----------
    Total current assets                       10,188,837

Vineyard development costs, net                 1,538,002
Property and equipment, net (Note 4)            3,985,680
Debt issuance costs                                28,258
Other assets                                       57,667
                                               -----------
                                             $ 15,798,444
                                               ___________

     LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
  Line of credit (Note 5)                    $         -
  Current portion of long-term debt (Note 6)      251,437
  Accounts payable                                945,741
  Accrued expenses                                392,952
  Income taxes payable                            305,608
  Grape payables                                  481,590
                                               -----------
    Total current liabilities                   2,377,328

Long-term debt (Note 6)                         1,237,571
Deferred rent liability                           190,951
Deferred gain (Note 11)                           410,119
Deferred income taxes (Note 9)                    242,000
                                               -----------
Total liabilities                               4,457,969
                                               -----------
Commitments and contingencies (Note 11)

Shareholders' equity (Notes 7 and 8):
  Common stock, no par value - 10,000,000
    shares authorized, 4,793,027 issued and
    outstanding at December 31, 2006            7,935,829
  Retained earnings                             3,404,646
                                               -----------
Total shareholders' equity                     11,340,475
                                               -----------
                                             $ 15,798,444
                                               ___________

    The accompanying notes are an integral part of the financial statements.
Willamette Valley Vineyards, Inc.
Statements of Operations
For the Years Ended December 31, 2006 and 2005
                                            2006         2005

Net revenues                            $14,916,072  $13,667,869
Cost of goods sold                        7,963,437    7,282,112
                                        ------------ ------------
    Gross margin                          6,952,635    6,385,757

Selling, general and
  administrative expenses                 4,678,228    4,385,354
                                        ------------ ------------
    Income from operations                2,274,407    2,000,403
                                        ------------ ------------
Other income (expenses):
  Interest income                            59,736        1,197
  Interest expense                         (169,643)    (233,736)
  Other income                               16,895       17,336
                                        ------------ ------------
                                            (93,012)    (215,203)
                                        ------------ ------------

    Income before income taxes            2,181,395    1,785,200

Income tax provision (Note 9)               889,621      628,261
                                        ------------ ------------

Net income                              $ 1,291,774  $ 1,156,939
                                        ____________ ____________

Basic net income
  per common share                      $      0.27  $      0.26
                                        ____________ ____________
Diluted net income
  per common share                      $      0.26  $      0.25
                                        ____________ ____________

    The accompanying notes are an integral part of the financial statements.


Willamette Valley Vineyards, Inc.
Statements of Shareholders' Equity
For the Years Ended December 31, 2006 and 2005

                              Common stock               Retained
                                 Shares       Dollars    earnings     Total
                              ----------- ------------ ----------- -----------

Balances at December 31, 2004  4,486,278  $ 7,182,329  $  955,933  $ 8,138,262

Stock issuance for compensation    2,725        9,610          -         9,610

Common stock issued and
  options exercised              171,199      421,283          -       421,283

Net income                            -            -    1,156,939    1,156,939
                              ----------- ------------ ----------- -----------
Balances at December 31, 2005  4,660,202  $ 7,613,222  $2,112,872  $ 9,726,094

Stock based compensation expense   3,325       42,712          -        42,712

Common stock issued and
  Options and warrants exercised 129,500      279,895          -       279,895

Net income                            -            -    1,291,774    1,291,774
                              ----------- ------------ ----------- -----------

Balances at December 31, 2006  4,793,027  $ 7,935,829  $3,404,646  $11,340,475
                              ___________ ____________ ___________ ___________

    The accompanying notes are an integral part of the financial statements.



Willamette Valley Vineyards, Inc.
Statements of Cash Flows
For the Years Ended December 31, 2006 and 2005
                                            2006         2005
Cash flows from operating activities:
  Net income                             $1,291,774   $1,156,939
  Reconciliation of net income
    to net cash (used for) provided by
    operating activities:
      Depreciation and amortization         541,848      556,487
      Stock based compensation expense       42,712        9,610
      Deferred income taxes                  78,000      (46,574)
      Bad debt expense                        5,562       16,066
      Changes in assets and liabilities:
        Accounts receivable                 (47,004)    (675,811)
        Inventories                         199,066    1,448,344
        Prepaid expenses and
          other current assets              (85,182)      30,498
        Note receivable                           -        5,000
        Other assets                         22,404        2,244
        Accounts payable                    134,600      300,338
        Accrued expenses                     44,783     (178,691)
        Income taxes receivable/payable     (39,379)      66,017
        Grape payables                        9,717     (120,517)
        Deferred rent liability              26,180       32,986
        Deferred gain                       (32,095)     (32,095)
                                        ------------ ------------
    Net cash provided by
      operating activities                2,192,986    2,570,841
                                        ------------ ------------
Cash flows from investing activities:
  Additions to property and equipment      (400,537)    (248,030)
  Vineyard development expenditures         (94,608)    (123,043)
                                        ------------ ------------
    Net cash provided by (used for)
      investing activities                 (495,145)    (371,073)
                                        ------------ ------------
Cash flows from financing activities:
  Debt issuance costs                             -       (4,622)
  Net increase (decrease) in line of
    credit balance                                -   (1,232,251)
  Proceeds from and stock
    options exercised                       279,895      421,283
  Repayments of distributor obligation            -   (1,500,000)
  Issuance of long-term debt                      -    1,500,000
  Repayments of long-term debt             (780,857)  (1,820,079)
                                        ------------ ------------
    Net cash used for
      financing activities                 (500,962)  (2,635,669)
                                        ------------ ------------
Net (decrease) increase in cash
  and cash equivalents                    1,196,879     (435,901)

Cash and cash equivalents:
  Beginning of year                         415,591      851,492
                                        ------------ ------------
  End of year                           $ 1,612,470  $   415,591
                                        ____________ ____________

    The accompanying notes are an integral part of the financial statements.

Willamette Valley Vineyards, Inc.
Notes to Financial Statements

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, super premium, and ultra premium wines, primarily Pinot Noir, Pinot
Gris, Chardonnay, and Riesling.  In 2006 and 2005 no one customer represented
more than 10% of revenues.  Sales in Oregon through the Company's independent
sales force and through direct sales from the winery represented approximately
49% and 50% respectively, of revenues for 2006 and 2005.  Out-of-state sales
represented approximately 37% and 35% respectively, of revenues for 2006 and
2005.  Foreign sales represent less than 1% of total sales.  The Company also
sells its wine through the tasting room at its winery.

