UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


Washington,
D.C. 20549







FORM
10-Q









x  QUARTERLY REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES


EXCHANGE
ACT OF 1934


For the
quarterly period ended March 31, 2010





o  TRANSITION REPORT
UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT





Commission
File Number 000-21522





WILLAMETTE
VALLEY VINEYARDS, INC.





(Exact
name of registrant as specified in charter)





Oregon
              93-0981021(State or other jurisdiction of
              (I.R.S.
      Employerincorporation
      or organization)
              Identification
      No.)







8800
      Enchanted Way, S.E., Turner, Oregon
                
                97392(Address
      of principal executive offices)
                
                (Zip
      Code)





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







Indicate
by check mark whether the registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Exchange Act during the preceding 12 months
(or for such shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for the past 90
days.





x
YES         
     o NO





Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this
chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such files).





o
YES          
     o NO




Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company. See
the definitions of “large accelerated filer,” “accelerated filer,” and “smaller
reporting company” in Rule 12b-2 of the Exchange Act.





o Large accelerated
      filer
              o Accelerated
      filero Non-accelerated
      filer
              x Smaller reporting
      company





Indicate
by checkmark whether the registrant is a shell company (as defined in Rule 12b-2
of the Exchange Act).





o
YES             
  x
NO




Number of
shares of common stock outstanding as of April 30, 2010:


4,888,977
shares, no par value










WILLAMETTE
VALLEY VINEYARDS, INC.


INDEX TO
FORM 10-Q




Part
      I - Financial Information
                3Item
      1 - Financial Statements
                3Balance
      Sheet
                3Statement
      of Operations
                4Statement
      of Cash Flows
                5Notes
      to Unaudited Interim Financial Statements
                6Item
      2 - Management's Discussion and Analysis of Financial Condition and
      Results of Operations
                10Item
      3 – Quantitative and Qualitative Disclosures about Market
    Risk
                16Item
      4 - Controls and Procedures
                16Part
      II - Other Information
                18Item
      1 - Legal Proceedings
                18Item
      1A – Risk Factors
                18Item
      2 - Unregistered Sales of Equity Securities and Use of
      Proceeds
                18Item
      3 - Defaults upon Senior Securities
                18Item
      4 - Submission of Matters to a Vote of Security Holders
                18Item
      5 - Other Information
                18Item
      6 - Exhibits
                19Signatures
                20




2




Part
      1
                FINANCIAL
      INFORMATIONItem
      1
                FINANCIAL
      STATEMENTS





WILLAMETTE
VALLEY VINEYARDS, INC.


Balance
Sheet




March
      31,
                                                      
                                                      
                                                      December
      31,2010
                                                      
                                                      
                                                      2009(unaudited)ASSETSCurrent
      assets:Accounts
      receivable trade, net
                                                      
                                                      $
                                                      1,078,041
                                                      
                                                      
                                                      $
                                                      1,458,497Inventories,
      net
                                                      
                                                      
                                                      11,797,244
                                                      
                                                      
                                                      
                                                      12,169,407Prepaid
      expenses and other current assets
                                                      
                                                      
                                                      139,294
                                                      
                                                      
                                                      
                                                      58,746Current
      portion of notes receivable
                                                      
                                                      
                                                      62,415
                                                      
                                                      
                                                      
                                                      62,415Income
      tax receivable
                                                      
                                                      
                                                      588,778
                                                      
                                                      
                                                      
                                                      464,958Total
      current assets
                                                      
                                                      
                                                      13,665,772
                                                      
                                                      
                                                      
                                                      14,214,023Vineyard
      development cost, net
                                                      
                                                      
                                                      1,714,556
                                                      
                                                      
                                                      
                                                      1,732,979Property
      and equipment, net
                                                      
                                                      
                                                      6,090,083
                                                      
                                                      
                                                      
                                                      6,192,229Debt
      issuance costs, net
                                                      
                                                      
                                                      38,296
                                                      
                                                      
                                                      
                                                      41,353Note
      receivable
                                                      
                                                      
                                                      92,671
                                                      
                                                      
                                                      
                                                      120,248Other
      assets
                                                      
                                                      
                                                      4,456
                                                      
                                                      
                                                      
                                                      4,456Total
      assets
                                                      
                                                      $
                                                      21,605,834
                                                      
                                                      
                                                      $
                                                      22,305,288LIABILITIES
      AND SHAREHOLDERS’ EQUITYCurrent
      liabilitiesBank
      overdraft
                                                      
                                                      $
                                                      216,949
                                                      
                                                      
                                                      $
                                                      271,911Line
      of credit
                                                      
                                                      
                                                      803,255
                                                      
                                                      
                                                      
                                                      140,964Current
      portion of long term debt
                                                      
                                                      
                                                      432,863
                                                      
                                                      
                                                      
                                                      432,863Accounts
      payable
                                                      
                                                      
                                                      518,599
                                                      
                                                      
                                                      
                                                      823,517Accrued
      expenses
                                                      
                                                      
                                                      421,739
                                                      
                                                      
                                                      
                                                      467,588Deferred
      income taxes
                                                      
                                                      
                                                      62,000
                                                      
                                                      
                                                      
                                                      62,000Grapes
      payable
                                                      
                                                      
                                                      -
                                                      
                                                      
                                                      
                                                      657,371Total
      current liabilities
                                                      
                                                      
                                                      2,455,405
                                                      
                                                      
                                                      
                                                      2,856,214Long-term
      debt, less current portion
                                                      
                                                      
                                                      3,182,318
                                                      
                                                      
                                                      
                                                      3,286,005Deferred
      rent liability
                                                      
                                                      
                                                      217,404
                                                      
                                                      
                                                      
                                                      218,205Deferred
      gain
                                                      
                                                      
                                                      305,812
                                                      
                                                      
                                                      
                                                      313,835Deferred
      income taxes
                                                      
                                                      
                                                      491,000
                                                      
                                                      
                                                      
                                                      491,000Total
      liabilities
                                                      
                                                      
                                                      6,651,939
                                                      
                                                      
                                                      
                                                      7,165,259Shareholders’
      equityCommon
      stock, no par value - 10,000,000 shares authorized, 4,888,977 and
      4,888,977 shares issued and outstanding at March 31, 2010 and December 31,
      2009
                                                      
                                                      
                                                      8,610,868
                                                      
                                                      
                                                      
                                                      8,608,658Retained
      earnings
                                                      
                                                      
                                                      6,343,027
                                                      
                                                      
                                                      
                                                      6,531,371Total
      shareholders’ equity
                                                      
                                                      
                                                      14,953,895
                                                      
                                                      
                                                      
                                                      15,140,029Total
      liabilities and shareholders’ equity
                                                      
                                                      $
                                                      21,605,834
                                                      
                                                      
                                                      $
                                                      22,305,288




The
accompanying notes are an integral part of this financial
statement.




