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, 2009





 ̈ 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
      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)







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





x
    YES
             ̈
  NO








Check
whether the registrant is a large accelerated filer, an accelerated filer, a
non-accelerated filer, or a smaller reporting company.





 ̈ Large accelerated
      filer
             ̈ Accelerated
      filer ̈ 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).





 ̈
    YES
            x
  NO





Number of
shares of common stock outstanding as of May 11, 2009:


4,852,979
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
              9Item
      3 – Quantitative and Qualitative Disclosures About Market
    Risk
              15Item
      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
      INFORMATION




Item 1
              FINANCIAL
      STATEMENTS





WILLAMETTE
VALLEY VINEYARDS, INC.


Balance
Sheet


March
      31,
                  
                  
                  December
      31,2009
                  
                  
                  2008(unaudited)ASSETSCurrent
      assets:Cash
      and cash equivalents
                  
                  $
                  -
                  
                  
                  $
                  350,361Accounts
      receivable trade, net
                  
                  
                  1,175,923
                  
                  
                  
                  1,204,881Inventories
                  
                  
                  10,822,903
                  
                  
                  
                  10,604,204Prepaid
      expenses and other current assets
                  
                  
                  119,803
                  
                  
                  
                  68,834Current
      portion of notes receivable
                  
                  
                  62,415
                  
                  
                  
                  62,415Deferred
      income taxes
                  
                  
                  81,700
                  
                  
                  
                  81,700Total
      current assets
                  
                  
                  12,181,612
                  
                  
                  
                  12,372,395Vineyard
      development cost, net
                  
                  
                  1,676,735
                  
                  
                  
                  1,693,769Property
      and equipment, net
                  
                  
                  5,972,011
                  
                  
                  
                  6,069,408Note
      receivable
                  
                  
                  134,284
                  
                  
                  
                  165,491Debt
      issuance costs, net
                  
                  
                  27,337
                  
                  
                  
                  29,581Other
      assets
                  
                  
                  4,456
                  
                  
                  
                  4,456Total
      assets
                  
                  $
                  19,996,435
                  
                  
                  $
                  20,335,100LIABILITIES
      AND SHAREHOLDERS’ EQUITYCurrent
      liabilitiesBank
      overdraft
                  
                  $
                  81,132
                  
                  
                  
                  -Current
      portion of long term debt
                  
                  
                  354,536
                  
                  
                  
                  354,536Revolving
      credit line
                  
                  
                  507,149
                  
                  
                  
                  -Accounts
      payable
                  
                  
                  739,832
                  
                  
                  
                  1,111,499Accrued
      expenses
                  
                  
                  584,808
                  
                  
                  
                  510,768Income
      taxes payable
                  
                  
                  293,412
                  
                  
                  
                  350,870Grapes
      payable
                  
                  
                  24,837
                  
                  
                  
                  594,734Total
      current liabilities
                  
                  
                  2,504,574
                  
                  
                  
                  2,922,407Long-term
      debt, less current portion
                  
                  
                  2,093,073
                  
                  
                  
                  2,178,246Deferred
      rent liability
                  
                  
                  217,742
                  
                  
                  
                  217,742Deferred
      gain
                  
                  
                  337,906
                  
                  
                  
                  345,930Deferred
      income taxes
                  
                  
                  355,207
                  
                  
                  
                  355,207Total
      liabilities
                  
                  
                  5,508,502
                  
                  
                  
                  6,019,532Shareholders’
      equityCommon
      stock, no par value - 10,000,000 shares authorized, 4,852,827 and
      4,851,327  shares issued and outstanding at March 31, 2009 and
      December 31, 2008
                  
                  
                  8,522,876
                  
                  
                  
                  8,515,667Retained
      earnings
                  
                  
                  5,965,057
                  
                  
                  
                  5,799,901Total
      shareholders’ equity
                  
                  
                  14,487,933
                  
                  
                  
                  14,315,568Total
      liabilities and shareholders’  equity
                  
                  $
                  19,996,435
                  
                  
                  $
                  20,335,100




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


3




WILLAMETTE
VALLEY VINEYARDS, INC.


