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

                                    FORM 10-K

(Mark One)

[ X ]     Annual  Report  Pursuant  to  Section  13 or 15(d)  of the  Securities
          Exchange Act of 1934 for the fiscal year ended March 31, 2000.

[   ]     Transition  Report  Pursuant to Section 13 or 15(d) of the  Securities
          Exchange Act of 1934

                        Commission File Number: 333-74589

                          NATIONAL WINE & SPIRITS, INC.
                          -----------------------------
             (Exact name of registrant as specified in its charter)


            Indiana 35-2064429                        35-2064429
            ------------------                        ----------
     (State or other jurisdiction of       (IRS Employer Identification No.)
      incorporation or organization)


P.O. Box 1602, 700 W. Morris Street, Indianapolis, Indiana          46206
----------------------------------------------------------          -----
         (Address of principal executive offices)                 (Zip Code)

                                 (317) 636-6092
                                 --------------
              (Registrant's telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:     None

Securities registered pursuant to Section 12(g) of the Act:     None

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
by Regulation  S-K is not contained  herein,  and will not be contained,  to the
best of registrant's  knowledge,  in definitive proxy or information  statements
incorporated by reference in Part III of this Form 10-K or any Amendment to this
Form 10-K. [ X ]

The registrant is a privately held corporation. As such, there is no practicable
method to  determine  the  aggregate  market  value of the voting  stock held by
non-affiliates of the registrant.

The  number of shares  of Common  Stock,  $.01 par  value,  of  National  Wine &
Spirits,  Inc. outstanding as of March 31, 2000 was 5,330,521,  of which 104,520
were voting stock.

Documents Incorporated by Reference:  None


<PAGE>


                                TABLE OF CONTENTS


                                                                          Page
                                                                          ----
Part I

Item 1.   Business                                                          3
Item 2.   Properties                                                       15
Item 3.   Legal Proceedings                                                16
Item 4.   Submission of Matters to a Vote of Security Holders              16


Part II

Item 5.   Market for Registrant's Common Equity and Related
          Stockholder Matters                                              17
Item 6.   Selected Consolidated Financial Data                             17
Item 7.   Management's Discussion and Analysis of Financial
          Condition and Results of Operations                              19
Item 7a.  Quantitative and Qualitative Disclosures About
          Market Risk                                                      27
Item 8.   Financial Statements and Supplementary Data                      28
Item 9.   Changes in and Disagreements with Accountants on
          Accounting and Financial Disclosure                              47


Part III

Item 10.  Directors and Executive Officers of the Registrant               48
Item 11.  Executive Compensation                                           50
Item 12.  Security Ownership of Certain Beneficial
          Owners and Management                                            51
Item 13.  Certain Relationships and Related Transactions                   52


Part IV

Item 14.  Exhibits, Financial Statements, Schedules and
          Report on Form 8-K                                               54


                                       2

<PAGE>

                                     Part I

Disclosure Regarding Forward-Looking Statements

     This Form 10-K, including,  but not limited to the "Management's Discussion
and Analysis of Financial  Condition and Results of  Operations"  and "Business"
sections,  contains  "forward-looking  statements"  within  the  meaning  of the
Private Securities Litigation Reform Act of 1995, which can be identified by the
use of forward-looking  terminology,  such as "may," "intend," "will," "expect,"
"anticipate,"  "should,"  "plans to,"  "estimate"  or "continue" or the negative
thereof or other variations  thereon or comparable  terminology.  In particular,
any statement,  express or implied,  concerning  future operating results or the
ability  to  generate  revenues,  income or cash flow to  service  the Notes are
forward-looking statements.  Although the Company believes that the expectations
will prove to have been correct.  All  forward-looking  statements are expressly
qualified  by  such  cautionary  statements,   and  the  Company  undertakes  no
obligation to update such forward-looking statements.

Item 1.    Business

General

     National Wine & Spirits,  Inc. (NWS) is one of the largest  distributors of
wine and spirits in the United States. NWS is the largest distributor of spirits
in Indiana with 56% market share and Michigan with 57% market share,  and one of
the largest in Illinois with 30% market share.  NWS' markets include Chicago and
Detroit,  which are the largest and the sixth largest  metropolitan  markets for
spirits in the United States, respectively.  NWS conducts its operations through
its wholly owned subsidiaries,  NWS Corporation in Indiana ("NWS-Indiana"),  NWS
Illinois, LLC ("NWS-Illinois") and NWS Michigan, Inc. ("NWS- Michigan").

     NWS is the exclusive  distributor in one or more of its markets for many of
the world's  leading  suppliers of brand name  domestic  and  imported  spirits,
including  Diageo-UDV  (Diageo),  formed through the merger of United Distillers
(Guinness)  and  International  Distillers  and Vintners  (Grand  Metropolitan),
Fortune Brands, Allied Domecq, and Seagram. NWS' featured brands include:

     o Absolut;

     o Chivas Regal;

     o Crown Royal;

     o DeKuyper;

     o Jim Beam;

     o Jose Cuervo;

     o Smirnoff;

     o Kahlua;

     o Maker's Mark; and

     o Canadian Club.



                                       3

<PAGE>

     NWS also is the exclusive  distributor  in Indiana and Illinois for many of
the world's leading wineries, including:

     o Banfi Vintners, featuring Riunite and other Italian and Chilean wines;

     o Canandaigua, featuring Inglenook, Paul Masson, and Almaden wines;

     o Seagram, featuring premium European and California wines; and

     o Sebastiani, featuring Vendange and Talus

     o Kendall Jackson

     NWS operates 12 strategically  located distribution  facilities and a fleet
of  approximately  350  delivery  vehicles to provide  overnight  or  second-day
delivery to over 36,000 retail locations,  including package liquor stores, drug
and grocery stores,  mass  merchandisers,  hotels and restaurants and bars. NWS'
customers include both local and regional  businesses as well as national chains
such as American Stores (Osco),  Walgreens,  CVS, Sam's Club, Meijer,  Morton's,
Ruth's  Chris,  T.G.I.Friday's,   and  Hyatt.  In  select  locations,  NWS  also
distributes premium domestic and imported beer and other products.

     From 1996 to 2000,  NWS'  total  revenue  increased  steadily  from  $443.3
million to $625.8  million,  representing a compound annual growth rate of 9.0%,
while NWS' EBITDA increased from $14.4 million to $26.5 million,  representing a
compound  annual  growth  rate  of  16.4%.  NWS  achieved  this  performance  by
successfully  integrating  several strategic  acquisitions since 1992,  actively
developing  new  geographic  market  areas,  pursuing  new  supplier  and  brand
relationships, implementing advanced product handling technology and proprietary
information systems, and providing high levels of supplier and customer service.

     Under the three-tier  regulatory framework established by federal and state
law, suppliers of alcohol-based  beverages are generally prohibited from selling
their products  directly to retail outlets or consumers,  effectively  requiring
suppliers to use distributors such as NWS. This regulatory framework effectively
insulates  distributors  from  vertical  competition  from  suppliers  or retail
customers.  In some  states,  referred  to as  "control  states",  state law has
historically  mandated the state to act as the exclusive  wholesale  distributor
and/or retailer of alcohol-based  beverages.  In 1996, Michigan became the first
control state to privatize aspects of the wholesale distribution of spirits, and
NWS has become the leading distributor of spirits in that state.

Industry Overview

     The United States  alcohol-based  beverage industry  generated total annual
retail sales of approximately $113.5 billion in 1999. Sales of wine and spirits,
in which  NWS  primarily  competes,  accounted  for  approximately  14% and 31%,
respectively,  or an estimated  $50.2  billion of total retail sales in 1999. In
the  United  States  spirits  market,  total  revenues  on a per case basis have
increased  since 1994,  more than  offsetting a general decline in the volume of
spirits sold. Wine consumption has increased nationally and in Indiana, Illinois
and Michigan since 1993 and management believes the demand for high quality wine
will continue to grow.  Similar to the trend in the spirits industry,  consumers
have been purchasing higher quality and more expensive wines.



                                       4

<PAGE>

     Since the repeal of Prohibition in 1933, the federal and state  governments
have regulated the sale of spirits,  wine, and beer. State regulatory frameworks
fall  into  three  types:  control,  open  and  open-franchise.  In  nearly  all
circumstances,  suppliers may not legally sell directly to retailers.  In the 18
control states,  the state controls either the distribution,  the retail sale or
both. In open states,  including  Indiana and  Illinois,  the  distributors  and
retailers are privately owned businesses.  In the open-franchise  states,  there
are laws and  regulations,  which  restrict  the  suppliers'  ability  to change
distributors.

     Given  the  three  tier   regulatory   structure,   the  wine  and  spirits
distribution industry varies greatly from distribution  businesses serving other
industries such as food, drugs,  non-alcohol-based beverages and paper products.
Margins in these other industries are often much lower, as suppliers can compete
with or bypass distributors. Some distributors in other industries are also more
sensitive to economic cycles relative to NWS and its competitors.

Competitive Strengths

     Market Leadership. NWS is the largest distributor of spirits in Indiana and
Michigan and one of the largest in Illinois. NWS' market leadership reflects its
strong  relationships  with both  suppliers  and customers and provides NWS with
numerous advantages over smaller  distributors,  including significant economies
of scale and increased  purchasing power. NWS maintains and seeks to enhance its
market  leadership  by  providing  high levels of service to its  suppliers  and
customers and through its investments in technology and information systems.

     Strong  Supplier   Relationships  NWS'  success  is  due  in  part  to  its
long-standing  relationships with its major wine and spirits suppliers,  many of
which extend back more than 25 years.  The strength of these  relationships  was
recently  demonstrated  when  each of NWS'  three  largest  suppliers,  Seagram,
Fortune  Brands and Diageo,  selected NWS over  numerous  competitors  to be its
exclusive  distributor of spirits in Michigan.  In Indiana and Michigan,  NWS is
the exclusive  distributor of seven out of the top ten brands of spirits sold in
the United States,  including Absolut, Jim Beam, Jose Cuervo,  Popov,  Seagram's
Gin,  Seagram's  7  Crown  and  Smirnoff.  In  Illinois,  NWS is  the  exclusive
distributor  of four  out of the top ten U.S.  brands.  NWS  also  represents  a
significant  share of each of its major suppliers' total United States business.
In calendar 1999, NWS distributed approximately 17% of all cases of spirits sold
in the United States by Seagram, and 11% of all cases of spirits sold by Fortune
Brands.

     Stable  Industry  and  Diversified  Customer  Base.  Total wine and spirits
industry  revenues  have  grown  steadily  over the past 25 years,  even  during
periods of economic decline. NWS offers products to over 36,000 retail locations
and no single  customer or chain  represented  more than 6.2% of NWS' 2000 total
revenue.  Moreover,  the three-tier  regulatory framework established by federal
and  state  law  generally  prohibits  vertical  integration  by  suppliers  and
retailers   and  thereby   enhances  the  stability  of  the  wine  and  spirits
distribution  industry.  NWS  believes  that the nature of the wine and  spirits
distribution  industry and NWS' diverse  customer base provide it with increased
stability and predictability of cash flow relative to distributors in many other
industries.

     Customer  Service  Focus.  NWS'  commitment  to highly  effective  customer
service  has also been a major  factor  in its  historical  success.  Management
emphasizes  on-time  delivery,  product  availability,  the  ability  to  accept
last-minute  orders and  special  orders for low  volume or unusual  items,  and
reliability on a long-term basis. NWS provides numerous  value-added services to
its  customers,  including  category  management,   customized  advertising  and
point-of-sale  materials,  customized packaging and on-line electronic ordering.
Management believes that highly effective customer service strengthens  customer
relationships,  thereby  improving  product  positioning and sell-through to the
consumer.


                                       5

<PAGE>

     Advanced Infrastructure,  Distribution Network and Information Systems. NWS
maintains an extensive  distribution  network  consisting of master  warehouses,
hyper-terminals  and  cross-docking   facilities  strategically  located  across
Indiana,  Illinois  and  Michigan  and a fleet  of  approximately  350  delivery
vehicles.  This distribution system generates  significant operating leverage by
enabling  NWS to  deliver  hundreds  of  suppliers'  products  from each  master
warehouse and optimize  delivery  routes by  maximizing  the density of customer
locations served from each facility.  NWS is investing more than $6 million over
18 months to expand  existing  Indianapolis  facilities  as well as upgrade  and
computerize  material handling systems.  NWS also utilizes supplier and customer
ordering  via  electronic  data  interchange,  internet  interfaces  and on-line
reporting  systems used by  suppliers  to track sales.  In addition to enhancing
supplier and customer  relationships,  the  implementation  of these systems has
improved NWS' efficiency and enabled NWS to remain a low cost provider.

     Experienced Management Team. The seven individuals who comprise NWS' senior
management  team  have  an  average  of  over  24  years  of  experience  in the
alcohol-based  beverage  industry  and 12  years  of  experience  with  NWS.  In
addition,   NWS'  senior  management  team  has  successfully  integrated  eight
acquisitions since 1992.  Management's experience and expertise have enabled NWS
to establish  and  maintain  long-term  relationships  with both  suppliers  and
customers and take advantage of consolidation and privatization opportunities.

Operating Strategy

     Continue  to  Maximize  Operating  Leverage.  As the  largest or one of the
largest wine and spirits  distributors in each of its markets,  NWS continuously
seeks to minimize its operating  costs by leveraging  its resources in the areas
of  warehousing,   transportation,  general  and  administrative  functions  and
information  systems to create  economies of scale.  The fixed nature of many of
these  costs  enables  NWS to  generate  a  higher  level  of  profitability  on
incremental  increases in volume and price.  In  addition,  NWS'  facilities  in
Illinois and Michigan  have  additional  capacity,  which  positions NWS to take
advantage of future expansion opportunities in these markets with relatively low
capital expenditures.

     Growth through Addition of New Brands Long-term  relationships are critical
to maintaining  supplier and brand continuity with distributors.  Although brand
movements  among  distributors  are  relatively  rare  as the  result  of  these
relationships,  consolidation  of  distributors or suppliers can affect existing
relationships  and present NWS with  opportunities to add brands affected by the
consolidation.

     Selectively Pursue Strategic  Acquisitions and Joint Ventures. NWS plans to
continue to strengthen its competitive  position by selectively  acquiring other
distributors  and entering  into  strategic  joint  ventures both in its current
markets and in contiguous markets.  These strategic  opportunities may arise for
several reasons, including:

     (1)  suppliers  sometimes  encourage the  consolidation  of distributors in
          order to reduce costs and improve efficiency.

     (2)  most distributors are family businesses, and acquisition opportunities
          can  develop  as owners  approach  retirement  age  without a definite
          succession plan; and

     (3)  many  distributors lack the resources and supplier support to meet the
          demands of large suppliers, including expanding outside of their brand
          lines or geographic markets.

     Management  believes NWS' reputation with suppliers and customers,  as well
as its financial position, market share and established infrastructure, make NWS
an attractive buyer of, or strategic partner for, other distributors.