3




WILLAMETTE
VALLEY VINEYARDS, INC.


Statement
of Operations


(unaudited)




Three
      months endedMarch
      31,2010
                                                              
                                                              
                                                              2009Net
      revenuesCase
      revenue
                                                              
                                                              $
                                                              3,553,576
                                                              
                                                              
                                                              $
                                                              3,629,247Total
      net revenues
                                                              
                                                              
                                                              3,553,576
                                                              
                                                              
                                                              
                                                              3,629,247Cost
      of salesCase
                                                              
                                                              
                                                              2,084,849
                                                              
                                                              
                                                              
                                                              1,763,144Total
      cost of sales
                                                              
                                                              
                                                              2,084,849
                                                              
                                                              
                                                              
                                                              1,763,144Gross
      profit
                                                              
                                                              
                                                              1,468,727
                                                              
                                                              
                                                              
                                                              1,866,103Selling,
      general and administrative expenses
                                                              
                                                              
                                                              1,741,483
                                                              
                                                              
                                                              
                                                              1,561,734Net
      operatingincome
      (loss)
                                                              
                                                              
                                                              (272,756
                                                              )
                                                              
                                                              
                                                              304,369Other
      income (expense)Interest
      income
                                                              
                                                              
                                                              2,819
                                                              
                                                              
                                                              
                                                              -Interest
      expense
                                                              
                                                              
                                                              (53,304
                                                              )
                                                              
                                                              
                                                              (32,663
                                                              )Other
      income(expense)
                                                              
                                                              
                                                              11,078
                                                              
                                                              
                                                              
                                                              10,992Net
      income (loss) before income taxes
                                                              
                                                              
                                                              (312,163
                                                              )
                                                              
                                                              
                                                              282,698Income
      tax expense/(benefit)
                                                              
                                                              
                                                              (123,819
                                                              )
                                                              
                                                              
                                                              117,542Net
      income (loss)
                                                              
                                                              
                                                              (188,344
                                                              )
                                                              
                                                              
                                                              165,156Retained
      earnings beginning of period
                                                              
                                                              
                                                              6,531,371
                                                              
                                                              
                                                              
                                                              5,799,901Retained
      earnings end of period
                                                              
                                                              $
                                                              6,343,027
                                                              
                                                              
                                                              $
                                                              5,965,057Basic
      earnings (loss) per common share
                                                              
                                                              $
                                                              (.04
                                                              )
                                                              
                                                              $
                                                              .03Diluted
      earnings (loss) per common share
                                                              
                                                              $
                                                              (.04
                                                              )
                                                              
                                                              $
                                                              .03Weighted
      average number of basic common shares outstanding
                                                              
                                                              
                                                              4,888,977
                                                              
                                                              
                                                              
                                                              4,852,244Weighted
      average number of diluted common shares outstanding
                                                              
                                                              
                                                              4,904,452
                                                              
                                                              
                                                              
                                                              4,864,444




The
accompanying notes are an integral part of this financial
statement.





4





WILLAMETTE
VALLEY VINEYARDS, INC.


Statement
of Cash Flows


(unaudited)





Three Months ended March 31,2010
                                              
                                              
                                              2009Cash
      flows from operating activities:Net
      income (loss)
                                              
                                              $
                                              (188,344
                                              )
                                              
                                              $
                                              165,156Reconciliation
      of net income (loss) to net cash provided by (used in) operating
      activities:Depreciation
      and amortization
                                              
                                              
                                              177,900
                                              
                                              
                                              
                                              162,977Inventory
      obsolescence reserve
                                              
                                              
                                              54,303
                                              
                                              
                                              
                                              -Deferred
      gain
                                              
                                              
                                              (8,023
                                              )
                                              
                                              
                                              (8,024
                                              )Deferred
      rent
                                              
                                              
                                              (801
                                              )
                                              
                                              
                                              -Stock
      based compensation expense
                                              
                                              
                                              2,210
                                              
                                              
                                              
                                              4,494Changes
      in operating assets and liabilities:Accounts
      receivable trade
                                              
                                              
                                              380,458
                                              
                                              
                                              
                                              28,958Inventories
                                              
                                              
                                              317,860
                                              
                                              
                                              
                                              (218,699
                                              )Prepaid
      expenses and other current assets
                                              
                                              
                                              (80,548
                                              )
                                              
                                              
                                              (50,969
                                              )Bank
      overdraft
                                              
                                              
                                              (54,962
                                              )
                                              
                                              
                                              81,132Accounts
      payable
                                              
                                              
                                              (304,918
                                              )
                                              
                                              
                                              (371,667
                                              )Accrued
      expenses
                                              
                                              
                                              (45,849
                                              )
                                              
                                              
                                              74,040Income
      taxes receivable/payable
                                              
                                              
                                              (123,820
                                              )
                                              
                                              
                                              (57,458
                                              )Grape
      payables
                                              
                                              
                                              (657,371
                                              )
                                              
                                              
                                              (569,897
                                              )Net
      cash used in operating activities
                                              
                                              
                                              (531,905
                                              )
                                              
