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

                                    FORM 10-K

                ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF
                       THE SECURITIES EXCHANGE ACT OF 1934
                   For the fiscal year ended December 31, 2001

                        Commission file number: 333-42201

                        BEAR ISLAND PAPER COMPANY, L.L.C.
             (Exact name of registrant as specified in its charter)

            Virginia                                            06-0980835
(State or other jurisdiction of                              (I.R.S. Employer
 incorporation or organization)                           Identification Number)

                              10026 Old Ridge Road
                                   Ashland, VA
                    (Address of Principal Executive Offices)

                                      23005
                                   (Zip Code)

                                 (804) 227-3394
              (Registrant's telephone number, including area code)

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. Yes [X] No [ ]

Indicate by check mark if disclosure of delinquent  filers  pursuant to Item 405
of Regulation S-K (ss.229.405 of this chapter) is not contained herein, and will
not be contained,  to the best of registrant's knowledge, in definitive proxy or
information statement incorporated by reference in Part III of this Form 10-K or
any amendment to this Form 10-K. [X]

                       Documents Incorporated by Reference

Certain exhibits required for Part IV of this report are incorporated  herein by
reference from Bear Island Paper  Company,  L.L.C.'s  registration  statement on
Form S-4, Registration No. 333-42201, as amended.

<PAGE>
<TABLE>
                                TABLE OF CONTENTS

                                                                                                  PAGE
                                                                                                  ----

                                                 PART I
<S> <C>
ITEM 1. BUSINESS.............................................................................       3

ITEM 2. PROPERTIES...........................................................................       6

ITEM 3. LEGAL PROCEEDINGS. ..................................................................       7

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. ................................       7

                                                 PART II

ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDERS MATTERS.  ........       7

ITEM 6. SELECTED FINANCIAL DATA. ............................................................       7

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
            OPERATIONS. .....................................................................       8

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK...........................      13

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA..........................................      14

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
            FINANCIAL DISCLOSURE.............................................................      14

                                                 PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT..................................      14

ITEM 11. EXECUTIVE COMPENSATION..............................................................      16

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT......................      16

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS......................................      16

                                                 PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K....................      18
</TABLE>

                                        2
<PAGE>
                                     PART I

ITEM 1. BUSINESS.

GENERAL

Bear Island Paper Company,  L.L.C. (the "Company"),  a limited liability company
organized in 1997 and a wholly owned subsidiary of Brant-Allen Industries,  Inc.
a  subchapter S  corporation,  ("Brant-Allen")  produces  newsprint at its mill,
located near Richmond, Virginia (the "Mill"). The Mill has an annual capacity of
229,700 metric tons ("tonnes") of high quality newsprint suitable for four-color
printing,  which publishers are increasingly using for general  circulation.  In
2001, the Mill produced  approximately  212,600 tonnes of newsprint,  and had an
estimated operating efficiency rate of 89.10%.

The  Company's  customers  include  leading  newspaper  publishers in the United
States, such as Dow Jones & Company, Inc. (publisher of The Wall Street Journal)
("Dow Jones"),  The Washington  Post Company ("The  Washington  Post"),  Advance
Publications  ("Newhouse  Group"),  Gannett Co.,  Inc.  (publisher of USA Today)
("Gannett"),  MediaNews Group Inc., Knight-Ridder Inc. ("Knight-Ridder"),  Media
General,  Inc.,  Tribune  Co.  and New York Times Co.  Approximately  88% of the
Company's newsprint production in 2001 was purchased by its top ten customers.

A combination of pulp material is used to feed the Company's  newsprint machine.
In its  manufacturing  process,  the Mill currently uses  thermomechanical  pulp
("TMP"),  and de-inked  pulp. The use of TMP provides high wood fiber yields and
higher  quality  newsprint  than that  produced  by the  traditional  mechanical
groundwood  process.  The de-inked pulp is produced at the  Company's  recycling
facility,  which  is  located  adjacent  to the  Mill.  The  recycling  facility
commenced operations in 1994 and features technology for de-inking, cleaning and
screening of old newspapers ("ONP") and old magazines ("OMG").

The Company  purchases all of its logs and pulp chips from outside  suppliers at
market prices. ONP and OMG used in the Company's recycling facility are provided
by a combination of individual  processors,  municipal  recovery  facilities and
brokers.  All fiber is currently  supplied from sources within a 300-mile radius
of the Mill.

THE MILL AND THE PRODUCTION PROCESS

The Mill,  which  began  operations  in 1979,  is  located  in  Hanover  County,
Virginia,  on an  approximately  700-acre site,  which is approximately 80 miles
south of Washington,  D.C., and 25 miles north of Richmond, Virginia. The Mill's
operations consist of a woodyard,  a pulping system, a paper machine and related
utility, recycling, storage and transportation facilities.

Currently,  approximately  63% of the Company's fiber  requirements  are derived
from the Company's TMP process using wood and woodchips,  and  approximately 37%
of the Company's fiber  requirements are de-inked pulp from the Mill's recycling
facility.

The Mill has a wood  requirement  of  approximately  144,000 cords per year. All
wood is currently supplied from sources within a 200-mile radius of the Mill. In
2001,  the Company's  wood needs were supplied 44% from wood  harvested by local
independent wood contractors and 56% in chip form, by independent sawmills.

The  Mill's  newsprint  machine  produces  newsprint  at  an  average  speed  of
approximately 4,250 feet per minute over a machine trim width of 300 inches. The
Mill produces approximately 635 tonnes per day of newsprint.

                                        3
<PAGE>

The Company's recycling plant features advanced technologies for the re-pulping,
de-inking,  cleaning and screening of ONP and OMG. The recycling  facility turns
ONP and OMG into de-inked  pulp.  ONP and OMG are procured from a combination of
individual processors, municipal recovery facilities and brokers. After delivery
to the plant,  the ONP and OMG are mixed by operators  into a blend with a ratio
of ONP to OMG of 81:19, which is then fed into a pulper which mixes in additives
and prepares the stock for ink separation.  During 1998, the Company undertook a
capital expansion of the recycling  facility resulting in a capacity increase of
20,200  tonnes per year. At full  capacity,  the  recycling  facility  processes
approximately 107,000 tonnes per year of ONP and OMG. The recycling facility has
the capacity to produce 246 tonnes of recycled fiber per day. The recycling mill
enables  the  Company  to  produce  up to  approximately  635  tonnes per day of
newsprint  containing a minimum of 20% and a maximum of 40% recycled fiber.  The
recycling  facility also includes a 50,000 square foot warehouse that can hold a
10-day supply of ONP and OMG.

MARKETS AND CUSTOMERS

The Company's  marketing  objective is to become a preferred supplier to each of
its newsprint  customers.  To achieve this goal, the Company focuses on service,
product  quality and long term  relationships.  Eight of the  Company's  top ten
customers have been customers for over 15 years. In 2001,  approximately  29% of
the production of the Mill was sold to Dow Jones and The  Washington  Post under
purchase  agreements  (the  "Purchase  Agreements")  that obligate each of those
customers to purchase a minimum of approximately  40,000 tonnes of newsprint per
year for The Washington Post and 32,000 tonnes for Dow Jones commencing in 2002,
at prices based on  prevailing  market  prices paid by those  customers to their
non-affiliated  East Coast  suppliers.  The term of the Purchase  Agreements has
been extended  through  December 31, 2004 and is subject to the parties agreeing
to pricing, which approximate market prices, on an annual basis. The Company has
sold newsprint to Dow Jones since 1980 and The Washington Post since 1979. Other
than the agreements with Dow Jones and The Washington Post, customers purchase a
minimum volume amount for short periods of up to one year based on market prices
at the time of purchase.

In 2001 and 2000, the Company's ten largest  customers  represented an aggregate
of 88% and 93%, respectively,  of the Company's total sales. The Company has had
five customers  whose sales represent a significant  portion of sales.  Sales to
Dow Jones  approximated  13%, 20% and 20% for the years ended December 31, 2001,
2000 and 1999, respectively. Sales to The Washington Post approximated 16%, 19%,
and 19% for the years ended  December  31,  2001,  2000 and 1999,  respectively.
Sales to  Newhouse  Group  approximated  16%,  14%,  and 15% for the years ended
December 31, 2001, 2000 and 1999,  respectively.  Sales to Gannett  approximated
15%,  17%,  and 12% for the  years  ended  December  31,  2001,  2000 and  1999,
respectively.  Sales to  Knight-Ridder  approximated  11%  during the year ended
December 31, 2001.

Brant-Allen  markets all of the  Company's  production  and is able to offer its
customers  newsprint  from  either the Mill or from F.F.  Soucy  Inc.'s  ("Soucy
Inc.") mill or from F.F. Soucy, Inc. & Partners,  Limited  Partnership's ("Soucy
Partners"  and,  together  with Soucy  Inc.,  "Soucy")  mill in order to satisfy
customer demand,  which enables Brant-Allen to optimize shipping costs from each
of these mills.  Brant-Allen employs three full-time salesmen and three customer
service  representatives.   Brant-Allen  also  performs  all  sales,  invoicing,
accounts receivable maintenance,  cash management and treasury functions for the
Company pursuant to the Management Services Agreement (as defined below).  Other
than the management fee paid by the Company to Brant-Allen  under the Management
Services Agreement, the Company does not pay Brant-Allen any additional fees for
its marketing services.

ENERGY AND WATER REQUIREMENTS

The Mill utilizes two forms of energy: steam, which is primarily used within the
paper  machine's  dryer  section  to dry  the  newsprint  sheet  as it is  being
produced,  and  electricity,  which is used to power  the  remaining  processes,
particularly the refining of the woodchips.

All of the  Mill's  process  steam  (on  average,  165,000  pounds  per hour) is
generated by an on-site  boiler rated at 243.0  million Btu per hour heat input.
The boiler is fired using  pulverized coal, as a primary fuel, and bark and wood
wastes as secondary fuels. In addition, a natural gas fired package boiler, with
a capacity  of 190,000  pounds per hour,  is used as a backup if the main boiler
malfunctions or is down for maintenance.

                                        4
<PAGE>

Through  Rappahannock  Electrical  Cooperative,  which  is the  Company's  local
utility,  the Company  purchases 100% of its electrical  power  indirectly  from
Virginia Power and Old Dominion Electric Cooperative.

Because  the  Company's  electricity  usage has an  impact  on both  electricity
generation  requirements  and costs of Virginia Power and Old Dominion  Electric
Cooperative,  especially  in periods of high demand  (i.e.,  periods of high air
conditioning or heating loads), the Company has been able to negotiate favorable
electricity  rates by  demonstrating  an ability to reduce  demand  during  peak
times.

The Mill was designed and is operated with one of the most  stringent  water use
and  wastewater  flow  requirements  of any  paper  mill  in the  U.S.  At  full
production of 635 tonnes of newsprint per day, water usage is approximately  3.8
million gallons per day. Mill effluent is approximately  3.6 million gallons per
day. The Mill's water is currently supplied by the Hanover County public utility
system and by the Mill's own river intake  structure  and pumping  system on the
North Anna  River.  The Mill  operates a  wastewater  treatment  facility  which
connects to the Hanover County wastewater  treatment plant. The Mill has its own
on-site industrial landfill for solid waste.

ENVIRONMENTAL MATTERS

The Company's  operations  are subject to extensive  and changing  environmental
regulation  by  federal,  state,  and local  authorities  in the United  States,
including those  requirements  that regulate  discharges  into the  environment,
waste management, and remediation of environmental contamination.  Environmental
permits are required  for the  operation of the  Company's  businesses,  and are
subject to revocation,  modification and renewal.  Governmental authorities have
the power to enforce  compliance with  environmental  requirements and violators
are subject to injunctions,  civil  penalties and criminal fines.  Third parties
may also have the right to sue to enforce compliance with such regulations.

The Company has in the past incurred  significant capital expenditures to comply
with current federal,  state and local  environmental laws and regulations.  The
Company  believes  that it is in  substantial  compliance  with  such  laws  and
regulations,  although no assurance can be given that it will not incur material
liabilities  and costs with respect to such laws and  regulations in the future.
Although the Company does not currently believe that it will be required to make
significant expenditures for pollution control in the near future, no assurances
can be given that future developments,  such as the potential for more stringent
environmental  standards or stricter enforcement of environmental laws, will not
cause the Company to incur such expenditures.

The wastewater  treatment facility for the Mill discharges  effluent through the
outfall line of the Hanover County wastewater  treatment plant to the North Anna
River.  The  effluent  limits that must be  maintained  in  accordance  with the
discharge  permit  require  continuous  monitoring  and  extensive  reporting of
numerous  tests.  The  treatment  facility  consists  of primary  and  secondary
clarification, aerated equalization and activated sludge treatment.