                                       6

<PAGE>

     As an  example  of this  strategy,  in  December,  1998,  NWS  formed a new
Kentucky distributorship,  Commonwealth Wine & Spirits, LLC, in partnership with
two existing Kentucky-based distributors, The Vertner Smith Company and Kentucky
Wine & Spirits.  NWS  invested  $7.5  million  ($4.5  million in cash and a $3.0
million cash franchise fee), in exchange for 25% of the new company. Vertner and
Kentucky W&S equally own the remaining 75%.

     Continue to Invest in Logistics  Technology and  Information  Systems.  The
wine and spirits distribution industry is a relatively mature industry, which is
not extensively  automated.  Many of NWS' competitors continue to rely primarily
on manual  processes and limited  technology.  NWS plans to expand on its recent
investments   in  sales  and  logistics   technology  and  sales  and  marketing
information systems to further reduce costs and improve service to its customers
and suppliers.

     Capitalize  on Further  Privatizations.  NWS'  established  reputation  and
relationships  with  its  major  suppliers  has  made  it  the  leading  spirits
distributor  in Michigan,  the first control  state to privatize  aspects of its
wholesale spirits distribution  business. NWS believes that other control states
may choose to privatize all or part of their  wholesale  distribution  business,
which may allow  NWS to expand  its  geographic  markets  without  acquiring  or
merging with existing distributors.  Should any such privatization opportunities
arise,  particularly  in the central  United  States,  NWS plans to  selectively
pursue such  opportunities by leveraging its experience in Michigan,  its strong
relationships with suppliers and its distribution expertise.

Suppliers and Products

     NWS  represents  many of the largest  suppliers  of wine and spirits in the
United  States,  and offers  hundreds of brands and more than 12,000  individual
products.  The  breakdown  of sales  among  wine,  spirits  and  other  products
distributed by NWS in 1998, 1999, and 2000 is as follows:

<TABLE>
<CAPTION>

                              Wine (in thousands)             Spirits (in thousands)              Other (in thousands)
                              -------------------             ----------------------              --------------------
                           1998      1999      2000        1998        1999        2000       1998        1999         2000

<S>                      <C>       <C>       <C>         <C>         <C>         <C>         <C>        <C>        <C>
Product sales .......... $125,861  $143,339  $149,160    $342,594    $355,807    $377,437    $36,686    $36,375    $  78,390
Distribution fees ......       --        --        --    $ 16,270      17,832      20,770         --         --           --
Percentage of total
  Company revenue ......    24.1%     25.9%     23.8%       68.8%       67.5%       63.6%       7.1%       6.6%        12.6%
</TABLE>

     In  Michigan,   spirits  distributors  have  exclusive  relationships  with
suppliers by law,  and receive  distribution  fees from  suppliers as set by the
state,  rather than purchasing from the suppliers for resale to customers.  This
arrangement  has the effect of  understating  the  importance of spirits in NWS'
overall product mix. For purposes of  illustrating  the scale of NWS' operations
in  Michigan,  the total  wholesale  prices  of  products  delivered  by NWS for
Michigan in 1998, 1999, and 2000 was $280.5 million,  $305.2 million, and $365.1
million,  respectively,  based on the  fixed  wholesale  prices  of the  spirits
delivered by NWS.

     NWS' products include the following brands, among many others:

Product Type                                     Brand Names
 Vodka:                              Absolut                  Popov
                                     Vox                      Smirnoff
                                     Grey Goose               Stolichnaya
                                     Gordons                  Belvedere

 Bourbon and Blended Whiskey:        Crown Royal              Seven Crown
                                     Jim Beam                 Wild Turkey
                                     Seagram's V.O.           Windsor Canadian
                                                              Knob Creek

                                       7

<PAGE>

 Scotch and Single Malt Whiskey:     Chivas Regal             Glenlivet
                                     Grant's                  Isle of Jura
                                     Balvenie                 J&B Rare
                                     Bowmore                  Springbank
                                     Glenfiddich


 Gin:                                Boodles                  Gilbey's
                                     Seagram's                Gordons

 Rum:                                Captain Morgan           Myers
                                     Malibu                   Ronrico

 Tequila:                            Herradura                Patron
                                     Jose Cuervo              Margaritaville

 Cognacs/Brandy:                     Hine                     Martell
                                     Remy Martin

 Specialty Spirits:                  Chambord                 DeKuyper Cordials
                                     Bailey's Irish Cream     Jagermeister
                                     Campari                  TGI Friday's
                                     Hiram Walker Cordials    Kahlua

 Wine:                               Almaden                  Inglenook
                                     Banfi                    Perrier Jouet
                                     Beringer                 Sebastiani
                                     Caymus                   Stags Leap
                                     Chateau Lafite           Sterling
                                     Rothschild               Veuve Clicquot
                                     Gundlach Bundschu        Kendall Jackson

 Specialty Beer:                     Goose Island             Rogue Ales
                                     Grolsch                  Sierra Nevada
                                     Petes Wicked Ale

 Non-Alcohol:                        Cameron Springs          Perrier
                                     Evian                    Stewart's
                                     Sobe                     Nantucket Nectars


     NWS has entered into written  distribution  agreements  with several of its
principal  suppliers  which generally may be extended on an annual basis but are
terminable  upon 30 days or 60 days written notice to NWS. In addition,  NWS has
informal  arrangements  with many of its suppliers  whereby NWS  distributes the
suppliers'  products  pursuant to purchase orders without  written  distribution
agreements.  Although the written  agreements provide NWS with the non-exclusive
right to distribute the suppliers'  products in a particular  state, in practice
the  suppliers  have  generally  selected  a  distributor  to be  the  exclusive
distributor of specified  products in each state.  In each of Indiana,  Illinois
and Michigan,  NWS is presently acting as the exclusive distributor with respect
to virtually all of the products it distributes in that state.

     The  following  chart  summarizes  information  about the  leading  spirits
suppliers in the United  States,  their rank in Indiana,  Illinois and Michigan,
the length of NWS'  relationship  with those  suppliers and their impact on 2000
case sales.

                                       8

<PAGE>

<TABLE>
<CAPTION>

                                                    Length of
                               State Rank            Company       Percentage of
    Supplier                 (calendar 1998)       Relationship     Company 2000
(by U.S. Rank)(1)           IN     IL     MI      (in years)(2)      Cases (3)       Representative Brands
-----------------           --     --     --      -------------      ---------       ---------------------

<S>                         <C>    <C>   <C>           <C>            <C>          <C>
1. Diageo (4).............   3      *     1             26             11.4%        Smirnoff and Jose Cuervo
2. Seagram................   2      2     3             26             23.1         Absolut and Crown Royal
3. Fortune Brands.........   1      6     2             24             11.7         Jim Beam
-----------

<FN>
(1)  Based on calendar 1999 industry sales information.

(2)  All of the  relationships  expressed in this column represent the duration of NWS' relationship with the
     suppliers or their predecessors in the Indiana market.

(3)  Represents Wine and Spirits cases only.

(4)  Diageo  represents  that  portion  of  Diageo  PLC  formed  by  merger  between  United  Distillers  and
     International  Distillers & Vintners.  NWS does not  represent  Diageo's  interest in the  Schieffelin &
     Somerset joint venture which remains a separate organization.

* Not represented by NWS in the referenced state.
</FN>
</TABLE>


     Top United  States  wine  brands and  wineries  represented  by NWS include
Beringer, Canandaigua, Inglenook, Sebastiani, and Kendall Jackson. NWS currently
does not  distribute  wine in Michigan.  Major wine  producers  served by NWS in
Indiana and Illinois include:

<TABLE>
<CAPTION>

                                                                       Length of
                                                                         Company

                              U.S.     State Representation     Relationship
     Supplier/Winery        Rank(1)      IN          IL(2)      (in years)(3)      Representative Brands
     ---------------        -------      --          -----      -------------      ---------------------

<S>                            <C>       <C>          <C>             <C>        <C>
Canandaigua Brands......       2          X           X               26         Inglenook and Paul Masson
Sebastiani Vineyards....       5          X           X               16         Sebastiani and Vendange
Sutter Home Winery......       4          X                            6         Sutter Home
Banfi Vintners..........       7          X           X               26         Riunite and Concha y Toro
Beringer Wine Estates...       8          X                           25         Beringer and Meridian
Kendall Jackson.........      11          X           X                1         Kendall Jackson and Cambria
Seagram.................      12          X           X               26         Sterling and Mumm
-----------

<FN>

(1)  Source: 1998 Wine Market Impact Databank Review and Forecast.

(2)  NWS does not represent the entire brand portfolio in Illinois.

(3)  All of the  relationships  expressed in this column represent the duration of NWS' relationship with the
     suppliers or their predecessors in the Indiana market.

</FN>
</TABLE>

                                                      9

<PAGE>

Related Operations

     In addition to its core alcohol-based beverage distribution operations, NWS
has conducted related beverage  operations  through a division,  Cameron Springs
Water Company,  and through NWS' U.S. Beverage  operations.  Cameron Springs,  a
bottled water supplier in Indiana,  was sold to Perrier Group for  approximately
$10.5  million  in cash,  which was in excess of net book value as of June 2000.
U.S. Beverage commenced operations as a division of NWS in March, 1997 to market
and sell imported,  specialty and microbrewed  beers and specialty malt products
nationally.  The  brand  distribution  contracts  related  to the U.S.  Beverage
operations are held by an entity, which is 50% owned by NWS-Illinois.  In select
markets,  NWS sells and distributes  premium cigars primarily as a complement to
NWS' distribution of fine wines and spirits.

     In 1998, U.S.  Beverage  entered into a multiyear  agreement with Bass, PLC
granting U.S. Beverage the exclusive U.S. distribution rights for Hooper's Hooch
flavored malt beverage. The Hooper's Hooch business and its growth have provided
U.S.  Beverage  with the  critical  mass to  support  its  nationwide  sales and
marketing  force. In April,  2000, U.S.  Beverage entered into an agreement with
the Goose  Island  Brewing  Company  by which  U.S.  Beverage  will  become  the
exclusive  sales and marketing  firm for the Goose Island brand  throughout  the
United States.  This  arrangement  facilitates the expansion of U.S.  Beverage's
sales  force in the  Central  U.S.  and will  increase  revenues  by $10 million
annually.

Customers

     Most states,  including  Indiana,  Illinois and Michigan,  require wine and
spirits   retailers   to  purchase   alcohol-based   beverages   from   licensed
distributors.  Suppliers in these states may not legally sell directly to retail
customers.  NWS' customers fall into two broad categories depending on where the
alcohol-based beverage ultimately will be consumed:  on-premise and off-premise.
Off-premise customers include package liquor stores, grocery stores, drug stores
and mass  merchandisers.  On-premise  customers include hotels,  restaurants and
bars,  and similar  establishments.  NWS  currently  serves  over 36,000  retail
locations in Indiana, Illinois and Michigan. No single customer represented more
than 6.2% of NWS' 2000 net sales. As is customary in the industry, NWS' products
are generally  purchased under standard  purchase orders and not under long-term
supply  contracts.  As a result,  backlog  is not  meaningful  in the  wholesale
distribution industry.

     The following table summarizes NWS' customer base:

<TABLE>
<CAPTION>

                                    Percentage of

      Type of Customer            Company 2000 Revenue       Representative Customers
      ----------------            --------------------       ------------------------

<S>                                      <C>              <C>
Off-Premise

    Package Stores                       44.3%            Gold Standard and Cap'n Cork
    Grocery stores, drug stores
        and mass merchandisers           30.0%            Kroger, Dominicks, Marsh, American
                                                          Stores (Osco), Walgreens, CVS, Sam's
                                                          Club, Meijer
    Other                                 0.4%            7-Eleven, White Hen, Village Pantry
                                         -----
         Percent of total                74.7%
                                         =====

On-Premise

    Restaurants and Bars                 23.5%            Charlie Trotter's, Hard RockCafe,
                                                          House of Blues, Mortons,
                                                          Lettuce Entertain U,
                                                          Levy, Ruth's Chris
    Hotels                                1.3%            Four Seasons, Hyatt, Hilton,
    Other                                 0.5%            Crooked Stick Golf Course, the United
                                         -----            Center, American Legion

         Percent of total                25.3%
                                         =====
</TABLE>


                                       10

<PAGE>

     Management believes that the number and diversity of NWS' customers and the
nature of NWS' business  strengthens NWS' liquidity.  The prompt payment of NWS'
invoices is governed by law in all states in which NWS  operates.  Indiana has a
15-day  credit law beyond  which retail  customers  are  restricted  from buying
alcohol-based  beverages  from any  distributor  in the market.  Illinois  has a
similar 30-day credit law.  Typically,  NWS' bad debt expenses are incurred less
than 30 days after shipment  since the credit laws prohibit  extension of terms.
Average  bad debt  expense  for the past five  years has been less than 0.10% of
revenue.

Marketing and Sales

     Supplier and Customer Services. NWS' marketing and sales programs add value
for  suppliers  and  customers  beyond  storage  and  distribution.  Through its
approximately  600-person  marketing  and  sales  force,  NWS acts as the  field
marketing and merchandising arm of its suppliers by maintaining  regular contact
with  NWS'  off-premise  and  on-premise  customers.   NWS  customizes  national
marketing  programs  developed by its suppliers for specific retail locations in
seeking to derive maximum benefit for the supplier and customer at each specific
retail  location.  NWS provides its  customers  with a wide variety of services,
including conducting  promotional events,  building product displays,  designing
shelf sets,  cross-marketing between off-premise and on-premise locations,  and,
in Michigan,  accounts receivable collection.  Management believes that NWS is a
market  leader in  developing  and  implementing  marketing  programs to improve
alcohol-based beverage sales for both suppliers and customers.

     Marketing  and Sales Teams.  NWS divides its  marketing and sales forces by
product brands and geographic region.  Field sales  representatives  provide the
primary source of contact with the customer's retail locations.  Brand managers,
who  concentrate on a small number of suppliers and brands,  are responsible for
product pricing, promotion and all other marketing and sales activity related to
their  brands.  NWS  recently  formed a  National  Accounts  Division,  which is
responsible for customers with a national profile. Sales and marketing personnel
are compensated under various  compensation  plans, which typically combine base
pay with a productivity bonus. Members of senior management also are very active
in maintaining supplier and customer  relationships with incentive  compensation
based on subsidiary, division or company-wide performance.

     Sales  and  Marketing  Information  Systems.  NWS'  management  information
systems are very  important  to NWS' sales and  marketing  efforts.  Through its
proprietary  information  systems, NWS seeks to offer improved levels of service
to suppliers  and  customers  through  prompt and accurate  product  deliveries,
demographic  information  regarding  the  purchase  and  sale  of  alcohol-based
beverages  and  other  important  sales  and  consumption  information.   Retail
locations  can utilize this  information  to make  decisions  regarding  product
placement in the wine and spirits sections of their stores,  while suppliers can
utilize  this  information  to  quickly  analyze  sell-through  by  product in a
particular customer location.

