SECURITIES AND EXCHANGE COMMISSION 
                    Washington, D.C. 20549 
 
___________________________________________________________  
                         FORM 10-QSB 
___________________________________________________________ 
 
   Quarterly Report Pursuant to Section 13 or 15 (d) of the 
              Securities Exchange Act of 1934 
 
           For the Quarter Ended March 31, 1998 
 
               Commission File Number 0-21522 
 
             WILLAMETTE VALLEY VINEYARDS, INC. 
 
     (Exact name of registrant as specified in charter) 
 
            Oregon                       93-0981021       
(State or other jurisdiction of      (I.R.S. Employer 
 incorporation or organization)     Identification Number) 
 
 
___________________________________________________________ 
 
 
     8800 Enchanted Way,  S.E., Turner, Oregon 97392 
                      (503)-588-9463 
 
     (Address, including Zip code, and telephone number, 
 including area code, of registrant's principal executive    
offices) 
 
___________________________________________________________ 
 
  Indicate by check mark whether the registrant (1) has 
filed all reports required to be filed by Section 13 or 
15(d) of the Securities Exchange Act of 1934 during the 
preceding 12 months (or for such shorter period that the 
registrant was required to file such reports) and (2) has 
been subject to such filing requirements for the past 90 
days. 
                [X] YES       [  ] NO 
 Number of shares of common stock outstanding as of March 
31, 1998       4,232,681 shares, no par value 
 
    Transitional Small Business Disclosure Format 
 
                [[  ] YES        [X]NO 
 
 
 
 
 
                    WILLAMETTE VALLEY VINEYARDS, INC. 
                        INDEX TO FORM 10-Q 
 
   
Part I - Financial Information 
 
Item 1--Balance Sheet                             
                                               
Statement of Operations              
 
Cash Flow                              
 
Notes to Consolidated Financial Statements   
 
Item 2--Management's Discussion and Analysis of Financial  
Condition and Results of Operations 
 
Part II - Other Information 
 
Item 4--Exhibits and Reports of Form 8-K                 
 
Signature                                                
 
 
                WILLAMETTE VALLEY VINEYARDS, INC. 
 
                          Balance Sheet 
 
                                  March 31,    December 31, 
                                    1998           1997 
ASSETS                           (unaudited) 
 
Current assets: 
 Cash and cash equivalents        $ 422,118       $ 13,541  
 Accounts receivable trade, net     784,437        820,526  
 Income taxes receivables            24,436         24,436 
 Other receivable                     7,712          3,122  
 Inventories                      3,961,428      4,171,027  
 Prepaid expenses                   122,700         75,171  
 Deferred income taxes               94,813         94,813  
 
Total current assets              5,417,644      5,202,636  
 
 Vineyard development cost, net   1,560,909      1,506,906  
 Property and equipment, net      6,766,935      6,859,835  
 Investments                        105,040        105,040  
 Notes receivable                   151,149        148,448  
 Debt issuance costs,net            123,470        122,870  
 
Total assets                    $14,125,147    $13,945,735  
 
 
LIABILITIES AND SHAREHOLDERS' EQUITY 
 
Current liabilities 
 Line of credit                  $1,667,297     $1,517,297  
 Current portion of long term debt  124,192        124,192  
 Accounts payable                   346,800        363,419  
 Accrued commissions and payroll    152,248        225,297  
 Grapes payable                     386,851        501,238  
 
Total current liabilities         2,677,388      2,731,443  
 
Long-term debt                    4,207,210      3,920,751  
Deferred income taxes               188,275        188,275  
 
Total liabilities                 7,072,873      6,840,469  
 
Shareholders' equity 
 Common stock, no par value  
- 10,000,000 shares authorized, 
 4.232,681 shares issued 
outstanding                       6,781,256      6,779,067  
 
Retained earnings                   271,018        326,199  
 
Total shareholders' equity        7,052,274      7,105,266  
 
Total liabilities and  
shareholders' equity           $ 14,125,147   $ 13,945,735  
 
The accompanying notes are an integral part of this 
financial statement 
 
 
                    WILLAMETTE VALLEY VINEYARDS, INC. 
                       Statement of Operations 
                              (Unaudited) 
 