Basis of Presentation
The accompanying financial statements have been prepared in accordance with
accounting principles generally accepted in the United States of America,
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.  The Company bases its estimates on historical experience
and on various assumptions that are believed to be reasonable under the
circumstances at the time.  Actual results could differ from those estimates
under different assumptions or conditions.

Segment Reporting
The Company has a single operating segment consisting of the retail, instate
self-distribution and out of state sales departments.  These departments have
similar economic characteristics, offer the same products to customers,
utilize the same production facilities and processes and have similar customer
types and distribution methods.

Fair Value of Financial Instruments
The following methods and assumptions were used to estimate the fair value of
each class of financial instrument for which it is practicable to estimate that
value:

  Cash and Cash Equivalents, Accounts Receivables, Prepaid Expenses and
  Other Current Assets, Accounts Payable, Accrued Expenses and Other Current
  Liabilities
The carrying amounts of these items are a reasonable estimate of their fair
values.

Line of Credit
Borrowings under the line of credit arrangement have variable interest rates
that reflect currently available terms and conditions for similar debt.  The
carrying amount of this debt is a reasonable estimate of its fair value.

Long-Term Debt
The fair value of the Company's long-term debt, including the current portion
thereof, is estimated based on the present value method using AA rates provided
by Farm Credit Services for the Northwest Farm Credit Services debt and
estimated current rates for similar borrowing arrangements for all other long
term debt.  The carrying value and estimated fair value of long term debt,
including current portion is as follows:

                    Carrying        Fair
                      Value        Value
                   __________    __________
Northwest Farm
  Credit Services $ 1,489,008   $ 1,495,128

Concentration of risk
Cash and cash equivalents are maintained with several financial institutions.
Deposits held with banks may exceed the amount of insurance provided on such
deposits. Generally, these deposits may be redeemed upon demand and are
maintained with financial institutions of reputable credit and therefore bear
minimal credit risk.

Financial instruments that potentially subject the Company to credit risk are
accounts receivable. The Company performs ongoing credit evaluations of its
customers and does not require collateral. A reserve is maintained for
potential credit losses. The allowance for doubtful accounts is based on an
assessment of the collectibility of customer accounts. The Company regularly
reviews the allowance by considering factors such as historical experience,
credit quality, the age of the accounts receivable balances, and current
economic conditions that may affect a customer's ability to pay.

Other Comprehensive Income
The nature of the Company's business and related transactions do not give rise
to other comprehensive income.

Cash and Cash Equivalents
Cash and cash equivalents include highly liquid short-term investments with an
original maturity of less than 90 days.

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-
process 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 first-in, first-out
("FIFO") cost or market by variety.  In accordance with general practices in
the wine industry, wine inventories are generally included in current assets
in the accompanying balance sheet, although a portion of such inventories may
be aged for more than one year (Note 3).

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 $649,270 and $566,591 at December 31,
2006 and 2005, respectively.

Amortization of vineyard development costs are included in capitalized crop
costs that in turn are included in inventory costs and ultimately become a
component of cost of goods sold.  For the year ending December 31, 2006
approximately $83,000 was amortized into inventory costs.


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.  The Company reviews the carrying value of investments
for impairment whenever events or changes in circumstances indicate the
carrying amounts may not be recoverable.

Debt Issuance Costs
Debt issuance costs are amortized on the straight-line basis, which
approximates the effective interest method, over the life of the debt.  For
the years ended December 31, 2006 and 2005, amortization of debt issuance
costs was approximately $7,000 and $12,000 respectively.

Income Taxes
Income taxes are recognized using enacted tax rates, and are composed of taxes
on financial accounting income that is adjusted for requirements of current tax
law, and deferred taxes. Deferred taxes are estimated using the asset and
liability approach whereby 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.

Deferred Rent Liability
The Company leases land under a sale-leaseback agreement.  The long-term
operating lease has minimum lease payments that escalate every year.  For
accounting purposes, rent expense is recognized on the straight-line basis by
dividing the total minimum rents due during the lease by the number of months
in the lease.  In the early years of a lease with escalation clauses, this
treatment results in rental expense recognition in excess of rents paid, and
the creation of a long-term deferred rent liability.  As the lease matures,
the deferred rent liability will decrease and the rental expense recognized
will be less than the rents actually paid.  For the period ended December 31,
2006 and 2005, rent costs recognized in excess of amounts paid totaled $26,180
and $32,986, respectively.

Revenue Recognition
The Company recognizes revenue when the product is shipped and title passes to
the customer.  The Company's standard terms are 'FOB' shipping point, with no
customer acceptance provisions.  The cost of price promotions and rebates are
treated as reductions of revenues.  No products are sold on consignment.
Credit sales are recorded as trade accounts receivable and no collateral is
required.  Revenue from items sold through the Company's retail locations is
recognized at the time of sale.  The Company has established an allowance for
doubtful accounts based upon factors pertaining to the credit risk of specific
customers, historical trends, and other information.  Delinquent accounts are
written-off when it is determined that the amounts are uncollectible.

Cost of Goods Sold
Costs of goods sold include costs associated with grape growing, external
grape costs, packaging materials, winemaking and production costs, vineyard
and production administrative support and overhead costs, purchasing and
receiving costs and warehousing costs.

Administrative support, purchasing, receiving and most other fixed overhead
costs are expensed as Selling, General and Administrative expenses without
regard to inventory units.  Warehouse and production facilities costs, which
make up less than 10 percent of total costs, are allocated to inventory units
on a per gallon basis during the production of wine, prior to bottling the
final product.  No further costs are allocated to inventory units after
bottling.

Selling, General and Administrative Expenses
Selling, general and administrative expenses consist primarily of non-
manufacturing administrative and overhead costs, advertising and other
marketing promotions.  Advertising costs are expensed as incurred or the
first time the advertising takes place.  For the years ended December 31, 2006
and 2005, advertising costs incurred were approximately $29,000 and $23,000
respectively.

The Company provides an allowance to distributors for providing sample of
products to potential customers.  For the years ended December 31, 2006 and
2005, these costs, which are included in selling, general and administrative
expenses, totaled approximately $76,000 and $64,000 respectively.