Warehousing and Distribution

     NWS utilizes a series of four master warehouses,  three hyper-terminals and
five cross-docking facilities strategically located throughout Indiana, Illinois
and Michigan to store and ship its products pending sale to customers.  NWS uses
common carriers to transport  products from suppliers to its master  warehouses.
Master  warehouses  located in Chicago,  Indianapolis  and Detroit  serve as the
primary  storage  facilities for NWS' inventory.  A smaller master  warehouse is
located in Champaign, Illinois. Upon receipt of the product at one of the master
warehouses,  the  products  are  inspected  and  stored on  pallets or in racks.
Temperature-sensitive   products,   such   as  fine   wines,   are   stored   in
temperature-controlled  areas  of the  warehouses.  Hyper-terminals  located  in
Peoria, Illinois, South Bend, Indiana and Grand Rapids, Michigan stock only high
volume products and provide an extension of the master  warehouses.  NWS strives
to  optimize  inventory  levels,   taking  into  account  minimum   out-of-stock
percentages,  projected sales,  including  seasonal  demands,  periodic supplier
shipments to meet supplier sales requirements and working capital requirements.


                                       11

<PAGE>

     NWS' customers  ordinarily receive either next day or second-day  delivery.
In  general,  orders are  collected  during the day for batch  routing and order
"picking"  at night.  The  Chicago  and Detroit  master  warehouses  each use an
automated material handling system,  including  scanners,  automated  conveyors,
dispensers  and sorters.  Products from the master  warehouses are then shuttled
nightly to either a hyper-terminal or a cross-docking  facility where the orders
are  consolidated  and loaded onto  delivery  trucks.  Cross-docking  facilities
located in Belleville, Illinois, Evansville, Indiana, and Traverse City, Saginaw
and  Escanaba,   Michigan  further  extend  the  service  areas  of  the  master
warehouses.  Orders for delivery out of the various cross-docking facilities are
picked  in the  master  warehouses,  shipped  in  during  the  night,  and  then
transferred onto local delivery trucks for final delivery.  NWS owns or leases a
total fleet of  approximately  350 delivery  trucks,  consisting of 280 delivery
trucks,  18 tractors,  33 trailers,  31 vans and 5 pick-up  trucks.  To maximize
prompt and efficient product delivery, NWS' fleet is allocated among NWS' master
warehouses,  hyper-terminals  and cross-docking  facilities  located  throughout
Indiana, Illinois and Michigan.

     As a result of a number of factors  including  state laws and  regulations,
NWS  maintains  independent  distribution  networks  in  Indiana,  Illinois  and
Michigan. The Indiana distribution network operates with the Indianapolis master
warehouse feeding the South Bend hyper-terminal and the Evansville cross-docking
facility.  The Michigan  distribution  network  operates with the Detroit master
warehouse  feeding  the  Grand  Rapids   hyper-terminal  and  the  cross-docking
facilities  located  in  Escanaba,  Saginaw  and  Traverse  City.  The  Illinois
distribution  network is separated into the  metropolitan  Chicago area, and all
other  service  areas.  The Chicago area is serviced  out of the Chicago  master
warehouse,  while the  downstate  areas are  serviced by the  smaller  Champaign
master warehouse,  the Peoria  hyper-terminal  and the Belleville  cross-docking
facility.

Management Information Systems

     NWS employs customized  management  information systems to more efficiently
utilize its material handling and distribution  system. NWS' information systems
help  streamline  its  distribution  network from receipt of order through final
delivery by calculating and implementing efficient product selection, optimizing
delivery routes to meet specific delivery times, and allocating the proper types
and volume of products on specific delivery trucks.  These information  systems,
when used in connection with NWS' material handling systems, have allowed NWS to
more  efficiently  manage its inventory and minimize its handling costs per case
primarily by reducing labor costs.

     NWS'  commitment  to  technology  has also advanced its sales and marketing
initiatives. NWS' sales force is equipped with laptop computers, which expedites
order entry and provides instant feedback to customers regarding order activity.
NWS provides its customers and suppliers  with the ability to directly enter and
track orders via electronic  data  interchange.  In addition,  NWS'  proprietary
information  systems  provide its sales and marketing  personnel,  customers and
suppliers  with access to a database of  information  regarding the purchase and
sale of alcohol-based  beverages in specific geographic markets.  NWS' suppliers
have immediate access to information  regarding  product and demographic  trends
within specific geographic markets and NWS' customers have access to information
regarding  popular  products or other  trends  from  similarly  situated  retail
locations.  Management believes that its management  information systems enhance
its  operating  performance  and improve its  relationships  with  customers and
suppliers.

Competition

     The wine and spirits wholesale distribution business is highly competitive.
The principal  competitive factors include service,  breadth and availability of
product brands offered and, to a lesser extent, price.  Distributors compete for
new suppliers or brands based on reputation,  market share,  access to customers
and ability to satisfy supplier demands. Given its size, supplier relationships,
distribution networks and low operating costs, NWS is well positioned to compete
in Indiana, Illinois and Michigan. NWS' primary competition in Illinois includes
Romano  Brothers and Judge & Dolph.  Romano  Brothers  has recently  joined with
Glazer's Wholesale  Distributing of Dallas, Texas to enter the Indiana market by
acquiring a controlling  interest in Olinger  Distributing,  the second  largest
Indiana distributor and the only meaningful Indiana competitor.  None of the ten
largest United States distributors competes with NWS in Michigan.

                                       12

<PAGE>

     There are significant barriers to entry into the wholesale wine and spirits
distribution business.  These barriers include established  supplier-distributor
relationships,  specialized  distribution  equipment  such as material  handling
systems and delivery vehicles,  important industry knowledge  regarding pricing,
inventory management, and distribution logistics.  Historically, it is extremely
rare for organizations  not already engaged as wine and spirits  distributors to
enter other markets.  New distributors  typically enter existing markets through
acquisition.

Environmental Matters

     NWS currently owns and leases a number of properties,  and  historically it
has owned and/or leased others. Under applicable  environmental laws, NWS may be
responsible for remediation of environmental conditions relating to the presence
of hazardous  substances on such properties.  The liability imposed by such laws
is often joint and several  without  regard for  whether the  property  owner or
operator  knew of,  or was  responsible  for,  the  presence  of such  hazardous
substances.  In addition,  the  presence of such  hazardous  substances,  or the
failure to properly remediate such substances, may adversely affect the property
owner's  ability to borrow using the real estate as  collateral  and to transfer
its  interest in the real  estate.  Although NWS is not aware of the presence of
hazardous  substances  requiring  remediation,  there can be no  assurance  that
releases unknown to NWS have not occurred. Except for blending and bottling of a
few of its own  brands,  NWS does  not  manufacture  any of the  wine or  spirit
products it sells and believes that it has conducted its business in substantial
compliance with applicable environmental laws and regulations.

Employees

     As of March 31, 2000, NWS had approximately 1,550 employees.  Approximately
142 employees in Michigan and 403 employees in Illinois are represented by labor
unions. In Illinois, NWS has relationships with three unions:

     (1)  Teamsters Union Local 744, expiring March 2, 2002;

     (2)  Liquor and Allied Workers Union Local 3, annual agreements; and

     (3)  Teamsters,  Chauffeurs &  Helpers Union Local 50,  expiring August 31,
          2001.

In Michigan, NWS has relationships with three unions:

     (1)  Teamsters Union Local 337, expiring March 2, 2001;

     (2)  Teamsters Union Local 299, expiring March 2, 2001; and

     (3)  Teamsters Union Local 486, expiring March 2, 2001.

Employees of NWS in Indiana are not represented by any labor unions.

     NWS has not  experienced  any  work  stoppages  in more  than 16 years as a
result of labor disputes and considers its employee relations to be good.

Regulatory Considerations

     The  manufacturing,  importation,  distribution  and sale of  alcohol-based
beverages  is  subject to  regulation  by the  federal  government  through  the
Department of the Treasury,  Bureau of Alcohol, Tobacco and Firearms, as well as
by state and local regulatory  agencies.  Suppliers,  distributors and customers
must be properly licensed in order to sell alcohol-based beverages.

                                       13

<PAGE>

     In most states, the alcohol-based beverage industry operates within what is
commonly referred to as a three-tier system of distribution. The three tiers are
identified as follows:

     (1)  tier  one  is  comprised  of  suppliers  which  produce  alcohol-based
          beverages and/or importers of alcohol-based beverages;

     (2)  tier two is comprised of distributors, such as NWS; and

     (3)  tier three is comprised of retail licensees.

     Under this system,  suppliers sell to  distributors,  distributors  sell to
retailers, and retailers sell to consumers.  Suppliers may not sell to retailers
or consumers and  distributors  may not sell directly to consumers.  Most states
prohibit  suppliers or distributors from having an interest in retail licensees.
NWS directly and through its  affiliates  holds  federal basic permits and state
permits/licenses  as  a  distributor  and  importer.  Also,  NWS-Illinois  holds
out-of-state  shipper permits that allow it to ship products from one state to a
licensed distributor in any one of the other states.

     NWS is  required  to have each of its  officers,  directors  and  principal
stockholders  who owns 5% or more of the issued and outstanding  stock qualified
by federal  and state  governmental  agencies  to have an interest in a licensed
company. NWS' officers,  directors and principal  stockholders have been, or are
in the  process  of  being,  deemed  to be  qualified  parties  by ATF and state
regulatory agencies.

     Suppliers  and retail  licensees  selling  directly to  consumers  are more
heavily  regulated than distributors by governmental  authorities.  Distributors
like NWS face  scrutiny  in a  number  of  important  areas,  including  initial
licensing or permitting and sales and marketing  activities with or on behalf of
retail customers. The distributors may not give or transfer anything of value to
their customers in exchange for business or other consideration.  The definition
of  "value"  differs  from  state to  state.  NWS  participates  in  significant
promotional   activities  for  suppliers  and  customers.   Suppliers  also  are
increasingly  asking  distributors  to be responsible for activities and related
costs formerly  undertaken by suppliers as suppliers pursue ways to reduce their
operating costs.  These increased  demands will likely  challenge  distributors,
including NWS, which desire to meet the wishes of their suppliers and customers.
As a result, NWS regularly  provides training and education  programming for its
sales and marketing personnel.

     NWS believes that it is in compliance  with  applicable  regulations in all
material respects.  Consistent with industry  practice,  the sales and marketing
activities  permitted by distributors  for the benefit of tier one suppliers are
generally  regulated by state  licensing  authorities,  many of which  regularly
advise  distributor  representatives of activities that would not be the subject
of  enforcement   action  for  failure  to  comply  with  all  regulations  they
administer.  NWS relies on such enforcement guidance, which is subject to change
at the discretion of the regulatory authorities, in determining the scope of its
permitted sales and marketing activities.

     As part of its regulatory  compliance  program,  NWS is in frequent contact
with regulatory agencies so that NWS can:

     (1)  be kept current on regulatory developments affecting NWS;

     (2)  obtain answers from the agencies to questions  from company  personnel
          regarding compliance issues; and

     (3)  encourage   enforcement  of  applicable  laws  and  regulations  on  a
          consistent basis throughout its markets.

                                       14

<PAGE>

     NWS  believes  that prompt and  consistent  enforcement  by the  regulatory
agencies is important and benefits NWS.

Reorganization of the Company

     Historically,  NWS' operations in Indiana,  Michigan and Illinois have been
conducted  through  wholly  owned  subsidiaries  for Indiana,  NWS-Indiana,  and
Michigan,  NWS-Michigan,  and through an affiliate for  Illinois,  NWS-Illinois.
Prior to the  reorganization,  James E. LaCrosse,  or a trust for the benefit of
his family,  and Norma M.  Johnston  owned  substantially  all of the voting and
non-voting  shares of common stock of NWS-Indiana  and,  together with Martin H.
Bart,  owned  substantially  all of the voting and  non-voting  shares of common
stock of NWS-Illinois.

     In December,  1998, a reorganization took place which created a new holding
company,  NWS, into which all of the shares of capital stock in NWS-Indiana  and
NWS-Illinois owned by Mr. LaCrosse, or a trust for the benefit of his family, or
Mrs.  Johnston  were  contributed  in  exchange  for shares of NWS.  NWS-Indiana
subsequently  distributed  all of its shares in  NWS-Michigan  to NWS.  Finally,
NWS-LLC  was  created  as  a  new  limited  liability   company   subsidiary  of
NWS-Illinois  into which  substantially  all of NWS'  Illinois  operations  were
transferred.  Currently,  NWS-LLC  is owned 75% by  NWS-Illinois  and 25% by Mr.
Bart.  Allocations  of  profits  and  losses are  different,  currently  96% for
NWS-Illinois  and 4% for Mr.  Bart.  The  profit and loss  allocations  would be
subject to change in the future  depending on the relative  capital  accounts of
the  members,  which in turn  would  affect the  amount of Mr.  Bart's  minority
interest  reflected in NWS' financial  statements.  NWS is substantially  wholly
owned by Mr.  LaCrosse,  or a trust  for the  benefit  of his  family,  and Mrs.
Johnston.

     The  primary  purpose  of the  reorganization  was to  establish  a holding
company  structure  for  NWS-Indiana  and  all  of  its  significant  affiliated
companies.  The  reorganization  was accounted for as a combination  of entities
under  common  control,  similar  to a  pooling-of-interest.  As  such,  the NWS
financial statements have been presented to reflect this accounting treatment.

Item 2.    Properties

     NWS'  distribution  facilities  consist of four  master  warehouses,  three
hyper-terminals and five cross-docking  facilities.  NWS' corporate headquarters
are located in Indianapolis, Indiana.

     The  master  warehouses,  located in  Indianapolis,  Chicago,  Detroit  and
Champaign, serve as the primary storage facilities and regional offices for NWS.
The Chicago warehouse contains  approximately 650,000 square feet of warehousing
space,    including   a    designated    temperature    controlled    area   for
temperature-sensitive    products.    The   Indianapolis    warehouse   contains
approximately  265,000 square feet of warehousing space,  including a designated
temperature controlled area for temperature-sensitive products. The Indianapolis
warehouse  is currently  being  expanded to 325,000  square feet of  warehousing
space and  expected  to be  completed  in fall,  2000.  In  calendar  1997,  NWS
completed its new Detroit warehouse  consisting of approximately  237,000 square
feet of  warehousing  space,  including  a  material  handling  system and eight
shipping  docks.  The  Champaign   warehouse  contains  50,000  square  feet  of
warehousing space and is designed to hold more high volume products for delivery
to customers in central and southern Illinois.

     In September,  1999, NWS purchased a strategically  located office building
for future expansion.  The building,  which is approximately 20,000 square feet,
was  purchased  for $1.55  million and is  currently  being  leased  entirely to
eSkye.com, Inc. under a three-year agreement.