                                Three Months Ended March 31, 
                                      1998       1997 
 
Net Revenues 
 Case revenue                    $ 1,106,885  $  817,122 
 Bulk revenue                        235,252           - 
 
Total Revenue                      1,342,137     817,122  
 
Cost of Sales 
 Case                                499,957     356,779 
 Bulk                                211,179           - 
 
Total Cost of sales                  711,136     356,779  
 
Gross Margin                         631,001     460,343  
 
Selling, general andadministrative 
 expenses                            567,541     501,200  
 
Other income (expense): 
 Interest income                       3,569      11,358 
 Interest expense                   (125,857)    (79,913) 
 Other income                          3,647       1,803  
 
                                    (118,641)    (66,752) 
 
Net loss before income taxes         (55,181)   (107,609) 
 
Income tax benefit (expense)               -           -    
 
Net loss                             (55,181)   (107,609) 
 
Retained earnings beginning 
 of period                           326,199     258,337  
 
Retained earnings end of period     $271,018    $150,728  
 
Basic loss per common share         $  (0.01)   $  (0.03) 
 
Diluted net loss per common share   $  (0.01)   $  (0.03) 
 
Weighted average number of  
basic common shares outstanding    4,232,681   3,785,356        
 
Weighted average number of  
diluted common shares outstanding  4,232,681   3,785,356 
 
 
The accompanying notes are an integral part of this  
financial statement. 
 
 
 
 
 
                WILLAMETTE VALLEY VINEYARDS, INC. 
                    Statement of Cash Flows 
                          (unaudited) 
                                Three Months Ended March 31, 
                                       1998         1997 
 
Cash flows from operating activities: 
 
Net loss                          $   (55,181)  $  (107,609) 
 
Reconciliation of net loss to net cash 
 used for operating activities: 
 
Depreciation and amortization         119,440       110,265  
 
Changes in assets and liabilities: 
 Accounts receivable trade             36,089        11,683  
 Other receivable                      (4,590)          496 
 Inventories                          209,599      (214,942) 
 Prepaid expenses                     (47,529)      (13,767) 
 Notes receivable                      (2,701)       (2,138) 
 Grape payable                       (114,387)     (125,252) 
 Accounts payable                     (16,619)      169,250 
 Taxes payable                              -       (15,000) 
 Accrued liabilities                  (73,049)      (84,101) 
 
Net cash provided by  
operating activities                   51,072      (271,115) 
 
Cash Flow from investing activities 
 
 Construction expenditures and 
 purchases of equipment               (13,124)     (135,504) 
 Vineyard development expenditures    (67,419)      (12,584) 
 Cash received for investments              -            84  
 
Net cash used by investing  
activities                            (80,543)     (148,004) 
 
Cash Flows from financing  
activities: 
 Line of credit borrowings            150,000       264,355 
 Debt issuance cost                      (600)      (29,687)  
 Increase in long term debt           286,459       (26,968) 
 Increase in equity                     2,189             - 
 
Net cash provided by  
financing activities                  438,048       207,700 
 
Net increase in cash and  
cash equivalents                      408,577      (211,419) 
 
Cash and cash equivalents: 
 
Beginning of period                    13,541       794,885  
 
End of period                      $  422,118    $  583,466  
 
 
The accompanying notes are an integral part of this 
financial statement. 
 
 
 
 
 
 
 
 
 
 
               WILLAMETTE VALLEY VINEYARDS, INC 
                 NOTES TO FINANCIAL STATEMENTS 
                         (unaudited) 
 
 
 
 
1)  BASIS OF PRESENTATION 
 
The interim financial statements have been prepared by the  
Company, without audit and subject to year-end adjustment,  
in accordance with generally accepted accounting principles,  
except that certain information and footnote disclosure made  
in the latest annual report have been condensed or omitted  
for the interim statements.  Certain costs are estimated for  
the full year and are allocated to interim periods based on  
estimates of operating time expired, benefit received, or  
activity associated with the interim period.  The financial  
statements reflect all adjustments which are, in the opinion  
of management, necessary for fair presentation. 
  