Shipping and Handling Costs
Amounts paid by customers to the Company for shipping and handling costs are
included in the net revenue.  Costs incurred for shipping and handling charges
are included in selling, general and administrative expense.  For the years
ended December 31, 2006 and 2005, such costs totaled approximately $324,000
and $416,000 respectively.  The Company's gross margins may not be comparable
to other companies in the same industry as other companies may include
shipping and handling costs as a cost of goods sold.

Excise Taxes
The Company pays alcohol excise taxes based on product sales to both the
Oregon Liquor Control Commission and to the U.S. Department of the Treasury,
Alcohol and Tobacco Tax and Trade Bureau.  The Company is liable for the taxes
upon the removal of product from the Company's warehouse on a per gallon basis.
The federal tax rate is affected by a small winery tax credit provision which
declines based upon the number of gallons of wine production in a year rather
than the quantity sold.  The Company also pays taxes on the grape harvest on a
per ton basis to the Oregon Liquor Control Commission for the Oregon Wine
Advisory.  For the years ended December 31, 2006 and 2005, excise taxes
incurred were approximately $361,000 and $382,000 respectively.

Stock Based Compensation
The Company expenses stock options on a straight line basis over the options'
related vesting term.  For the year ended December 31, 2006, the Company
recognized pretax compensation expense related to stock options of $33,560.
The following table, presented to aid the reader's ability to compare the
relevant period from 2005 if the Company had applied FASB123R to such period
in the same manner as the Company applied FASB123R in the current period,
illustrates the effect on net income and earnings per share if the fair value
method established in SFAS 123R had been applied to all outstanding and
unvested awards in the prior period.

                                        Year Ended
                                     December 31, 2005
                                        __________

Net income, as reported                $ 1,156,939

Add Stock-based employee
compensation expense included in
reported net income, net of
  related tax effects                            -

Deduct total stock based employee
  compensation expense determined
  under fair value based method for
  all awards, net of related tax
  effects                                 (675,854)
                                        __________

Pro forma net income                   $   481,085

Earnings per share:
  Basic - as reported                  $      0.26
  Basic - pro forma                    $      0.11

  Diluted - as reported                $      0.25
  Diluted - pro forma                  $      0.10


Basic and Diluted Net Income per Share
Basic earnings per share are computed based on the weighted-average number of
common shares outstanding each year.  Diluted earnings per share are computed
using the weighted average number of shares of common stock and potentially
dilutive securities assumed to be outstanding during the year.  Potentially
dilutive shares from stock options and other common stock equivalents are
excluded from the computation when their effect is antidilutive.

Options to purchase 495,000 shares of common stock were outstanding at
December 31, 2006 and diluted weighted-average shares outstanding at
December 31, 2006 include the effect of 210,003 stock options.  Options to
purchase 609,500 shares of common stock were outstanding at December 31, 2005
and diluted weighted-average shares outstanding at December 31, 2005 include
the effect of 116,150 stock options.  In addition, the warrant outstanding
since 1992 was included in the computation of diluted earnings per share in
2005.

                      2006                              2005
                    Weighted                          Weighted
                     average    Earnings               average    Earnings
                     shares       per                  shares       per
          Income   outstanding   share      Income   outstanding   share

Basic    $1,291,774    4,739,897    0.27     $1,156,939    4,518,827    0.26
Options          -       210,003      -              -       116,150      -
Warrant          -            -       -              -        15,000      -
         ----------    ---------   ------    ----------    ---------   ------
Diluted  $1,291,774    4,949,900   $0.26     $1,156,939    4,649,977   $0.25
         ==========    =========   ======    ==========    =========   ======

Statement of cash flows
Supplemental disclosure of cash flow information:

                                            2006         2005

Interest paid                           $ 170,000    $ 234,000
Supplemental schedule of noncash
  investing and financing activities:
    Issuance of common stock(Note 7)        9,152        9,610

Liquidity
The Company's ability to fund operations requires utilization of amounts
available pursuant to a line of credit agreement as further discussed in
Note 5. There was $0 outstanding on the line of credit with Umpqua Bank as of
December 31, 2006.   Management believes existing cash and cash flow from
operations, combined with the amounts available under the line of credit
facility will be sufficient to satisfy all debt service obligations and fund
the Company's operating needs and capital expenditures for the foreseeable
future.

Recently issued accounting pronouncements and proposed accounting changes
In February 2007, the FASB issued FAS 159, The Fair Value Option for financial
assets and financial liabilities - including an amendment of FASB statement
No. 115 ("FAS 159"). SFAS 159 permits entities to choose to measure many
financial instruments and certain other items at fair value. The objective is
to improve financial reporting by providing entities with the opportunity to
mitigate volatility in reported earnings caused by measuring related assets
and liabilities differently without having to apply complex hedge accounting
provisions. FAS 159 is expected to expand the use of fair value measurement,
which is consistent with the long-term measurement objectives for accounting
for financial instruments. FAS 159 is effective for financial statements
issued for fiscal years beginning after November 15, 2007 with early adoption
permitted. No entity is permitted to apply this Statement retrospectively to
fiscal years preceding the effective date unless the entity chooses early
adoption. The Company has not yet determined the effect, if any, that the
implementation of FAS 159 will have on our results of operations or financial
condition.

In September 2006, the FASB issued Staff Position (FSP) AIG AIR-1, "Accounting
for Planned Major Maintenance Activities" ("FSP AUG AIR-1"). FSP AUG AIR-1
addresses the accounting for planned major maintenance activities.
Specifically, the FSP prohibits the practice of the accrue-in-advance method
of accounting for planned major maintenance activities. FSP AUG AIR-1 is
effective for the first fiscal year beginning after December 15, 2006.
Retrospective application is required unless impracticable. We do not believe
the adoption of FSP AUG AIR-1 will have a material impact on our financial
statements.

In September 2006, the FASB issued FAS 158, "Employers' Accounting for Defined
Benefit Pension and Other Postretirement Plans - an Amendment of FASB
Statements No. 87, 88, 106 and 132(R)" ("FAS 158"). FAS 158 requires an
employer that is a business entity and sponsors one or more single employer
benefit plans to (1) recognize the funded status of the benefit in its
statement of financial position, (2) recognize as a component of other
comprehensive income, net of tax, the gains or losses and prior service costs
or credits that arise during the period, but are not recognized as components
of net periodic benefit cost, (3) measure defined benefit plan assets and
obligations as of the date of the employer's fiscal year end statement of
financial position and (4) disclose in the notes to financial statements
additional information about certain effects on net periodic benefit cost for
the next fiscal year that arise from delayed recognition of the gains or
losses, prior service costs on credits, and transition asset or obligations.
We do not expect FAS 158 to have a material impact on our financial statements.