                                              
                                              (759,957
                                              )Cash
      flows from investing activities;Additions
      to property and equipment
                                              
                                              
                                              (54,276
                                              )
                                              
                                              
                                              (46,302
                                              )Payments
      received on grape supplier loan
                                              
                                              
                                              27,577
                                              
                                              
                                              
                                              31,207Net
      cash used in investing activities
                                              
                                              
                                              (26,699
                                              )
                                              
                                              
                                              (15,095
                                              )Cash
      flows from financing activities:Proceeds
      from stock options exercised
                                              
                                              
                                              -
                                              
                                              
                                              
                                              2,715Borrowing
      from revolving line of credit
                                              
                                              
                                              662,291
                                              
                                              
                                              
                                              507,149Payments
      on long-term debt
                                              
                                              
                                              (103,687
                                              )
                                              
                                              
                                              (85,173
                                              )Net
      cash provided by financing activities
                                              
                                              
                                              558,604
                                              
                                              
                                              
                                              424,691Net
      change in cash and cash equivalents
                                              
                                              
                                              -
                                              
                                              
                                              
                                              (350,361
                                              )Cash
      and cash equivalents:Beginning
      of period
                                              
                                              
                                              -
                                              
                                              
                                              
                                              350,361End
      of period
                                              
                                              $
                                              -
                                              
                                              
                                              $
                                              -




The
accompanying notes are an integral part of this financial
statement.




5




NOTES TO
UNAUDITED INTERIM FINANCIAL STATEMENTS





1) BASIS
OF PRESENTATION





The
accompanying unaudited financial statements for the three months ended March 31,
2010 and 2009, have been prepared in conformity with accounting principles
generally accepted in the United States (“GAAP”). The financial information as
of December 31, 2009 is derived from the audited financial statements presented
in the Willamette Valley Vineyards, Inc. (the “Company”) Annual Report on Form
10-K for the year ended December 31, 2009. Certain information or footnote
disclosures normally included in financial statements prepared in accordance
with GAAP have been condensed or omitted pursuant to the rules and regulations
of the Securities and Exchange Commission. In the opinion of management, the
accompanying financial statements include all adjustments necessary (which are
of a normal recurring nature) for the fair statement of the results of the
interim periods presented. The accompanying financial statements should be read
in conjunction with the Company’s audited financial statements for the year
ended December 31, 2009, as presented in the Company’s Annual Report on Form
10-K.




Operating
results for the three months ended March 31, 2010 are not necessarily indicative
of the results that may be expected for the entire year ending December 31,
2010, or any portion thereof.





The
Company consists of the retail, in-state self-distribution and out-of-state
sales departments.  These departments have mostly similar economic
characteristics, offer comparable products to customers, and utilize similar
processes for production and distribution. The in-state self-distribution
business known as Bacchus Fine Wines has the unique characteristic of selling
wholesale purchased wines and glassware in addition to Company produced wines.
The Company reports limited financial information for two operating segments as
follows: Bacchus Distribution and Produced Wines.





Basic
earnings per share are computed based on the weighted-average number of common
shares outstanding each period. Diluted earnings per share are computed using
the weighted average number of shares of common stock and potentially dilutive
common shares outstanding during the year.  Potentially dilutive
shares from stock options and other potentially dilutive shares are excluded
from the computation when their effect is anti-dilutive. There were no
potentially dilutive shares excluded from the computation for the three months
ended March 31, 2010. 15,475 and 12,200 potentially dilutive shares are included
in the computation of dilutive earnings per share for the three months ended
March 31, 2010 and 2009, respectively.





2) EFFECTS
OF RECENTLY ISSUED ACCOUNTING STANDARDS





In May
2009, the Financial Accounting Standards Board (“FASB”) issued a new statement
that establishes general standards of accounting for, and disclosure of events
that occur after the balance sheet date but before the financial statements are
issued or are available to be issued. The new statement, located under the FASB
Accounting Standards CodificationTM (“ASC”) Topic 855 Subsequent Events (formerly
SFAS 165, Subsequent Events) requires entities to disclose the date through
which subsequent events were evaluated as well as the rationale for why that
date was selected, that is, whether that date represents the date the financial
statements were issued or were available to be issued. The new statement is
effective for interim or annual periods ending after June 15, 2009, which was
the quarter ended June 30, 2009 for the Company. In February 2010, the FASB
amended its guidance removing the requirement for SEC filers to disclose the
date through which an entity has evaluated subsequent events. The adoption of
this new statement did not have a material impact on our financial
statements.




6





3) STOCK
BASED COMPENSATION





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 was approved by the
shareholders, 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 related to the value of outstanding stock
options for the periods shown:




Three months endedMarch 31, 2010WeightedaverageexerciseShares
                                                    
                                                    
                                                    priceOutstanding
      at beginning of period
                                                    
                                                    
                                                    355,700
                                                    
                                                    
                                                    $
                                                    4.16Granted
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    
                                                    -Exercised
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    
                                                    -Forfeited
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    
                                                    -Outstanding
      at end of Period
                                                    
                                                    
                                                    355,700
                                                    
                                                    
                                                    $
                                                    4.16




In
accordance with the current accounting guidance for share-based payments, the
Company recognizes compensation expense for options awarded under its stock
incentive plans. Current accounting guidance requires the grant-date fair value
of all share-based payment awards, including employee stock options, to be
recognized as employee compensation expense over the requisite service period.
The fair value of each stock option granted is estimated on the date of grant
using the Black-Scholes 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.




Black-Scholes
assumptions


March
      31,2010Risk
      Free interest rates
                    
                    
                    3.84
                    %Expected
      dividend
                    
                    
                    0
                    %Expected
      lives, in years
                    
                    
                    5-10Expected
      volatility
                    
                    
                    26.9
                    %





7




The
Company expenses stock options on a straight-line basis over the options’
related vesting term.  For the three months ended March 31, 2010 and
2009, the Company recognized pretax compensation expense related to stock
options and restricted stock grants of $2,210 and $4,494,
respectively.