                                       15

<PAGE>

     The following  chart lists NWS'  warehouses  and delivery,  production  and
office facilities:

<TABLE>
<CAPTION>

                                                 Total
                                    Owned/      Square

                  Location          Leased       Feet       Principal Function
                  --------          ------       ----       ------------------

<S>          <C>                     <C>        <C>       <C>
Indiana         Indianapolis         Owned      265,000   Master Warehouse/Office
                 South Bend          Owned       76,800   Hyper-Terminal/Office
                 Evansville          Owned        5,800   Cross-Docking Facility
                 Evansville          Owned        2,400   Office
                 Ft. Wayne           Leased       5,500   Office
                Merrillville         Leased       2,600   Office
                Indianapolis         Owned        3,500   Office (Cameron Springs)
                Indianapolis         Owned       15,000   Production Plant (Cameron Springs)
                Indianapolis         Owned       20,000   Leased Office Property

Illinois          Chicago            Owned      650,000   Master Warehouse/Office
                 Champaign           Leased      50,000   Master Warehouse/Office
                   Peoria            Leased      35,000   Hyper-Terminal/Office
                 Belleville          Leased      16,000   Cross-Docking Facility/Office
                  Rockford           Leased       5,000   Office
                Springfield          Leased       1,000   Office

Michigan     Detroit (Brownstown)    Leased     237,000   Master Warehouse/Office
                Grand Rapids         Leased     100,000   Hyper-Terminal/Office
                  Escanaba           Leased       7,500   Cross-Docking Facility/Office
                  Saginaw            Leased       1,000   Cross-Docking Facility
               Traverse City         Leased       5,000   Cross-Docking Facility
</TABLE>

     NWS' lease agreements for the Detroit master warehouse and the Grand Rapids
hyper-terminal  each have a ten-year  term,  expiring April 20, 2007 and January
31,  2007,  respectively,  and  provide  NWS with an  option  to  purchase.  The
Merrillville lease expires in August,  2000, which will be replaced with a 7,900
square foot leased office facility in Crown Point, Indiana.

Item 3.    Legal Proceedings

     The  Company  has been  named as a  co-defendant  in a  lawsuit  against  a
supplier,  which  seeks  damages  of  $20,000,000.  This  suit was  filed by the
supplier's  former  distributor.  The Company  believes that the suit is without
merit.  The Company is also a party to various other lawsuits and claims arising
in the normal course of business.  While the ultimate  resolution of lawsuits or
claims  against the Company cannot be predicted  with  certainty,  management is
vigorously defending all claims and does not expect that these matters will have
a material adverse effect on the financial  position or results of operations of
the Company.

     The Company  settled a lawsuit in April 1999 brought by several  drivers of
NWS-LLC for  $475,000.  The  settlement  released  the Company  from all claims,
including legal fees.

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

     None.

                                       16

<PAGE>

                                     Part II

Item 5.    Market for Registrant's Common Equity and Related Stockholder Matters

     There is no established trading market for the common stock of NWS.

Item 6. Selected Consolidated Financial Data

     You should read the following summary historical  financial  information in
conjunction with  "Management's  Discussion and Analysis of Financial  Condition
and Results of Operations" and the consolidated  financial  statements and notes
thereto included elsewhere herein.

     Distribution  fees  include  our per  case  distribution  fee for  cases of
spirits  delivered  in and on behalf of the  State of  Michigan.  We do not take
title to or finance any  inventory  in  Michigan.  Please also note that we have
elected "S" corporation status under the Internal Revenue Code and consequently,
we do not incur liability for federal and state income taxes.

     The  following  will also assist in the review of the  following  financial
information:

     o    For  purposes  of  calculating  earnings  to fixed  charges,  earnings
          consist of net income plus fixed  charges.  Fixed  charges  consist of
          interest expense, amortization of debt expense and discount or premium
          relating  to  indebtedness  and  the  portion  of  rental  expense  on
          operating  leases  which  we  estimate  to be  representative  of  the
          interest factor attributable to rental expense.

                                       17

<PAGE>
<TABLE>
<CAPTION>

                                                   Years Ended March 31,
                              -----------------------------------------------------------------
                                 1996          1997           1998          1999         2000
                                   (Dollars and cases in thousands, except per case amount)

Statement of Income Data:
<S>                           <C>           <C>           <C>           <C>           <C>
   Net product sales          $ 443,257     $ 488,071     $ 505,141     $ 535,521     $ 604,987
   Distribution fees                 --         2,729        16,270        17,832        20,770
                              ---------     ---------     ---------     ---------     ---------
   Total revenue                443,257       490,800       521,411       553,353       625,757
   Cost of products sold        364,792       402,072       411,734       436,734       488,444
                              ---------     ---------     ---------     ---------     ---------
   Gross profit                  78,465        88,728       109,677       116,619       137,313
   Selling, general and
      administrative expenses    68,925        80,299        99,118       104,634       119,751
                              ---------     ---------     ---------     ---------     ---------
   Income from operations         9,540         8,429        10,559        11,985        17,562
   Interest expense              (7,935)       (8,486)       (9,672)      (11,037)      (13,274)
   Gain on sale of assets           172            41         4,139           188           173
   Other income                   1,247         1,619         2,085           341         1,394
                              ---------     ---------     ---------     ---------     ---------
   Income before

      extraordinary item          3,024         1,603         7,111         1,477         5,855
   Extraordinary item                --            --            --           318            --
                              ---------     ---------     ---------     ---------     ---------
   Net income                 $   3,024     $   1,603     $   7,111     $   1,159     $   5,855
                              =========     =========     =========     =========     =========
Other Financial Data:
   EBITDA (1)                 $  14,442     $  14,186     $  17,674     $  20,359     $  26,467
   EBITDA margin                    3.3%          2.9%          3.4%          3.7%          4.2%
   Cash  provided (used)
      by operating               (6,727)        6,939         9,783         6,013        17,103
      activities
   Cash used by

      investing                  (5,077)       (9,937)       (9,908)      (20,846)       (8,170)
      activities
   Cash provided (used)
      by financing activities    11,789         4,918        (1,900)       15,371        (7,282)
   Depreciation and

      amortization                4,902         5,757         7,115         8,374         8,905
   Capital expenditures(2)        3,609        10,447        13,952         7,858         6,672
   Ratio of earnings to
      fixed Charges                 1.4x          1.2x          1.6x          1.1x          1.4x
   Adjusted EBITDA(1)            14,987        15,641        18,244        20,905        27,406
Operating Statistics:
   Product Sales Operations
   Cases shipped (spirits         6,109         6,099         6,343         6,182         6,394
      and wine)
   Gross profit margin             17.7%         17.6%         18.5%         18.4%         19.3%
   Fee Operations
   Cases shipped                     --           396         2,545         2,731         2,786
      (spirits)
   Distribution fee per case         --     $    6.50     $    6.50     $    6.50     $    6.50
</TABLE>

<TABLE>
<CAPTION>

                                                    Years Ended March 31,
                              -----------------------------------------------------------------
                                 1996          1997           1998          1999         2000
                                                         (In thousands)
Balance Sheet Data:
<S>                           <C>           <C>           <C>           <C>           <C>
   Cash...................    $  1,475      $  3,395      $  1,370      $  1,908      $  3,559
   Total assets...........     143,316       160,366       169,102       180,376       191,140
   Total debt.............      86,908        99,545       102,434       117,222       112,471
   Stockholders' equity...      14,209        10,470        14,582        17,774        21,126
</TABLE>

                                               18

<PAGE>

                  NOTES TO SELECTED CONSOLIDATED FINANCIAL DATA

     (1) EBITDA is defined  as income  from  operations  plus  depreciation  and
amortization.  Adjusted  EBITDA is defined as EBITDA plus non-cash LIFO charges,
as follows:

<TABLE>
<CAPTION>

                                          Years Ended March 31,
                         -------------------------------------------------------
                            1996       1997       1998       1999       2000
                                             (In thousands)
<S>                       <C>        <C>        <C>        <C>        <C>
EBITDA.................   $ 14,442   $ 14,186   $ 17,674   $ 20,359   $ 26,467
LIFO charge............        545      1,455        570        546        939
                          ---------  ---------  ---------  ---------  ---------
   Adjusted EBITDA.....   $ 14,987   $ 15,641   $ 18,244   $ 20,905   $ 27,406
                          =========  =========  =========  =========  =========
</TABLE>

     EBITDA is presented  because it is a widely  accepted  financial  indicator
     used by  investors  and  analysts to analyze and compare  companies  on the
     basis of debt service  capability.  Adjusted EBITDA is presented because we
     believe  it  may  assist  in   evaluating   our   ability  to  service  our
     indebtedness,  including the exchange notes. EBITDA and Adjusted EBITDA are
     not intended to represent  cash flows for the periods  presented,  nor have
     they been presented as an  alternative to operating  income as an indicator
     of operating  performance and should not be considered in isolation or as a
     substitute for measures of performance and cash flow prepared in accordance
     with  generally  accepted  accounting  principles.  The EBITDA and Adjusted
     EBITDA  information  reflected  above may not be  comparable  to  similarly
     titled measures used by other companies.

     (2) The breakdown of our capital expenditures by significant project is set
forth below:

<TABLE>
<CAPTION>

                                          Years Ended March 31,
                         -------------------------------------------------------
                           1996       1997         1998       1999       2000
                                              (In thousands)
<S>                       <C>        <C>        <C>        <C>        <C>
Business expansion...     $  786     $ 5,855     $10,758     $4,856     $3,112
Information systems..      1,553       2,446       1,781      1,281        970
Maintenance..........      1,270       2,146       1,413      1,721      2,590
                          -------    --------   ---------   --------    -------
                          $3,609     $10,447     $13,952     $7,858     $6,672
                          =======    ========   =========   ========    =======
</TABLE>

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

     You should read the following  discussion  in  conjunction  with  "Selected
Consolidated   Financial  Data"  and  NWS'  historical   consolidated  financial
statements  and the  accompanying  notes  included  elsewhere in this Form 10-K.
Unless  otherwise  indicated,  all  references  to years are to NWS' fiscal year
ended March 31.

Disclosure Regarding Forward-Looking Statements

This Form 10-K, including,  but not limited to the "Management's  Discussion and
Analysis of  Financial  Condition  and  Results of  Operations"  and  "Business"
sections,  contains  "forward-looking  statements"  within  the  meaning  of the
Private Securities Litigation Reform Act of 1995, which can be identified by the

                                       19

<PAGE>

use of forward-looking  terminology,  such as "may," "intend," "will," "expect,"
"anticipate,"  "should,"  "plans to,"  "estimate"  or "continue" or the negative
thereof or other variations  thereon or comparable  terminology.  In particular,
any statement,  express or implied,  concerning  future operating results or the
ability  to  generate  revenues,  income or cash flow to  service  the Notes are
forward-looking statements.  Although the Company believes that the expectations
will prove to have been correct.  All  forward-looking  statements are expressly
qualified  by  such  cautionary  statements,   and  the  Company  undertakes  no
obligation to update such forward-looking statements.

Overview

     NWS is one of the  largest  distributors  of wine and spirits in the United
States.  Substantially all of NWS' current  operations are in Illinois,  Indiana
and Michigan.  NWS' reported  revenues  include net product sales in Indiana and
Illinois, the U.S. Beverage sales operation,  and distribution fees in Michigan.
In Indiana and Illinois, NWS' net product sales are comprised of sales to retail
customers of wine and spirits products and, to a much lesser extent, beer, water
and other related  products.  NWS purchases  these  products from  suppliers and
resells them to customers  at more than 24,000  retail  locations in Indiana and
Illinois through NWS' approximately 600 person sales organization. U.S. Beverage
purchases products from brewers and resells them through distributors across the
United  States.  In  Michigan,   which  privatized   aspects  of  its  wholesale
distribution  of spirits  in 1996,  NWS  serves as an  "authorized  distribution
agent" for the state and collects a flat $6.50 per case  delivery fee set by the
state and paid by suppliers for each case of spirits  delivered to approximately
12,000 locations throughout Michigan.  NWS does not take title to or finance any
inventory in Michigan and operates with a relatively small sales force.

     The Company  experienced  increases  in both product and  distribution  fee
revenue for the year ended March 31,  2000,  over the prior  fiscal  year.  This
increase  in revenue  resulted  from  increased  case sales along with a greater
average case sale price.  Price increases in the product  markets,  along with a
shift by consumers to premium  products were  responsible for the revenue gains.
Distribution  fee revenue and case volume increased for the year ended March 31,
2000,  over the comparable  fiscal year due to the acquisition of new suppliers.
The  distribution  fee product mix has shifted to a higher  percentage of bottle
business i.e. less than a full case sale, thus increasing  labor and operational
cost.  In FY 2000,  NWS obtained  additional  brands in Illinois,  Indiana,  and
Michigan.  NWS became the exclusive  distributor  for Kendall  Jackson Winery in
Indiana and parts of Illinois  (the  Chicago-land  area and most of  downstate),
adding approximately $22.0 million in revenue on 200,000 cases. In Michigan, the
brands of Allied Domecq were added (July), generating $1.6 million in revenue on
more  than  250,000  cases.  Through  the sale of the  Black  Velvet,  Christian
Brothers  (both in  May),  and  Arrow  brands  (February)  by  Diageo,  NWS lost
approximately   350,000  cases  in  Michigan  and  29,000  in  Indiana  (costing
approximately  $5.1 million in annual revenue).  Robert Mondavi Winery and Ketel
One left the Indiana operation (in June and July,  respectively)  taking with it
approximately 60,000 cases and $4.8 million in annual sales.

                                       20

<PAGE>

Results of Operations

     The following table includes  information  regarding total cases shipped by
NWS in 1998, 1999 and 2000:

<TABLE>
<CAPTION>

                                                           Years ended March 31,
                                                1998      1999                 2000
                                             ---------- --------------------  ----------------
                                                                   Percent             Percent
                                              Cases       Cases     Change     Cases    Change
                                                        (Cases in thousands)
<S>                                          <C>         <C>        <C>       <C>        <C>
Wine (product sales operations)               2,981       2,928     (1.8)%     3,044      4.0
Spirits (product sales operations)            3,362       3,254     (3.2)      3,350      3.0
                                             ------      ------     -----     ------     ----
Spirits (distribution fee operations)         2,545       2,731      7.3       2,786      2.0
      Total wine and spirits                  8,888       8,913      0.3       9,180      3.0
Other*                                        1,971       2,764     40.2       4,274     54.6
                                             ------      ------     -----     ------     ----
       Total                                 10,859      11,677      7.5%     13,454     15.2
                                             ======      ======     =====     ======     ====

<FN>

*U.S. Beverage's results are included in the other category for the current year and prior years.
</FN>
</TABLE>

Quarterly Results of Operations; Seasonality

     NWS'  revenues  are  influenced  by a number of factors,  particularly  the
Christmas  holiday  season,  which tend to result in  seasonally  high levels of
volume and  profitability  in NWS' fiscal third quarter with seasonal  losses in
NWS' fiscal fourth quarter.

     The following table presents unaudited quarterly financial  information for
each of the eight quarters in the period ended March 31, 2000. In the opinion of
NWS'  management,  this  information  has been prepared on the same basis as the
consolidated  historical  financial  statements appearing elsewhere in this Form
10-K and includes all adjustments, consisting only of normal recurring accruals,
necessary to present fairly the financial  results set forth herein.  Results of
operations for any quarter are not necessarily  indicative of the results of any
future period.