Statement
of Operations


(unaudited)





Three
      months endedMarch
      31,2009
                    
                    
                    2008Net
      revenuesCase
      revenue
                    
                    $
                    3,629,247
                    
                    
                    $
                    3,402,674Total
      net revenues
                    
                    
                    3,629,247
                    
                    
                    
                    3,402,674Cost
      of salesCase
                    
                    
                    1,763,144
                    
                    
                    
                    1,753,834Total
      cost of sales
                    
                    
                    1,763,144
                    
                    
                    
                    1,753,834Gross
      profit
                    
                    
                    1,866,103
                    
                    
                    
                    1,648,840Selling,
      general and administrative expenses
                    
                    
                    1,561,734
                    
                    
                    
                    1,528,509Net
      operating income
                    
                    
                    304,369
                    
                    
                    
                    120,331Other
      income (expense)Interest
      income
                    
                    
                    -
                    
                    
                    
                    971Interest
      expense
                    
                    
                    (32,663
                    )
                    
                    
                    (22,328
                    )Other
      income
                    
                    
                    10,992
                    
                    
                    
                    1,196Net
      income before income taxes
                    
                    
                    282,698
                    
                    
                    
                    100,170Income
      tax
                    
                    
                    117,542
                    
                    
                    
                    40,068Net
      income
                    
                    
                    165,156
                    
                    
                    
                    60,102Retained
      earnings beginning of period
                    
                    
                    5,799,901
                    
                    
                    
                    5,091,307Retained
      earnings end of period
                    
                    $
                    5,965,057
                    
                    
                    $
                    5,151,409Basic
      earnings per common share
                    
                    $
                    .03
                    
                    
                    $
                    .01Diluted
      earnings per common share
                    
                    $
                    .03
                    
                    
                    $
                    .01Weighted
      average number of basic common shares outstanding
                    
                    
                    4,852,244
                    
                    
                    
                    4,837,288Weighted
      average number of diluted common shares outstanding
                    
                    
                    4,864,444
                    
                    
                    
                    4,997,082





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 31,2009
                
                
                2008Cash
      flows from operating activities:Net
      income
                
                $
                165,156
                
                
                $
                60,102Reconciliation
      of net income to net cash provided by (used in) operating
      activities:Depreciation
      and amortization
                
                
                162,977
                
                
                
                149,024Deferred
      rent liability
                
                
                -
                
                
                
                8,246Deferred
      gain
                
                
                (8,024
                )
                
                
                (8,024
                )Stock
      based compensation expense
                
                
                4,494
                
                
                
                12,590Changes
      in operating assets and liabilities:Accounts
      receivable trade
                
                
                28,958
                
                
                
                676,233Inventories
                
                
                (218,699
                )
                
                
                (1,508,926
                )Prepaid
      expenses and other current assets
                
                
                (50,969
                )
                
                
                (284,034
                )Other
      assets
                
                
                -
                
                
                
                58,329Accounts
      payable
                
                
                (371,667
                )
                
                
                504,282Accrued
      expenses
                
                
                74,040
                
                
                
                (48,040
                )Income
      taxes payable
                
                
                (57,458
                )
                
                
                (39,046
                )Grape
      payables
                
                
                (569,897
                )
                
                
                (392,368
                )Net
      cash used in operating activities
                
                
                (841,089
                )
                
                
                (811,632
                )Cash
      flows from investing activities; Additions to property and
      equipment
                
                
                (46,302
                )
                
                
                (230,135
                )Net
      cash used in investing activities
                
                
                (46,302
                )
                
                
                (230,135
                )Cash
      flows from financing activities:Bank
      overdraft
                
                
                81,132
                
                
                
                -Proceeds
      from stock options exercised
                
                
                2,715
                
                
                
                2,250Borrowing
      from revolving line of credit
                
                
                507,149
                
                
                
                303,977Payment
      received on grape supplier loan
                
                
                31,207
                
                
                
                -Payments
      on long-term debt
                
                
                (85,173
                )
                
                
                (69,060
                )Excess
      tax benefit on stock option exercises
                
                
                -
                
                
                
                2,598Net
      cash provided by (used in) financing activities
                
                
                537,030
                
                
                
                239,765Net
      increase (decrease) in cash and cash equivalents
                
                
                (350,361
                )
                
                
                (802,002
                )Cash
      and cash equivalents:Beginning
      of period
                
                
                350,361
                
                
                
                1,083,405End
      of period
                
                $
                -
                
                
                $
                281,403





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,
2009 and 2008, have been prepared in conformity with accounting principles
generally accepted in the United States (“GAAP”). The financial information as
of December 31, 2008 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, 2008. 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, 2008, as presented in the Company’s Annual Report on Form
10-K.