In September 2006, the FASB issued FAS 157, Fair Value Measurements
("FAS 157"). SFAS 157 clarifies the principle that fair value should be based
on the assumptions market participants would use when pricing an asset or
liability and establishes a fair value hierarchy that prioritizes the
information used to develop those assumptions. Under the standard, fair value
measurements would be separately disclosed by level within the fair value
hierarchy. FAS 157 is effective for financial statements issued for fiscal
years beginning after November 15, 2007 and interim periods within those
fiscal years, with early adoption permitted. We have not yet determined the
effect, if any, that the implementation of FAS 157 will have on our results of
operations or financial condition.

In September 2006, the Securities and Exchange Commission ("SEC") issued Staff
Accounting Bulletin No. 108, "Considering the Effects of Prior Year
Misstatements when Quantifying Misstatements in Current Year Financial
Statements" ("SAB 108"). SAB 108 provides interpretive guidance on how the
effects of the carryover or reversal of prior year misstatements should be
considered in quantifying a current year misstatement. The SEC staff believes
that registrants should quantify errors using both a balance sheet and an
income statement approach and evaluate whether either approach results in
quantifying a misstatement that, when all relevant quantitative and qualitative
factors are considered, is material. SAB 108 is effective for the fiscal years
beginning after November 15, 2006. We do not expect SAB 108 to have a material
impact on our financial statements.

In July 2006, the FASB issued FASB interpretation (FIN) No. 48, "Accounting
for Uncertainty in Income Taxes" which clarifies the accounting for uncertainty
in income taxes recognized in an enterprise's financial statements in
accordance with FASB Statement No. 109, "Accounting for Income Taxes." FIN 48
prescribes a comprehensive model for how companies should recognize, measure,
present, and disclose in their financial statements uncertain tax positions
taken or expected to be taken on a tax return. Under FIN 48, tax positions
shall initially be recognized in the financial statements when it is more
likely than not the position will be sustained upon examination by the tax
authorities. Such tax positions shall initially and subsequently be measured
as the largest amount of tax benefit that is greater than 50% likely of being
realized upon ultimate settlement with the tax authority assuming full
knowledge of the position and all relevant facts. FIN 48 also revises
disclosure requirements to include an annual tabular rollforward of
unrecognized tax benefits. FIN 48 is effective for fiscal years beginning
after December 15, 2006. The cumulative effects, if any, of adopting FIN 48
will be recorded as an adjustment to retained earnings as of the beginning of
the period of adoption. We are currently evaluating the impact of adopting
FIN 48 and its impact on our financial statements.  We do not expect FIN 48
to have a material impact on our financial statements.

In March 2006, the Emerging Issues Task Force ("EITF") reached a consensus on
EITF Issue No. 06-3, "How Taxes Collected from Customers and Remitted to
Governmental Authorities Should be Presented in the Income Statement (that is,
Gross versus Net Presentation)." Taxes within the cope of EITF Issue No. 06-3
include any taxes assessed by a governmental authority that are directly
imposed on a revenue-producing transaction between a seller and a customer
and may include, but are not limited to, sales taxes, use taxes, value-added
taxes, and some excise taxes. The EITF concluded that the presentation of
these taxes on either a gross (included in revenues and costs) or a net
(excluded from revenues) basis is an accounting policy decision that should be
disclosed. For any such taxes that are reported on a gross basis, a company
should disclose the amounts of those taxes in interim and annual financial
statements. Our policy is to exclude all such taxes, if any, from revenue. The
provisions of EITF 06-3 are effective for interim and annual reporting periods
beginning after December 15, 2006. The adoption of EITF 06-3 will not have any
effect on our financial statements.


2.	Accounts Receivable

Oregon law prohibits the sale of wine in Oregon on credit; therefore, the
Company's accounts receivable balances are primarily the result of sales to
out-of-state and foreign distributors.  At December 31, 2006 the Company's
accounts receivable balance is net of an allowance for doubtful accounts of
$63,513.

Changes in the allowance for doubtful accounts are as follows:

                   Balance at  Charged to  Charged to  Write-offs  Balance at
                   Beginning   costs and     other       net of      end of
                   Of period    expenses    accounts   recoveries    period
                   __________  __________  __________  __________  __________

Fiscal year ended December 31, 2005:
Allowance for
 Doubtful accounts  $  41,885   $  16,066   $       -   $       -   $  57,951
                   ==========  ==========  ==========  ==========  ==========

Fiscal year ended December 31, 2006:
Allowance for
 Doubtful accounts  $  57,951   $   5,562   $       -   $       -   $  63,513
                   ==========  ==========  ==========  ==========  ==========


3. Inventories

Inventories consist of:

Winemaking and packaging materials            $   142,737
Work-in-process (costs relating to unprocessed
  and/or unbottled wine products)               2,697,354
Finished goods (bottled wine
  and related products)                         3,911,836
                                               -----------
Current inventories                           $ 6,751,927
                                               ___________


4. Property and Equipment

Land and improvements                         $   769,644
Winery building and hospitality center          4,782,064
Equipment                                       4,009,023
                                               -----------
                                                9,560,731

Less accumulated depreciation                  (5,575,051)
                                               -----------
                                              $ 3,985,680
                                               ___________


5.	Line of Credit Facility

In December of 2005 the Company entered into a revolving line of credit
agreement with Umpqua Bank that allows borrowings of up to $2,000,000 against
eligible accounts receivables and inventories as defined in the agreement.
The revolving line bears interest at prime and is payable monthly.  The
interest rate was 8.25% at December 31, 2006.  At December 31, 2006 there were
borrowings of $0 on the revolving line of credit.

The weighted-average interest rate on the aforementioned borrowings for the
fiscal years ended December 31, are as follows:

2006  7.75%
2005	5.75%

The line of credit agreement includes various covenants, which among other
things, requires the Company to maintain minimum amounts of tangible net worth,
debt-to-equity, and debt service coverage as defined, and limits the level of
acquisitions of property and equipment.  As of December 31, 2006, the Company
was in compliance with these covenants.

Umpqua Bank Capital borrowings are collateralized by the bulk and case goods
inventory and the proceeds from the sales thereof.