During
the three months ended March 31, 2010, there were no transactions related to
stock option exercise activity.




4)
INVENTORIES





The
Company’s inventories, by major classification, are summarized as follows, as of
the dates shown:





March
      31,
                              
                              
                              December
      31,2010
                              
                              
                              2009(unaudited)Winemaking
      and packaging materials
                              
                              $
                              683,341
                              
                              
                              $
                              336,813Work-in-progress
      (costs relating to unprocessed and/or bulk wine products)
                              
                              
                              3,634,802
                              
                              
                              
                              3,068,934Finished goods
      (bottled wines and
      related products)
                              
                              
                              7,533,404
                              
                              
                              
                              8,763,660Obsolescence
      reserve
                              
                              
                              (54,303
                              )
                              
                              
                              -Current
      inventories
                              
                              $
                              11,797,244
                              
                              
                              $
                              12,169,407




5)
PROPERTY AND EQUIPMENT





The
Company’s property and equipment consists of the following, as of the dates
shown:


March
      31,
                                
                                
                                December
      31,2010
                                
                                
                                2009(unaudited)Construction
      in progress
                                
                                $
                                184,147
                                
                                
                                $
                                142,971Land
      and improvements
                                
                                
                                2,594,155
                                
                                
                                
                                2,594,155Winery
      building and hospitality center
                                
                                
                                5,321,892
                                
                                
                                
                                5,315,163Equipment
                                
                                
                                5,573,126
                                
                                
                                
                                5,566,75713,673,320
                                
                                
                                
                                13,619,046Less
      accumulated depreciation
                                
                                
                                (7,583,237
                                )
                                
                                
                                (7,426,817
                                )$
                                6,090,083
                                
                                
                                $
                                6,192,229





6)  INTEREST
AND TAXES PAID





During
the first quarter ended March 31, 2010, the Company paid $0 in federal, state
and local income taxes and $110,025 in payroll tax. Additionally, $53,304 was
paid in interest on the long-term debt and revolving credit line for the same
period.




8





7)
SEGMENT REPORTING





The
Company has identified two operating segments, Produced Wine and Bacchus
Distribution. Bacchus Distribution (dba Bacchus Fine Wines), is the Company’s
in-state distribution department. Bacchus distributes produced wine, purchased
wine and Riedel glassware at wholesale prices to in-state customers. Produced
wine represents all Willamette Valley Vineyard branded wine which is produced at
the winery. Purchased wines and Riedel glassware are brands purchased from other
wine distributors and wineries for sale to in-state customers. For segment
reporting, the produced wines distributed by Bacchus are consolidated with
Retail and Out-of-State sales and shown as Produced Wines.





The two
segments reflect how the Company’s operations are evaluated by senior management
and the structure of its internal financial reporting.  The Company
evaluates performance based on the gross profit of the respective business
segment.  Sales, general and administrative expenses are not allocated
between operating segments, therefore net income information for the respective
segments is not available.  Discrete financial information related to
segment assets, other than inventory, is not available and that information
continues to be aggregated.





The
following tables outline the sales, cost of sales and gross profit, for the
three month period ended March 31, 2010 and 2009 by operating
segment:





Three
      months ended March 31, 2010Bacchus
                        
                        
                        ProducedDistribution
                        
                        
                        Wine
                        
                        
                        TotalNet
      Sales
                        
                        $
                        965,080
                        
                        
                        $
                        2,588,496
                        
                        
                        $
                        3,553,576Cost
      of Sales
                        
                        $
                        780,238
                        
                        
                        $
                        1,304,611
                        
                        
                        $
                        2,084,849Gross
      Profit
                        
                        $
                        184,842
                        
                        
                        $
                        1,283,885
                        
                        
                        $
                        1,468,727%
      of sales
                        
                        
                        19.2
                        %
                        
                        
                        49.6
                        %
                        
                        
                        41.3
                        %




Three
      months ended March 31, 2009Bacchus
                        
                        
                        ProducedDistribution
                        
                        
                        Wine
                        
                        
                        TotalNet
      Sales
                        
                        $
                        907,526
                        
                        
                        $
                        2,721,721
                        
                        
                        $
                        3,629,247Cost
      of Sales
                        
                        $
                        642,955
                        
                        
                        $
                        1,120,189
                        
                        
                        $
                        1,763,144Gross
      Profit
                        
                        $
                        264,571
                        
                        
                        $
                        1,601,532
                        
                        
                        $
                        1,866,103%
      of sales
                        
                        
                        29.2
                        %
                        
                        
                        58.8
                        %
                        
                        
                        51.4
                        %





Total
inventory for Bacchus Distribution was $1,554,059 of purchased wines and
$335,768 of non-wine merchandise at March 31, 2010.  This compares to
produced wine inventory of $5,530,944 and $4,376,473 of non-wine merchandise and
work-in-process for the same period. At March 31, 2009 total inventory for
Bacchus Distribution was $2,098,072 of purchased wines and $226,645 of non-wine
merchandise at period end March 31, 2009. This compares to produced wine
inventory of $4,210,312 and $4,287,874 of non-wine merchandise and
work-in-process for the same period.




9




Item
2





MANAGEMENT'S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS




Forward Looking
Statements





This
Management’s Discussion and Analysis of Financial Condition and Results of
Operations and other sections of this Form 10-Q contain forward-looking
statements within the meaning of the Private Securities Litigation Reform Act of
1995.  These forward-looking statements involve risks and
uncertainties that are based on current expectations, estimates and projections
about the Company’s business, and beliefs and assumptions made by
management.  Words such as “expects,” “anticipates,” “intends,”
“plans,” “believes,” “seeks,” “estimates” and variations of such words and
similar expressions are intended to identify such forward-looking
statements.  Therefore, actual outcomes and results may differ
materially from what is expressed or forecasted in such forward-looking
statements due to numerous factors, including, but not limited
to:  availability of financing for growth, availability of adequate
supply of high quality grapes, successful performance of internal operations,
impact of competition, changes in wine broker or distributor relations or
performance, impact of possible adverse weather conditions, impact of reduction
in grape quality or supply due to disease, impact of governmental regulatory
decisions, and other risks disclosed from time to time in the Company’s
Securities and Exchange Commission filings and reports.  In addition,
such statements could be affected by general industry and market conditions and
growth rates, and general domestic economic conditions.  The
forward-looking statements are made as of the date hereof, and, except as
otherwise required by law, we disclaim any intention or obligation to update or
revise any forward-looking statements or to update the reasons whythe actual
results could differ materially from those projected in the forward-looking
statements, whether as a result of new information, future events or
otherwise.