The Company  maintains  valid and current air, solid waste and water permits and
believes it is  currently  in  substantial  compliance  with respect to all such
permits. The Company believes that it has good relations with the federal, state
and local  regulatory  authorities,  and management is not aware of any material
problems or costs that might jeopardize the Company's scheduled permit renewals.

The U.S.  Environmental  Protection Agency (the "EPA") has required that certain
pulp and paper  mills  meet  stringent  air  emissions  and  revised  wastewater
discharge standards for toxic and hazardous pollutants. These proposed standards
are commonly  known as the "Cluster  Rules".  Bear Island's  operations  are not
subject  to  further  control  as a result of the  current  "Cluster  Rules" and
therefore, no related capital expenditures are anticipated.

On July 12,  1996,  the Company  entered  into a  Reasonably  Available  Control
Technology  ("RACT")  Agreement  with the Virginia  Department of  Environmental
Quality.  Under the RACT  Agreement,  the  Company is not  required to incur any
significant capital  expenditures for the purchase and installation of pollution
control equipment.

                                        5
<PAGE>

COMPETITION

The  newsprint   industry  is  highly  competitive  and  is  comprised  of  many
participants.   The  Company  competes  directly  with  a  number  of  newsprint
manufacturers,  many of which have  longer  histories,  larger  customer  bases,
closer geographical  proximity to customers and significantly  greater financial
and  marketing  resources  than  the  Company.  The  Company  faces  significant
competition  from both  large,  vertically  integrated  companies  and  numerous
smaller   companies.   The  Company   competes  with  several  other   newsprint
manufacturers  in Canada,  as well as  regional  manufacturers  in the  Southern
United States.  Competition in the newsprint market is generally based on price,
quality and customer service.

EMPLOYEES

As of December 31, 2001,  the Company had 218  employees,  approximately  35% of
which  have been  employed  by the  Company  since its  inception  in 1979.  The
workforce  is  non-unionized  and has been very  receptive  to flexible  working
conditions and requirements.

MANAGEMENT SERVICES AGREEMENT

Executive  management of the Company is provided by  Brant-Allen,  pursuant to a
management  contract  (the  "Management  Services  Agreement").   The  Company's
newsprint is sold through  Brant-Allen,  which currently  markets  approximately
456,600 tonnes of newsprint  (212,600  tonnes for the Company and 244,000 tonnes
for Soucy). Brant-Allen manages the Company to maximize any available synergies.
The  Company  benefits  from  the   centralization   of  marketing,   financial,
administrative  and  distribution  functions at Brant-Allen.  These services are
provided  pursuant to the Management  Services  Agreement for which a management
fee of 3% of  annual  net sales of the  Company  less  transportation  costs was
payable by the Company,  of which,  since  December 1, 1997,  as a result of the
Company's  debt  agreements,  one third was  payable in cash with the  remainder
contributed to the Company's  capital.  Effective  April 1, 2000, the Management
Services  Agreement  was  amended  to reduce  the  management  fees  payable  to
Brant-Allen to 1% of the Company's  annual net sales of which 100% is payable in
cash.  During 2001, the Company was charged  $1,120,000 by Brant-Allen under the
Management Services Agreement.

Brant-Allen  is a subchapter S corporation  jointly owned by Mr. Peter Brant and
Mr. Joseph Allen.  Brant-Allen's  predecessor was formed in the early 1940s when
the fathers of Messrs.  Brant and Allen founded a paper conversion and newsprint
sales  business.  In the early 1970s,  Brant-Allen  entered  into the  newsprint
manufacturing  business.  Messrs.  Brant and Allen  have  been  involved  in the
management of Brant-Allen for over 30 years: Mr. Brant serves as the Chairman of
the Board,  and Chief  Executive  Officer of Brant-Allen and Mr. Allen serves as
President and Chief Operating  Officer of Brant-Allen.  Mr. Brant also serves as
the Chairman of the Board,  and Chief  Executive  Officer of the Company and Mr.
Allen also serves as President and Chief Operating Officer of the Company.

THE ACQUISITION

In December 1997, the Company purchased the 70% Limited Partnership interests of
Bear  Island  Paper  Company,   L.P.  (the   "Predecessor")   owned  equally  by
subsidiaries  of The  Washington  Post and Dow Jones  (the  "Acquisition").  The
Predecessor,  was formed in 1978 as a limited  partnership,  with Brant-Allen as
its  general  partner.  Prior  to  the  Acquisition,  Brant-Allen  owned  a  30%
partnership  interest  in the  Predecessor.  Funding  for  the  Acquisition  was
provided  through the  issuance of $100 million  principal  amount of 10% Senior
Secured Notes due 2007 (the "Notes") and $120 million  principal  amount of bank
debt (the "Bank Credit  Facilities")  comprised of a $70 million  8-year  senior
secured term loan facility (the "Term Loan  Facility")  and a $50 million 6-year
senior  secured  reducing  revolving  credit  facility  (the  "Revolving  Credit
Facility").   Following   the   Acquisition   and  related   transactions   (the
"Transactions") 100% of the Company was owned by Brant-Allen.

ITEM 2.  PROPERTIES.

The Mill is  located  on  approximately  700  acres of land that is owned by the
Company, which is approximately 80 miles south of Washington, D.C., and 25 miles
north of Richmond,  Virginia. In addition,  the Company owns approximately 1,600
acres of land and timberland in Virginia.

                                        6
<PAGE>

ITEM 3.  LEGAL PROCEEDINGS.

From time to time the  Company is  involved  in legal  proceedings  relating  to
claims  arising out of its  operations  in the normal  course of  business.  The
Company  believes  that  there are no  material  legal  proceedings  pending  or
threatened against the Company or any of its properties.

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

No  matters  were  submitted  to a vote of  security  holders  during the fourth
quarter of 2001.

                                     PART II

ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDERS
        MATTERS.

Brant-Allen  beneficially  owns all the equity of the Company.  Brant-Allen,  in
turn, is owned by Mr. Peter Brant and Mr. Joseph Allen.

ITEM 6.  SELECTED FINANCIAL DATA.

The  following  selected  financial  data is derived from the audited  financial
statements of the  Predecessor for the eleven months ended November 30, 1997, as
well as the audited financial  statements of the Company for the one month ended
December 31, 1997 and the years ended  December 31, 1998,  1999,  2000 and 2001,
for which the  statements of operations  are included  elsewhere  herein for the
years ended December 31, 1999, 2000 and 2001.
<TABLE>
                                          Predecessor                                   Company
                                          -----------           -----------------------------------------------------------

                                             Eleven
                                             Months     One Month
                                             Ended        Ended
                                            November     December
                                              30,           31,                   Years Ended December 31,
                                          -----------    -------------------------------------------------------------------

                                              1997          1997           1998          1999         2000           2001
                                                            (Dollars in Thousands, Except Tonnes Produced)
Income Statement Data:
<S>                                         <C>           <C>            <C>           <C>          <C>            <C>
      Sales non-affiliates                  $65,446       $11,363        $128,112      $110,231     $118,629       $117,845
      Affiliates (1)                         46,040           --              --            --           --             --
                                            -------       -------        --------      --------     --------       --------

                 Total sales                111,486        11,363         128,112       110,231      118,629       $117,845
      Cost of sales                         101,302         9,625         100,570       101,621      103,961        108,509
                                            -------       -------        --------      --------     --------       --------

      Gross profit                           10,184         1,738          27,542         8,610        14,668         9,336

Selling, general & administrative:
      Management fee to Brant-Allen           3,175           325           3,666         3,110        1,653          1,120
      Other direct                              573            45             536           394          182            965
                                            -------       -------        --------      --------     --------       --------

      Income from operations                  6,436         1,368          23,340         5,106        12,833         7,251
                                            -------       -------        --------      --------     --------       --------
Other income (expense):
      Interest income                           591            --             201           149          144            103
      Interest expense                       (4,332)       (1,633)        (18,892)      (17,097)     (14,192)       (13,076)
      Other income (expense)                    (41)           53             --            863           84            --
                                            -------       -------        --------      --------     --------       --------
                 Total other expense         (3,782)       (1,580)        (18,691)      (16,085)     (13,964)       (12,973)
                                            -------       -------        --------      --------     --------       --------

Income (Loss) before                         $2,654         $(212)         $4,649      $(10,979)      (1,131)        (5,722)
      extraordinary item
      Extraordinary item                     (4,367)          --              --         (1,006)         --             --
                                            -------       -------        --------      --------     --------       --------

      Net income (loss)                     $(1,713)      $  (212)       $  4,649      $(11,985)    $ (1,131)      $ (5,722)
                                            =======       =======        ========      ========     ========       ========


Other Data:
      Operational EBITDA (2)                $16,184        $2,190         $33,407       $15,752      $23,719        $18,611
      Adjusted operational EBITDA(3)                        2,406          36,068        17,825       24,246         18,611


                                        7

<PAGE>
                                          Predecessor                                   Company
                                          -----------           -----------------------------------------------------------

                                             Eleven
                                             Months     One Month
                                             Ended        Ended
                                            November     December
                                              30,           31,                   Years Ended December 31,
                                          -----------    -------------------------------------------------------------------

                                              1997          1997           1998          1999         2000           2001
                                                          (Dollars in Thousands, Except Ratios and Tonnes Produced)
Summary cash flow information:
       Net cash provided by (used in)
        operating activities                $12,546       $(4,024)        $20,623        $2,547       $9.609        $16,691
       Net cash used in investing
        activities                           (4,702)     (140,169)         (7,394)         (265)      (2,704)       (13,877)
       Net cash provided by (used in)
        financing activities                (12,467)      145,545         (12,451)       (3,431)      (7,203)        (2,610)
       Depreciation                           9,735           822          10,033        10,615       10,886         11,360
       Depletion                                 13           --               34            31          --            --
       Capital expenditures                   4,836           239           7,544         3,009        2,750         13,877
       Saleable tonnes produced             206,058        18,802         222,668       226,249      219,161        212,575
       Noncash portion of management fee                      216           2,661         2,073          527            --

                                                                                  As of December 31,
                                                                                  ------------------
                                                               1997           1998         1999         2000         2001
Balance Sheet Data:
     Cash and short-term investments                          $1,353         $2,131         $981         $682         $886
     Working capital (5)                                      18,176         17,375       15,449       17,386      (24,947)
     Property, plant and equipment, net                      194,262        190,777      181,059      172,718      175,033
     Total indebtedness (4)                                  196,435        184,946      138,291      133,102      132,444
     Total assets                                            232,485        229,251      214,587      206,801      203,409
     Total partners' equity/member's interest                 25,258         32,567       65,879       63,262       55,587
</TABLE>


     (1) Prior to  November  30,  1997 Dow Jones and The  Washington  Post were
     affiliates of the Company.

     (2) EBITDA is defined as income (loss) from operations  plus  depreciation,
     depletion  and  amortization,  if any.  EBITDA  is  generally  accepted  as
     providing  useful  information  regarding  a  company's  ability to service
     and/or incur debt.  EBITDA  should not be  considered  in isolation or as a
     substitute for net income,  cash flows from operations,  or other income or
     cash flow data prepared in accordance  with generally  accepted  accounting
     principles or as a measure of a company's profitability or liquidity.

     (3) Adjusted  EBITDA is defined as EBITDA (as shown in note (2) above) plus
     the noncash  portion,  or two-thirds,  of the management fee to Brant-Allen
     after November 30, 1997.  Pursuant to the limitation on restricted payments
     covenant of the Notes,  payments by the  Company for  management  fees were
     limited to  Brant-Allen  (or any of its  Subsidiaries  or Affiliates) to an
     amount per annum not in excess of 3% of net sales of the Company,  of which
     no more than one third may be in cash. In April 2000,  the  management  fee
     limitation  was  reduced  to 1% of net  sales,  all of which may be paid in
     cash.

     (4) Total  indebtedness is defined as long-term debt and long-term purchase
     obligations and current portions thereof.

     (5) The Company was not in  compliance  with  certain  financial  covenants
     under the Bank Credit  Facilities  at December 31, 2001.  As a result $32.4
     million of debt was reclassed to current liabilities.

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS.

The  following  discussion  and analysis of financial  condition  and results of
operations should be read in conjunction with "Item 6. Selected  Financial Data"
and the financial  statements of the Company and related notes thereto  included
elsewhere in this report. Historically,  the Predecessor's cost of manufacturing
had also  included an  up-charge  (a margin in excess of the market price of the
fiber)  paid to Bear Island  Timberlands  Company,  L.P.,  an  affiliate  of the
Company  ("BITCO") with respect to wood, and a procurement  fee per tonne of ONP
and OMG,  supplied or provided by BITCO to the  Predecessor.  This up charge and
procurement fee was eliminated on December 1, 1997.