6. Long-Term Debt

Long-term debt consists of:
                                                  2006

Northwest Farm Credit Services Loan           $ 1,489,008
                                               -----------
                                                1,489,008

Less current portion                             (251,437)
                                               -----------
                                              $ 1,237,571
                                               ___________


The Company has an agreement with Northwest Farm Credit Services containing a
note bearing interest at a rate of 7.85%, which are collateralized by real
estate and equipment.  This note requires monthly payments of $30,102 until
the notes are fully repaid in 2012.  The loan agreement contains covenants,
which require the Company to maintain certain financial ratios and balances.
At December 31, 2006, the Company was in compliance with these covenants.  In
the event of future noncompliance with the Company's debt covenants, Northwest
Farm Credit Services ("FCS") would have the right to declare the Company in
default, and at FCS' option without notice or demand, the unpaid principal
balance of the loan, plus all accrued unpaid interest thereon and all other
amounts due shall immediately become due and payable.

Future minimum principal payments of long-term debt mature as follows:

Year ending
December 31,

   2007                                             $   251,437
   2008                                                 271,900
   2009                                                 294,029
   2010                                                 317,960
   2011                                                 343,857
Thereafter                                                9,825
                                                     -----------
                                                    $ 1,489,008
                                                     ___________


7.	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.

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 (Notes 6 and 8).  The warrant was exercisable through June 1, 2012
at an exercise price of $3.42 per share.  The warrant was exercised in
February of 2006.

In each of the years ended December 31, 2006 and 2005, the Company granted
3,325 and 2,725 shares of stock valued at $9,152 and $9,610, respectively,
as compensation to employees and agents.  The cost of these grants was
capitalized as inventory or included in selling, general and administrative
expenses in the statement of operations.  The effects of these noncash
transactions have been excluded from the cash flow statements in each period.


8.	Stock Incentive Plan

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


The following table presents information on stock options outstanding for the
periods shown:
                                2006                    2005
                           _______________         _______________
                                  Weighted                Weighted
                                   Average                 average
                                  Exercise                exercise
                           Shares   price          Shares   price
Outstanding at
    beginning of period   609,500  $ 3.57         284,200  $ 1.90
  Granted                       -       -         496,500    4.15
  Exercised              (114,500) $ 2.00        (171,199)   2.46
  Forfeited                     -       -              (1)   3.00
                          --------                --------
Outstanding at
    end of period         495,000  $ 3.94         609,500  $ 3.57
                          ________                ________


The following table presents information on stock options outstanding for the
periods shown:
                                2006                    2005
                           __________________     __________________
Intrinsic value of options
    exercised in the period        $  643,734             $  453,303
Stock options fully vested and
    expected to vest
  Number                     495,000                609,500
  Weighted average exercise
    Price                          $     3.94             $     3.57
  Aggregate intrinsic value        $1,427,656             $  862,711
  Weighted average contractual
    term of options                6.90 years             7.01 years

Stock options vested and
    Currently exercisable
  Number                     448,434
  Weighted average exercise
    Price                          $     3.98
  Aggregate intrinsic value        $1,274,401
  Weighted average contractual
    term of options                6.77 years


Weighted-average options outstanding and exercisable at December 31, 2006 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       2006           life           price       2006          price

  $ 1.50        1,500          1.03           1.50        1,500         1.50
    1.56        4,000          3.58           1.56        4,000         1.56
    1.75        3,000          1.17           1.75        3,000         1.75
    1.81        1,500          2.24           1.81        1,500         1.81
    2.30       60,000          7.58           2.30       37,600         2.30
    2.31       20,000          8.40           2.31       20,000         2.31
    2.99       24,000          8.12           2.99       24,000         2.99
    3.29       75,000          3.12           3.29       75,000         3.29
    3.76      104,000          8.58           3.76       97,800         3.76
    4.14        4,000          3.58           4.14        4,000         4.14
    4.98       25,000          8.76           4.98        7,034         4.98
    5.00      109,000          8.99           5.00      109,000         5.00
    5.50       64,000          3.99           5.50       64,000         5.50
   ------    ---------        ------         ------     --------       ------
$ 1.50-$5.50  495,000          6.90         $ 3.94      448,434       $ 3.98

At January 1, 2006, the Company began recognizing compensation expense for
stock options with the adoption of Statement of Financial Accounting Standards
("SFAS") No. 123 (Revised), "Share-Based Payment," ("SFAS 123R"). The fair
value of each stock option granted is estimated on the date of grant using the
Black-Scholes based stock option valuation model. This model uses the
assumptions listed in the table below. Expected volatilities are based on
implied volatilities from the Company's stock, historical volatility of the
Company's stock, and other factors.  Expected dividends are based on the
Company's plan not to pay dividends for the foreseeable future.  The Company
uses historical data to estimate option exercises and employee terminations
within the valuation model. The risk-free rate for periods within the
contractual life of the option is based on the U.S. Treasury yield curve in
effect at the time of grant.

                                             2006         2005
Risk-free interest rate                     4.26 %       4.26 %
Expected lives                             10 years     10 years
Expected volatility                           47 %         45 %

Adjustments are made for options forfeited prior to vesting.  For the year
ended December 31, 2005, the total value of the options granted was computed
to be approximately $1,356,068, which would be amortized on the straight-line
basis over the vesting period of the options.

For the year ended December 31, 2005, the weighted average fair value of
options granted was computed to be $2.73.


9. Income Taxes
The provision for income taxes consists of:
                                            2006         2005
Current tax expense:
  Federal                                  $660,888     $591,247
  State                                     150,733       83,588
                                        ------------ ------------
                                            811,621      674,835
                                        ------------ ------------
Deferred tax expense (benefit):
  Federal                                    69,142      (43,041)
  State                                       8,858       (3,533)
                                        ------------ ------------
                                             78,000      (46,574)
                                        ------------ ------------

    Total                                  $889,621     $628,261
                                        ____________ ____________


The effective income tax rate differs from the federal statutory rate as
follows:
                                         Year ended December 31,
                                            2006         2005
Federal statutory rate                      34.0 %       34.0 %
State taxes, net of federal benefit          4.4          2.6
Permanent differences                        0.6         (0.5)
Other, primarily prior year taxes            1.8         (0.9)
                                        ------------ ------------
                                            40.8 %       35.2 %
                                        ____________ ____________


Permanent differences consist primarily of nondeductible meals and
entertainment and life insurance premiums.