 
Forward Looking Statement: 
 
This Management's Discussion and  Analysis of Financial  
Condition and Results of Operation and other sections of 
this Form 10Q contain forward-looking statements within the  
meaning of the Private Securities Litigation Reform Act of  
1995.  These forward-looking statements involve risks and  
uncertainties that are based on current expectations,  
estimates and projections about the Company's business, and  
beliefs and assumptions made by management.  Words such as  
"expects," "anticipates," "intends," "plans," "believes,"  
"seeks," "estimates" and variations of such words and 
similar expressions are intended to identify such forward-
looking statements.  Therefore, actual outcomes and results 
may differ materially  from what is expressed or forecasted 
in such forward-looking statements due to numerous factors,  
including, but not limited to:  availability of financing 
for growth, availability of adequate supply of high quality  
grapes, successful performance of internal operations, 
impact of competition, changes in wine broker or distributor  
relations or performance, impact of possible adverse weather  
conditions, impact of reduction in grape quality or supply  
due to disease, impact of governmental regulatory decisions,  
successful assimilation of Tualatin Vineyards Inc.'s 
business with that of the Company and other risks detailed 
below as well as those discussed elsewhere in this Form 10Q 
and from time to time in the company's Securities and 
Exchange Commission filings and reports.  In addition, such 
statements could be affected by general industry and market 
conditions and growth rates, and general domestic economic 
conditions. 
 
 
 
 
2)  INVENTORIES BY MAJOR CLASSIFICATION ARE SUMMARIZED AS  
FOLLOW: 
 
 
                                     March 31, December 31, 
                                       1998        1997 
 
Winemaking and packaging materials $  246,935   $  189,062 
Work-in-progress (costs relating 
  to unprocessed and/or bulk 
  wine products                     1,542,523    1,725,910 
Finished goods (bottled wines  
 and related products)              2,171,970    2,256,055 
                                   $3,961,428   $4,171,027 
                                    =========    ========= 
 
 
 
3)  PROPERTY AND EQUIPMENT CONSIST OF THE FOLLOWING: 
 
                                   March 31,   December 31, 
                                     1998         1997 
 
Land and improvements            $ 1,031,115    $ 1,031,115 
Winery building and hospitality  
 center                            4,506,344      4,506,344 
Equipment                          3,276,757      3,263,633 
Construction in progress                   -              - 
                                   _________      _________  
                                 $ 8,814,216    $ 8,801,092 
Less accumulated depreciation     (2,047,281)    (1,941,257) 
                                   _________ 
                                 $ 6,766,935     $6,859,835 
                                   =========      ========= 
 
 
4) SUBSEQUENT EVENTS: 
 
 
 
 
 
 
 
 
              Management's Discussion and Analysis of 
           Financial Condition and Results of Operations 
 
 
 
RESULTS OF OPERATIONS 
 
Revenue 
 
Winery Operations 
The Company's revenues from winery operations before the  
deduction of excise taxes are summarized as follows: 
 
                                      Three Months Ended            
                                          March 31,            
                                       1998       1997 
 
Tasting Room sales & Rental Income  $ 154,780  $ 140,598 
On-site and off-site festivals        117,904     85,622 
In state sales                        426,063    316,964 
Out of state sales                    437,190    298,126 
Bulk wine sales                       235,252     _____- 
Total Revenue                      $1,371,189  $ 841,310  
                                      =======    ======= 
 
Tasting Room sales and rental income for the three months  
ended March 31, 1998 increased 10% over the same period in  
1997.  The increase in sales during the first quarter of   
1998 was principally attributable to revenue increases in  
room rental from the Hospitality Center over the same period  
last year. The Company will be contracting its hospitality  
and catering service which will save the Company the annual  
salary of one employee plus offer the customer a more  
complete set of services.  The Company will utilize this  
savings to hire a data entry person to focus on improving  
the Company's customer data base which will improve the  
Company's efforts in targeting direct mail and telephone  
sales. 
 
On-site and off-site festival sales for the first quarter of  
1998 increased 38% over the first quarter of 1997.  In  
the first quarter of 1998, the Company began a campaign to  
increase customer awareness in the Willamette Valley  
Vineyards label and to increase traffic in  its tasting  
room.  For its Valentines Day festivities, the Company sent  
out a special mailing promoting a buying opportunity of  
Pinot Noir and chocolate to 40,000 potential customers which  
successfully increased the sales of Pinot Noir.  
 