                                        8
<PAGE>

The Company  manufactures and is dependent on one product,  newsprint,  which is
used in general printing,  the newspaper publishing industry and for advertising
circulars.  Accordingly,  demand  for  newsprint  fluctuates  with the  economy,
newspaper  circulation and purchases of advertising  lineage which significantly
impacts the Company's  selling price of newsprint and,  therefore,  its revenues
and  profitability.  In addition,  variation in the balance  between  supply and
demand as a result of global  capacity  additions  have an increasing  impact on
both selling prices and inventory levels in the North American markets. Capacity
is  typically  added in  large  blocks  because  of the  scale of new  newsprint
machines.

As a result,  the newsprint market is highly  cyclical,  depending on changes in
global supply,  demand and inventory levels. These factors  significantly impact
the Company's sales volume and newsprint  prices and,  therefore,  the Company's
revenues  and  profitability.  Given  the  commodity  nature of  newsprint,  the
Company,  like other  suppliers to this market,  has little  influence  over the
timing and extent of price  changes.  Sales are recognized at the time title and
risk of loss transfers to the customer,  which generally  occurs at the point of
shipment from the Mill. However,  significant fluctuations in revenue can and do
occur as a result of the timing of shipments  caused by increases  and decreases
in Mill inventory levels.

Newsprint  prices  have  been  extremely  volatile  over  the past  five  years.
Newsprint  prices in 1997  recovered from a level of $510 per tonne in the first
quarter of 1997 to $560 per tonne in the fourth quarter.  During 1998, newsprint
prices  decreased  from $582 per tonne in the first quarter to $573 per tonne in
the fourth quarter.  During 1999,  newsprint  prices averaged $495 per tonne and
ranged from high of $545 per tonne in the first quarter to low of $485 per tonne
in the fourth quarter. During 2000, newsprint prices averaged $538 per tonne and
ranged  from a low of $492  per  tonne  in  January  2000 to $585  per  tonne in
December 2000. During 2001,  newsprint prices averaged $559 per tonne and ranged
from a high of $592 per tonne in the  second  quarter to a low of $500 per tonne
in the fourth  quarter.  In February  2002  newsprint  prices  averaged $448 per
tonne.

The  table  below  summarizes  the  annual  volumes  and  selling  prices of the
Predecessor and the Company's newsprint during the periods indicated below:
<TABLE>
<CAPTION>
                               Predecessor                                Company
                               -----------                                -------

                               Eleven Months One Month
                                 Ended          Ended
                               November 30,  December 31                           Years Ended December 31,
                               ------------  ------------------------------------------------------------------------

                                 1997           1997           1998           1999            2,000           2001
                                 ----           ----           ----           ----            -----           ----
<S>                             <C>           <C>            <C>             <C>             <C>            <C>
TONNES SOLD                     206,400       19,900         221,700         222,574         220,389        210,795

AVERAGE SELLING PRICE              $540         $571            $578            $495            $538           $559
</TABLE>

The Company's primary cost components  consist of raw materials (wood, ONP, OMG,
and chemicals),  electrical energy,  direct labor and certain fixed costs. Fixed
costs  consist  of  indirect  labor  and other  plant  related  costs  including
maintenance expenses and mill overhead.

For the year ended  December  31,  2001,  raw  materials,  which are  subject to
significant price fluctuations based on supply and demand,  represented 28.5% of
the total cost of manufacturing.  Electrical energy represented 20.8% and direct
and  indirect  labor  represented  19.9% of total cost of  manufacturing.  On an
average per tonne basis electricity costs increased 39.9% from 2000 to 2001. The
Company  currently uses a raw material mix of 63% TMP, and 37% recycled fiber in
its production process.

                                        9
<PAGE>

RESULTS OF OPERATIONS

2001 COMPARED TO 2000

Net sales  decreased by $0.8 million,  or 0.7%,  to $117.8  million in 2001 from
$118.6  million in 2000.  The decrease was  attributable  to a 4.4%  decrease in
sales  volumes  to  approximately  210,800  tonnes in 2001,  from  approximately
220,400  tonnes in 2000 offset by a 3.9% increase in average net selling  prices
for the  Company's  products.  The  Company's  net selling  price for  newsprint
increased  to an average of $559 per tonne in 2001 from an average  net  selling
price of $538 per tonne in 2000.

Cost of sales increased by $4.6 million, or 4.4%, to $108.5 million in 2001 from
$103.9  million in 2000.  This  increase  was  attributable  primarily to a 9.6%
increase  in unit  manufacturing  costs  per  tonne,  offset in part by the 4.4%
decrease in sales volume, as mentioned above. The increase in unit manufacturing
cost per  tonne  was a result  of a 39.9%  increase  in  electrical  costs and a
shutdown of manufacturing  operations for major  maintenance in late October and
early  November for  fourteen  days,  offset by a 20.4%  decrease in fiber costs
primarily due to decreased  prices for ONP and decreased use of kraft pulp. Cost
of sales as a percentage  of net sales  increased to 92.1% in 2001 from 87.6% in
2000,  due to the  increase  in unit  costs of  manufacturing  offset by the net
increase in newsprint selling prices as noted above.

The Company's  selling,  general and  administrative  expenses increased by $0.2
million,  or 11.1%,  to $2.0  million in 2001 from $1.8  million  in 2000.  This
increase was  attributable to a bad debt write-off of $0.6 million offset by the
reduction in the  management  fee to  Brant-Allen.  Effective  April 1, 2000 the
management fee to Brant-Allen for administrative services was reduced from 3% to
1%.

As a result of the above  factors,  income  from  operations  decreased  by $5.6
million to $7.3 million in 2001 from $12.9 million in 2000.

The Company's  interest  expense  decreased by $1.1  million,  or 7.8%, to $13.1
million in 2001 from $14.2 million in 2000,  due to reductions in interest rates
and repayments on the Company's Term Loan Facility.

The Company's other income including  interest income decreased by $0.1 million,
to $0.1 million in 2001 from $0.2 million in 2000 due to a gain in 2000 from the
demutualization of an insurance company not repeated in 2001.

As a result  of the  above  factors,  the  Company  reported  a net loss of $5.7
million in 2001 compared to a net loss of $1.1 million in 2000.

2000 COMPARED TO 1999

Net sales  increased by $8.4 million,  or 7.6%,  to $118.6  million in 2000 from
$110.2  million in 1999.  The increase was  attributable  to an 8.7% increase in
average net selling prices for the Company's products, offset by a 1.0% decrease
in sales volumes to  approximately  220,400 tonnes in 2000,  from  approximately
222,600 tonnes in 1999. The Company's net selling price for newsprint  increased
to an  average of $538 per tonne in 2000 from an average  net  selling  price of
$495 per tonne in 1999.

Cost of sales increased by $2.3 million, or 2.3%, to $104.0 million in 2000 from
$101.6  million in 1999.  This  increase  was  attributable  primarily to a 3.3%
increase  in unit  manufacturing  costs  per  tonne,  offset in part by the 1.0%
decrease in sales volume.  The increase in unit manufacturing cost per tonne was
a result of 3.9% increase in fiber costs  primarily due to increased  prices for
ONP, a 15.4% increase in electrical  costs and an increase in major  maintenance
expenditures  of $0.6 million during the year.  Cost of sales as a percentage of
net sales  decreased to 87.6% in 2000 from 92.2% in 1999,  due to a net increase
in newsprint  selling prices and partially  offset by the increase in unit costs
of manufacturing as noted above.

                                       10
<PAGE>

The Company's  selling,  general and  administrative  expenses decreased by $1.7
million,  or 48.6%,  to $1.8  million in 2000 from $3.5  million  in 1999.  This
decrease was  attributable to the reduction in the management fee to Brant-Allen
for the period April 1, 2000 through December 31, 2000.  Effective April 1, 2000
the management fee to Brant-Allen for  administrative  services was reduced from
3% to 1%.

As a result of the above  factors,  income  from  operations  increased  by $7.7
million to $12.8 million in 2000 from $5.1 million in 1999.

The Company's  interest  expense  decreased by $2.9 million,  or 17.0%, to $14.2
million in 2000 from $17.1 million in 1999, due to scheduled amortization of the
Company's outstanding indebtedness, accelerated repayments on the Company's Term
Loan Facility as result of the liquidation of timberlands and lower  outstanding
balances on the Company's Revolving Credit Facility.

The Company's other income including  interest income decreased by $0.8 million,
to $0.2 million from $1.0 million in 1999 as a result of a gain on the sale of a
portion of the Company's timberlands in 1999.

The  extraordinary  loss of $1.0 million  incurred in the fourth quarter of 1999
was a result of a write off of a portion  of the  Company's  deferred  financing
costs due to the early  extinguishment of $49.6 million of debt on the Term Loan
Facility.

As a result  of the  above  factors,  the  Company  reported  a net loss of $1.1
million in 2000 compared to a net loss of $12.0 million in 1999.


LIQUIDITY AND CAPITAL RESOURCES

The Company's  principal  liquidity  requirements have been for working capital,
capital expenditures and debt service under the Company's loan agreements. These
requirements have been met through cash flows from operations and/or loans under
the Company's Revolving Credit Facility.

The  Company's  cash and  short-term  investments  at  December  31,  2001  were
approximately  $0.9  million,  representing  an increase of  approximately  $0.2
million from $0.7 million at December 31, 2000.  Net cash  provided by operating
activities was $16.7 million for the year ended December 31, 2001. Net cash used
in financing  activities was $2.6 million and cash used in investing  activities
was $13.9 million for the year ended December 31, 2001. In total, $16.0 million,
was used to cover:  capital expenditures of $13.9 million; a tax distribution of
$2.0 million;  and a reduction in long-term debt including purchase  obligations
of  $0.1  million.  While  the  Company  anticipates  that  cash  provided  from
operations in the future,  combined with borrowings  under the Revolving  Credit
Facility will be sufficient to pay its operating expenses,  satisfy debt-service
obligations  and  fund  capital  expenditures  current  market  conditions  have
resulted in extreme financial constraints. As a result, at December 31, 2001 the
Company  did  not  meet  several  Financial  Covenants  under  the  Bank  Credit
Facilities.  The Company is presently in  discussion  with the Lenders under the
Bank Credit Facilities to work out a solution to these deficiencies.

For the year ended  December 31, 2001,  the Company's cash provided by operating
activities  increased  by 74.0% to $16.7  million from $9.6 million for the year
ended December 31, 2000,  primarily due to increased selling prices,  changes in
working  capital and offset by higher cost of sales  resulting in a net loss for
the year ended  December 31, 2001 of $5.7  million  compared to net loss of $1.1
million for the year ended December 31, 2000.

The Company  incurred  capital  expenditures  of $13.9  million and $2.7 million
during the years  ended  December  31,  2001 and 2000,  respectively.  The large
increase in capital  expenditures  in 2001 reflects the replacement of machinery
and  equipment  as well as  payments  made in  anticipation  of  installing  new
equipment  on the  Company's  paper  machine.  Management  anticipates  that the
Company's total capital  expenditures for the years 2002 and 2003 will primarily
relate to existing capital projects in progress and maintenance of its newsprint
facilities.

                                       11
<PAGE>

At  December  31,  2001,  the  Company  had  approximately   $132.4  million  of
indebtedness,  consisting  of  borrowings  of $15.0  million under the Revolving
Credit  Facility,  $17.4 million under the Term Loan Facility and $100.0 million
under the Notes.  In addition,  $7.3 million was  available in unused  borrowing
capacity under the Revolving Credit Facility.

As  shown in the  accompanying  comparative  financial  statements  the  Company
incurred net losses of  $5,722,211,  $1,130,703  and  $11,984,773  for the years
ended  December 31, 2001,  2000 and 1999,  respectively,  and had an accumulated
deficit of $23,993,818 at December 31, 2001. Management also anticipates further
losses for the year ending  December  31, 2002 due to the current and  near-term
anticipated selling prices for newsprint.  Because of these recurring losses the
Company is not currently in compliance  with certain  financial  debt  covenants
under the Bank Credit Facilities.  Management  believes that the Company will be
able to  successfully  manage  through  this debt  covenant  deficiency  period,
although the Company's lenders could accelerate the debt at any time. As result,
$32.4  million  of debt  previously  reported  in the  financial  statements  as
long-term has been reclassified as current.  The Company has approximately  $7.3
million available under its Revolving Credit Facility to fund cash requirements.
Based on current market  conditions,  management  anticipates being able to meet
liquidity  requirements  for 2002;  however  there exists a range of  reasonably
possible  outcomes which could  significantly  impact the ability to achieve the
aforementioned.