Deferred tax assets and (liabilities) at December 31 consist of:

                                                  2006
Accounts receivable                           $    24,000
Inventories                                        75,000
Other                                               8,000
                                               -----------
Net current deferred tax asset                    107,000
                                               -----------

Depreciation                                     (374,000)
Deferred gain on sale-leaseback                   157,000
Deferred liabilities                              (25,000)
                                               -----------
Net noncurrent deferred tax liability            (242,000)
                                               -----------
Net deferred tax liability                    $  (135,000)
                                               ___________


10.	Related Parties

During 2006, the Company purchased grapes from certain director/shareholders
for an aggregate price of $17,630.  At December 31, 2006 grape payables
included no amounts owed to these shareholders.

The Company provides living accommodations in a manufactured home on the
Company's premises for the president and his family as additional compensation
for security and lock-up services the president provides.  During the years
ended December 31, 2006 and 2005, the Company recorded $10,595 and $6,985,
respectively, in expenses related to the housing provided for its president.


11.	Commitments and Contingencies

Litigation
From time to time, in the normal course of business, the Company is a party
to legal proceedings.  Management believes that these matters will not have a
material adverse effect on the Company's financial position, results of
operations or cash flows, 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.  In December 1999, under a sale-
leaseback agreement, the Company sold a portion of the Tualatin Vineyards
property with a net book value of approximately $1,000,000 for approximately
$1,500,000 cash and entered into a 20-year operating lease agreement.  The
gain of approximately $500,000 is being amortized over the 20-year term of
the lease. In December 2004, under a new sale-leaseback agreement, the Company
sold a 75.3 acres portion of the Tualatin Vineyards property with a net book
value of approximately $551,000 for approximately $727,000 cash and entered
into a 14-year operating lease agreement for 42.7 acres of the subject sale
agreement.  Approximately $99,000, relating to the 42.7 acres leased back, of
the total gain of $176,000 realized from this 75.3 acre sale/leaseback
transaction has been deferred and will be amortized over the life of the lease
agreement.

The amortization of the deferred gain totals approximately $25,000 per year
for the 1999 sale-leaseback agreement and $7,000 for the 2004 sale-leaseback
agreement, and is recorded as an offset to the related lease expense in
selling, general and administrative expenses.

As of December 31, 2006, future minimum lease payments are as follows:

    Year ending
    December 31,
       2007                                          $   158,083
       2008                                              178,486
       2009                                              182,061
       2010                                              185,724
       2011                                              189,479
    Thereafter                                         1,632,579
                                                      -----------
         Total                                       $ 2,526,412
                                                      ===========

The Company is also committed to lease payments for various office equipment.
Total rental expense for all operating leases excluding the vineyards, amounted
to $13,175 and $15,638 in 2006 and 2005, respectively.  In addition, payments
for the leased vineyards have been included in inventory or vineyard
developments costs and aggregate approximately $200,765 and $215,436 for the
years ended December 31, 2006 and 2005, respectively.

Susceptibility of Vineyards to Disease
The Tualatin Vineyard and the leased vineyards are known to be infested with
phylloxera, an aphid-like insect, which can destroy vines.  The Company has
not detected any phylloxera at its Turner Vineyard.

It is not possible to estimate any range of loss that may be incurred due to
the phylloxera infestation of our vineyards.  The phylloxera at Tualatin
Estate Vineyard is believed to have been introduced on the roots of the vines
first planted on the property in the southern most section Gewurztraminer in
1971 that the Company partially removed in 2004.  The remaining vines, and all
others infested, remain productive at low crop levels.


12.	Employee Benefit Plan

During February 2006, the Company instituted a 401(k) profit sharing plan
covering all eligible employees. Employees who participate may elect to make
salary deferral contributions to the Plan up to 100% of the employees'
eligible payroll subject to annual Internal Revenue Code maximum limitations.
We make a matching contribution of $1 for every $1 contributed by the
participant up to 4% of the participant's eligible payroll. In addition, we
may make a discretionary contribution to the entire qualified employee pool,
in accordance with the Plan.

For the year ended December 31, 2006, total amounts expensed under this plan
was approximately $61,282



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

None.


ITEM 8A.    CONTROLS AND PROCEDURES.

a) We carried out an evaluation, under the supervision and with the
participation of the Chief Executive Officer, Controller and other management
personnel, of the effectiveness of our disclosure controls and procedures, as
defined in Rules 13a-15(e) and 15d-15(e) of the Securities and Exchange Act of
1934 as of December 31, 2006.  Based on that evaluation, the Chief Executive
Officer and Controller concluded that our disclosure controls and procedures
as of December 31, 2006 were effective to ensure that information required to
be disclosed by the Company in the reports it files or submits under the
Securities and Exchange Act of 1934 is recorded, processed, summarized, and
reported within the time periods specified in the Securities and Exchange
Commission's rules and forms, and is accumulated and communicated to
management, including the Chief Executive Officer and Controller, to allow
timely decisions regarding required disclosure.

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

b) There were no changes in the Company's internal control procedures over
financial reporting that occurred during the period ended December 31, 2006
that have materially affected, or are reasonably likely to materially affect,
our internal controls over financial reporting, except as noted above.


ITEM 8B.    OTHER INFORMATION.

None.


ITEM 9.     DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL
PERSONS; COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT.

Directors, nominees for election as a director, and each such person's age at
March 31, 2007 and position with the Company.

Name                         Position(s) with the Company    Age
James W. Bernau ***              Chairperson of the Board,
                                 President and Director      53
James L. Ellis * ***             Secretary and Director      62
Sean M. Cary                     Controller                  33
Thomas M. Brian**                Director                    58
Delna L. Jones***                Director                    66
Lisa M. Matich**                 Director                    44
Betty M. O'Brien*                Director                    63
Stan G. Turel * **  ***          Director                    59
_______________________________
*Member of the Compensation Committee
**Member of the Audit Committee
***Member of the Executive 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.  Willamette
Valley Vineyards was originally established as a sole proprietorship by Oregon
winegrower Jim Bernau in 1983, and he 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.
Mr. Bernau has served as the President of the Oregon Winegrowers Association
and the Treasurer of the association's Political Action Committee (PAC) and
Chair of the Promotions Committee of the Oregon Wine Advisory Board, the State
of Oregon's agency dedicated to the development of the industry.  In March
2005, Mr. Bernau received the industry's Founder's Award for his service.

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, and Vice President /Corporate since 1998.
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.