Critical
Accounting Policies





The
foregoing discussion and analysis of our financial condition and results of
operations are based upon our financial statements, which have been prepared in
accordance with accounting principles generally accepted in the United States of
America.  The preparation of these financial statements requires the
Company’s management to make estimates and judgments that affect the reported
amounts of assets, liabilities, revenues and expenses, and related disclosure of
contingent assets and liabilities.  On an on-going basis, we evaluate
our estimates, including those related to revenue recognition, collection of
accounts receivable, valuation of inventories, and amortization of vineyard
development costs.  We base our estimates on historical experience and
on various other assumptions that are believed to be reasonable under the
circumstances.  Actual results may differ from these estimates under
different assumptions or conditions.  A description of our critical
accounting policies and related judgments and estimates that affect the
preparation of our financial statements is set forth in our Annual Report on
Form 10-K for the year ended December 31, 2009.  Such policies were
unchanged during the three months ended March 31, 2010.





Overview





The
Company’s principal sources of revenue are derived from sales and distribution
of wine.  Net loss for the first quarter ended March 31, 2010 was
($188,344) compared to net earnings of $165,156 for the first quarter ended
March 31, 2009, a 214.0% decrease over the comparable prior year
period.





As a
result, the Company generated ($0.04) basic earnings per share during the three
months ended March 31, 2010, a decrease of $0.07 basic earnings per share versus
the comparable prior year period.





The
Company sold approximately 31,865 cases during the three months ended March 31,
2010.  Of these cases sold, approximately 22,968 cases were produced
brands and another 8,897 cases were purchased brands.





Sales
revenue for the three months ended March 31, 2010 decreased $75,671 or -2.1%,
from the comparable prior year period.




10




Reductions
in sales revenue for the three months ended March 31, 2010 versus 2009 is being
principally driven by loss of product placements and order activity from our
chain store customers.  The main channel of the reduction is through
our in-state wholesale distribution unit, Bacchus Fine Wines. The mix of
produced brand versus purchased brands sales in-state has shifted from 45% in
2009 to 36% in 2010, a 20% reduction. This decrease in produced brands is mainly
due to the reduced order activity of key chain store accounts as previously
mentioned. Purchased brands sales revenue in-state in the first quarter 2010 is
slightly higher than first quarter 2009.





Retail
sales in the quarter increased versus the prior year mainly due to the
additional sales provided by the off-site tasting room known as the Wine Center
located in McMinnville, OR.  This new Retail location was opened in
the fourth quarter of 2009.





Net
operating loss for the quarter ended March 31, 2010 was ($272,756) which is
$577,125 lower than that of the prior year. The substantially lower operating
income is a result of several key factors as follows:





Decreased
sales volume from Oregon wholesale customers of higher margin winery produced
wines.  Restaurant customers are experiencing reduced demand for wine
and retailers are seeing a shift to lower priced wines.  The Company's
mix of sales, particularly Oregon wholesale sales, has shifted to its lower
priced, lower margin wines during this period.





Gross
margins on produced wine are declining due to higher wine and packaging costs
incurred in 2007 and 2008 while the recession has prevented any price increases
in finished wine.  During 2007, at the height of supply demand, prices
of supplies rose and freight surcharges were applied.  During 2008,
production materials, grapes and bulk wine demand and prices started to soften
but the Oregon wine industry was hit with one of its lowest harvest yields per
acre on record, causing much higher per ton costs.  The reduced demand
for production supplies and record high wine-grape harvest in 2009 have produced
a lower per case production cost from which the Company should benefit with the
release of the 2009 vintage beginning with the '09 Whole Cluster Pinot Noir in
June. Provided the Company can maintain its general price position, operating
income from produced wines should improve. Promotional pricing to remain
competitive has also negatively impacted gross margins.





The
historically high 2009 harvest will produce lower per unit costs but also a
challenge.  Management has identified approximately 25,000 case
equivalents in bulk wine that are in excess of projected need for this vintage
and is currently presenting bulk wine samples to wine brokers and other
producers.  If management is unable to sell all the excess bulk wine,
then the balance will need to be bottled to preserve its quality, placing
additional demand on cash resources.





Gross
margins on purchased wines have declined due to smaller, less efficient freight
cost orders placed with suppliers and less container purchases from
overseas.  The Company has been focused on managing its inventory
tighter but this has resulted in higher per case costs.  From June
2008 to the end of the First Quarter 2010, total purchased wine inventory has
been reduced from $2.3 million to $1.5 million.  Promotional pricing
to remain competitive has also reduced margins as well as a shift to lower
priced wines which earn smaller margins.





As the
Company is working down its aged inventory of purchased wines, these are being
sold at lower than standard margins and in some cases at or below cost to avoid
the wine spoiling from excessive age.  In 2009, management implemented
a new inventory management and purchasing system to identify and prevent the
accumulation of purchased wine inventory.  From October 2009 to the
end of the 1st Quarter 2010, aged wine inventory has been reduced from $698,332
to $543,034.  Approximately 30% of purchased wine inventory has been
categorized by management as aged and of special sales focus.  In the
first quarter 2010 an inventory obsolescence reserve of $54,303 was established
for purchased brands wine inventory that is slow-moving and aged.





11




Management
expects to return to more profitable container orders and a balanced inventory
next year which should restore gross margins from purchased wines to historic
levels.