<TABLE>
<CAPTION>

                                                          Years ended March 31,
                             ---------------------------------------------------------------------------------
                                              1999                                      2000
                             --------------------------------------     --------------------------------------
                                Q1        Q2        Q3        Q4            Q1      Q2         Q3      Q4

<S>                          <C>      <C>       <C>       <C>          <C>       <C>       <C>       <C>
Revenues                     $35,899  $122,005  $179,473  $115,976     $170,059  $130,397  $193,509  $131,792
Operating income (loss)        3,908       503     7,760      (186)       6,718     2,580     8,453      (189)
EBITDA(1)                      5,912     2,544     9,789     2,114        8,840     4,831    10,677     2,119
Operating working capital     76,963    78,491    91,381    77,436       89,522    87,128   104,355    78,184
  (end of period)(2)

<FN>

(1)  See Note 1 to  "Selected  Consolidated  Financial  and  Other  Data"  for a
     definition of EBITDA and other information regarding EBITDA.

(2)  Operating working capital is defined as the sum of accounts  receivable and
     inventory less accounts payable.

</FN>
</TABLE>

                                       21

<PAGE>

Fiscal 2000 Compared with Fiscal 1999

     Revenue The  Company  reported  product  sales for the year ended March 31,
2000 of $605.0  million,  an increase of $69.5 million,  or 13.0% over the prior
year period.  This  increase  primarily  resulted  from the  continued  shift by
consumers to more premium brands, price increases during the year in the Indiana
and  Illinois  markets,  and  strong  increases  in the U.S.  Beverage  sales of
Hooper's Hooch.  U.S. Beverage had product sales of $28.8 million as compared to
$9.2 million over the prior year  period.  Distribution  fees for the year ended
March 31, 2000 increased $2.9 million, or 16.5%, to $20.8 million from the prior
year period.

     Gross  Profit.  Gross  profit on total  revenue  increased  17.7% to $137.3
million,  from $116.6 million in the prior year period.  Gross profit percentage
on product  sales for the year ended  March 31,  2000,  was 19.3% as compared to
18.4% for the prior year  period.  Increase  sales of premium  brands along with
margins  on  Hooper's  Hooch  were  primarily  responsible  for  the  percentage
increase.  Gross profit on product  sales  increased  by $17.8  million from the
prior year period.

     Operating  Expenses.  Operating  expenses for the year ended March 31, 2000
increased to $119.8 million, or 14.4% over the comparable year. The expansion of
our U.S.  Beverage  operation along with the creation of a sales  department for
our fee market  contributed  to this  increase in expenses.  Employee  costs and
outside  professional  expenses  were  increased  due  to the  expansion  of our
business units and to meet the increased  public reporting  requirements.  Total
operating  expenses were 19.1% for total revenue for March 31, 2000, as compared
to 18.9% for the prior annual period.

     Selling expenses increased $4.6 million,  or 12.0% for the year ended March
31,  2000,over  the  prior  annual  period.  U.S.  Beverage's  selling  expenses
increased  $1.9  million as required  brand  promotion  support for the Hooper's
Hooch brand  increased.  The increased  expenses were primarily brand promotion,
point of sale material,  and greater brand advertising  costs.  U.S.  Beverage's
case sales for the year ended  March 31,  2000  increased  385.2% over the prior
annual period. The creation of a sales department for the brokerage operation in
our fee market  resulted in an increase of $1.5 million for March 31, 2000, from
the comparable annual period.  These brokerage  expenses were primarily employee
salaries with additional  expenditures in brand  advertising and promotion.  The
remaining  increase of $1.2  million of selling  expense  over the prior  annual
period  resulted  from  additional   promotional  and  advertising   costs.  The
introduction  of new brands and the increased cost of existing brand  promotion,
were primarily responsible for these larger product market selling expenses.

     Warehouse and delivery expenses  increased 7.7% or $2.7 million in the year
ended March 31, 2000 over the comparable annual period. The volume increase that
was  experienced  in our  Illinois  market  prior to the tax increase on July 1,
1999, was primarily  responsible for the product market increase of $1.8 million
over the comparable annual period.  The fee market increase of $0.9 million over
the prior  year  period  was the  result of  acquiring  product  lines  that had
increased  splits,  or less than full case  orders,  which drove up labor costs.
Total  warehouse  and  delivery  expense was 6.1% of total  revenue for the year
ended March 31, 2000, as compared to 6.4% the prior annual period.

     Total  administrative  costs  increased  $7.8 million or 25.1% for the year
ended  March 31,  2000,  over the  comparable  annual  period.  The  Company has
developed and expanded the  corporate  services area in the year ended March 31,
2000,   which  has  increased   corporate  wages  and  related  employee  costs.
Professional fees have increased due to the additional  reporting and compliance
requirements  associated  with the senior note  issuance.  These  administrative
expenses  have also  included  first time  costs  associated  with  non-employee
directors.  Expansion in our U.S.  Beverage  operation  has required  additional
administrative support,  primarily employees and their associated benefit costs.
Administrative  expense,  as a percentage of total revenue was 6.2% for the year
ended March 31, 2000, as compared to 5.6% for the comparable annual period.


                                       22

<PAGE>

     Income from Operations Total operating  income  increased $5.6 million,  or
46.5% for the year ended March 31,  2000,  over the  comparable  annual  period.
Product  markets  operating  income were up $6.7 million for the current year as
compared to the prior annual period. Revenue gains and an increased gross profit
percentage more than offset the increases in operating  expenses for the product
markets.  Operating  income for the fee market  decreased  $1.1  million for the
current  year as  compared to the prior year.  The  increased  cost of the sales
department along with increased labor costs in the operational area outpaced the
increase in fee revenue.

     Interest Expense Interest expense increased $2.2 million for the year ended
March 31, 2000 over the prior  annual  period.  The Company had the senior notes
outstanding  for  approximately  two months for the year ended  March 31,  1999,
whereas  they were  outstanding  for the entire year that ended March 31,  2000.
Prior to the issuance of the senior notes the marginal rate was 8.25%, while the
senior  notes  carry a  10.125%  fixed  rate.  The  Company's  revolving  credit
facility's  rate is related to the prime lending rate. The  revolver's  rate was
9.5% at March 31, 2000, and 8.25% at March 31, 1999.

     Other Income Other income increased by $1.0 million to $1.6 million for the
year ended March 31, 2000,  from the prior annual period.  The Company settled a
lawsuit  brought by several  drivers in our Illinois  market for $0.5 million in
the year ended March 31,  1999.  The Company also wrote off  intangible  assets,
non-compete and organizational  costs in the amount of $0.3 million for the year
ended March 31, 1999. These expenses in the year ended March 31, 1999, that were
one time costs,  along with an increase in rental income of $0.1 million for the
year ended March 31, 2000, were primarily  responsible for the increase in other
income.

     Minority  Investment in Kentucky  Distributor The Company's share of income
from Commonwealth Wine & Spirits,  L.L.C.  remained constant at $0.1 million for
the year ended  March 31,  2000 as cash  compared  to the prior  annual  period.
Distributions  received from Commonwealth were $0.5 million and $0.2 million for
the years ending March 31, 2000 and March 31, 1999, respectively.

     Net Income Net income was $5.9  million for the year ended March 31,  2000,
which was an increase of $4.7 million over the comparable annual period.

     For  financial  analysis  purposes  only,  the  Company's  earnings  before
interest, taxes, depreciation and amortization (EBITDA) for the year ended March
31, 2000  increased  $6.1 million,  or 30.0% to $26.5 million as compared to the
prior annual period.

Inflation

     Inflation has not had a significant impact on the Company's  operations but
there can be no assurance that inflation will not have a negative  effect on the
Company's   financial   condition,   results  of   operations  or  debt  service
capabilities in the future.

Year 2000

     The Company did not experience any significant  disruptions at December 31,
1999 and is not aware of any  material  Year 2000 issues from our  customers  or
suppliers  that  would  impact the  Company's  financial  condition,  results of
operations, or debt service capabilities.

     At March 31,  2000,  the Company had  incurred  less than  $75,000 in costs
directly  associated  with the  remediation of its systems.  Management does not
believe that future Year 2000 assessment and remediation costs will be material,
and intends to fund any such costs from its existing  resources.  These costs do
not include  the cost of  upgrading  or  replacing  systems  for other  business
reasons.

                                       23

<PAGE>

Environmental Matters

     The  Company  currently  owns  and  leases  a  number  of  properties,  and
historically it has owned and/or leased others.  Under applicable  environmental
laws, the Company may be responsible for remediation of environmental conditions
relating to the presence of certain hazardous substances on such properties. The
liability  imposed by such laws is often  joint and several  without  regard for
whether the  property  owner or operator  knew of, or was  responsible  for, the
presence  of such  hazardous  substances.  In  addition,  the  presence  of such
hazardous substances, or the failure to properly remediate such substances,  may
adversely affect the property owner's ability to borrow using the real estate as
collateral and to transfer its interest in the real estate. Although the Company
is not aware of the  presence of  hazardous  substances  requiring  remediation,
there  can be no  assurance  that  releases  unknown  to the  Company  have  not
occurred.  Except for blending and  bottling of a few of the  Company's  private
label  brands,  the  Company  does not  manufacture  any of the  wine or  spirit
products it sells and believes that it has conducted its business in substantial
compliance with applicable environmental laws and regulations.

Other

     As a matter of  policy,  the  Company  plans to  review  and  evaluate  all
professional  services firms every three years.  This review will include but is
not limited to legal, audit and information systems services. The next scheduled
review will occur after Fiscal 2000 books are closed at March 31, 2000.

Fiscal 1999 Compared with Fiscal 1998

     Revenue.  NWS reported  total sales in 1999 of $553.4  million  compared to
$521.4 million for 1998, a gain of $31.9 million or 6.1%.

     Product  sales in the year ended  March 31, 1999 were  $535.5  million,  an
increase of $30.4 million,  or 6.0%, over the comparable prior year period. This
increase  resulted  primarily  from the  continued  shift by  consumers  to more
premium  brands,  a strong  increase at U.S.  Beverage  with the addition of six
months of sales of Hooper's Hooch beverage, and the addition Sebastiani Wines in
the Chicago market for the entire year,  which more than offset a slight decline
in total wine and spirits cases sold. Contributing to the decline in the sale of
spirits  cases was the  additional  customer  purchases of spirits  cases in the
fourth  quarter of fiscal  1998 in advance of an  announced  price  increase  on
certain key brands.  This increased case sales in fiscal 1998 and decreased case
sales in the year ended March 31, 1999. In addition,  U.S. Beverage  contributed
$9.2  million of  revenue;  all of which was  incremental  compared to the prior
year.

     Distribution  fees  increased to $17.8  million for fiscal 1999 compared to
$16.3  million for 1998, a 9.6%  increase  due to  increased  volume of existing
brands and the addition of new suppliers  throughout  the year.  Our addition of
new supplier  brands in Michigan,  McCormick and  Austin-Nichols,  did not occur
until the middle of the second quarter of 1999 and the addition of Laird did not
occur until the end of the fourth quarter.  Therefore,  the additional volume is
only  partially  reflected  in our 1999  results.  The loss of the J&B  brand in
Michigan,  which was due to supplier realignment,  did not occur until November,
but management does not expect it to have a material impact on our  distribution
fee operations.  The loss of other brands due to Diageo's  divestitures  did not
occur until after the fiscal year end.


                                       24

<PAGE>

     Gross  Profit.  Gross  profit on NWS'  total  revenue  increased  to $116.6
million in the year ended March 31, 1999 from $109.7  million in the  comparable
prior year period.  This  represented a 6.3%  increase,  due to relatively  flat
gross  margins  on our  increased  product  sales  from  18.5% to 18.4%  and the
additional  volume in Michigan  with no  corresponding  cost of  products  sold.
Additionally,  the U.S. Beverage business  contributed  slightly with margins of
19.5% for the year ended March 31,  1999.  As a result of this  improvement  and
since gross profit in Michigan is 100% of fee revenues; our overall gross profit
margin  grew from  21.0% for the year ended  March 31,  1998 to 21.1% for fiscal
1999.  Cost of products  sold included a non-cash LIFO charge of $0.5 million in
1999 compared with $0.6 million for the comparable prior year period.

     Operating Expenses.  Overall,  selling, general and administrative expenses
increase  $5.5  million to $104.6  million  for 1999 from $99.1  million for the
prior year. As a percent of total revenue,  selling, general, and administrative
expenses decreased from 19.0% for 1998 to 18.9% for 1999.

     Selling expenses for product markets  increased $5.2 million,  or from 6.4%
to 7.0% of total revenues,  for 1999 primarily as a result of increased manpower
to support the Illinois and Indiana product markets,  including additional sales
staff  in  Illinois  to  support  the  newly  acquired  Sebastiani  brand  line.
Additionally,  U.S.  Beverage  contributed  $3.9  million  to  overall  selling,
warehouse and delivery expenses in the prior year.  Finally, in order to acquire
additional lines in Michigan, we created a sales team for the first time in that
market.  This  increased  selling  expenses by $0.4 million for the year.  While
small,  selling  expenses  are  expected to grow as we continue to increase  our
sales force in Michigan.  The recent acquisition of R.M. Gilligan is expected to
accelerate the growth of the Michigan-based sales force.

     Total  administrative  expenses  increased  by $1.8 million to 5.6% of NWS'
total revenue during 1999. The increase in administrative expenses was primarily
a result of the  installation  of new  computer  systems in Indiana  and general
employee benefit cost increases.

     Start-up expenses decreased 100%, or $3.3 million for 1999 as U.S. Beverage
moved out of its start-up  phase and  incurred  ongoing  operating  expenses and
NWS-Michigan completed its start-up in fiscal 1998.

     Income from  Operations.  Operating  income increased 13.5% or $1.4 million
for 1999 over  1998.  As a percent  of total  revenue,  income  from  operations
improved  from 2.0% for 1998 to 2.2% for 1999.  The  increased  revenues for the
year and  improved  gross  margins  more than  offset the  increase  in selling,
general and administrative expenses.

     Interest Expense  Interest expense  increased 14.1% to $11.0 million during
the year ended March 31, 1999. The increase was  attributable to slightly higher
interest rates on our $110.0 million in senior notes sold in January, 1999, when
compared to the bank debt the senior notes  replaced,  additional  borrowings to
finance the capital expenditures needed for our Michigan operations,  an upgrade
to the Chicago material handling system and our recent Kentucky investment.

     Other Income. Other income decreased by $5.7 for 1999 compared to the prior
year  primarily  due to a $4.1  million  gain on the  sale of  certain  licensed
brands,  trademarks,  and tradenames in Illinois in 1998. Excluding the one-time
gain, other income was down $1.6 million. This was the result of other income of
$0.6  million  from a gain on Heaven Hill bulk  inventories  and $0.5 million in
interest  income  during 1998.  Additionally,  results for 1999 include the $0.5
million  expense to resolve the  Illinois  driver  lawsuit  and $0.5  million in
reorganization costs.