The  Company's  future  operating  performance  and  ability to service the Bank
Credit Facilities and the Notes and repay other indebtedness of the Company will
be  subject  to future  economic  conditions  and the  financial  success of the
Company's  business and other  factors,  many of which are not in the  Company's
control,  including  changes  in  market  prices  for  newsprint,  fiber  costs,
electrical  rates  and  future  government   requirements  as  to  environmental
discharges and recycling content in newsprint. The Company currently anticipates
that in order to pay the principal amount of the Notes at maturity,  the Company
will be  required  to  refinance  such Notes or adopt one or more  alternatives,
including reducing or delaying capital expenditures or seeking additional equity
capital or other  additional  financing.  None of the  affiliates of the Company
will be  required  to make any capital  contributions  or other  payments to the
Company  with  respect to the Issuer's  obligations  on the Notes.  Although the
Company currently has no reason to believe that it will not be able to refinance
the Notes at maturity,  there can be no assurance  that such  refinancing or any
alternative  strategy could be effected upon  satisfactory  terms, if at all, or
that  any of the  foregoing  actions  would  enable  the  Company  to make  such
principal  payments on the Notes or that any of such actions  would be permitted
by the terms of any debt  instruments  of the Company or of any of the Company's
affiliates then in effect.

RESTRICTIVE DEBT COVENANTS

The indenture  dated  December 1, 1997 between the Company,  Bear Island Finance
Company II, Soucy Inc., Bear Island Timberlands Company, L.L.C. ("Timberlands"),
Brant-Allen  and Crestar  Bank,  as trustee  (the  "Indenture"),  restricts  the
ability of the Company  and its  subsidiaries  to,  among  other  things,  incur
additional  indebtedness,  incur liens,  pay  dividends  or make  certain  other
restricted  payments or investments,  consummate certain asset sales, enter into
certain  transactions with affiliates,  impose  restrictions on the ability of a
subsidiary  to pay dividends or make certain  payments to the Company,  merge or
consolidate with any other person or sell, assign,  transfer,  lease,  convey or
otherwise dispose of all or substantially  all of the assets of the Company.  In
addition,  the  Bank  Credit  Facilities  contain  other  and  more  restrictive
covenants and prohibit the Company from  prepaying the Notes,  except in certain
circumstances.  The Bank Credit  Facilities also require the Company to maintain
specified  financial ratios and satisfy certain financial tests. The Company was
deficient under several Financial  Covenants under the Bank Credit Facilities at
December 31, 2001.  Failure to reach  agreement  with the Lenders under the Bank
Credit  Facilities  could result in an event of default  under such  instruments
which could result in the  acceleration of the related debt and the acceleration
of  debt  under  other  debt  instruments  that  may  contain  cross-default  or
cross-acceleration  provisions.  If such an event of  default  occurs,  then the
lenders  under the Bank Credit  Facilities  would also be able to terminate  all
commitments  under the Bank Credit  Facilities.  If the  Company  were unable to
repay all amounts  declared  due and  payable,  then the lenders  under the Bank
Credit  Facilities  could  proceed  against  the  collateral  granted to them to
satisfy such  indebtedness and other  obligations due and payable under the Bank
Credit  Facilities.  If Indebtedness under the Bank Credit Facilities were to be
accelerated,  there can be no assurance  that the assets of the Company would be
sufficient to repay in full such indebtedness and the other  Indebtedness of the
Company, including the Notes.

                                       12

<PAGE>

ENVIRONMENTAL EXPENDITURES

The  operation  of the Mill is subject to extensive  and changing  environmental
regulation by federal, state and local authorities, including those requirements
that regulate discharges into the environment, waste management, and remediation
of  environmental  contamination.  Environmental  permits are  required  for the
operation  of  the  Company's   businesses,   and  are  subject  to  revocation,
modification  and renewal.  Governmental  authorities  have the power to enforce
compliance with  environmental  requirements and violators are subject to fines,
injunctions, civil penalties and criminal fines. Third parties may also have the
right to sue to enforce compliance with such regulations.

The Company has in the past made significant capital expenditures to comply with
current federal, state and local environmental laws and regulations. The Company
believes that it is in substantial  compliance  with such laws and  regulations,
although no assurance can be given that it will not incur  material  liabilities
and costs with respect to such laws and regulations in the future.  Although the
Company does not currently  believe that it will be required to make significant
expenditures  for pollution  control in the near future,  no  assurances  can be
given  that  future  developments,  such as the  potential  for  more  stringent
environmental  standards or stricter enforcement of environmental laws, will not
cause the Company to incur such expenditures.  The Company anticipates incurring
approximately  $95,000 to modify the Mill air  discharge  permits to  facilitate
future Mill upgrades  and/or process  changes (over and above routine  operating
expenditures)  over the next two years.  Future process changes may also require
various  permit  modifications  and may subject the Mill to  additional  capital
expenditures.

NEW ACCOUNTING STANDARDS

In July 2001, The Financial Accounting Standards Board ("FASB") issued Statement
of Financial Accounting Standards No. 141 ("SFAS 141"),  Business  Combinations.
SFAS 141  requires  that  the  purchase  method  of  accounting  be used for all
business combinations initiated after June 30, 2001. SFAS 141 is not expected to
have a material impact on the Company's financial statements.

In July 2001, the FASB issued  Statement of Financial  Accounting  Standards No.
142 ("SFAS 142"),  Goodwill and Other  Intangible  Assets,  effective for fiscal
years  beginning  after  December 15, 2001.  SFAS 142  primarily  addresses  the
accounting  for goodwill  and  intangible  assets  subsequent  to their  initial
recognition. SFAS 142 is not expected to have a material impact on the Company's
financial statements.

In August 2001, the FASB issued Statement of Financial  Accounting Standards No.
143  ("SFAS  143"),  Accounting  for  Asset  Retirement  Obligations.  SFAS  143
addresses financial accounting and reporting for obligations associated with the
retirement of tangible  long-lived  assets and related asset  retirement  costs.
SFAS 143 is effective for financial statements with fiscal years beginning after
June 15, 2002,  and is not expected to have a material  impact on the  Company's
financial statements.

In October 2001, the FASB issued Statement of Financial Accounting Standards No.
144 ("SFAS  144"),  Accounting  for the  Impairment  or Disposal  of  Long-Lived
Assets.  SFAS 144 requires that long-lived  assets to be disposed of be measured
at the  lower of  carrying  amount  or fair  value  less  cost to sell,  whether
reported in continuing  operations or in  discontinued  operations.  SFAS 144 is
effective for financial  statements  with fiscal years  beginning after December
15,  2001,  and is not  expected  to have a  material  impact  on the  Company's
financial statements.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK.

The Company is exposed to various  market risk factors such as  fluctuations  in
interest  rates,  as well as  changes in the cost of raw  materials.  These risk
factors can impact results of operations, cash flows and financial position. The
Company manages these risks through regular operating and financing  activities,
and  when  necessary,  the  use of  derivative  financial  instruments,  such as
interest rate swap contracts. These derivative instruments,  when used, are with
major financial institutions and are not for speculative or trading purposes.

                                       13
<PAGE>

The following analysis presents the effect on the Company's earnings, cash flows
and  financial  position as if the  hypothetical  changes in market risk factors
occurred on December 31, 2001. Only the potential impacts of these  hypothetical
assumptions are analyzed.  The analysis does not consider other possible effects
that could impact the Company's business.

At year-end 2001, the Company carried $132.4 million of outstanding  debt on its
books, with $32.4 million of that total held at variable interest rates. Holding
all other variables constant, if interest rates hypothetically increased by 10%,
the impact on earnings and cash flow would be an increase to interest expense of
$61,000. Conversely, if interest rates hypothetically decreased by 10%, with all
other  variables  held  constant,  the  change in  interest  expense  would be a
decrease to interest expense of $61,000.

The Company is exposed to the risk of  increasing  raw  material  prices,  which
could impact  profit  margins.  When raw material  costs  increase,  the Company
generally is unable to increase selling prices.  Therefore,  the Company expects
the impact of  increasing  raw  material  costs to result in  reductions  in the
results of its operations or cash flows.  Major raw material  components include
wood, ONP, OMG and chemicals.


ITEM 8.  FINANCIAL STATEMENTS.

Certain statements in the financial  statements and elsewhere in this report may
constitute forward-looking statements.  Because these forward-looking statements
include risks and uncertainties, actual results may differ materially from those
expressed  in or implied by the  statements.  Factors  that could  cause  actual
results to differ  include,  among other things:  increased  domestic or foreign
competition;  increases  in  capacity  through  construction  of  new  mills  or
conversion of older facilities to produce  competitive  products;  variations in
demand  for our  products;  changes in our cost for or the  availability  of raw
materials, particularly market pulp, ONP, OMG, wood and electricity; the cost of
compliance  with  new   environmental   laws  and   regulations;   the  pace  of
acquisitions;  cost  structure  improvements;  the  success of new  initiatives;
integration of systems; the success of computer-based  system enhancements;  and
general economic conditions.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
        FINANCIAL DISCLOSURE.

None.

                                    PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.

The following table sets forth certain information about the Company's directors
and executive officers:

NAME                           AGE         POSITION
----                           ---         --------
Peter M. Brant                 54           Co-Chairman    of   the   Board   of
                                            Directors   and   Chief    Executive
                                            Officer   of   the    Company    and
                                            Timberlands;  Co-Chairman, and Chief
                                            Executive  Officer  of  Brant-Allen;
                                            and Chief Executive Officer of Soucy
                                            Inc.

Joseph Allen                   60           President,  Co-Chairman of the Board
                                            of   Directors,    Chief   Operating
                                            Officer and Secretary of the Company
                                            and  Timberlands;   Co-Chairman  and
                                            Chief    Operating     Officer    of
                                            Brant-Allen;   and  Chief  Operating
                                            Officer of Soucy Inc.

Edward D. Sherrick              56          Vice   President   of  Finance   and
                                            Director   of  the   Company;   Vice
                                            President of Finance of Timberlands;
                                            Senior  Vice   President  and  Chief
                                            Financial  Officer  of  Brant-Allen;
                                            and Vice President of Soucy Inc.

                                       14

<PAGE>

Thomas E. Armstrong             64          Vice    President   of   Sales   and
                                            Manufacturing  and  Director  of the
                                            Company; Vice President of Sales and
                                            Manufacturing     of    Timberlands;
                                            Executive    Vice    President    of
                                            Brant-Allen;  and Vice  President of
                                            Soucy Inc.

Michael Conroy                  62          Director

Robert Flug                     54          Director

The  following  table sets forth  certain  information  about the  Company's key
employees:

NAME                           AGE         POSITION
----                           ---         --------
Jacques Beauchesne             57          Mill Manager
Thomas Conte                   47          Production Manager
Robert Jackson                 62          Human Resources Manager
Seth Hobart                    49          Financial Manager
David Crooks                   43          Manager of Engineering, Maintenance
                                           and Government Affairs of the Company

PETER M. BRANT. Mr. Brant is the Co-Chairman of the Board of Directors and Chief
Executive  Officer of the Company and  Timberlands,  the  Co-Chairman  and Chief
Executive  Officer of Brant-Allen and Chief Executive  Officer of Soucy Inc. Mr.
Brant jointly owns Brant-Allen with Mr. Joseph Allen. Mr. Brant has served as an
executive officer of the Company since its inception and has served as executive
officer of Brant-Allen for over 30 years.

JOSEPH  ALLEN.  Mr.  Allen is the  President,  and Chief  Operating  Officer and
Secretary of the Company and  Timberlands,  the  President  and Chief  Operating
Officer of  Brant-Allen  and Chief  Operating  Officer of Soucy Inc.  Mr.  Allen
jointly owns  Brant-Allen  with Mr. Brant.  Mr. Allen has served as an executive
officer of the Company since its  inception and has served as executive  officer
of Brant-Allen for over 30 years.

EDWARD D. SHERRICK.  Mr. Sherrick is Vice President of Finance and a Director of
the Company, Vice President of Finance of Timberlands, Senior Vice President and
Chief  Financial  Officer of Brant-Allen and Vice President of Soucy Inc. He has
been with the Company and Brant-Allen for over 25 years.

THOMAS E. ARMSTRONG.  Mr. Armstrong is Vice President of Sales and Manufacturing
and a Director of the  Company,  Vice  President of Sales and  Manufacturing  of
Timberlands, Executive Vice President of Brant-Allen and Vice President of Soucy
Inc. He has been an executive officer of the Company and Brant-Allen for over 30
years and has been involved in the sale and marketing of the Company's newsprint
as well as overseeing mill operations.

MICHAEL  CONROY.  Mr. Conroy was appointed a Director of the Company in November
1997. Mr. Conroy is an independent  consultant.  Mr. Conroy was the President of
the  International  Herald Tribune Company US, Inc. (the "Herald Tribune") up to
December 1998 . He had been with that company for 12 years.  Before  joining the
Herald Tribune, he was publisher at Newsweek Atlantic.