Operating
results for the three months ended March 31, 2009 are not necessarily indicative
of the results that may be expected for the entire year ending December 31,
2009, 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, 2009. 12,200 potentially dilutive shares are included in the
computation of dilutive earnings per share for the three months ended March 31,
2009. 159,794 potentially dilutive shares are included in the computation
of dilutive earnings per share for the three months ended March 31,
2008.





2) 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:


6





Three
      months endedMarch
      31, 2009WeightedaverageexerciseShares
                    
                    
                    priceOutstanding
      at beginning of period
                    
                    
                    442,200
                    
                    
                    $
                    3.77Granted
                    
                    
                    -
                    
                    
                    
                    -Exercised
                    
                    
                    (1,500
                    )
                    
                    $
                    1.81Forfeited
                    
                    
                    -
                    
                    
                    
                    -Outstanding
      at end of Period
                    
                    
                    440,700
                    
                    
                    $
                    3.78





At
January 1, 2006, the Company began recognizing compensation expense for stock
options with the adoption of Statement of Financial Accounting Standards
(“SFAS”) No. 123 (Revised), “Share-Based Payment,” (“SFAS 123R”). The fair value
of each stock option granted is estimated on the date of grant using the
Black-Scholes 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
      31,2009Risk
      Free interest rates
                  
                  
                  2.71
                  %Expected
      dividend
                  
                  
                  0
                  %Expected
      lives, in years
                  
                  
                  5-10Expected
      volatility
                  
                  
                  37.1
                  %





The
Company expenses stock options on a straight-line basis over the options’
related vesting term.  For the three months ended March 31, 2009 and
2008 the Company recognized pretax compensation expense related to stock options
and restricted stock grants of $4,494 and $12,590, respectively.





During
the three months ended March 31, 2009, the following transactions related to
stock option exercise occurred:





ExerciseShares
                  
                  
                  PriceStock
      Options Exercised
                  
                  
                  1,500
                  
                  
                  $
                  1.81





The
exercise of the aforementioned options resulted in a reduction of $456 in the
Company’s tax liability.  This tax savings is not reflected in the
financials presented at March 31, 2009. Since the deduction does not exceed the
compensation costs recognized in the financial statements, the excess tax
benefit is not recognized as additional paid in capital.


7


3)
INVENTORIES





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





March
      31,
                    
                    
                    December
      31,2009
                    
                    
                    2008(unaudited)Winemaking
      and packaging materials
                    
                    $
                    590,021
                    
                    
                    $
                    309,467Work-in-progress
      (costs relating to unprocessed and/or bulk wine products)
                    
                    
                    3,625,019
                    
                    
                    
                    3,350,830Finished
      goods (bottled wines and related products)
                    
                    
                    6,607,863
                    
                    
                    
                    6,943,907Current
      inventories
                    
                    $
                    10,822,903
                    
                    
                    $
                    10,604,204





4)
PROPERTY AND EQUIPMENT





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





March
      31,
                    
                    
                    December
      31,2009
                    
                    
                    2008(unaudited)Land
      and improvements
                    
                    $
                    2,589,560
                    
                    
                    $
                    2,589,560Winery
      building and hospitality center
                    
                    
                    4,969,758
                    
                    
                    
                    4,969,758Equipment
                    
                    
                    5,399,137
                    
                    
                    
                    5,352,83512,958,455
                    
                    
                    
                    12,912,153Less
      accumulated depreciation
                    
                    
                    (6,986,444
                    )
                    
                    
                    (6,842,745
                    )$
                    5,972,011
                    
                    
                    $
                    6,069,408





5)  INTEREST
AND TAXES PAID





During
the first quarter ended March 31, 2009, the Company paid $175,000 in Federal,
State and Local income taxes and $82,159 in Payroll tax. Additionally, $32,663
was paid in interest on the long-term debt and revolving credit line for the
same period.





6)
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 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 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.