Additionally,
a shift in the mix of sales from produced brands to purchased brands in our
Oregon wholesale market where we achieve a lower gross profit has adversely
impacted gross margins in the first quarter 2010.





The
increase in Sales, General and Administrative expense is primarily due to
incremental labor costs for shared service departments including related payroll
taxes and fringe benefits. These increased expenses are somewhat offset by
savings in professional service fees for accounting and legal services versus
the prior year.





Management
has taken steps to increase sales with the Founder/CEO making numerous key
account calls across the nation and the sales and production staff increasing
account presentations.  Management is cutting expenses by reducing
staffing, selling and administrative expenses and discontinuing the employer
match of the 401k employee contributions.  Packaging and freight costs
are being renegotiated and lowered.





The
winery bottled approximately 3,300 cases in the first quarter of 2010, mainly
2009 vintage Pinot Gris.





The
Company has an asset-based loan agreement with Umpqua Bank that allows it to
borrow up to $2,000,000.  The maturity date on this loan agreement is
June 2010.  At March 31, 2010, the Company had a credit line balance
of $803,255 and $1,196,745 of available credit. The interest rate charged in the
quarter was 3.25%. The interest rate on this note is a variable interest rate
and is subject to change from time to time based on changes in an independent
index which is the Prime Rate as published in the Wall Street Journal (the
“Index”).  The index rate at March 31, 2010 is 3.25%. The loan
agreement contains, among other things, certain restrictive financial covenants
with respect to total equity, debt-to-equity and debt coverage that must be
maintained by the Company on a quarterly basis.  As of March 31, 2010,
the Company was in compliance with all of the financial covenants. The Company
is in the process of renewing its revolving line of credit which is due to
expire in June 2010.





In the
first quarter of 2010 Willamette Valley Vineyards received significant media
attention surrounding our sustainable efforts and reputation for
innovation.





Willamette
Valley Vineyards' 2007 Hannah Pinot Noir received 90 pts in the June edition of
the Wine Enthusiast magazine as did the 2007 Griffin Creek Merlot.





The 2008
Riesling garnered a 89 point score and Best Value rating from the Wine Spectator
and was featured by them as Wine of the Week.





Sunset
Magazine in their March issue included information about the winery's new
Willamette Valley Vineyards Wine Center in downtown McMinnville.





RESULTS
OF OPERATIONS





Revenue





Net
revenue for the three months ended March 31, 2010 decreased $75,671 or -2.1%,
from the comparable prior year period. In-state wholesale revenue decreased
$147,556 versus the comparable prior year quarter. The decrease in Oregon
wholesale revenue in the quarter is primarily due to reduced order activity of
produced brands by chain customers.





Sales to
out-of-state distributors in the first quarter of 2010 through our National
Sales Department are consistent with first quarter sales in 2009.





12




Retail
direct-to-consumer sales for the three months ended March 31, 2010 increased by
$55,694 or 10.4% versus prior year. This is mainly due to increased attendance
and related sales activity at on-site and off-site events. The addition of a new
tasting room in McMinnville, OR known as the Wine Center also helped sustain
retail tasting room sales in the first quarter 2010 versus 2009.





Our
revenues from winery operations are summarized as follows:





Three
      months endedMarch
      31,2010
                          
                          
                          2009Retail
      Sales, RentalIncome and
      Events
                          
                          $
                          588,969
                          
                          
                          $
                          533,275In-state
      sales
                          
                          
                          1,509,330
                          
                          
                          
                          1,656,886Out-of-state
      sales
                          
                          
                          1,530,865
                          
                          
                          
                          1,528,873Misc.
      sales
                          
                          
                          10,650
                          
                          
                          
                          -Total
      Revenue
                          
                          
                          3,639,814
                          
                          
                          
                          3,719,034Less
      excise taxes
                          
                          
                          (86,238
                          )
                          
                          
                          (89,787
                          )Net
      Revenue
                          
                          $
                          3,553,576
                          
                          
                          $
                          3,629,247





Retail
sales, rental income and events for the three months ended March 31, 2010
increased $55,694 or 10.4% compared to the first quarter 2009.  For
the quarter, the increase in sales revenue is primarily due to increased
attendance and related sales at on-site and off-site
events.  Additionally, the addition of the new off-site tasting room
known as the Wine Center located in McMinnville, OR, helped maintain tasting
room sales consistent with prior year sales.





Sales in
the state of Oregon, through our wholesale department, Bacchus Fine Wines,
decreased $147,556 or -8.9%, for the three months ended March 31, 2010, compared
to the corresponding prior year period. The decrease is largely the result of
the reduced level of order activity by some key chain store customers versus the
first quarter of 2009. Sales to our largest wholesale in-state customer for the
three months ended March 31, 2010 represent 9.6% of total wholesale in-state
sales. Compared to the three months ended March 31, 2009 sales to this customer
as a percentage of total wholesale in-state sales has decreased 53.7%. This
raises awareness regarding the concentration of sales upon a retailer who
customarily rotates there stock of producer brands, where no assurance can be
given of continued placement.





Out-of-state
sales in the three months ended March 31, 2010 increased only $1,992 or 0.1%
versus the comparable prior year period.





Gross
Profit





Gross
profit for the three months ended March 31, 2010 decreased $397,376 or -21.3%,
versus the first quarter of 2009.





As a
percentage of net revenue, gross profit from winery operations was 41.3% in the
three months ended March 31, 2010, compared to 51.4% in the comparable prior
year period. The decrease in gross profit as a percentage of net revenue for the
three months ended March 31, 2010 is mainly due to the increase in the cost of
our produced brands across our product lines.  Additionally, the shift
in the mix of sales from produced brands to purchased brands in our in-state
wholesale distributor, Bacchus Fine Wines. This shift represents a lower
percentage of total gross profit and has unfavorably impacted our gross profit
percentage for the first three months of 2010 versus prior year. The Company
continues to focus on improved distribution of higher margin Willamette Valley
Vineyards brand products as well as continuing our efforts to reduce grape and
production costs.