ROBERT FLUG.  Mr. Flug was appointed a Director of the Company in November 1997.
Mr. Flug has been the President and Chief  Executive  Officer of S.I.  Danielle,
Inc., a junior apparel manufacturer,  since 1987. Mr. Flug is also a director at
Take-Two Interactive Software, Inc.

JACQUES  BEAUCHESNE.  Mr. Beauchesne joined the Company in February 2001 as Mill
Manager.  From 1993 to 2000 Mr. Beauchesne was with Weavexx  Corporation as Vice
President Sales - North America.

                                       15
<PAGE>

THOMAS  CONTE.  Mr.  Conte  joined the  Company in  January  2000 as  Production
Manager.  From July  1989 to  January  2000 Mr.  Conte  was with  Alabama  River
Newsprint, Inc. as Assistant Papermachine Superintendent.

ROBERT JACKSON.  Mr. Jackson has been the Human Resources Manager of the Company
since 1979.

SETH HOBART.  Mr.  Hobart has been the  Financial  Manager of the Company  since
January 2000.  From  November 1979 to January 2000 Mr. Hobart was  Controller of
the Company. He has been with the Company since 1976.

DAVID CROOKS. Mr. Crooks was named the Manager of Engineering, Mill Services and
Environmental  Affairs  of the  Company  in  January  2002.  Prior to his latest
promotion Mr. Crooks was Manager of Mill Services and  Environmental  Affairs of
the  Company and has been with the  Company  since June 2000.  From June 1996 to
June 2000 Mr. Crooks was with J W Fergusson & Sons as Plant Manager.


ITEM 11. EXECUTIVE COMPENSATION.

No executive  officer of Brant-Allen  was paid any  compensation  by the Company
between 1999 and 2001. All officers of the Company who also serve as officers of
Brant-Allen  have received and will continue to receive  compensation  from and,
except as noted in the  following  paragraph,  participate  in employee  benefit
plans and arrangements sponsored by Brant-Allen,  including, but not limited to,
employee  insurance,  long term disabilities,  medical and other plans which are
maintained by  Brant-Allen  or which may be  established  by  Brant-Allen in the
future  except  as noted in the  following  paragraph,  these  officers  are not
entitled  to   participate   in  the  Company's   employee   benefit  plans  and
arrangements.

Effective as of March 15,  1999,  the  Brant-Allen  Industries,  Inc.  Incentive
Profit-Sharing Plan was merged with and into the Bear Island Paper Company, L.P.
Thrift Plan.  Brant-Allen  also adopted both the Company's Thrift Plan effective
for employee 401(k)  contributions  and employer  matching  contributions  as of
April  1,  1999  and for  other  contributions  as of  January  1,  1999 and the
Company's  Retirement  Plan  effective  as  of  January  1,  1999.   Brant-Allen
contributes the amount of employer  contributions due on behalf of its employees
under such plans.

Outside directors of the Company are paid $2,500 plus expenses per board meeting
attended.

ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.

Brant-Allen beneficially owns all the equity of each of the Company, Timberlands
and Soucy Inc. Brant-Allen, in turn, is jointly owned by Mr. Peter Brant and Mr.
Joseph Allen.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

RELATIONSHIP WITH BRANT-ALLEN

Brant-Allen  owns all of the equity in the Company,  Timberlands  and Soucy Inc.
Brant-Allen  is a subchapter S corporation  jointly owned by Mr. Peter Brant and
Mr. Joseph Allen.  Mr. Brant serves as  Brant-Allen's  Chairman of the Board and
Chief Executive Officer and also as Chairman of the Board of Directors and Chief
Executive  Officer of the Company and Timberlands and Chief Executive Officer of
Soucy Inc. Mr.  Allen  serves as  Brant-Allen's  President  and Chief  Operating
Officer and also as  President  and Chief  Operating  Officer of the Company and
Timberlands  and Chief  Operating  Officer of Soucy Inc.  The other  officers of
Brant-Allen, Mr. Edward Sherrick and Mr. Thomas Armstrong, are also directors of
the Company.

Brant-Allen  may  engage  in  a  variety  of  transactions   with  the  Company,
Timberlands  and/or Soucy.  These  transactions are expected to include the sale
and  marketing  of the  newsprint  produced  by the  Company  and  Soucy and the
provision of management  and other services  described  below to the Company and
Soucy.

                                       16

<PAGE>

MANAGEMENT SERVICES AGREEMENT

Concurrently  with the closing of the Acquisition,  the Company entered into the
Management  Services  Agreement  with  Brant-Allen.  Pursuant to the  Management
Services Agreement, Brant-Allen will continue to provide the Company with senior
management  treasury,  financial  and  administrative  (including  marketing and
sales) services. For these services, Brant-Allen will continue to be entitled to
a monthly fee, payable in advance, calculated at the rate of 3% of the Company's
net sales less  transportation  costs,  of which since  December  1, 1997,  as a
result of the Company's debt  agreements,  one third is payable in cash with the
remainder  contributed  to the Company's  capital.  Effective  April 1, 2000 the
Management  Service  Agreement was amended to reduce the management fees payable
to  Brant-Allen  to 1% of the Company's net sales less  transportation  costs of
which 100% is payable in cash.  This fee amounted to $1,120,000,  $1,653,000 and
$3,110,000 for the years ended December 31, 2001,  2000 and 1999,  respectively.
See  the  accompanying  financial  statements  of the  Company.  The  Management
Services  Agreement has a term of five years and is automatically  renewable for
successive  five-year terms unless terminated earlier by either party giving two
years written  notice.  The Management  Services  Agreement  contains  customary
indemnification provisions.

ARRANGEMENTS WITH TIMBERLANDS

The  Company  shares  employees,   facilities  and  recordkeeping  systems  with
Timberlands,  and the Company charges Timberlands monthly for its share of these
costs. Accordingly,  these shared employees receive benefits under the Company's
defined  contribution  retirement  plan and are eligible to  participate  in the
Company's thrift plan. Costs associated with these plans are reimbursed  monthly
by Timberlands. Amounts paid to the Company for shared costs, which are included
in selling, general and administrative expenses,  approximated $16,000, $170,000
and  $1,024,000,  during  the years  ended  December  31,  2001,  2000 and 1999,
respectively. See the accompanying financial statements of the Company.



                                       17
<PAGE>

                                     PART IV

ITEM  14.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.

(a) Exhibits and Financial Statements

(1) See Index to Financial Statements and Schedule of Bear Island Paper Company,
L.L.C. on page 21.

(2) Financial Statement Schedule of Bear Island Paper Company, L.L.C.

All other  schedules for which  provision is made in the  applicable  accounting
regulation of the Securities and Exchange  Commission are not required under the
related instructions or are inapplicable and therefore have been omitted.

(3) Exhibits

         2.1 The Partnership  Interest Sale  Agreement,  dated as of December 1,
         1997, by and among Dow Jones Virginia Company Inc., Newsprint, Inc. and
         Brant-Allen.*

         3.1 Articles of Organization of the Company.*

         3.2 Operating Agreement of the Company.*

         4.1  Indenture,  dated as of December 1, 1997,  among the  Registrants,
         Timberlands,  Soucy Inc. and Crestar Bank, as Trustee,  relating to the
         Notes.*

         4.2 Registration  Rights  Agreement,  dated December 1, 1997, among the
         Registrants and TD Securities  (USA), Inc. and Salomon Brothers Inc, as
         Initial Purchasers.*

         4.3  Intercreditor  Agreement,  dated as of December 1, 1997, among the
         Registrants,  Brant-Allen,  Toronto Dominion (Texas),  Inc. and Crestar
         Bank.*

         4.4 Deed of Trust  dated as of  December  1, 1997,  by and  between the
         Company and Crestar Bank, as Trustee. *

         4.5  Company  Pledge and  Security  Agreement,  dated as of December 1,
         1997, by and between the Company and Crestar Bank, as Trustee.*

         4.6 Hypotech  Agreement,  dated as of December 1, 1997,  by and between
         Brant-Allen and Crestar Bank, as Trustee.*

                                       18
<PAGE>

         10.1 Bank Credit Agreement,  dated as of December 1, 1997, by and among
         the Company, TD Securities (USA), Inc., Toronto Dominion (Texas), Inc.,
         Christiania  Bank OG Kreditkass  ASA,  Keyport Life Insurance  Company,
         Prime Income Trust,  Deeprock & Company,  Merrill Lynch Senior Floating
         Rate Fund, Inc. and Van Kampen American Capital Prime Rate Trust.*

         10.2 The Management Services  Agreement,  dated as of December 1, 1997,
         by and among the Company and Brant-Allen.*

         10.3 The Wood Supply  Agreement,  dated as of December 1, 1997,  by and
         among the Company and Timberlands.*

         10.4 The Newsprint Purchase Agreement, dated as of May 19, 1978, by and
         between the Company and the Dow Jones & Co., Inc.*

         10.4a Amendments to Newsprint Purchase Agreement,  dated as of April 1,
         1987, December 10, 1991, August 10, 1993 and April 22, 1996.

         10.5 The Newsprint Purchase Agreement, dated as of May 19, 1978, by and
         between the Company and The Washington Post.*

         10.5a Amendments to Newsprint Purchase Agreement,  dated as of December
         10, 1991, August 10, 1993 and April 22, 1996.

         21.1 Subsidiaries of the Company.*


          *         Previously filed as an exhibit to the Company's registration
                    statement  on  Form  S-4  Registration  No.  333-42201,   as
                    amended, and incorporated herein by reference.

                                       19
<PAGE>

                                   SIGNATURES

         Pursuant to the  requirements  of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.

                        BEAR ISLAND PAPER COMPANY, L.L.C.

                                   By:      /s/ Peter M. Brant
                                      --------------------------------------
                                   Name: Peter M. Brant
                                   Title: Chairman of the Board of Directors
                                   and Chief Executive Officer of the Company

Date: April 1, 2002

         Pursuant to the  requirements  of the Securities  Exchange Act of 1934,
this  report has been  signed  below by the  following  persons on behalf of the
registrant and in the capacity and on the dates indicated.
<TABLE>

Signature                           Title                                               Date
---------                           -----                                               ----
<S> <C>
                                    Principal Executive Officer
/s/ Peter M. Brant                  Chairman of the Board of Directors and           April 1, 2002
--------------------------
Peter M. Brant                      Chief Executive Officer
                                    Principal Financial and Accounting Officer

/s/ Joseph Allen                    President, Co-Chairman of the Board of           April 1, 2002
--------------------------
Joseph Allen                        Directors, Chief Operating Officer and
                                    Secretary

/s/ Edward D. Sherrick              Vice President of Finance and Director of        April 1, 2002
--------------------------
Edward D. Sherrick                  the Board of Directors

/s/ Thomas E. Armstrong             Vice President of Sales and Manufacturing        April 1, 2002
--------------------------
Thomas E. Armstrong                 and Director of the Board of Directors

/s/ Michael Conroy                  Director of the Board of Directors               April 1, 2002
--------------------------
Michael Conroy

/s/ Robert Flug                     Director of the Board of Directors               April 1, 2002
--------------------------
Robert Flug
</TABLE>

                                       20
<PAGE>

            INDEX TO FINANCIAL STATEMENTS AND SCHEDULE OF BEAR ISLAND
                              PAPER COMPANY, L.L.C.

          BEAR ISLAND PAPER COMPANY, L.L.C.

          Balance Sheets--December 31, 2001 and 2000

          Statements of Operations--Years ended December 31, 2001, 2000 and 1999

          Statements of Changes in Member's Interest--Years ended December 31,
            2001, 2000 and 1999

          Statements of Cash Flows--Years ended December 31, 2001, 2000 and 1999


          Schedule II             Valuation and Qualifying Accounts

                                       21

<PAGE>

         BEAR ISLAND PAPER COMPANY, L.L.C.
         (A Virginia Limited LIABILITY CORPORATION)

         FINANCIAL STATEMENTS

         FOR THE YEARS ENDED DECEMBER 31, 2001
         AND 2000

<PAGE>

Report of Independent Accountants




To the Board of Directors and Member of
Bear Island Paper Company, L.L.C.:

In our opinion,  the accompanying  balance sheets and the related  statements of
operations,  of  changes  in equity and of cash  flows  present  fairly,  in all
material respects,  the financial position of Bear Island Paper Company,  L.L.C.
(a Virginia limited liability  corporation) (the "Company") at December 31, 2001
and 2000,  and the  results of its  operations  and its cash flows for the years
then ended in conformity with accounting  principles  generally  accepted in the
United States of America.  These financial  statements are the responsibility of
the Company's  management;  our responsibility is to express an opinion on these
financial  statements  based on our  audits.  We  conducted  our audits of these
statements  in  accordance  with auditing  standards  generally  accepted in the
United  States of America  which  require  that we plan and perform the audit to
obtain reasonable  assurance about whether the financial  statements are free of
material  misstatement.  An audit includes examining,  on a test basis, evidence
supporting the amounts and  disclosures in the financial  statements,  assessing
the accounting principles used and significant estimates made by management, and
evaluating the overall  financial  statement  presentation.  We believe that our
audits provide a reasonable basis for the opinion expressed above.