Sales in the state of Oregon, through the Company's  
independent sales force, increased 34% in the first quarter  
of 1998 over the first quarter of 1997.  This increase was  
principally due to new accounts, better point-of-sale  
information, improved sales management, and targeted sales  
of higher margin wines. The sales of White Riesling in a  
special package in the first quarter of 1998 led to an  
increase of $71,000 over the previous year.  The Company's  
focus on the sale of higher margin products achieved  
significant increases in sales of Pinot Gris and Pinot Noir  
in the first quarter of 1998 as compared to sales in the  
same period for 1997.  The Company also started a program to  
place its wine in the top 48 restaurants in the Portland  
area. So far it has been placed in about 20% of these  
restaurants where the Company's wine is not currently on  
their wine list.  This is a substantial move in making the  
Willamette Valley Vineyards brand the significant player in  
the largest population center in Oregon. The Company has  
also initiated a program to do a shelf survey at different  
locations around the state to create data as to the prices  
of its competitors and the location of its wine on the  
shelves of supermarkets.  This data will be used to prepare  
a marketing program to strengthen the Company's position in  
markets where its wine is not currently found.   
 
Out-of-state sales in the first quarter of 1998 increased  
47% over the first quarter of 1997.  The Company now sells  
wine in 39 states as compared to 32 states in the first  
quarter of 1997. The Company's growth came primarily in two  
varieties of wine: Pinot Noir and Pinot Gris. The programmed  
price reduction of Pinot Gris increased the number of cases  
sold in the first quarter of 1998 to 612 cases as compared  
to 153 cases in the same period in 1997. Pinot Noir sales  
increased to 3,811 cases in the first quarter of 1998 as  
compared to 2,274 for the same period in 1997. This increase  
in the Pinot Noir variety reaffirms that sales of the  
Company's flagship wine remains quite strong.   
 
Bulk wine sales were made in the first quarter of 1998 to  
further reduce excess inventories from the large harvest of  
1997. 
 
Excise taxes  
The Company reports its excise taxes as a deduction of sales  
revenue to equal net revenue (as shown on the Statement of  
Operations).  The amount for the first quarter of 1998 was  
$29,052. For the same period in 1997, the excise taxes  
collected was $24,188. 
 
Gross Profit 
Winery Operations 
As a percentage of revenue, gross profit for the winery  
operations decreased to 47% in the first quarter of 1998 as  
compared to 56% in the first quarter of 1997.  After  
adjusting for the sale of lower margin bulk wine, the gross  
margin was 55% in the first quarter of 1998 as compared to  
56% in the first quarter of 1997. The slight decrease was  
due to the depletion allowances designed to stimulate sales  
and reduce excess inventory. The Company expects the gross  
margins to remain near this level through 1998.  In the past  
few years, the Company has experienced higher production  
costs, specifically in the price of grapes that it purchases  
from other vineyards.  In order to keep margin's at a  
sustained level, the Company has expanded its marketing  
efforts to sell higher priced wines which have a greater  
profit margin. 
 
Selling, General and Administrative Expense 
Selling, general and administrative expenses increased 13%  
to $567,541 in the first quarter of 1998 from $501,200 in  
the first quarter of 1997.  The increase was principally  
attributed to higher costs due to operating at a higher  
sales level.  The Company pays its sales representatives by  
commission. Thus, as sales revenue increases, more  
commissions are due. 
 
More importantly, as a percentage of revenue from winery  
operations, selling, general and administrative expenses  
decreased to 42% in the first quarter of 1998 from 61% in  
the first quarter of 1997.  The effect of staff  
eliminations in the latter part of 1997 is partially  
reflected in a lower percentage of expenses against   
revenue.  In addition, the reorganization of delivery routes  
in the remote areas of Oregon resulted in the elimination of  
two vans and accompanying costs. Also in the first quarter  
of 1998,  the Company highlighted certain expenses on a  
"target list" due to excess spending in 1997 in these  
accounts.  The most significant cost reduction in the first  
quarter of 1998 was a $17,000 reduction in legal fees over  
last year's first quarter. Other targeted areas for reduced  
spending include telephones, office supplies, dues and  
publications, and printing and postage. The Company closely  
monitors all expenses in the selling, general, and  
administration and measures all departments strictly against  
their own budgets. 
 