8


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 periods ended March 31, 2009 and 2008 by operating
segment:





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
                    %





Three
      months ended March 31, 2008Bacchus
                    
                    
                    ProducedDistribution
                    
                    
                    Wine
                    
                    
                    TotalNet
      Sales
                    
                    $
                    1,071,266
                    
                    
                    $
                    2,331,408
                    
                    
                    $
                    3,402,674Cost
      of Sales
                    
                    $
                    761,341
                    
                    
                    $
                    992,493
                    
                    
                    $
                    1,753,834Gross
      Profit
                    
                    $
                    309,925
                    
                    
                    $
                    1,338,915
                    
                    
                    $
                    1,648,840%
      of sales
                    
                    
                    28.9
                    %
                    
                    
                    57.4
                    %
                    
                    
                    48.5
                    %





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. At March 31, 2008 total
inventory for Bacchus Distribution was $1,940,288 of purchased wines and
$267,896 of non-wine merchandise. This compares to produced wine inventory of
$6,455,241 and $821,933 of non-wine merchandise and work-in-process for the same
period.





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.


9


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, 2008.  Such policies were
unchanged during the three months ended March 31, 2009.





Overview





The
Company’s principal sources of revenue are derived from sales and distribution
of wine.  Sales revenue for the three months ended March 31, 2009
increased $226,573, or 6.7%, from the comparable prior year period.





Sales
revenue growth for the first three months of 2009 versus 2008 is being
principally driven by new product placements and order activity from our chain
store customers.  The main channel of this growth is through our
National Sales business unit which deals with out of state customers where
product is sold through distributors in each state.  Additionally
in-state sales were slightly down versus the prior year.  The mix of
sales in-state has shifted from purchased brands to produced brands mainly due
to the availability of three produced Pinot Noir products that became available
for sale in the 4th Quarter of 2008. The decrease in purchased brands sales
in-state from 2007 to 2008 is largely the result of reduced order activity by
on-premise customers whom are experiencing significant reductions in consumer
demand in a struggling economy.





Taken as
a whole, the three sales departments: National Sales, Oregon Wholesale (Bacchus
Fine Wines) and Retail showed increased performance on their net contribution
for the three months ended March 31, 2009 versus the comparable prior year
period.


10


Net
operating income performance for the quarter ended March 31, 2009 was improved
mainly due the increased sales volume in National Sales, coupled with improved
gross profit which is slightly offset by increased sales, general and
administrative expenses. Cost of sales has decreased mainly due to a shift in
the mix of sales from purchased brands to produced brands where we achieve a
higher gross profit. Additionally, the Company has seen improved inventory
controls resulted in reduced inventory shrinkage and therefore has improved
operations. Sales, General and Administrative expense increases are primarily
due to higher labor costs including related fringe benefits and increased
accounting professional service fees related to the 2008 independent
audit.





As a
result, the Company generated $0.03 basic earnings per share during the three
months ended March 31, 2009, an increase of $0.02 basic earnings per share
versus the comparable prior year period.





The
winery bottled approximately 68,655 cases in the first quarter of 2009, mainly
2007 vintage Pinot Noir and 2008 vintage Whole Cluster Pinot Noir.





The
Company has an asset-based loan agreement with Umpqua Bank that allows it to
borrow up to $2,000,000.  This loan agreement was recently renewed for
18 months and the new maturity date on this note is June 2010.  At
March 31, 2009, the Company had a credit line balance of $507,149 and $1,492,851
of available credit. The interest rate charged in the quarter was 4.5%. 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, 2009 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, 2009, the Company was in compliance
with all of the financial covenants.





The
Company's wines continued to accumulate prized recognition from national wine
groups and publications.





On
February 4, 2009 Willamette Valley Vineyards’ 2006 Estate Pinot Noir and 2006
Signature Cuvee Pinot Noir both took Gold at the Grand Harvest Awards. This
international competition is sponsored by Vineyard & Winery Management
Magazine and has a special focus on terroir, meaning that these wines were
recognized for how well they represent quality Pinot Noirs specifically from
Willamette Valley, Oregon.





In March
2009 several WVV wines won an additional terroir-based award through the
Best-of-Appellation awards put on by AppellationAmerica.com. The BOA process
rigorously follows the proposition that “The best wines are defined by place,
and the character of each appellation is defined by its best wines”. Both our
2006 WVV Pinot Noir and our 2006 Tualatin Estate Pinot Noir were recognized with
Double Gold awards, and our 2006 Estate Pinot Noir and 2007 Whole Cluster Pinot
Noir were recognized with Gold medals.





On March
14, 2009 our 2006 Estate Pinot Noir took Double Gold and was nominated for Best
of Show at the Hilton Head Island Wine and Food Festival in South
Carolina.