13




Selling,
General and Administrative Expense





Selling,
general and administrative expense for the three months ended March 31, 2010
increased $179,749 or 11.5% compared to the corresponding prior year
period.  This increase is due primarily to incremental labor and
related taxes and benefits for shared service administrative staff. The Company
has experienced significant savings in professional service fees for accounting
and legal services and freight costs for outbound shipments. In total, as a
percentage of net revenues from winery operations, selling, general and
administrative expenses were 49.0% for the three months ended March 31, 2010, as
compared to 43.0% for the comparable prior year period.





Interest
Income, Interest Expense





Interest
income for the first quarter 2010 was $2,819. Interest expense for the three
months ended March 31, 2010, increased $20,641 or 63.7% compared to the
corresponding prior year period.  The average interest rate paid for
the three months ended March 31, 2010 was 4.9%.





Income
Taxes





The
income tax benefit in the first quarter 2010 was $123,819 for the three months
ended March 31, 2010, compared to income tax expense of $117,542 for the
comparable prior year period. Our estimated tax rate for the three months
ended March 31, 2010 and 2009 was 39.7% and 41.6%, respectively.




Net
Income and Earnings per Share





As a
result of the factors listed above, net loss for the three months ended March
31, 2010 was $188,344 compared to net income of $165,156 in the comparable prior
year period. This is a decrease of 214.0% versus 2009 for the three months ended
March 31, 2010.  Diluted loss per share was ($0.04) for the first
quarter 2010, compared to $0.03 earnings per diluted share in the comparable
prior year period.





Liquidity
and Capital Resources





At March
31, 2010, we had a working capital balance of $11.2 million and a current
working capital ratio of 5.57:1. At December 31, 2009, we had a working capital
balance of $11.4 million and a current working capital ratio of
4.98:1.  We had a cash balance of $0 at March 31, 2010, compared to a
cash balance of $0 at December 31, 2009.





Total
cash used in operating activities in the three months ended March 31, 2010 was
$531,905 compared to cash used by operating activities of $759,957 for the same
period in the prior year.  The decrease in cash used in operating
activities versus prior year was primarily due to the reduction in on-hand
inventory. This is offset somewhat by an increase in cash used to reduce grapes
payable.





Total
cash used in investing activities in the three months ended March 31, 2010 was
$26,699, compared to $15,095 used in the comparable prior year
period.  The slight increase was due to a small increase in capital
expenditures versus the prior year.





Total
cash provided by financing activities in the three months ended March 31, 2010
was $558,604 compared to $424,691 provided by financing activities in the
comparable prior year period. Cash provided by financing activities in the
current year primarily consists of revolving credit line advances needed to
support working capital requirements.





14




At March
31, 2010, the line of credit balance was $803,255, on a maximum borrowing amount
of $2,000,000.  We have 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 us on a quarterly basis. As of March 31, 2010, we were in
compliance with all of the financial covenants. The existing line of credit with
Umpqua bank is due to expires on June 30, 2010. The Company is actively pursuing
a renewal of its line of credit for another year. The terms of our line of
credit refinancing, including amounts available and interest rates, may be less
favorable then the terms of our current arrangement.





As of
March 31, 2010, we had a total long-term debt balance of $3,615,181, including
the portion due in the next year, owed to Farm Credit Services. There was no new
long-term debt incurred in the quarter ended March 31, 2010. The remaining debt
balance mainly represents the debt service with Farm Credit Services which was
used to acquire vineyard land, finance our Hospitality Center, invest in new
winery equipment to increase our winemaking capacity, and complete a larger
warehouse storage facility.





At March
31, 2010, we owed $0 on grape contracts. For the 2010 harvest, there are grape
purchase contracts in place with local growers that will be accrued when the
grapes are received, typically in October.





We
believe that cash flow from operations and funds available under our existing
credit facilities will be sufficient to meet our foreseeable short and long-term
needs.





Segment
Reporting





The
Company’s in-state self-distribution business know as Bacchus Fine Wines sells
wholesale purchased wines from other wineries and Riedel glassware in addition
to Company produced wines. The sale of purchased wines and Riedel glassware is a
distinct category of the Company’s sales versus the retail and out-of-state
sales organizations of the Company and therefore warrants segment
discussion.  The purchased wine and Riedel glassware segment is shown
below as Bacchus Distribution. For purposes of segment reporting the produced
wines sold by Bacchus are consolidated with retail and out-of-state sales and
shown below as Produced Wines. Sales, general and administrative expenses are
not allocated between operating segments, and therefore net income information
for the respective segments is not available.





The
following table outlines the sales, cost of sales and gross profit, for the
three month period ended March 31, 2010 by operating segment:





Three
      months ended March 31, 2010Bacchus
                    
                    
                    ProducedDistribution
                    
                    
                    Wine
                    
                    
                    TotalNet
      Sales
                    
                    $
                    965,080
                    
                    
                    $
                    2,588,496
                    
                    
                    $
                    3,553,576Cost
      of Sales
                    
                    $
                    780,238
                    
                    
                    $
                    1,304,611
                    
                    
                    $
                    2,084,849Gross
      Profit
                    
                    $
                    184,842
                    
                    
                    $
                    1,283,885
                    
                    
                    $
                    1,468,727%
      of sales
                    
                    
                    19.2
                    %
                    
                    
                    49.6
                    %
                    
                    
                    41.3
                    %




15




Three
      months ended March 31, 2009Bacchus
                    
                    
                    ProducedDistribution
                    
                    
                    Wine
                    
                    
                    TotalNet
      Sales
                    
                    $
                    907,526
                    
                    
                    $
                    2,721,721
                    
                    
                    $
                    3,629,247Cost
      of Sales
                    
                    $
                    642,955
                    
                    
                    $
                    1,120,189
                    
                    
                    $
                    1,763,144Gross
      Profit
                    
                    $
                    264,571
                    
                    
                    $
                    1,601,532
                    
                    
                    $
                    1,866,103%
      of sales
                    
                    
                    29.2
                    %
                    
                    
                    58.8
                    %
                    
                    
                    51.4
                    %





Total
inventory for Bacchus Distribution was $1,554,059 of purchased wines and
$335,768 of non-wine merchandise at March 31, 2010.  This compares to
produced wine inventory of $5,530,944 and $4,376,473 of non-wine merchandise and
work-in-process for the same period. At March 31, 2009 total inventory for
Bacchus Distribution was $2,098,072 of purchased wines and $226,645 of non-wine
merchandise at period end March 31, 2009. This compares to produced wine
inventory of $4,210,312 and $4,287,874 of non-wine merchandise and
work-in-process for the same period.