The  accompanying  financial  statements  have been  prepared  assuming that the
Company  will  continue  as a  going  concern.  As  discussed  in  Note 2 to the
financial statements, the Company has suffered recurring losses from operations,
experienced  liquidity  issues  and has  failed  to  meet  certain  of its  debt
covenants.  These matters raise substantial doubt about the Company's ability to
continue as a going concern.  Management's  plans in regard to these matters are
also  described  in  Note  2.  The  financial  statements  do  not  include  any
adjustments that might result from the outcome of this uncertainty.

The Company is a member of a group of affiliated Companies, and, as discussed in
Note 4 to the financial  statements,  the Company had significant  related-party
transactions  with  members  of  the  group.   Because  of  these  related-party
transactions, it is possible that the terms are not the same as those that would
result from transactions among wholly unrelated parties.



                                        PRICEWATERHOUSECOOPERS LLP

February 4, 2002

                                       1
<PAGE>
<TABLE>
BEAR ISLAND PAPER COMPANY, L.L.C.
(A Virginia Limited Liability Corporation)
BALANCE SHEETS
December 31, 2001 and 2000

                                                                                          December 31,
                                                                           ----------------------------------------
   ASSETS                                                                         2001                 2000

<S>                                                                              <C>                  <C>
Cash and short-term investments                                                  $    886,300         $    682,329
Accounts receivable:
    Trade, less allowance for doubtful accounts of $734,399 and
        $67,778 in 2001 and 2000, respectively                                      8,026,839           13,708,199
    Affiliates                                                                        556,430              211,209
    Other                                                                              79,563              172,477
Inventories, net                                                                   12,665,519           12,651,078
Other current assets                                                                  659,848              492,022
                                                                           -------------------  -------------------

           Total current assets                                                    22,874,499           27,917,314
                                                                           -------------------  -------------------

Property, plant and equipment, at cost                                            218,595,176          205,032,041
Less accumulated depreciation                                                     (43,562,514)         (32,314,191)
                                                                           -------------------  -------------------

           Net property, plant and equipment                                      175,032,662          172,717,850
                                                                           -------------------  -------------------

Deferred financing costs, net of accumulated amortization of
      $2,516,442 and $1,852,840 in 2001 and 2000, respectively                      5,502,064            6,165,666
                                                                           -------------------  -------------------

                                                                                 $203,409,225         $206,800,830
                                                                           ===================  ===================


                               LIABILITIES

Current portion of long-term purchase obligations                                           -               93,494
Accounts payable and accrued expenses                                              13,573,664            9,026,377
Due to affiliates                                                                     870,179              377,028
Interest payable                                                                      934,005            1,034,044
Debt                                                                               32,444,121                    -
                                                                           -------------------  -------------------

           Total current liabilities                                               47,821,969           10,530,943
                                                                           -------------------  -------------------

Long-term debt                                                                    100,000,000          133,008,276
                                                                           -------------------  -------------------

                                                                                  147,821,969          143,539,219
                                                                           -------------------  -------------------

   EQUITY

Member's interest                                                                  79,581,074           79,581,074
Accumulated deficit                                                               (23,993,818)         (16,319,463)
                                                                           -------------------  -------------------

           Total member's interest                                                 55,587,256           63,261,611
                                                                           -------------------  -------------------

                                                                                 $203,409,225         $206,800,830
                                                                           ===================  ===================
</TABLE>


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

                                       2
<PAGE>
<TABLE>
BEAR ISLAND PAPER COMPANY, L.L.C.
(A Virginia Limited Liability Corporation)
STATEMENTS OF OPERATIONS
for the years ended December 31, 2001, 2000 and 1999

                                                                  2001                2000                1999

<S>                                                           <C>                 <C>               <C>
Sales                                                         $117,845,511        $118,628,761      $ 110,231,202

Cost of sales                                                  108,509,114         103,960,697        101,621,263
                                                         ------------------  ------------------  -----------------

           Gross profit                                          9,336,397          14,668,064          8,609,939

Selling, general and administrative expenses:
    Management fees to affiliate                                 1,119,872           1,653,218          3,110,180
    Other direct                                                   965,325             181,974            393,693
                                                         ------------------  ------------------  -----------------

           Income from operations                                7,251,200          12,832,872          5,106,066
                                                         ------------------  ------------------  -----------------

Other income (expense):
    Interest income                                                103,017             144,346            148,995
    Interest expense                                           (13,076,428)        (14,192,258)       (17,097,180)
    Other income                                                         -              84,337            863,346
                                                         ------------------  ------------------  -----------------

                                                               (12,973,411)        (13,963,575)       (16,084,839)
                                                         ------------------  ------------------  -----------------

           Loss before extraordinary item                       (5,722,211)         (1,130,703)       (10,978,773)

Extraordinary item:
    Early extinguishment of debt                                         -                   -         (1,006,000)
                                                         ------------------  ------------------  -----------------

             Net loss                                         $ (5,722,211)       $ (1,130,703)     $ (11,984,773)
                                                         ==================  ==================  =================
</TABLE>
The accompanying notes are an integral part of the financial statements.


                                        3


<PAGE>
<TABLE>
BEAR ISLAND PAPER COMPANY, L.L.C.
(A Virginia Limited Liability  Corporation)
STATEMENTS OF CHANGES IN EQUITY
for the years ended December 31, 2001, 2000 and 1999
                                                                                   Retained
                                                                                   Earnings
                                                                 Member's        (Accumulated
                                                                 Interest           Deficit)              Total

<S>                                                             <C>                <C>                 <C>
Balance, December 31, 1998                                      $28,130,250        $ 4,436,479         $32,566,729

Management fee payable contributed to capital                     2,073,455                              2,073,455

Capital contributions                                            47,350,000                             47,350,000

Tax distributions to parent                                                         (4,126,421)         (4,126,421)

Net loss                                                                           (11,984,773)        (11,984,773)
                                                           -----------------  -----------------   -----------------

Balance, December 31, 1999                                       77,553,705        (11,674,715)         65,878,990

Management fee payable contributed to capital
      by parent                                                     527,369                                527,369

Capital contributions                                             1,500,000                              1,500,000

Tax distributions to parent                                                         (3,514,045)         (3,514,045)

Net loss                                                                            (1,130,703)         (1,130,703)
                                                           -----------------  -----------------   -----------------

Balance, December 31, 2000                                       79,581,074        (16,319,463)         63,261,611

Tax distributions to parent                                                         (1,952,144)         (1,952,144)

Net loss                                                                            (5,722,211)         (5,722,211)
                                                           -----------------  -----------------   -----------------

Balance, December 31, 2001                                      $79,581,074      $ (23,993,818)        $55,587,256
                                                           =================  =================   =================
</TABLE>

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


                                       4
<PAGE>
<TABLE>
BEAR ISLAND PAPER COMPANY, L.L.C.
(A Virginia Limited Liability Corporation)
STATEMENTS OF CASH FLOWS
for the years ended December 31, 2001, 2000 and 1999

                                                                             2001             2000              1999

Operating activities:
<S>                                                                     <C>               <C>               <C>
    Net loss                                                            $ (5,722,211)     $ (1,130,703)     $(11,984,773)
      Adjustments to reconcile net loss to net cash provided
           by operating activities:
        Depreciation                                                      11,359,628        10,885,622        10,615,303
        Depletion                                                                  -                 -            31,022
        Amortization of deferred financing costs                             663,602           665,228           438,887
        Noncash portion of extraordinary item                                      -                 -         1,006,000
        Increase in allowance for obsolescence                               180,000           116,500            63,000
        (Gain) loss on disposal/writedown of property, plant
             and equipment                                                   202,797           160,400          (663,186)
        Changes in operating assets and liabilities:
           Accounts receivable                                             5,429,053        (1,731,068)        1,308,534
           Inventories                                                      (194,441)          207,704           789,542
           Other current assets                                             (167,826)         (112,587)          190,799
           Accounts payable and accrued expenses                           4,547,287           192,972         1,081,189
           Due to affiliate                                                  493,151           365,237           (66,401)
           Interest payable                                                 (100,039)          (10,318)         (262,668)
                                                                      ---------------  ----------------  ----------------

           Net cash provided by operating activities                      16,691,001         9,608,987         2,547,248
                                                                      ---------------  ----------------  ----------------

Investing activities:
    Purchases of property, plant and equipment                           (13,877,237)       (2,749,942)       (3,009,194)
    Proceeds from disposition of property, plant and
        equipment                                                                  -            45,450         2,743,852
                                                                      ---------------  ----------------  ----------------

           Net cash used in investing activities                         (13,877,237)       (2,704,492)         (265,342)
                                                                      ---------------  ----------------  ----------------

Financing activities:
    Contributions from parent                                                      -         1,500,000        47,350,000
    Tax distributions to parent                                           (1,952,144)       (3,514,045)       (4,126,421)
    Principal payments on long-term debt                                  (6,064,155)      (12,025,000)      (70,266,724)
    Principal payments on long-term purchase obligations                     (93,494)         (164,320)         (388,349)
    Proceeds from issuance of long-term debt                               5,500,000         7,000,000        24,000,000
                                                                      ---------------  ----------------  ----------------

           Net cash used in financing activities                          (2,609,793)       (7,203,365)       (3,431,494)
                                                                      ---------------  ----------------  ----------------

           Net increase (decrease) in cash and short-term
               investments                                                   203,971          (298,870)       (1,149,588)

Cash and short-term investments, beginning of period                         682,329           981,199         2,130,787
                                                                      ---------------  ----------------  ----------------

             Cash and short-term investments, end of period                $ 886,300         $ 682,329         $ 981,199
                                                                      ===============  ================  ================


Supplemental disclosures of cash flow information:
    Cash paid for interest                                              $ 12,512,865      $ 13,537,348      $ 16,920,961
                                                                      ===============  ================  ================

    Management fee payable contributed to capital by parent             $          -      $    527,369      $  2,073,455
                                                                      ===============  ================  ================
</TABLE>


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

                                       5
<PAGE>

NOTES TO FINANCIAL STATEMENTS


 1.    Description of Business:

       Bear  Island  Paper  Company,   L.L.C.,  a  Virginia  limited   liability
       corporation (the "Company"),  located in Doswell, Virginia, is a producer
       of  high  quality  newsprint  suitable  for  four-color   printing  whose
       customers  include leading  newspaper  publishers in the United States of
       America.  The  Company  is  a  wholly  owned  subsidiary  of  Brant-Allen
       Industries, Inc. ("Brant-Allen"), a Delaware corporation.



2.     Business Conditions and Liquidity:

       As shown in the  accompanying  comparative  statements of operations  and
       balance sheets, the Company incurred net losses of $5,722,211, $1,130,703
       and  $11,984,773  for the years ended  December 31, 2001,  2000 and 1999,
       respectively,  and had an accumulated  deficit of $23,993,818 at December
       31, 2001. Management also anticipates a loss for the year ending December
       31, 2002.  Because of these recurring losses the Company is not currently
       in compliance with certain financial debt covenants.  Management believes
       that the Company  will be able to  successfully  manage  through the debt
       covenant  situation,  although the Company's lenders could accelerate the
       debt at any time during that period.  As a result,  some debts previously
       reported as long-term have been  reclassified  as current.  These matters
       raise  substantial  doubt  about the  Company's  ability to continue as a
       going concern.  The accompanying  financial statements have been prepared
       on a going concern basis that  contemplates the realization of assets and
       the satisfaction of liabilities in the normal course of business.

       At December  31,  2001,  the Company had  approximately  $7.3  million in
       available  borrowings under its Revolving Credit Facility (see Note 7) to
       fund cash  requirements.  In  addition,  the  Company  has the ability to
       access approximately $7 million of additional capital equipment financing
       through the use of certain leasing options. The Company also had positive
       cash flows from operations during the past three years.  Based on current
       market  conditions,  management  anticipates being able to meet liquidity
       requirements  for  2002;  however,  there  exists a range  of  reasonably
       possible  outcomes  which could  significantly  impact  their  ability to
       achieve the aforementioned.