     Minority  Investment  in Kentucky  Distributor.  NWS' share of  partnership
income in Commonwealth Wine & Spirits,  LLC was  approximately  $0.1 million for
the year. The six-month period ended March 31, 1999 was Commonwealth's first two
quarters of operation.

     Extraordinary  Item. NWS recorded a loss on  extinguishment of debt of $0.3
million as a result of the $110 million senior note offering.



                                       25

<PAGE>

     Net Income. For the year ended March 31, 1999, NWS reported $1.2 million in
net income compared to $7.1 million for 1998. Without the one-time gain in 1998,
net income was down 61.0% or $1.8 million for 1999.

Liquidity and Capital Resources

     The  Company's  primary  cash  requirements  have  been  to  fund  accounts
receivable  and  inventories  in  Indiana  and  Illinois  and  to  fund  capital
expenditures  and  acquisitions.   NWS  has  historically   satisfied  its  cash
requirements principally through cash flow from operations, trade terms and bank
borrowings.

     As  indicated  above,  NWS'  business is highly  seasonal.  NWS'  operating
working capital  fluctuates with seasonal trends as illustrated in the quarterly
table above. As a result, NWS' working capital requirements and borrowings under
its credit  facility  have  fluctuated  over the course of each year.  In fiscal
2000,  NWS' minimum and maximum  amount of  borrowings  under the current  $60.0
million credit  facility,  at any one time was $1.0 million in March,  2000, and
$35.8 million in December,  1999. At March 31, 2000, NWS' outstanding borrowings
under its credit facility were $1.0 million.

     Net cash provided by operating activities for the annual period ended March
31,  2000,  was $17.1  million as compared to $6.0  million for the prior annual
period.  Increases in cash  provided  were from greater  accounts  payable,  net
income,  accrued  expenses,  and lower prepaid  expenses and other  receivables.
Decreases  in cash  from  operating  activities  were the  result  of  increased
inventories and increased accounts receivable.  As part of our seasonality,  NWS
typically  receives  replenishment  of  inventory  in  March,  which is also the
largest revenue month in our fourth quarter.  As a result,  accounts  receivable
and inventories increase with corresponding increases in accounts payable, which
funds the increased assets. Net cash used for investing  activities for the year
ended  March 31, 2000 was $8.2  million as  compared to $20.8  million the prior
annual  period.  Investments  that  were  made in  fiscal  1999  were  primarily
responsible  for this  decrease  in cash used.  The Company  had  invested  $7.5
million in fiscal 1999 for an equity  investment in Commonwealth Wine & Spirits,
L.L.C.  The Company  invested $1.6 million in the year ended March 31, 2000, for
the stock of R.M. Gilligan, Inc. The Company had increase proceeds from the sale
of property  and  equipment  in the current  year  primarily  from the sale of a
building in our Illinois  market.  Investments  in  intangible  assets were $3.9
million  lower in the current year due to the $5.9 million  investment in fiscal
1999 that were primarily the costs of issuing the senior notes in January, 1999.

     Net cash used by financing  activities  was $7.3 million for the year ended
March 31,  2000,  as  compared to cash  provided of $15.4  million for the prior
annual  period.  Upon the  issuance of the senior  notes in January,  1999,  the
Company repaid its outstanding bank and other debt and amounts outstanding under
its revolving credit facility. The net result of this refinancing and other debt
repayments  during the year ended March 31, 1999, was net cash provided of $19.5
million.  Net repayments  for the year ended March 31, 2000,  were $4.8 million,
which was a use of cash,  resulting in a difference from the prior year of $24.3
million. The Company had distributions to stockholders during the year that were
for tax liabilities and used to repay shareholder receivables.  The $2.4 million
increase in cash from the change in notes receivable from stockholders consisted
of repayments for $3.5 million and net advances of $1.1 million.

     Total assets increased to $191.1 million at March 31, 2000, a $10.8 million
increase  from the  prior  year.  This  increase  was  primarily  the  result of
increased  accounts  receivable of $7.9 million and inventories of $3.2 million.
March,  2000,  was a strong  revenue  month as compared to March,  1999,  with a
corresponding  increase  in  purchases  of  inventory.  Property  and  equipment
declined by $2.6 million due to decreased capital expenditures and the sale of a
building in our Illinois market.  Intangibles  increased $1.9 million  primarily
consisting of goodwill, which resulted from the R.M. Gilligan, Inc. acquisition.
In October,  1999, the Company invested $500,000 in convertible  preferred stock
of eSkye.com,  Inc. The Company invested an additional $2,012,500 in convertible
preferred stock in May 2000.

                                       26

<PAGE>

     Current  liabilities  increased $12.4 million from the prior year. Accounts
payable  increased $10.4 million due to the increased  purchases of inventory in
March,  2000, as compared to March,  1999.  Accrued excise taxes  increased $1.1
million  from the prior year,  and was also  directly  related to the  increased
purchase of  inventory.  Total debt  decreased to $112.5  million,  at March 31,
2000,  as  compared  to $117.2  million  the  prior  year.  Increased  cash flow
contributed to a decrease in the revolving credit facility of $3.7 million.

Item 7a.   Quantitative and Qualitative Disclosures About Market Risk

     Not Applicable.



                                       27

<PAGE>

Item 8.    Financial Statements and Supplementary Data


                         Report of Independent Auditors

The Board of Directors and Stockholders
National Wine & Spirits, Inc.

We have audited the accompanying  consolidated balance sheets of National Wine &
Spirits,  Inc.  as of March 31,  2000 and  1999,  and the  related  consolidated
statements of income,  stockholders' equity and cash flows for each of the three
years in the period ended March 31, 2000. Our audits also included the financial
statement  schedules  listed  in  the  Index  at  Item  14(a).  These  financial
statements and schedules are the responsibility of the Company's management. Our
responsibility  is to  express  an opinion  on these  financial  statements  and
schedules based on our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards 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.  An audit
also includes assessing the accounting principles used and significant estimates
made by  management,  as well as  evaluating  the  overall  financial  statement
presentation.  We believe  that our audits  provide a  reasonable  basis for our
opinion.

In our opinion,  the financial  statements  referred to above present fairly, in
all material  respects,  the consolidated  financial position of National Wine &
Spirits,  Inc. at March 31, 2000 and 1999, and the  consolidated  results of its
operations  and its cash flows for each of the three  years in the period  ended
March 31, 2000 in conformity with accounting  principles  generally  accepted in
the United  States.  Also,  in our  opinion,  the  related  financial  statement
schedules,  when considered in relation to the basic financial  statements taken
as a whole,  present fairly in all material  respects the  information set forth
therein.

                                        /s/ Ernst & Young LLP

Indianapolis, Indiana
May 19, 2000

                                       28

<PAGE>
<TABLE>
<CAPTION>

                                  National Wine & Spirits, Inc.

                                   Consolidated Balance Sheets

                                                                            March 31
                                                                      2000            1999
                                                                 ------------------------------
Assets
Current assets:

<S>                                                              <C>              <C>
    Cash                                                         $   3,559,000    $   1,908,000
    Accounts receivable, less allowance
      for doubtful accounts of $1,412,000
      ($1,298,000 in 1999)                                          44,952,000       37,042,000
    Inventory                                                       71,167,000       67,961,000
    Prepaid expenses and other                                       3,571,000        4,776,000
                                                                 -------------    -------------
Total current assets                                               123,249,000      111,687,000

Property and equipment, net                                         46,735,000       49,307,000

Other assets:
    Notes receivable                                                 1,142,000        1,486,000
    Cash surrender value of life insurance, net of loans             2,270,000        1,849,000
    Investment in Kentucky distributor                               7,072,000        7,438,000
    Investment in eSkye.com, Inc.                                      500,000               --
    Intangible assets, net of amortization                           9,988,000        8,080,000
    Deferred pension costs                                                  --          387,000
    Deposits and other                                                 184,000          142,000
                                                                 -------------    -------------
Total other assets                                                  21,156,000       19,382,000
                                                                 -------------    -------------
Total assets                                                     $ 191,140,000    $ 180,376,000
                                                                 =============    =============

Liabilities and stockholders' equity Current liabilities:

    Accounts payable                                             $  37,935,000    $  27,567,000
    Accrued payroll and payroll taxes                                6,757,000        5,912,000
    Excise taxes payable                                             5,200,000        4,055,000
    Other accrued expenses and taxes                                 7,651,000        7,459,000
    Current maturities of long-term debt                               900,000        1,050,000
                                                                 -------------    -------------
Total current liabilities                                           58,443,000       46,043,000

Deferred pension liability                                                  --          387,000
Long-term debt                                                     111,571,000      116,172,000
                                                                 -------------    -------------
Total liabilities                                                  170,014,000      162,602,000

Stockholders' equity:
    Voting common stock, $.01 par value                                  1,000            1,000
    Nonvoting common stock, $.01 par value                              53,000           53,000
    Additional paid-in capital                                      25,009,000       25,009,000
    Accumulated deficit                                               (825,000)      (1,883,000)
                                                                 -------------    -------------
                                                                    24,238,000       23,180,000
    Notes receivable from stockholders                              (3,112,000)      (5,406,000)
                                                                 -------------    -------------
Total stockholders' equity                                          21,126,000       17,774,000
                                                                 -------------    -------------
Total liabilities and stockholders' equity                       $ 191,140,000    $ 180,376,000
                                                                 =============    =============

<FN>
See accompanying notes.
</FN>
</TABLE>


                                               29

<PAGE>
<TABLE>
<CAPTION>

                                    National Wine & Spirits, Inc.

                                  Consolidated Statements of Income

                                                                Years Ended March 31
                                                      2000              1999              1998
                                                 -------------------------------------------------

<S>                                              <C>               <C>               <C>
Net product sales                                $ 604,987,000     $ 535,521,000     $ 505,141,000
Distribution fees                                   20,770,000        17,832,000        16,270,000
                                                 -------------     -------------     -------------
Total revenue                                      625,757,000       553,353,000       521,411,000
Cost of products sold                              488,444,000       436,734,000       411,734,000
                                                 -------------     -------------     -------------
Gross profit                                       137,313,000       116,619,000       109,677,000

Selling, general and administrative expenses:

    Warehouse and delivery                          38,401,000        35,655,000        34,196,000
    Selling                                         42,434,000        37,872,000        32,328,000
    Administrative                                  38,916,000        31,107,000        29,274,000
    Start-up costs                                          --                --         3,320,000
                                                 -------------     -------------     -------------
                                                   119,751,000       104,634,000        99,118,000
                                                 -------------     -------------     -------------

Income from operations                              17,562,000        11,985,000        10,559,000

Interest expense:
    Related parties                                   (425,000)         (461,000)         (507,000)
    Third parties                                  (12,849,000)      (10,576,000)       (9,165,000)
                                                 -------------     -------------     -------------
                                                   (13,274,000)      (11,037,000)       (9,672,000)
Other income (expense):
    Gain on sale of assets                             173,000           188,000         4,139,000
    Interest income                                    892,000           977,000         1,246,000
    Rental and other income (expense)                  371,000         (756,000)           839,000
    Equity in earnings of Kentucky

    distributor                                        131,000           120,000                --
                                                 -------------     -------------     -------------

Total other income

                                                     1,567,000           529,000         6,224,000
                                                 -------------     -------------     -------------
Income before extraordinary item
                                                     5,855,000         1,477,000         7,111,000
Extraordinary item:
    Loss on extinguishment of debt                          --          (318,000)               --
                                                 -------------     -------------     -------------

Net income                                       $   5,855,000     $   1,159,000     $   7,111,000
                                                 =============     =============     =============


<FN>
See accompanying notes.
</FN>
</TABLE>

                                                 30

<PAGE>
<TABLE>
<CAPTION>

                                             National Wine & Spirits, Inc.

                                    Consolidated Statements of Stockholders' Equity


                                                                            Accumulated       Notes
                            $.01 Par Value       Additional                    Other       Receivable        Total
                             Common Stock         Paid-in     Accumulated  Comprehensive      from       Stockholders'
                          Voting   Nonvoting      Capital       Deficit    Income (Loss)  Stockholders      Equity
                         ---------------------------------------------------------------------------------------------

Balance at

<S>   <C> <C>            <C>       <C>          <C>           <C>           <C>           <C>             <C>
March 31, 1997           $ 1,000   $ 53,000     $23,202,000   $(2,357,000)  $ (438,000)   $(9,991,000)    $10,470,000

  Comprehensive
  income:

      Net income              --         --              --     7,111,000           --             --       7,111,000
      Decrease in
      unrecognized

      net pension             --         --              --            --      438,000             --         438,000
      loss
  Total

  comprehensive               --         --              --            --           --             --       7,549,000
  income

  Increase in notes
  receivable from

  stockholders                --         --              --            --           --       (612,000)       (612,000)
  Distributions to
  stockholders                --         --              --    (2,825,000)          --             --      (2,825,000)
                         ---------------------------------------------------------------------------------------------

Balance at

March 31, 1998             1,000     53,000      23,202,000     1,929,000           --     10,603,000)     14,582,000

     Net income               --         --              --     1,159,000           --             --       1,159,000
     Decrease in notes
     receivable from
     stockholders             --         --              --            --           --      5,197,000       5,197,000
     Distributions to
     stockholders             --         --              --    (4,971,000)          --             --      (4,971,000)
     Conversion of
     notes payable to
     stockholders'            --         --       1,807,000            --           --             --       1,807,000
     equity
                         ---------------------------------------------------------------------------------------------

Balance at

March 31, 1999             1,000     53,000      25,009,000    (1,883,000)          --     (5,406,000)     17,774,000


     Net income               --         --              --     5,855,000           --             --       5,855,000
     Decrease in notes
     receivable from
     stockholders             --         --              --            --           --      2,294,000       2,294,000
     Distributions to
     stockholders             --         --              --    (4,797,000)          --             --      (4,797,000)
                         ---------------------------------------------------------------------------------------------

Balance at

March 31, 2000           $ 1,000   $ 53,000     $25,009,000   $  (825,000)      $   --    $(3,112,000)    $21,126,000
                         =============================================================================================


<FN>
See accompanying notes.
</FN>
</TABLE>

                                                          31

<PAGE>
<TABLE>
<CAPTION>

                                   National Wine & Spirits, Inc.