March 28,
2009 marked the conclusion of the first annual Oregon Wine Awards, a competition
for and by Oregon wine industry specialists. Three of our wines took Double Gold
Awards in their categories, an honor that the competition classifies as “Best of
the Best”: 2007 WVV Riesling, 2006 WVV Signature Cuvee Pinot Noir and the 2003
Griffin Creek Syrah.


11


In
January of 2009 we launched our Cork ReHarvest program in partnership with Whole
Foods, Rainforest Alliance and Western Pulp. Willamette Valley Vineyards was the
first winery in the world to receive certification from the Rainforest Alliance
for using 100 percent Forest Stewardship Council (FSC) certified
cork.  With the new Cork Re-Harvest program, we are also the first
winery to launch a cradle-to-cradle cork recycling program with zero increase to
our carbon footprint. Cork recycling boxes were placed in the 11 Whole Foods
stores in Oregon and Washington. When distributors deliver wine to these stores,
they pick up the cork and return it to WVV’s Turner-based warehouse. The cork
will then be delivered to Western Pulp, where it is remanufactured into wine
shippers, when WVV makes its current deliveries to the Corvallis
warehouse.





Erez
Klein, Regional Purchasing Specialist at Whole Foods Market Pacific Northwest
Region, said its consumers have been asking for a cork recycling program: “We
are thrilled to extend services to our shoppers that benefit the community,”
Klein said. “Providing the lowest possible carbon footprint in cork recycling is
something we are proud to offer. This program is consistent with the core values
of our company.”





The Cork
ReHarvest program has received recognition by such national media as The
Oregonian, The Washington Post, The Earth Times, Sustainable Food News and
Just-Drinks.com, as well as by several international online news
organizations.





The April
issue of Shape Magazine, available on shelves in March 2009, debuted Shapes’
2009 Green Living Awards. Starting on page 41, twenty-nine companies and
products were recognized for their sustainable efforts. WVV received one of the
awards for our commitment to sustainable practices, and producing sustainable
products. The sustainable certification of our vineyards through LIVE (Low Input
Viticulture and Enology) was highlighted.





RESULTS
OF OPERATIONS





Revenue





Net
revenue for the three months ended March 31, 2009 increased $226,573 or 6.7%,
versus the corresponding period in the preceding year. The increase in the
quarter is primarily due to increased product placements in National chain
stores and related out-of-state distributors. This is offset slightly by the
decrease in in-state wholesale revenue which is driven by the decreased volume
of order activity in purchased brands. The reduction in the volume of in-state
order activity is mainly due to on-premise accounts that are experiencing
significant reductions in consumer demand in a struggling economy. Retail direct
to consumer sales for the first three months are favorable over last year by
64.8%. This is mostly offset by decreased Retail sales in the Tasting Room which
are down 15.5%.





Our
revenues from winery operations are summarized as follows:





Three
      months endedMarch
      31,2009
                      
                      
                      2008Retail
      Sales, RentalIncome
      and Events
                      
                      $
                      533,275
                      
                      
                      $
                      529,528In-state
      sales
                      
                      
                      1,656,886
                      
                      
                      
                      1,713,115Out-of-state
      sales
                      
                      
                      1,528,873
                      
                      
                      
                      1,252,435Misc.
      sales
                      
                      
                      -
                      
                      
                      
                      (245
                      )Total
      Revenue
                      
                      
                      3,719,034
                      
                      
                      
                      3,494,132Less
      excise taxes
                      
                      
                      (89,787
                      )
                      
                      
                      (91,458
                      )Net
      Revenue
                      
                      $
                      3,629,247
                      
                      
                      $
                      3,402,674


12


Retail
sales, rental income and events for the three months ended March 31, 2009
increased $3,747 or 0.7% compared to the corresponding prior year
period.  The incremental revenue is primarily due to increased volumes
of direct to consumer retail sales in the quarter.  This is mostly
offset by reduced volume of tasting room sales, on-site room rentals and event
revenue versus prior year.





Sales in
the state of Oregon, through our wholesale department, Bacchus Fine Wines,
decreased $56,229, or -3.3%, for the three months ended March 31, 2009, compared
to the corresponding prior year period. The decrease is largely the result of
reduced order activity for purchased brands by on-premise customers whom are
experiencing significant reductions in consumer demand in a struggling
economy.  This is mostly offset by the favorable increase in the
volume of Willamette Valley Vineyard brand Pinot Noir varietals. The release of
the 2007 vintage Pinot Noir in the fourth quarter of 2008, allowed a key
customer to begin receiving shipments that were unavailable in the first nine
months of 2008. The Company does not anticipate a shortage of the 2007 vintage
Pinot Noir in 2009.