Thomas M.  Brian.  Mr. Brian was appointed to the Board of Directors in June
of 2004.  Mr. Brian has served as Chairman of the Washington County Board of
Commissioners since 1999.  Previously, he served for 10 years in the Oregon
House of Representatives.  While in the legislature, Mr. Brian was Chairman of
the Revenue Committee and served on the Judicial and Ways and Means Committees.
He also served 10 years as City Councilor and Mayor of Tigard, OR.  Mr. Brian
has successfully owned and operated a commercial/industrial real estate
company for eighteen years.

Delna L. Jones.  Ms. Jones has served as a Director since November 1994.
Ms. Jones resigned from the Board in December of 2002 having moved to Southern
California and was reappointed by the Board in March of 2005 having returned
to Oregon.  Currently Ms. Jones is President of Delna Jones and Associates, an
independent consulting firm.  Ms. Jones was elected in 1998 and served as a
County Commissioner for Washington County, Oregon from 1998 to 2000.  Ms. Jones
has served as project director for the CAPITAL Center, an education and
business consortium from 1990 to 1998.  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.

Lisa M. Matich. Ms. Matich was appointed to the Board of Directors in April of
2004.  She is the former Director of Financial Analysis of PacifiCorp, a multi-
state electric utility with over 1.5 million customers. Previously she was a
Financial Consultant with SAIC 1996 to 2002, a Fortune 500 company and the
nation's largest employee-owned research and engineering company.  She was
Chief Financial Officer of Egmont Electricity 1991-1996, a New Zealand
electricity provider and public company.  Ms. Matich also has a background in
public accounting with both Price Waterhouse and Coopers & Lybrand.  She is a
CPA in the state of California and a member of the American Institute of
Certified Public Accountants.  Ms. Matich has a degree in Business
Administration from the University of California, Berkeley.

Betty M. O'Brien.  Ms. O'Brien has served as a Director since July 1991.
Ms. O'Brien is a partner in Elton Vineyards, a commercial vineyard located in
Eola Hills in Yamhill County, Oregon and established in 1983.  Ms. O'Brien was
the Executive Director of the Oregon Wine Board from 2001 to 2004.  Ms. O'Brien
was employed by Willamette University as its Director of News and Publications
from 1988 to 2000.  She is a member of the Oregon Winegrowers Association,
having previously served as its President and Treasurer and as a director.
Ms. O'Brien is a member of the Vineyard Management/Winemaking Program Advisory
Committee at Chemeketa Community College (CCC). She heads a wine industry task
force developing a new wine marketing program and curriculum leading to a two-
year degree at CCC.  She is teaching the first class in the program,
Introduction to Wine Marketing.

Stan G. Turel.  Mr. Turel has served as a Director since November of 1994.
Mr. Turel is President of Turel Enterprises, a real estate management company
managing his own properties in Oregon, Washington and Idaho. Prior to his
current activities, Mr. Turel was the Principal and CEO of Columbia Turel,
(formally Columbia Bookkeeping, Inc.) a position which he held from 1974 to
2001. Prior to the sale of the company to Fiducial, one of Europe's largest
accounting firms, Columbia had 26,000 annual tax clients including 4,000 small
business clients. Additionally Mr. Turel successfully operated as majority
owner two cable TV companies during the 80's and 90's which were eventually
sold to several public corporations. Mr. Turel is a pilot, was a former
delegate to the White House Conference on Small Business and held positions on
several state and local Government committees.


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 that, during the year ended
December 31, 2006, conducted four meetings.  The elected members of the Audit
Committee are Delna L. Jones, Lisa Matich, and Stan G. Turel.  Ms. Matich is
designated by the Board of Directors as the "audit committee financial expert"
under SEC rules.  The Audit Committee is responsible for engaging the Company's
Independent Registered Public Accounting Firm, and reviews the scope of the
independent annual audit, the independent 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,
2006, the Compensation Committee held two meetings.  The members of the
Compensation Committee currently are Betty M. O'Brien, Chair, Stan Turel, and
James Ellis.  In 1997 the Board appointed an Executive Committee, members are:
James Bernau, James Ellis, and Stan Turel.  The Executive Committee held two
meetings during 2006.

Code of Ethics. The Company adopted a code of ethics applicable to its Chief
Executive Officer, Controller and other finance leaders, which is a "code of
ethics" as defined by applicable rules of the Securities and Exchange
Commission. Amendments to the code of ethics or any grant of a waiver from a
provision of the code of ethics requiring disclosure under applicable SEC
rules, if any, will be disclosed on our website at
www.WillametteValleyVineyards.com.   Any person may request a copy of the code
of ethics, at no cost, by writing to us at the following address:
Willamette Valley Vineyards, Inc.
8800 Enchanted Way SE
Turner, OR 97392
Attention: Corporate Secretary


ITEM 10.  EXECUTIVE COMPENSATION.

Summary of Cash and Certain Other Compensation

The following table sets forth certain information concerning compensation
paid or accrued by the Company, to or on behalf of the Company's Primary
Executive Officer, James W. Bernau (the "named executive officer") for the
years ending December 31, 2006 and 2005.  Except for Mr. Bernau, no officer,
director or other employee of the Company received total compensation in
excess of $100,000, as calculated pursuant to Instruction 1 to Item 402(a)(2)
of Regulation S-B.

<table>





                                  SUMMARY COMPENSATION TABLE
                                                                                    Nonqualified
                                                                      Non-Equity      Deferred         All
                                                    Stock   Option  Incentive Plan  Compensation      Other
                                  Salary     Bonus  Awards  Awards   Compensation     Earnings     Compensation     Total
Name and Principal Position  Year   ($)       ($)    ($)     ($)          ($)            ($)           ($)           ($)

Bernau, James W.,            2006  162,511  39,475    -       -            -              -          17,129        219,115
President, Chief Executive   2005  158,658  37,500    -    235,784         -              -           6,985        429,501
Officer and Chairman

</table>

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
$162,511 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 live in the mobile home 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
directly issue shares of stock to its employees.  Options are typically issued
at a per share exercise price equal to the closing price as reported by the
Capital Market 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 terminate.

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, 2006.