                               Consolidated Statements of Cash Flows

                                                                Years Ended March 31
                                                        2000           1999              1998
                                                   ----------------------------------------------
Operating activities

<S>                                                <C>             <C>                <C>
Net income                                         $ 5,855,000     $ 1,159,000        $ 7,111,000
Adjustments to reconcile net income to net cash
  provided by operating activities:
    Depreciation of property and equipment           7,270,000       6,967,000          5,872,000
    Gain on sale of assets                            (174,000)       (188,000)        (4,139,000)
    Amortization of intangible assets                1,635,000       1,407,000          1,243,000
    Equity in earnings of Kentucky distributor        (131,000)       (120,000)                --
    Loss on extinguishment of debt                          --         318,000                 --
    Changes in operating assets and liabilities:
      Accounts receivable                           (7,760,000)     (5,729,000)         3,427,000
      Inventories                                   (3,206,000)      8,773,000         (4,656,000)
      Prepaid expenses and other receivables         1,252,000         157,000           (810,000)
      Accounts payable                              10,329,000      (6,154,000)         2,482,000
      Accrued expenses and taxes                     2,033,000        (577,000)          (747,000)
                                                   -----------     -----------        -----------
Net cash provided by operating activities           17,103,000       6,013,000          9,783,000

Investing activities

Purchases of property and equipment                 (6,672,000)     (7,858,000)       (13,952,000)
Acquisition of R. M. Gilligan, Inc.,
net of cash received                                (1,630,000)             --                 --
Investment in Kentucky distributor                          --      (7,500,000)                --
Proceeds from sale of property and equipment         2,242,000         338,000            253,000
Proceeds from sale of assets                                --              --          3,000,000
Intangible assets                                   (1,996,000)     (5,869,000)          (730,000)
Deposits and other                                     (42,000)         28,000          1,766,000
Increase in cash surrender value of life
insurance                                             (413,000)       (453,000)          (492,000)
Investment in eSkye.com, Inc.                         (500,000)             --                 --
Distributions from Kentucky distributor                497,000         182,000                 --
Collections on notes receivable                        344,000         286,000            247,000
                                                   -----------     -----------        -----------
Net cash used by investing activities               (8,170,000)    (20,846,000)        (9,908,000)

Financing activities

Net repayments on lines of credit                   (3,700,000)    (62,010,000)        (3,078,000)
Proceeds from senior notes issuance                         --     110,000,000                 --
Proceeds from long-term debt                                --       7,500,000         11,257,000
Principal payments on long-term debt                (1,079,000)    (36,017,000)        (5,975,000)
Proceeds from borrowings from stockholder               97,000         241,000            685,000
Repayments on borrowings from stockholder             (205,000)             --                 --
Notes receivable from stockholders and others        2,402,000         628,000         (1,964,000)
Distributions to stockholders                       (4,797,000)     (4,971,000)        (2,825,000)
                                                   -----------     -----------        -----------
Net cash provided (used) by financing activities    (7,282,000)     15,371,000         (1,900,000)
                                                   -----------     -----------        -----------
Net increase (decrease) in cash                      1,651,000         538,000         (2,025,000)
Cash, beginning of year                              1,908,000       1,370,000          3,395,000
                                                   -----------     -----------        -----------
Cash, end of year                                  $ 3,559,000     $ 1,908,000        $ 1,370,000
                                                   ===========     ===========        ===========

<FN>
See accompanying notes.
</FN>
</TABLE>

                                                          32

<PAGE>

                          National Wine & Spirits, Inc.

                   Notes to Consolidated Financial Statements

                                 March 31, 2000

1. Nature of Business and Summary of Significant Accounting Policies

Nature of Business and Principles of Consolidation

In December  1998,  a  reorganization  took place,  which  created a new holding
company,  National Wine & Spirits, Inc. (NWS or the Company).  All of the shares
of capital  stock in National  Wine & Spirits  Corporation  (NWSC) and NWS, Inc.
(NWSI)  were  contributed  in  exchange  for shares of NWS.  In  addition,  NWSC
subsequently  distributed all of its shares in NWS Michigan, Inc. (NWSM) to NWS.
Finally,  a new limited liability company subsidiary of NWS-LLC was created into
which substantially all of the Illinois operations were transferred (NWS-LLC).

The  reorganization  was accounted for as a combination of entities under common
control,  similar to a  pooling-of-interests.  As such, the financial statements
have been  presented  to reflect this  accounting  treatment.  The  consolidated
financial  statements include the accounts of NWS, NWSC, NWS-LLC,  and NWSM. All
significant intercompany accounts and transactions have been eliminated from the
consolidated  financial  statements.  Substantially all revenues result from the
sale of liquor, beer and wine.

Based in  Indianapolis,  NWSC is a  wholesale  distributor  of liquor  and wines
throughout  Indiana.  Based in Chicago,  NWS-LLC is a wholesale  distributor  of
liquor and wines throughout Illinois.  NWSM is a wholesale distributor of liquor
throughout Michigan.  NWSC also operates a bottled water division and a division
for  distribution  of cigars  and  accessories.  NWS  performs  periodic  credit
evaluations of its customers' financial condition and generally does not require
collateral. Credit losses have been within management's expectations.

Use of Estimates

The preparation of financial  statements in conformity  with generally  accepted
accounting principles requires management to make estimates and assumptions that
affect the amounts reported in the financial  statements and accompanying notes.
Actual results could differ from those estimates.

                                       33

<PAGE>

                          National Wine & Spirits, Inc.

             Notes to Consolidated Financial Statements (continued)

1. Nature of Business and Summary of Significant Accounting Policies (continued)

Fair Value of Financial Instruments

The Company's cash, accounts receivable,  short-term notes receivable,  accounts
payable and certain other accrued  liabilities  are all short-term in nature and
the carrying  amounts  approximate  fair value.  Long-term notes  receivable and
payable,  except for the Company's senior notes payable, have primarily variable
interest rates, thus their carrying amounts approximate fair value. The carrying
value of the senior notes payable approximates fair value.

Inventory

Substantially  all  inventory is stated at the lower of cost,  determined by the
last-in, first-out (LIFO) method, or market.

Bulk whiskey  represents the Company's  interest in certain  whiskey  inventory,
which  is  being  aged by the  supplying  distiller.  This  interest  serves  as
collateral  for related  notes  payable to the  distiller.  In  accordance  with
industry practices, storage and handling costs incurred during the aging process
are included as a component of the cost of bulk whiskey. Bulk whisky represented
approximately  $1,497,000 and $1,692,000 of the total inventory balance at March
31, 2000 and 1999, respectively.

Advertising Costs

Advertising costs are charged to operations when incurred.  Advertising  expense
was  $5,685,000,  $3,224,000  and  $2,087,000 in March 31, 2000,  1999 and 1998,
respectively.

Property and Equipment

Property and Equipment are recorded at cost and are depreciated  using primarily
the straight-line method over their expected useful lives as follows:

         Land improvements                  15-40 years
         Buildings and improvements         10-40 years
         Furniture and equipment              5-7 years
         Warehouse equipment                    7 years
         Automobiles and trucks                 5 years


                                       34

<PAGE>

                          National Wine & Spirits, Inc.

             Notes to Consolidated Financial Statements (continued)

1. Nature of Business and Summary of Significant Accounting Policies (continued)

Intangible Assets

Intangible  assets,  including  goodwill,  represent the cost of certain  assets
obtained in the acquisition of various distributors, costs incurred in obtaining
financing and amounts paid to acquire supplier  distribution rights. These costs
are being amortized by the straight-line method over the terms of the agreements
or  their  estimated  useful  lives,  which  range  from  two to  twenty  years.
Accumulated  amortization  related to these assets was $3,490,000 and $1,852,000
at March 31, 2000 and 1999, respectively.

Long-lived Assets

The  carrying  value  of the  long-lived  assets  is  periodically  reviewed  by
management.  If this review  indicates  that the carrying  value may be impaired
then the impaired amount will be written off.

Income Taxes

There is no  provision  for  federal  or state  income  taxes  reflected  in the
financial statements because the stockholders have consented to NWS' election to
be taxed as an S  corporation  under the  applicable  provisions of the Internal
Revenue Code. NWS' income is taxable directly to its stockholders.

Revenue Recognition

NWSC and NWS-LLC purchase inventory items for resale to customers and are liable
for payment to the suppliers, as well as collecting payment from customers. NWSM
receives a fixed fee per case of liquor  distributed  for the State of  Michigan
(distribution  fees) which is also  responsible  for payments to suppliers.  All
Michigan  shipments are cash on delivery and are deposited directly to the State
of Michigan.

Net sales and distribution fees are recognized at the time product is shipped.

Start-up Costs

Start-up costs to commence  operations and to reach normal capacity are expensed
as incurred,  in accordance  with Statement of Position  98-5,  Reporting on the
Costs of Start-up Activities.

                                       35

<PAGE>

                          National Wine & Spirits, Inc.

             Notes to Consolidated Financial Statements (continued)

1. Nature of Business and Summary of Significant Accounting Policies (continued)

Reclassifications

Certain amounts in the 1999 and 1998 consolidated financial statements have been
reclassified to conform to the 2000 presentation.

2. Purchase of R. M. Gilligan, Inc.

On April 30, 1999,  NWSM purchased all of the stock of R. M. Gilligan,  Inc. for
$1,800,000.  R. M. Gilligan, Inc. is a Michigan corporation that conducts liquor
brokerage  activities  and  receives  revenue on a per case  basis  from  NWSM's
suppliers.

The  acquisition  was accounted for using the purchase  method of accounting and
the  results of  operations  have been  included in the  consolidated  financial
statements  since the date of  acquisition.  The purchase price was allocated to
the net assets acquired, including $1,547,000 to goodwill recorded in intangible
assets, based upon the fair market value at the date of acquisition.

     Assets acquired:
        Cash                                          $   170,000
        Other current assets                              187,000
        Property and equipment                             94,000
        Goodwill                                        1,547,000
        Other assets                                       18,000
                                                      -----------
                                                        2,016,000
     Liabilities assumed:
        Current liabilities                              (188,000)
        Debt and other long-term liabilities              (28,000)
                                                      -----------
     Purchase Price                                   $ 1,800,000
                                                      ===========

3. Investment In Kentucky Distributorship

In December 1998, NWSC formed a new  distributorship  in Kentucky  (Commonwealth
Wine  &  Spirits,   LLC)  in  partnership   with  two  existing   Kentucky-based
distributors,  The Vertner Smith Company ("Vertner") and Kentucky Wine & Spirits
("Kentucky  W&S").  Under the terms, NWSC invested $7.5 million ($4.5 million in
cash and a $3  million  cash  franchise  fee),  in  exchange  for 25% of the new
company.  Vertner  and  Kentucky  W&S equally own the  remaining  75%.  NWSC has
accounted  for its  investment  in  Commonwealth  Wine & Spirits,  LLC using the
equity method.

                                       36

<PAGE>

                          National Wine & Spirits, Inc.

             Notes to Consolidated Financial Statements (continued)

3. Investment In Kentucky Distributorship (continued)

The Company received  distributions  of $497,000 and $182,000 from  Commonwealth
Wine & Spirits, LLC in 2000 and 1999, respectively.

4. Inventory

Inventory at March 31 is comprised of the following:

                                              2000              1999
                                         -------------------------------

  Inventory at FIFO                      $ 79,652,000       $ 75,507,000
  Less: LIFO reserve                        8,485,000          7,546,000
                                         ------------       ------------
                                         $ 71,167,000       $ 67,961,000
                                         ============       ============

If the Company had used the first-in,  first-out  (FIFO) inventory  method,  net
income would have been $939,000, $546,000 and $570,000 greater in 2000, 1999 and
1998, respectively.

5. Property and Equipment

Property and equipment at March 31 is comprised of the following:

                                              2000              1999
                                         -------------------------------

  Land and improvements                  $  1,532,000       $  1,421,000
  Buildings and improvements               26,505,000         27,709,000
  Furniture and equipment                  16,313,000         15,032,000
  Warehouse equipment                      29,250,000         27,298,000
  Automobiles and trucks                    7,401,000          8,311,000
  Construction in progress                    891,000                 --
                                         ------------       ------------
                                           81,892,000         79,771,000
  Less: Accumulated depreciation           35,157,000         30,464,000
                                         ------------       ------------
                                         $ 46,735,000       $ 49,307,000
                                         ============       ============


                                       37

<PAGE>

                          National Wine & Spirits, Inc.

             Notes to Consolidated Financial Statements (continued)

6. Debt

Long-term debt at March 31 is comprised of the following:

<TABLE>

                                              2000              1999
                                         -------------------------------

<S>                                      <C>                <C>
Senior notes payable (A)                 $110,000,000       $110,000,000
Bank revolving line of credit (B)           1,000,000          4,700,000
Term loan payable in annual
  installments of $500,000 in 2001
  and 2002, including interest              1,000,000          1,300,000
Non-competition agreement                     300,000            600,000
City of Indianapolis-First
  Mortgage Note, Series 1983-
  payable monthly, with interest
  computed at 80% of the bank's
  prime lending rate, through
  April 2003, secured by certain
  property in Indianapolis                    171,000            272,000
Subordinated promissory note payable
  to an employee, repaid November 1999             --            350,000
                                         ------------       ------------
                                          112,471,000        117,222,000
Less:  current maturities                     900,000          1,050,000
                                         ------------       ------------
                                         $111,571,000       $116,172,000
                                         ============       ============
</TABLE>

(A) On January 25, 1999, the Company  issued  $110,000,000  of unsecured  senior
notes with a maturity  of January  15,  2009.  Interest  on the senior  notes is
10.125% and is payable  semiannually.  These senior notes are  guaranteed by the
Company's  subsidiaries.  The  guarantors  are all wholly owned and there are no
non-guarantor subsidiaries. The guarantees are full, unconditional and joint and
several.  Audited  financial  information  of  guarantor  subsidiaries  has been
omitted  because  management has  determined  that they would not be material to
users of the financial statements.

The  Company  used  the  net   proceeds  of  the  senior  notes   (approximately
$106,900,000)  to  repay  its  outstanding  bank  and  other  debt  and  amounts
outstanding under its revolving credit facilities.  The early  extinguishment of
the bank debt and  revolving  credit  facilities  resulted  in an  extraordinary
charge of $318,000 in 1999.

The bond indenture  restricts the ability of the Company and its subsidiaries to
incur   additional   indebtedness,   pay   dividends,   engage  in   mergers  or
consolidations,  make capital  expenditures  and otherwise  restricts  corporate
activities.

                                       38

<PAGE>

                          National Wine & Spirits, Inc.

             Notes to Consolidated Financial Statements (continued)

6. Debt (continued)

On or after  January 15, 2004,  the Company may redeem some or all of the senior
notes  at any  time at  stated  redemption  prices  plus  accrued  interest  and
liquidated damages.  Notwithstanding  the foregoing,  during the first 36 months
after  January  20,  1999,  the  Company  may redeem up to 33% of the  aggregate
principal  amount of the senior  notes at a redemption  price of 110.125%,  plus
accrued  interest and liquidated  damages,  with the net cash proceeds of one or
more public offerings of common stock of the Company.

(B) On January  25,  1999,  the Company  entered  into a credit  agreement  that
provides a revolving line of credit for borrowings of up to $60 million  through
January 25, 2004.  Line of credit  borrowings  are limited to eligible  accounts
receivable plus eligible  inventories.  The credit agreement permits the Company
to elect an interest  rate based upon the  Eurodollar  rate or the higher of the
prime lending rate or the federal funds  effective  rate plus 0.5%. At March 31,
2000 and 1999, all borrowings  bear interest at the prime lending rate plus 0.5%
(9.50% at March 31, 2000).  The Company also pays a commitment  fee ranging from
0.25% to 0.5% of its undrawn portion of its line of credit.