Item
3





QUANTITATIVE
AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK





None.





Item
4





CONTROLS
AND PROCEDURES





Evaluation
of Disclosure Controls and Procedures





We
maintain disclosure controls and procedures that are designed to ensure that
information required to be disclosed in our reports under the Securities
Exchange Act of 1934, as amended (the “Exchange Act”), is recorded, processed,
summarized and reported within the time periods specified in the SEC’s rules and
forms, and that such information is accumulated and communicated to management,
including our Chief Executive Officer, as appropriate, to allow timely decisions
regarding required disclosure.  For the period ended March 31, 2010,
management performed an evaluation, under the supervision and with the
participation of the Chief Executive Officer, and Chief Financial Officer, of
the effectiveness of our disclosure controls and procedures, as defined in Rules
13a-15(e) and 15d-15(e) of the Exchange Act. Based on this evaluation, our
Chief Executive Officer and Chief Financial Officer have concluded that our
disclosure controls and procedures as of March 31, 2010 were not effective
in ensuring that information required to be disclosed in our Exchange Act
reports is (1) recorded, processed, summarized and reported in a timely manner,
and (2)accumulated and communicated to our management, including our Chief
Executive Officer and Chief Financial Officer, as appropriate, to allow timely
decisions regarding required disclosure. Management’s conclusions are based upon
the continued existence of the material weakness identified in our annual report
on Form 10-K for the period ended December 31, 2009, the nature of which is
summarized below.





As of
December 31, 2009, the Company had identified the following material weakness.
Management has determined this material weakness continued to exist as of March
31, 2010.





·
            Lack
      of sufficient procedures and controls related to the allocation of our
      costs to our produced wine. This weakness was identified during the 2009
      year-end audit by management and accounting staff present at the time of
      the audit, in conjunction with our independent auditors, Moss-Adams LLP.
      During the 2009 year-end audit, significant analysis and review were
      completed and ultimately resulted in an adjustment to inventory and cost
      of goods sold of $373,691.





16




The
Company does not expect that its disclosure controls and procedures will prevent
all errors and instances of 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 its disclosure controls and procedures,
and will continually reevaluate them to ensure they provide reasonable assurance
that such controls and procedures are effective.





Changes
in Internal Control over Financial Reporting





In our
Management’s Report on Internal Control Over Financial Reporting included in the
Company’s Form 10-K for the year ended December 31, 2009, management concluded
that our internal control over financial reporting was not effective due to the
existence of the material weakness identified above.





In an
attempt to remediate this material weakness, the Company implemented the
following remedial actions during the first three months of 2010:





·
            The
      Company has added additional accounting resources to develop, implement
      and maintain procedures and controls related to the costing of our
      produced wines.  As of March 31, 2010, these controls and
      procedures had not been fully developed or implemented and the material
      weakness identified above had not been fully
  remediated.




17





PART
II.                        
     OTHER INFORMATION





Item
      1.
            Legal
      Proceedings.





From time
to time, we are a party to various judicial and administrative proceedings
arising in the ordinary course of business.  Our management and legal
counsel have reviewed the probable outcome of any proceedings that were pending
during the period covered by this report, the costs and expenses reasonably
expected to be incurred, the availability and limits of our insurance coverage,
and our established liabilities.  While the outcome of legal
proceedings cannot be predicted with certainty, based on our review, we believe
that any unrecorded liability that may result as a result of any legal
proceedings is not likely to have a material effect on our liquidity, financial
condition or results from operations.





Item
      1A
                Risk
      Factors





As a
smaller reporting company, we are not required to provide the information
required by this item.





Item
      2.
            Unregistered
      Sales of Equity Securities and Use of
Proceeds.





None.





Item
      3.
            Defaults
      Upon Senior Securities.





None.





Item
      4.
            Submission
      of Matters to a Vote of Security
Holders.





None.





Item
      5.
            Other
      Information





None.




18




Item
      6.
            Exhibits





Exhibit
No.  Description





3.1  
 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)





3.2   
Articles of Amendment, dated August 22, 2000 (incorporated herein by reference
to Exhibit 3.4 to the Company’s Form 10-Q for the quarterly period ended June
30, 2008, filed August 14, 2008, File No. 000-21522)





3.3   
Bylaws of Willamette Valley Vineyards, Inc. (incorporated herein by reference to
Exhibit 3.5 to the Company’s Form 10-Q for the quarterly period ended June 30,
2008, filed August 14, 2008 File No. 000-21522)





31.1  
Certification of Chief Executive Officer required by Rule 13a-14(a) or Rule
15d-14(a) of the Securities Exchange Act of 1934 (Filed herewith)





31.2  
Certification of Chief Financial Officer required by Rule 13a-14(a) or Rule
15d-14(a) of the Securities Exchange Act of 1934 (Filed herewith)





32.1  
Certification of James W. Bernau pursuant to 18 U.S.C. Section 1350 as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (Filed
herewith)





32.2  
Certification of Jeffrey J. Fox pursuant to 18 U.S.C. Section 1350 as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (Filed
herewith)




19





SIGNATURES




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




WILLAMETTE
VALLEY VINEYARDS, INC.




Date:
      May 21, 2010
              By  /s/  James
      W. BernauJames
      W. BernauPresidentDate:
      May 21, 2010
              By  /s/  Jeffrey
      J. FoxJeffrey
      J. FoxController




20