Interest Income, Other Income and Expense 
 
Interest income/other income decreased to $7,216 for the  
first quarter of 1998 from $13,161 for the first quarter of  
1997 because the Company no longer receives interest income  
from invested funds set aside for the completion of the  
storage facility.  Interest expense  increased to $125,857  
in the first quarter of 1998 from $79,913 in 1997. Interest  
costs in the first quarter rose as the Company borrowed more  
funds to process and bottle wine from its 1996 and 1997  
crushes ; to finance the construction of a 20,000 square  
foot warehouse; and  purchase Tualatin Vineyards Inc., in  
1997.  Additional cash needs have resulted from the Company  
becoming a larger grower of grapes which means the company  
needs more cash prior to the actual harvest of grapes for  
labor and chemicals costs not needed previously. 
 
Income Taxes 
 
As in prior years, the Company has operated with a net loss  
for the first three months in 1998 but expects to show a  
profit by the end of 1998.  
 
LIQUIDITY AND CAPITAL RESOURCES 
 
At March 31, 1998, the Company had a working capital balance  
of $2.7 million and a current ratio of 2.0:1.  At December  
31, 1997, the Company had a working capital balance of $2.5  
million and a current ratio of  1.9:1.  
 
The Company has a cash balance of $422,118 at March 31,  
1998. It has committed $61,000 of funds held by Farm Credit  
Services for a dispute of $84,000 with the contractor over  
the completion of the storage facility built in 1997. The  
Company is retaining the funds until he finishes several  
problems in the building. In January 1998, the Company  
received $371,000 from Farm Credit Services committed to  
complete the planting at Tualatin Vineyards in 1998. It was  
remaining funds from a $1.3 million loan taking out in April  
of 1997 to purchase Tualatin Vineyards and to plant  
additional acreage at Tualatin. The Company receives about  
6% interest on these funds until the time the funds are  
withdrawn from Farm Credit Services to pay for the new  
plantings. 
  
The Company obtained a line of credit of $2,000,000 from  
Farm Credit Services in May, 1997.  At March 31, 1998, the  
line of credit balance was $1,667,297. On May 1, 1998, Farm 
Credit Services submitted loan documents to the Company  
for renewal of the line of credit for an additional year. 
The 
Company intends to accept the agreement. 
 
The Company has a total long term debt balance of $4,331,402  
owed to Farm Credit Services. This debt was used to finance  
the Hospitality Center, invest in winery equipment to  
increase its capacity, complete the storage facility, and  
purchase Tualatin Vineyards. At December 31, 1997 and also  
at March 31, 1998, the Company was found in violation of  
some of its debt covenants. At both of these times, Farm  
Credit Services released the Company from these covenants. 
In 
the renewal of the line of credit in May of 1998, Farm 
Credit 
Services revised the loan covenants to insure that the 
Company 
can meet the new covenants. The long term debt increased in 
 the first quarter of 1998 as Farm Credit disbursed the  
remaining funds to plant additional vineyards at Tualatin. 
 
At March 31, 1998, the Company still owes $386,851 on grape  
contracts for the 1997 fall production crop which are due  
and were paid on April 1, 1998. The Company expects to pay  
off these grape contracts using funds remaining on its line  
of credit.  
 
 
 
 
 
 
 
 
 
 
PART II.  OTHER INFORMATION 
 
 
Item 6     Exhibits and Reports on Form 8-K. 
 
(a)  No Exhibits  
                                                                             
 
 
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:                         By /s/ James W Bernau                
                                  James W Bernau 
                                  President      
 
 
Date:                          By /s/ John Moore                    
                                  John Moore 
                                  Controller 
 
                                                                            
 
 
 
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. 
 
Date:                          
By  James W Bernau                
                                                           
President      
 
 
 
Date:                           
By John Moore                    
                                                    
Controller