                                       6
<PAGE>

NOTES TO FINANCIAL STATEMENTS, Continued


 3.    Summary of Significant Accounting Policies:

       Cash and Short-Term Investments:  Cash and short-term investments include
       all cash balances and highly liquid investments.  Short-term  investments
       are stated at cost, which approximates  market value. For purposes of the
       statements  of cash  flows,  the  Company  considers  all  highly  liquid
       short-term  investments  purchased  with an  original  maturity  of three
       months or less to be cash equivalents.

       Inventories:  Finished goods and raw materials  inventories are valued at
       the  lower of cost or  market,  with  cost  determined  on the  first-in,
       first-out  ("FIFO") basis.  Stores inventories are valued at the lower of
       average cost or market and are shown net of an allowance for obsolescence
       at December 31, 2001 and 2000 of  approximately  $1,105,254 and $925,254,
       respectively.

       Property,   Plant  and  Equipment:   The  costs  of  major  renewals  and
       betterments  are  capitalized  while the costs of maintenance and repairs
       are charged to income as incurred.  When  properties are sold or retired,
       their cost and the related  accumulated  depreciation  or  depletion  are
       eliminated from the accounts and the gain or loss is reflected in income.
       The  Company   capitalizes   interest  costs  as  part  of  the  cost  of
       constructing significant assets. There were no capitalized interest costs
       during the years ended December 31, 2001 or 2000.

       The carrying value of property, plant and equipment is evaluated whenever
       significant  events or changes  occur that might  indicate an  impairment
       through  comparison  of the  carrying  value to total  undiscounted  cash
       flows.

       Repair and Maintenance: The Company accrues the annual estimated costs of
       planned major maintenance  activity over the course of the calendar year.
       As actual major  maintenance  project costs are incurred they are charged
       against the accrual.  The Company reviews amounts  accrued,  actual costs
       incurred to date and estimated costs to be incurred for major maintenance
       items  through  year end on a monthly  basis and  adjusts the accrual and
       accrual  rates  accordingly  so that the costs of all  major  maintenance
       projects  are  spread  over the  calendar  year with no  accrual  balance
       remaining at year-end.  Routine repair and maintenance costs are expensed
       as incurred.

       Depreciation  and  Depletion:  Depreciation  of plant  and  equipment  is
       computed principally on the straight-line basis over the estimated useful
       lives of the assets.  Lives range from 10 to 50 years for  buildings  and
       improvements,  40 years for recycling facilities,  35 years for tanks, 30
       years for  specialized  building  improvements,  25 years  for  newsprint
       manufacturing  equipment,  and from three to 50 years for other machinery
       and  equipment.  The  portion of the cost of  timberlands  attributed  to
       standing  timber is charged  against income as timber is cut and utilized
       in the manufacturing  process at rates determined annually,  based on the
       relationship  of  unamortized  timber  costs to the  estimated  volume of
       recoverable timber.

       Deferred Financing Costs: Costs directly  associated with the issuance of
       debt have been deferred and are being amortized using the interest method
       over the life of the related debt.  Unamortized  balances  written off in
       connection  with early  retirements  of long-term  debt are recognized as
       extraordinary items at the time of early retirement.


                                       7
<PAGE>

 3.    Summary of Significant Accounting Policies, continued:

       Income Taxes:  No provision for income taxes is required in the financial
       statements  since the  member is liable  for any  income  tax that may be
       payable on the Company's taxable income.

       Revenue  Recognition:  Sales are  recognized  by the  Company at the time
       title and risk of loss transfers to the customer,  which generally occurs
       at the point of shipment of the newsprint to the customer.

       Estimates:  The  preparation of financial  statements in conformity  with
       generally  accepted  accounting  principles  requires  management to make
       estimates and assumptions  that affect the reported amounts of assets and
       liabilities  and disclosure of contingent  assets and  liabilities at the
       dates of the financial  statements  and the reported  amounts of revenues
       and expenses  during the reporting  period.  Actual  results could differ
       from those estimates.

       Derivatives:  The  Company  records  all  derivative  instruments  on the
       balance  sheet as assets or  liabilities,  measured at fair market value.
       Derivatives  that are not  hedges  are  adjusted  to fair  value  through
       income.  If the  derivative  is a hedge,  depending  on the nature of the
       hedge,  changes in the fair value of the derivative will either be offset
       against  the change in fair value of the hedged  assets,  liabilities  or
       firm commitments  through  earnings or recognized in other  comprehensive
       income until the hedged item is recognized in earnings.  The  ineffective
       portion  of a  derivative's  change  in fair  value  will be  immediately
       recognized  in  earnings.  The Company  did not  utilize  any  derivative
       instruments during 2001 or 2000.

       Fair Value of  Financial  Instruments:  The fair  value of the  Company's
       long-term debt is estimated using  discounted cash flow analyses based on
       the incremental  borrowing  rates  currently  available to companies with
       loans of similar terms and maturity.  The fair value of trade receivables
       and  payables  approximates  the  carrying  amount  because  of the short
       maturity of these instruments.

       Risks and Uncertainties:  Financial instruments which potentially subject
       the Company to concentrations of credit risk consist principally of cash,
       short-term  investments  and  accounts  receivable.  The  Company's  cash
       balance  is  maintained  at a  major  financial  institution.  Short-term
       investments,  which  consist of U.S.  government  securities,  are with a
       high-credit-quality  financial  institution.  Accounts receivable consist
       principally of trade accounts  receivable  resulting primarily from sales
       to  newspaper  publishers.  Credit  is  extended  to  customers  after an
       evaluation of creditworthiness.  Generally,  the Company does not require
       collateral  or  other   security  from   customers  for  trade   accounts
       receivable.  Substantially all of the Company's  customers operate in the
       printing sectors,  consequently  their ability to honor their obligations
       are dependent upon the financial  strength of the printing and publishing
       sectors.  The Company's  customers  are primarily  located in the eastern
       United States.

       The Company has had five  customers  whose sales  represent a significant
       portion of sales.  Sales to one of these customers  approximated  11%, 0%
       and  0%  for  the  years  ended   December  31,  2001,   2000  and  1999,
       respectively.  Sales to a second customer  approximated  16%, 13% and 11%
       for the years ended December 31, 2001, 2000 and 1999, respectively. Sales
       to a third


                                       8
<PAGE>

 3.    Summary of Significant Accounting Policies, continued:

       customer  approximated  16%, 19% and 18% for the years ended December 31,
       2001,   2000  and  1999,   respectively.   Sales  to  a  fourth  customer
       approximated  14% and 20% for the years ended December 31, 2001 and 2000,
       respectively. Sales to a fifth customer approximated 14%, 17% and 19% for
       the years ended December 31, 2001, 2000 and 1999, respectively.

       Newsprint  Sales,  the sales  division of  Brant-Allen,  has entered into
       certain supply contracts,  as amended,  (the "Supply Contracts") with two
       customers. Under the terms of the Supply Contracts, as amended, Newsprint
       Sales is required to provide to these customers  certain fixed volumes of
       newsprint at prices determined annually, through December 31, 2004.

       New  Accounting  Standards:   In  July  2001,  the  Financial  Accounting
       Standards  Board  ("FASB")  issued  Statement  of  Financial   Accounting
       Standards No. 141 ("SFAS 41"), Business  Combinations.  SFAS 141 requires
       that  the  purchase  method  of  accounting  be  used  for  all  business
       combinations  initiated  after June 30, 2001. SFAS 141 is not expected to
       have a material impact on the Company's financial statements.

       In July 2001, the FASB issued Statement of Financial Accounting Standards
       No. 142 ("SFAS 142"),  Goodwill and Other Intangible Assets, is effective
       for fiscal years  beginning  after December 15, 2001.  SFAS 142 primarily
       addresses the accounting for goodwill and intangible assets subsequent to
       their  initial  recognition.  SFAS 142 is not expected to have a material
       impact on the Company's financial statements.

       In  August  2001,  the FASB  issued  Statement  of  Financial  Accounting
       Standards  No.  143  ("SFAS  143"),   Accounting  for  Asset   Retirement
       Obligations.  SFAS 143 addresses  financial  accounting and reporting for
       obligations  associated with the retirement of tangible long-lived assets
       and related asset retirement  costs.  SFAS 143 is effective for financial
       statements with fiscal years beginning after June 15, 2002, and it is not
       expected to have a material impact on the Company's financial statements.

       In October  2001,  the FASB  issued  Statement  of  Financial  Accounting
       Standards No. 144 ("SFAS 144"), Accounting for the Impairment or Disposal
       of  Long-Lived  Assets.  SFAS 144 requires that  long-lived  assets to be
       disposed of be  measured  at the lower of  carrying  amount or fair value
       less  cost to sell,  whether  reported  in  continuing  operations  or in
       discontinued operations. SFAS 144 is effective for fiscal years beginning
       after December 15, 2001, and is not expected to have a material impact on
       the Company's financial statements.


 4.    Related-Party Transactions:

       All sales and related  collections  are made through  Newsprint  Sales, a
       division  of  Brant-Allen.   Brant-Allen   provides   similar  sales  and
       collection activities for F.F. Soucy, Inc. ("Soucy, Inc."), an affiliated
       Canadian newsprint company 100% owned by Brant-Allen. As part of the Term
       Loan and Revolving  Loans (see Note 7),  Brant-Allen  entered into a cash
       collateral  agreement on December 1, 1997 (the  "Collateral  Agreement").
       The  Collateral  Agreement  requires  that  collections  of the Company's
       receivables by Newsprint Sales be remitted to the Company within two days
       of receipt.



                                       9
<PAGE>

 4.    Related-Party Transactions, continued:

       The Company received  payments of approximately $0, $186,200 and $234,100
       from  Brant-Allen  as  reimbursement  for expenses  incurred on behalf of
       Brant-Allen  during the years ended  December  31,  2001,  2000 and 1999,
       respectively.    Additionally,   the   Company   received   payments   of
       approximately  $101,900,  $101,800  and  $137,200  from Soucy,  Inc.  for
       expenses  incurred  on behalf  of  Soucy,  Inc.  during  the years  ended
       December 31, 2001, 2000 and 1999, respectively.

       A component of selling,  general and administrative  expenses as shown on
       the statements of operations  includes aggregate  management fees charged
       to the  Company  by  Brant-Allen.  The  management  fee  includes  senior
       management,  treasury, financial, marketing and sales services. There are
       restrictions on payment of the management fee as described in Note 7. The
       level of these fees that would be incurred  if the Company  operated on a
       stand-alone basis are not practicably determinable.

       The   Company   charged   Bear   Island   Timberlands    Company   L.L.C.
       ("Timberlands"),  an affiliated  company owned 100% by  Brant-Allen,  for
       certain  administrative  and other expenses.  These charges  approximated
       $16,000,  $170,000  and  $1,024,000  during the years ended  December 31,
       2001, 2000 and 1999, respectively.

       The  Company's  receivables  and payables with their  affiliates  were as
       follows:

                                                         December 31,
                                            ----------------------------------
                                                     2001              2000

       Due from (to) Brant-Allen                 $ (508,773)        $  36,986
       Due from Newsprint Sales                     530,039           157,379
       Due from Soucy, Inc. and Partners              7,604            11,791
       Due from Soucy, Inc.                          18,787             5,053
       Due to Timberlands                          (361,406)         (377,028)


 5.    Inventories:

       Inventories, net consisted of:

                                                        December 31,
                                            ----------------------------------
                                                    2001              2000

       Raw materials                             $2,153,044        $2,427,336
       Stores                                     7,686,207         8,148,930
       Finished goods                             2,826,268         2,074,812
                                            ----------------  ----------------

                                               $ 12,665,519      $ 12,651,078
                                            ================  ================


                                       10
<PAGE>

 6.   Property, Plant and Equipment:

      Property,  plant  and  equipment  is stated  at cost and  consists  of the
      following:
<TABLE>
                                                                December 31,
                                                   ------------------------------------
                                                            2001               2000
<S>                                                     <C>                <C>
    Land                                               $  1,548,847       $  1,548,847
    Timberlands                                           1,568,972          1,568,972
    Building                                             28,412,280         28,412,280
    Machinery and equipment                             183,281,817        172,055,862
    Construction in progress                              3,783,260          1,446,080
                                                   -----------------  -----------------

                                                        218,595,176        205,032,041
    Less accumulated depreciation and depletion         (43,562,514)       (32,314,191)
                                                   -----------------  -----------------

               Total                                   $175,032,662       $172,717,850
                                                   =================  =================
</TABLE>

      During the years ended December 31, 2000, the Company recorded charges for
      net losses of  $160,400  to record a  write-down  and  disposal of certain
      operating  assets  in  connection  with  increasing  the  capacity  of its
      recycling  facilities.  The charges  are  included in cost of sales in the
      accompanying statements of operations.