<table>




                                                                                                  Stock Awards
                                                                                                                        Equity
                                                                                                                       Incentive
                                                                                                            Equity    Plan Awards:
                                         Option Awards                                                     Incentive   Market or
                                                  Equity                                                  Plan Awards:   Payout
                                                 Incentive                                       Market    Number of    Value of
                                                Plan Awards:                         Number     Value of    Unearned    Unearned
                     Number of     Number of     Number of                         of Shares    Shares or    Shares,     Shares,
                    Securities    Securities    Securities                          or Units    Units of    Units or    Units or
                    Underlying    Underlying    Underlying                          of Stock      Stock       Other       Other
                   Unexercised   Unexercised   Unexercised    Option                  that         that    Rights that Rights that
                     Options       Options       Unearned    Exercise    Option     Have Not    Have Not       Have      Have Not
                       (#)           (#)          Options     Price    Expiration    Vested      Vested     Not Vested    Vested
 Name              Exercisable  Unexercisable       (#)        ($)        Date         (#)         ($)         (#)         ($)

Bernau, James
  2/11/2005          75,000           -              -         3.289    2/11/2010       -           -           -           -
  8/1/2005            4,000           -              -         4.136    8/1/2010        -           -           -           -
  12/27/2005         64,000           -              -         5.50     12/27/2010      -           -           -           -

</table>

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.  This option was increased to 4,000 per year when the
50-share grant per Director's meeting was discontinued for the year 2000 and
beyond.  In December 2005, each Director was granted 14,000 options for
service during 2005.  In the foreseeable future, as a result of the Financial
Accounting Standards Board ("FASB") Statement of Financial Accounting Standard
("SFAS") No. 123R, Share-Based Payment, requiring all share-based payments to
be recognized as expenses in the statement of operations based on their fair
values and vesting periods, the Company does not intend to issue stock options
to the Directors for their service.


Section 16(a) Beneficial Ownership Reporting Compliance

None


ITEM 11.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT AND RELATED STOCKHOLDER MATTERS.

The following table sets forth certain information with respect to beneficial
ownership of the Company's Common Stock as of December 31, 2006, 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.

                                              Number of           Percent of
                                         Shares Outstanding         Shares
                                                Stock            Beneficially
                                                                    Owned
James W. Bernau     President/CEO, Chair of the Board
2545 Cloverdale Road                            761,176   (1)      15.9%
Turner, OR  97392

James L. Ellis      Secretary, Director
7850 S.E. King Road                              81,300   (2)       1.7%
Milwaukie, OR  97222

Thomas M. Brian     Director
7630 SW Fir                           	         22,000   (3)        **
Tigard, OR  97223

Delna L. Jones      Director
14480 SW Chardonnay Ave                          27,800   (4)        **
Tigard, OR 97224

Lisa M. Matich      Director
5321 Linda Way                                   33,700   (5)        **
La Jolla, CA 92037

Betty M. O'Brien    Director
22500 Ingram Lane NW                             38,150   (6)        **
Salem, OR  97304

Stan G. Turel       Director
604 SE 121 Street                                36,517   (7)        **
Vancouver, WA  98683

All Directors, executive                        996,643   (8)      20.9%
officers and persons owning
5% or more as a group (6 persons)
______________________________
**         Less than one percent.

(1) Includes 143,000 shares issuable upon exercise of options exercisable
within 60 days of the date of this report.

(2) Includes 76,000 shares issuable upon the exercise of options exercisable
within 60 days of the date of this report.

(3) Includes 22,000 shares issuable upon the exercise of options exercisable
within 60 days of the date of this report.

(4) Includes 26,000 shares issuable upon the exercise of options exercisable
within 60 days of the date of this report.

(5) Includes 26,000 shares issuable upon the exercise of options exercisable
within 60 days of the date of this report.

(6) Includes 33,000 shares issuable upon the exercise of options exercisable
within 60 days of the date of this report.

(7) Includes 14,000 shares issuable upon the exercise of options exercisable
within 60 days of the date of this report.

(8) Includes 340,000 shares issuable upon exercise of options exercisable
within 60 days of the date of this report.


ITEM 12.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.


During 2006, the Company purchased grapes from Elton Vineyards for $17,630.
Betty M. O'Brien, a Director of the Company, is a principal owner of Elton
Vineyards.  In 2007, the Company entered into a long-term lease for Elton
vineyards which consists of 60 acres of mature grapevines, of which
approximately 42 acres are Pinot Noir. The agreement was for an initial 10
year lease with the option to renew for 4 successive terms of 5 years each,
plus a first right of refusal on the property's sale.

On June 1, 1992, the Company granted Mr. Bernau a warrant to purchase 15,000
shares of the Company's Common Stock at an exercise price of $3.42 per share
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 was exercised in February 2006.

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.

The following directors are independent as the term is defined by NASDAQ
rules:  Thomas M. Brian, Delna L. Jones, Lisa M. Matich, Berry M. O'Brien,
and Stan G. Turel.


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. 000-21522)

(n) Business Financing Agreement dated July 2, 2002 by and between GE
Commercial Distribution Finance and Willamette Valley Vineyards, Inc.
(File No. 000-21522)

(o) Business Loan Agreement dated December 29, 2004 by and between Umpqua
Bank and Willamette Valley Vineyards, Inc. (File No. 000-21522)


(b) Reports on Form 8-K

None.


ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES.

The information contained under the caption entitled "Audit and Related Fees"
in the Proxy Statement is incorporated herein by reference.


SIGNATURES

In accordance with Section 13 or 15(d) of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.

WILLAMETTE VALLEY VINEYARDS, INC.
(Registrant)


Date: April 2, 2007     By:__/s/________________
James W. Bernau,
Chairperson of the Board,
President


In accordance with the Exchange Act, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.

Signature                       Title                  Date


__/s/________________  Chairperson of the Board,   April 2, 2007
James W. Bernau        President
                        (Principal Executive Officer)

__/s/________________  Controller                  April 2, 2007
Sean M. Cary           (Principal Accounting Officer)



__/s/________________  Director and Vice-President April 2, 2007
James L. Ellis         and Secretary

__/s/________________  Director                    April 2, 2007
Thomas M. Brian

__/s/________________  Director                    April 2, 2007
Delna L. Jones

__/s/________________  Director                    April 2, 2007
Lisa M. Matich

__/s/________________  Director                    April 2, 2007
Betty M. O'Brien

__/s/________________  Director                    April 2, 2007
Stan G. Turel



EXHIBIT INDEX

Exhibit

23.1 Consent of Independent Registered Public Accounting Firm

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

31.2 Certification by Sean M. Cary pursuant to Rule 13a-14(a) of the
Securities Exchange Act of 1934

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

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