Out-of-state
sales in the three months ended March 31, 2009 increased $276,438, or 22.1%,
versus the comparable prior year period. The increase in the quarter is
primarily due to increased volume of 2007 Pinot Gris shipments to a key customer
and their related out of state distributors. These distributors are carefully
managing their inventory levels even though sales to end consumers are up over
last year.





Gross
Profit





Gross
profit for the three months ended March 31, 2009 increased $217,263, or 13.2%,
versus the comparable prior year period.





As a
percentage of net revenue, gross profit from winery operations was 51.4% in the
three months ended March 31, 2009, compared to 48.5% in the comparable prior
year period. The increase in gross profit as a percentage of net revenue is
mainly due to the mix of sales towards produced brands versus purchased brands
in our in-state wholesale distributor, Bacchus Fine Wines. This shift in the mix
of sales represents a higher percentage of total gross profit. This improvement
in gross profit percentage is slightly offset by the increase in the volume of
out of state sales towards lower margin products 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.





Selling,
General and Administrative Expense





Selling,
general and administrative expense for the three months ended March 31, 2009
increased $33,225, or 2.2%, compared to the corresponding prior year
period.  This increase is due primarily to increased accrued
professional service fees for Accounting audit services and legal services.
Additionally, incremental labor and related fringe benefit expenses for sales
and administrative staff have also unfavorably impacted the quarter versus prior
year.  As a percentage of net revenues from winery operations,
selling, general and administrative expenses decreased to 43.0% for the three
months ended March 31, 2009, as compared to 44.9% for the comparable prior year
period.





Interest
Income, Interest Expense





Interest
income decreased $971, or -100%, for the three and months ended March 31, 2009,
respectively, compared to the comparable prior year period.  Interest
expense for the three months ended March 31, 2009 increased $10,335 or 46.3%,
compared to the corresponding prior year period.  The average interest
rate paid for the three months ended March 31, 2009 was 4.6%.


13


Income
Taxes





Income
tax expense was $117,542 for the three and nine months ended March 31, 2009,
compared to $40,068 for the prior year period.  Our estimated tax rate for
the three months ended March 31, 2009 was 41.6%.




Net
Income and Earnings per Share





As a
result of the factors listed above, net income for the three months ended March
31, 2009 was $165,156 compared to net income of $60,102 in the comparable prior
year period. Diluted earnings per share was $0.03 for the quarter ended March
31, 2009, compared to $0.01 per diluted share, in the comparable prior year
period.





Liquidity
and Capital Resources





At March
31, 2009, we had a working capital balance of $9.7 million and a current ratio
of 4.86:1.  At December 31, 2008, we had a working capital balance of
$9.4 million and a current ratio of 4.23:1.  We had a cash balance of
$0 at March 31, 2009, compared to a cash balance of $350,361 at December 31,
2008.  The decrease in cash was primarily due to the payments on grape
contracts and trade payables that were previously accrued in the prior
year.





Total
cash used in operating activities in the three months ended March 31, 2009 was
($841,089) compared to cash used by operating activities of ($811,632) for the
same period in the prior year.  The increase in cash used in operating
activities versus prior year was primarily due to the timing of payments related
to trade payables, the payment of grape contracts and the  continued
build-up of inventory.  This is somewhat offset by the favorable
increase in net income versus the comparable prior year period.





Total
cash used in investing activities in the three months ended March 31, 2009 was
($46,302), compared to ($230,135) in the prior year period.  The
decrease was mainly due to the reduction in capital expenditures, although the
Company anticipates some increased capital expenditures for vehicles and
computer upgrades going into the second quarter of 2009.





Total
cash provided by financing activities in the three months ended March 31, 2009
was $537,030 compared to $239,765 provided by financing activities in the prior
year period.  Cash provided by financing activities primarily consists
of revolving credit line advances needed to support working capital requirements
and payments on a loan to a grape producer. This is offset somewhat by cash used
to repay long-term debt. Bank
overdrafts are $81,132 for the quarter ended March 31, 2009. These overdrafts
represent outstanding checks that have been recorded on the financials but yet
to be presented to the bank. These checks are funded by the revolving credit
line as they are presented to the bank.