      During  1999,  the  Company  sold  a  portion  of  its   timberlands   for
      approximately  $2.7 million and  recognized a gain on the sale of $698,000
      which is included in other income in the 1999 statement of operations.




                                       11
<PAGE>

7.    Long-Term Debt:

      Long-Term debt consisted of:
<TABLE>
                                                                       December 31,
                                                          ------------------------------------
                                                                  2001               2000
<S> <C>
Senior Secured Notes bearing interest at 10%
(interest payable semi-annually commenced June 1,
1998); due 2007                                               $100,000,000       $100,000,000

Term Loan Facility bearing interest at LIBOR plus
3% (5.02% and 9.62% at December 31, 2001 and 2000,
respectively) (interest payable quarterly);
quarterly principal payments of $175,000 commenced
March 31, 1998; effective November 6, 2000,
quarterly principal payments were no longer
required; remaining balance due December 31, 2005               17,444,121         18,508,276

$25 million Revolving Credit Facility bearing
interest at (i) LIBOR plus 2.75% (weighted average
rate of 7.02% and 9.29% for the years ended
December 31, 2001 and 2000, respectively) for
$15,000,000 and $13,000,000 of borrowings at
December 31, 2001 and 2000, respectively, with
interest due monthly; and (ii) prime plus 1.75%
(weighted average rate of 9.80% for the year ended
December 31, 2000, respectively) for $1,500,000 of
borrowings at December 31, 2000, with interest due
quarterly; due December 31, 2003                                15,000,000         14,500,000
                                                          -----------------  -----------------

                                                               132,444,121        133,008,276
Less amounts classified as current                              32,444,121                  -
                                                          -----------------  -----------------

             Total long-term debt                             $100,000,000       $133,008,276
                                                          =================  =================
</TABLE>
      On December 1, 1997, the Company sold $100 million of Senior Secured Notes
      (the "Notes") in a private placement. On December 1, 1997 the Company also
      entered into  Indenture  Agreements  for a $70 million Term Loan  Facility
      ("Term  Loan") and a $50 million  Revolving  Credit  Facility  ("Revolving
      Loan").  The proceeds from the Notes,  Term Loan and  Revolving  Loan were
      used by the Company to purchase the 70% interest of the Predecessor.

      During  1999,  Timberlands  sold  the  majority  of  its  timberlands  and
      distributed a portion of the proceeds to Brant-Allen. In turn, Brant-Allen
      made capital  contributions to the Company of $47,350,000  which were used
      towards the retirement of  approximately  $49,600,000 on the Term Loan. In
      connection  with this process,  unamortized  financing costs of $1,006,000
      were  written  off and  recorded  as an  extraordinary  item  in the  1999
      statement of  operations.  In  addition,  the amount  available  under the
      Revolving  Loan was  reduced  from $50  million to $25  million  effective
      November 23, 1999.


                                       11
<PAGE>


7.       Long-Term Debt, continued:

      The Notes are redeemable, together with accrued interest, at the option of
      the  Company,  in whole or in part,  at any time on or after  December  1,
      2002,  with  sufficient  notice at the  redemption  prices set forth below
      calculated beginning on December 1 of the years indicated:

                                                    Redemption
                         Year                          Price

                         2002                         105.00%
                         2003                         103.333
                         2004                         101.667
                 2005 and thereafter                  100.000

      The Term  Loan and  Revolving  Loan are  redeemable  at the  option of the
      Company,  in whole or in part, at any time without premium or penalty upon
      irrevocable notice delivered to the administrative agent. Elective partial
      prepayments  on the Term Loan or  Revolving  Loan shall be in an aggregate
      principal amount of $5,000,000 or a whole multiple thereof.  Prepayment of
      the Term Loan and  Revolving  Loan is required to the extent of any excess
      cash flow ("ECF"), as computed on the ECF date.

      The Notes are collateralized by (i) a second priority security interest in
      all real property of the Company and all personal property of the Company,
      to the extent  such  personal  property is  assignable,  and (ii) a second
      priority  security  interest  in  100%  of  the  membership  interests  in
      Timberlands. The Term Loan and Revolving Loan are partly collateralized by
      (i) a first  priority  security  interest in a substantial  portion of the
      assets of the Company and (ii) a first priority  security interest in 100%
      of Brant-Allen's membership interest in Timberlands.

      The most restrictive  covenants of the Notes, Term Loan and Revolving Loan
      state  that  the  Company  has  a  limitation   on  incurring   additional
      indebtedness,  making restricted payments, creating, incurring or assuming
      any liens,  making sales of capital  stock of  subsidiaries,  transactions
      with  affiliates,  and sale of assets.  Furthermore  under the Notes,  the
      Company is not permitted to pay  management  fees to Brant-Allen in excess
      of 3% of the Company's net sales. Only one-third of this payment may be in
      cash.  Effective  April 1,  2000 the Notes  were  amended  to  reduce  the
      management fees payable to Brant-Allen to 1% of the Company's net sales of
      which 100% is payable in cash.

      As  discussed  in Note 2, the Company  failed to comply with  certain loan
      covenants at December 31, 2001.

      The fair values of the Term Loan and Revolving Loan  approximate  carrying
      values at  December  31,  2001 and 2000.  The fair  value of the Notes was
      $95,000,000 and  $89,200,000 at December 31, 2001 and 2000,  respectively.
      Maturities   on  long-term   debt  for  the  four  years  after  2002  are
      approximately  as  follows:  2003  -  $15,000,000;   2004  -  $0;  2005  -
      $17,444,121; 2006 - $0; and thereafter - $100,000,000.

      As disclosed above, the Company's $100 million Senior Notes become payable
      in 2007. The Company does not  anticipate  being able to repay these notes
      from  operating  cash flows and intends to refinance  these Notes prior to
      their maturity.



                                       12
<PAGE>

 8.   Long-Term Purchase Obligations:

      Capitalized purchase obligations for purchases of machinery and equipment,
      which approximate fair value, consisted of:

                                                           December 31,
                                                 -------------------------------
                                                      2001               2000

Long-term purchase obligations bearing interest
      at various rates ranging from
      approximately 7% to 8%; with
      principal payments ending in 2001               $     -         $  93,494
Less current portion                                        -            93,494
                                                 -------------   ---------------

                                                      $     -           $     -
                                                 =============   ===============

 9.   Letters of Credit:

      In   accordance   with   requirements   of  the  Virginia   Department  of
      Environmental  Quality,  the Company has outstanding  irrevocable  standby
      letters of credit of $614,000 and $73,000 to cover  potential  closure and
      post-closure costs associated with the Company's landfills.

      In addition,  the Company has an outstanding  letter of credit with one of
      its contractors for $2,050,000.



10.  Derivative Financial Instruments:

      At December  31,  1998,  the Company had  outstanding  a variable to fixed
      interest  rate swap with a notional  value of $60 million,  with a term of
      five years maturing  December 5, 2002.  Under the terms of this agreement,
      the Company  paid a fixed  interest  rate of 6.13% and received a variable
      rate based on 3-month London  Interbank  Offered Rates ("LIBOR") (5.25% at
      December 31, 1998). In October 1999, the interest rate swap was terminated
      and a gain of $150,000 was recognized as a result of the termination which
      is included in other income in the 1999 statement of operations.



11.  Employee Benefit Plans:

      The Company provides a defined contribution money purchase retirement plan
      for  substantially  all  employees.  The  annual  cost  of  the  Company's
      contributions  to the  plan,  which  is  currently  funded,  is based on a
      percentage of the compensation of participants.

      The Company provides a thrift plan for  substantially  all employees which
      incorporates  the provisions of Internal  Revenue Code Subsection  401(k),
      whereby employees can make voluntary,  tax-deductible contributions within
      specified limits. The Company matched employee contributions at 60% during
      the years ended December 31, 2001, 2000 and 1999, up to a maximum of 6% of
      an employee's base pay.

      The Company's expense for both plans approximated  $1,156,000,  $1,097,000
      and  $1,242,000  for the years ended  December  31,  2001,  2000 and 1999,
      respectively.

<PAGE>

11.  Employee Benefit Plans, continued:

      Prior to July 1, 2001, the Company was self-insured for employee  medical,
      dental and disability claims up to $50,000 per claim per year. The Company
      provided  an accrual of  approximately  $20,000  and  $313,000  for claims
      incurred but not reported at December 31, 2001 and 2000, respectively.

      The  Company  became  fully  insured  for  employee  medical,  dental  and
      disability claims starting July 1, 2001.


<PAGE>
                      Report of Independent Accountants on
                          Financial Statement Schedule



To the Board of Directors and Member of
Bear Island Paper Company, L.L.C.:

Our audits of the financial  statements referred to in our report dated February
4, 2002  appearing  in the 2001 Annual  Report on Form 10-K of Bear Island Paper
Company,  L.L.C.  also  included an audit of the  financial  statement  schedule
listed in Item  14(a)(2)  of this Form  10-K.  In our  opinion,  this  financial
statement  schedule presents fairly, in all material  respects,  the information
set  forth  therein  when  read  in  conjunction  with  the  related   financial
statements.

                                        PRICEWATERHOUSECOOPERS LLP

February 4, 2002

<PAGE>

<TABLE>
                                                                                                               SCHEDULE II
                                              VALUATION AND QUALIFYING ACCOUNTS
                                              BEAR ISLAND PAPER COMPANY, L.L.C.
                                                        (IN THOUSANDS)

                                                                              ADDITIONS
                                                    ---------------------------------------------------------------

                                             BALANCE AT       CHARGED TO       CHARGED TO
                                            BEGINNING OF      COSTS AND          OTHER                           BALANCE AT
DESCRIPTION                                    PERIOD          EXPENSES         ACCOUNTS        DEDUCTIONS     END OF PERIOD
-----------                                    ------          --------         --------        ----------     -------------
<S>                                               <C>             <C>                 <C>          <C>             <C>
YEAR ENDED DECEMBER 31, 2001

ALLOWANCE FOR DOUBTFUL ACCOUNTS
(DEDUCTED FROM ACCOUNTS RECEIVABLE)               $68             $666                -                -             $734

ALLOWANCE FOR STORES OBSOLESCENCE
(DEDUCTED FROM STORES INVENTORY)                 $925             $180                -                -           $1,105
                                             ---------        ---------        ---------        ---------       ----------

                                                 $993             $846                -                -           $1,839
                                             =========        =========        =========        =========       ==========


RESERVE FOR CAPPING OF LANDFILL                  $535                -                -            ($230)c           $305

RESERVE FOR WORKMAN'S COMPENSATION CLAIMS         $20                -                -                -              $20
                                             ---------        ---------        ---------        ---------       ----------

                                                 $555                -                -            ($230)            $325
                                             =========        =========        =========        =========       ==========



YEAR ENDED DECEMBER 31, 2000

ALLOWANCE FOR DOUBTFUL ACCOUNTS
(DEDUCTED FROM ACCOUNTS RECEIVABLE)               $68                -                -                -              $68

ALLOWANCE FOR STORES OBSOLESCENCE
(DEDUCTED FROM STORES INVENTORY)                 $809             $116                -                -             $925
                                             ---------        ---------        ---------        ---------       ----------

                                                 $877             $116                -                -             $993
                                             =========        =========        =========        =========       ==========


RESERVE FOR CAPPING OF LANDFILL                  $555                -                -             ($20)b           $535

RESERVE FOR WORKMAN'S COMPENSATION CLAIMS         $20                -                -                -              $20
                                             ---------        ---------        ---------        ---------       ----------

                                                 $575                -                -             ($20)            $555
                                             =========        =========        =========        =========       ==========



YEAR ENDED DECEMBER 31, 1999

ALLOWANCE FOR DOUBTFUL ACCOUNTS
(DEDUCTED FROM ACCOUNTS RECEIVABLE)               $73                -                -              ($5)a            $68

ALLOWANCE FOR STORES OBSOLESCENCE
(DEDUCTED FROM STORES INVENTORY)                 $746              $63                -                -             $809
                                             ---------        ---------        ---------        ---------       ----------

                                                 $819              $63                -              ($5)            $877
                                             =========        =========        =========        =========       ==========


RESERVE FOR CAPPING OF LANDFILL                  $574             ($10)               -              ($9)b           $555

RESERVE FOR WORKMAN'S COMPENSATION CLAIMS         $20                -                -                -              $20
                                             ---------        ---------        ---------        ---------       ----------

                                                 $594             ($10)               -              ($9)            $575
                                             =========        =========        =========        =========       ==========
</TABLE>


a) WRITE OFF OF ACCOUNTS RECEIVABLE
b) PAYMENTS FOR CAPPING AND MAINTENANCE OF LANDFILL CELLS
c) REDUCTION TO RESERVE FOR CAPPING AND MAINTENANCE OF LANDFILL CELLS