At March
31, 2009, the line of credit balance was $507,149, 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, 2009, we were
in compliance with all of the financial covenants.





As of
March 31, 2009, we had a total long-term debt balance of $2,447,609, including
the portion due in the next year, owed to Farm Credit Services. There was no new
long-term debt incurred in the three months ended March 31, 2009. The debt
balance 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 storage
facility.





At March
31, 2009, we owed $24,837 on grape contracts. For the 2009 harvest, there are
grape purchase contracts in place with local growers that will be accrued when
the grapes are received, typically in October.


14


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 glassware in addition to
Company produced wines. The sale of purchased wines and glassware is a unique
characteristic versus the Retail and Out-Of-State sales organizations of the
Company and therefore warrants segment discussion.  The purchased wine
and 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, 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, 2009 by operating segment:





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
                  %








Three months ended March 31,
      2008Bacchus
                  
                  
                  ProducedDistribution
                  
                  
                  Wine
                  
                  
                  TotalNet
      Sales
                  
                  $
                  1,071,266
                  
                  
                  $
                  2,331,408
                  
                  
                  $
                  3,402,674Cost
      of Sales
                  
                  $
                  761,341
                  
                  
                  $
                  992,493
                  
                  
                  $
                  1,753,834Gross
      Profit
                  
                  $
                  309,925
                  
                  
                  $
                  1,338,915
                  
                  
                  $
                  1,648,840%
      of sales
                  
                  
                  28.9
                  %
                  
                  
                  57.4
                  %
                  
                  
                  48.5
                  %





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. At March 31, 2008, total
inventory for Bacchus Distribution was $1,940,288 of purchased wines and
$267,896 of non-wine merchandise. This compares to produced wine inventory of
$6,455,241 and $821,933 of non-wine merchandise and work-in-process for the same
period.





Item
3





QUANTITATIVE
AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK





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


15


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, 2009,
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, the
Chief Executive Officer and Chief Financial Officer have concluded that the
disclosure controls and procedures as of March 31, 2009 were not effective
in providing a reasonable level of assurance that information required to
disclosed by the Company in reports that it files or submits under the Exchange
Act is recorded, processed, summarized and reported with the time periods
specified in the Securities and Exchange Commission’s rules and forms, as a
result of the material weaknesses identified as of December 31, 2008 in our
annual report on Form 10-K and the nature of which are summarized
below.





The
Company does not expect that its disclosure controls and procedures will prevent
all error 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, 2008 and 2007, management
concluded that our internal control over financial reporting was not effective
due to the existence of certain material weaknesses.





At
December 31, 2008, the Company identified the following material
weaknesses:





•        
    Inadequate reconciliations of our general ledger cash
balances to the balances per our bank statements.





•           Lack
of sufficient procedures and controls related to our maintenance of our
perpetual inventory records of in-state purchased wines.





•           Lack
of sufficient procedures and controls related to the allocation of our costs to
our purchased and produced wines.


16


•           Lack
of adequate accounting and finance personnel and transition/training
of personnel responsible for preparation and review of such reconciliations,
records, and allocations.





In an
attempt to remediate the material weaknesses outlined above, the Company
implemented the following remedial actions during the first quarter of
2009:





•           We
commenced a review of our documentation and where necessary we have put into
place policies and procedures to document such evidence to comply with our
internal control requirements. We also retained a financial consultant to assist
us in further reviewing and improving our internal control
processes.





•           The
Company engaged additional temporary resources in the accounting department at
the end of 2008 and has maintained those resources into 2009.  The
Company intends to replace existing temporary accounting resources with
permanent accounting personnel during the second quarter of 2009.





We
believe that as of the date hereof, these measures have not remediated the
material weaknesses identified above. Management, with oversight of the
Audit Committee of our board of directors, is currently working on a plan to
remediate the material weaknesses noted above.


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)Articles of Merger, dated April 15,
1997 (incorporated herein by reference to Exhibit 99 to the Company’s Form
10QSB, filed May 15, 1997 (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 (Furnished, not 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 (Furnished, not filed,
herewith)


19


SIGNATURES





Pursuant
to the requirements of the Security Exchange Act of 1934, as amended, 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 14,
      2009
                        By
      /s/ James W. BernauJames
      W. BernauPresidentDate:
      May 14, 2009
                        By
      /s/ Jeffrey J. FoxJeffrey
      J. FoxController




20