Credit  borrowings  are secured by the accounts  receivable and inventory of the
Company  and  its  subsidiaries   and  are  guaranteed  by  NWS'   subsidiaries.
Additionally,  NWS-LLC  has a supplier  letter of credit of which  $300,000  was
outstanding at March 31, 2000. In addition,  the agreement restricts the ability
of the  Company  and its  subsidiaries  to incur  additional  indebtedness,  pay
dividends,  engage in mergers or consolidations,  make capital  expenditures and
otherwise restricts corporate activities.

Principal payments due on debt at March 31, 2000 are as follows:

           2001                          $    900,000
           2002                               571,000
           2003                                    --
           2004                             1,000,000
           2005                                    --
           Thereafter                     110,000,000
                                         ------------
                                         $112,471,000
                                         ============

The  Company  guarantees  an  obligation  of a  related  entity,  which  has  an
outstanding balance of $1,000,000 at March 31, 2000.

Cash paid for interest was $13,116,000,  $9,780,000 and $9,643,000 in 2000, 1999
and 1998, respectively.

                                       39

<PAGE>

                          National Wine & Spirits, Inc.

             Notes to Consolidated Financial Statements (continued)

7. Common Stock

The Company has two authorized classes of capital stock:  voting $0.01 par value
common shares and nonvoting $0.01 par value common shares. Both classes of stock
have the same relative rights, performance limitations and restrictions,  except
that  nonvoting  shares are not  entitled to vote on any matters  submitted to a
vote of the stockholders, except as provided by law.

Common stock at March 31, 2000 and 1999 is comprised of the following:

                                          Number of Shares
                   Authorized         Issued      Outstanding       Amount
                  ---------------------------------------------------------

Voting                200,000         104,520        104,520       $ 1,000
Nonvoting          20,000,000       5,226,001      5,226,001        53,000

8. Commitments

The Company  leases office and warehouse  space under  noncancellable  operating
leases ranging from two to ten years, some of which include renewal and purchase
options and  escalation  clauses,  expiring on various dates  through 2010.  The
Company also leases  certain  trucks and  equipment  pursuant to  noncancellable
operating  leases with terms ranging from three to seven years.  Future  minimum
rent payments as of March 31, 2000 are as follows:

           2001                          $  3,810,000
           2002                             3,694,000
           2003                             3,444,000
           2004                             3,399,000
           2005                             2,653,000
           Thereafter                       5,636,000
                                         ------------
                                         $ 22,636,000
                                         ============


Rent expense was  $4,171,000,  $3,738,000 and $3,732,000 in 2000, 1999 and 1998,
respectively.

During 2000, NWSC entered into construction  agreements for the expansion of its
warehouse  facilities in  Indianapolis.  The commitment under the first phase of
this  expansion is $3,000,000.  At March 31, 2000,  $891,000 of these costs were
capitalized.

                                       40

<PAGE>

                          National Wine & Spirits, Inc.

             Notes to Consolidated Financial Statements (continued)

9. Pension Plans

The Company sponsors a defined benefit pension plan covering  substantially  all
of its warehousemen and drivers.  Under terms of the plan, the Company is liable
for any unsatisfied  liabilities of the other affiliated  entities.  The Company
makes  contributions  to the  plan  based on  amounts  permitted  by law.  Total
expenses under the plan were $272,000,  $347,000 and $224,000 in 2000,  1999 and
1998, respectively.

The components of net periodic  pension cost of the defined  benefit plan are as
follows for the years ended March 31:

<TABLE>
<CAPTION>

                                                      2000       1999        1998
                                                 ------------------------------------

<S>                                              <C>          <C>         <C>
Service cost-benefits earned during the year     $  270,000   $  262,000  $  114,000
Interest on projected benefit obligation            248,000      224,000     196,000
Actual return on plan assets                       (417,000)    (464,000)   (624,000)
Amortization of unrecognized
  net transition asset                               20,000       20,000      19,000
Amortization of loss                                     --           --       8,000
Amortization of prior service cost                   35,000       35,000      19,000
Difference between expected and
    actual return on plan assets                    150,000      247,000     471,000
                                                 ----------   ----------  ----------
Net periodic pension cost                        $  306,000   $  324,000  $  203,000
                                                 ==========   ==========  ==========
</TABLE>

The change in the projected benefit obligation,  plan assets,  funded status and
amounts recognized in the accompanying  consolidated balance sheets at March 31,
2000 and 1999 for the defined benefit pension plan are as follows:

<TABLE>
<CAPTION>

                                                      2000       1999
                                                 -----------------------

Change in projected benefit obligation:

<S>                                              <C>          <C>
   Benefit obligation at beginning of year       $3,751,000   $3,277,000
     Service cost                                   270,000      262,000
     Interest cost                                  248,000      224,000
     Actuarial changes                             (662,000)     156,000
     Benefits paid                                 (124,000)    (168,000)
                                                 ----------   ----------
   Benefit obligation at end of year             $3,483,000   $3,751,000
                                                 ==========   ==========
</TABLE>

                                       41

<PAGE>

                          National Wine & Spirits, Inc.

             Notes to Consolidated Financial Statements (continued)

9. Pension Plans (continued)

<TABLE>
<CAPTION>

                                                      2000       1999
                                                 -----------------------

<S>                                              <C>           <C>
Change in plan assets:

   Fair value of plan assets at
   beginning of year                             $ 3,179,000   $ 2,662,000
   Actual return on plan assets                      417,000       464,000
   Company contributions                             481,000       221,000
   Benefits paid                                    (124,000)     (168,000)
                                                  ----------    ----------
   Fair value of plan assets at end of year      $ 3,953,000   $ 3,179,000
                                                  ==========    ==========

Funded status of the plan (underfunded)          $   470,000   $  (572,000)
Unrecognized net actuarial gain                   (1,092,000)     (289,000)
Unrecognized prior service cost                      496,000       531,000
Unrecognized transition obligation                   126,000       146,000
                                                 -----------    ----------

Accrued benefit cost                             $        --   $  (184,000)
                                                 ===========   ===========

Weighted-average assumptions:
   Discount rate                                       6.75%         6.75%
   Expected return on plan assets                      8.0%          8.0%

Balance Sheet Classification:
   Current accrued liability                     $        --   $   184,000
   Noncurrent deferred additional liability               --       387,000
                                                 -----------   -----------
   Minimum liability                             $        --   $   571,000
                                                 ===========   ===========

   Deferred pension costs (intangible asset)     $        --   $   387,000
                                                 ===========   ===========
</TABLE>

The Company also sponsors a defined  contribution pension plan for substantially
all employees not covered by the defined benefit plan. Contributions to the plan
are  made  at  the  discretion  of  the  Company  and  may  not  exceed  5% of a
participant's  compensation.  The  Company's  pension  expense  for the  defined
contribution  plan was  $1,293,000,  $1,044,000  and $942,000 in 2000,  1999 and
1998, respectively.

                                       42

<PAGE>

                          National Wine & Spirits, Inc.

             Notes to Consolidated Financial Statements (continued)

9. Pension Plans (continued)

NWS-LLC  contributes to  union-sponsored  multi-employer  pension  plans,  which
provide  for  contributions  based on a  specified  rate per labor  hour.  Union
employees constitute  approximately 57% of NWS-LLC's workforce and 58% of NWSM's
workforce. The union contracts for NWSM expire in 2001. Contributions charged to
expense  were  $668,000,   $602,000  and  $565,000  in  2000,   1999  and  1998,
respectively.  Information as to NWS-LLC's  portion of accumulated plan benefits
and plan net assets is not currently  available.  Under the Employee  Retirement
Income  Security  Act of 1974 as amended,  an employer  upon  withdrawal  from a
multi-employer  plan is required to continue funding its proportionate  share of
the plan's  unfunded  vested  benefits.  NWS-LLC has no intention of withdrawing
from the plans.

10. Related Party Transactions

NWSC had notes  receivable  from its two  stockholders  totaling  $7,571,000 and
$9,975,000 at March 31, 2000 and 1999, respectively.  The notes earn interest at
the Company's effective borrowing rate on its revolving line of credit. Interest
income  earned was  $809,000,  $880,000  and  $893,000  in 2000,  1999 and 1998,
respectively.  Proceeds of the notes were used by the  stockholders  to purchase
additional capital stock of NWSC and to make loans to NWS-LLC.  The notes, which
are due on demand, have been reflected as a reduction of stockholders' equity in
the consolidated balance sheets as it is the Company's present intent to satisfy
these receivables through future stockholder distributions.

Effective  July 31, 1998,  the Company and its  stockholders  executed new notes
payable to stockholders to provide for a legal right of offset against the notes
receivable from  stockholders.  Accordingly,  as of March 31, 2000 and 1999, the
notes payable to stockholders (principal plus accrued interest) have been offset
against the notes  receivable from  stockholders,  with the resulting net amount
reflected as a reduction of stockholders'  equity. The total of the subordinated
notes  payable  was  $4,459,000  and  $4,569,000  at March  31,  2000 and  1999,
respectively.  These notes bear interest at the effective  borrowing rate on the
Company's  revolving  line of  credit.  Interest  expense  on  these  notes  was
$425,000, $461,000, and $507,000 in 2000, 1999, and 1998, respectively.

The Company  paid  $170,000 in 2000,  1999,  and 1998 for  consulting  fees to a
minority stockholder of NWS-LLC.

                                       43

<PAGE>

                          National Wine & Spirits, Inc.

             Notes to Consolidated Financial Statements (continued)

10. Related Party Transactions (continued)

Effective June 25, 1997, NWS-LLC sold certain of its licensed brands, trademarks
and  tradenames  for  approximately  $5,250,000.  NWS-LLC  recognized  a gain of
$4,071,000,  which represents  $5,250,000 less $1,179,000 in transaction  costs,
and the costs of assets  related to the brands  which  were sold.  The  purchase
price is receivable  under a $2,250,000  seven-year  promissory  note,  with the
remaining balance received in cash at the sale date. At March 31, 2000 and 1999,
the note receivable balance was $1,142,000 and $1,759,000, respectively.

A  Director  of the  Company  is the  Chairman  and Chief  Executive  Officer of
eSkye.com,  Inc.  The  Company  received  1,500,000  shares of  common  stock in
eSkye.com,  Inc.  upon  inception,  representing  founders  stock.  The  Company
accounts for its  investment  in eSkye.com,  Inc.  using the equity  method.  In
October,  1999, the Company invested $500,000 in convertible  preferred stock of
eSkye.com,  Inc. The Company  invested an additional  $2,012,500 in  convertible
preferred stock in May 2000.

NWS leases facilities and certain office equipment to eSkye.com,  Inc. under the
terms of a three-year operating lease. NWS received rent from eSkye.com, Inc. of
$151,000  in 2000.  eSkye.com,  Inc.  reimbursed  the  Company  for  $384,000 of
expenses  paid on its behalf  during  2000.  The Company  paid  eSkye.com,  Inc.
$20,000 for consulting services in 2000.

The Company  paid  $1,000,000  in April 2000 on behalf of an  affiliate to Goose
Island, a distiller of specialty beer, for the national  distribution  rights on
all Goose Island malt-based products.

                                       44

<PAGE>

                          National Wine & Spirits, Inc.

             Notes to Consolidated Financial Statements (continued)

11. Segment Reporting

The  Company's  reportable  segments are  business  units that engage in product
sales and all other activities.  The majority of the all other activities relate
to distribution fee operations.  The Company evaluates performance and allocates
resources  based on these  segments.  The accounting  policies of the reportable
segments  are  the  same  as  those  described  in the  summary  of  significant
accounting policies.

<TABLE>
<CAPTION>

                                                    2000             1999            1998
                                               ---------------------------------------------

<S>                                           <C>              <C>             <C>
Revenues from external customers
  Product sales                               $ 604,987,000    $ 535,521,000   $ 505,141,000
  All other                                      20,770,000       17,832,000      16,270,000
Interest expense

  Product sales                                  11,698,000        9,778,000       8,480,000
  All other                                       1,576,000        1,259,000       1,192,000
Depreciation expense

  Product sales                                   5,205,000        5,020,000       4,750,000
  All other                                       2,065,000        1,947,000       1,122,000
Amortization expense

  Product sales                                   1,243,000        1,320,000       1,224,000
  All other                                         392,000           87,000          19,000
Equity in earnings of Kentucky distributor
  Product sales                                     131,000          120,000              --
Loss on extinguishment of debt
  Product sales                                          --          172,000              --
  All other                                              --          146,000              --
Segment profit (loss)
  Product sales                                   6,959,000          938,000       8,506,000
  All other                                      (1,104,000)         221,000      (1,395,000)
Segment assets

  Product sales                                 177,354,000      168,581,000     155,351,000
  All other                                      13,786,000       11,795,000      13,751,000
Expenditures on long-lived assets
  Product sales                                   5,869,000        7,798,000       5,190,000
  All other                                         803,000           60,000       8,762,000
</TABLE>

                                       45

<PAGE>

                          National Wine & Spirits, Inc.

             Notes to Consolidated Financial Statements (continued)

12. Concentration of Risk

Products  purchased from four suppliers  amounted to approximately  70%, 65% and
65% of all revenues in 2000, 1999 and 1998, respectively.

13. Litigation

The Company has been named as a  co-defendant  in a lawsuit  against a supplier,
which seeks damages of $20,000,000. This suit was filed by the supplier's former
distributor.  The Company is also a party to various  other  lawsuits and claims
arising in the normal  course of  business.  While the  ultimate  resolution  of
lawsuits or claims  against  the Company  cannot be  predicted  with  certainty,
management  is  vigorously  defending  all claims and does not expect that these
matters will have a material adverse effect on the financial position or results
of operations of the Company.

The  Company  settled a lawsuit  in April 1999  brought  by  several  drivers of
NWS-LLC for  $475,000.  The  settlement  released  the Company  from all claims,
including legal fees.

14. Subsequent Event - Unaudited

On June 5, 2000, NWSC sold its bottled water division for $10,500,000 in cash.

                                       46

<PAGE>

Item  9.  Changes  in and  Disagreements  with  Accountants  on  Accounting  and
Financial Disclosure

      Not applicable.



                                       47

<PAGE>

                                    Part III

Item 10.   Directors & Executive Officers of the Registrant

Directors and Executive Officers

     The following  table sets forth  information  concerning  the directors and
executive officers of NWS:

Name                   Age     Position
----                   ---     --------

James E. LaCrosse      67      Chairman, President, Chief Executive Officer,
                               Chief Financial Officer and Director
Martin H. Bart         67      Vice Chairman, Senior Vice President and Director
J. Smoke Wallin        33      Executive Vice President, Secretary and Director
Catherine LaCrosse     33      Corporate Vice President of Sales & Marketing
                               and Director

James Beck             56      President, NWS-Indiana and Director
Mitchell Stoltz        46      President, NWS-Illinois and Director
David Wilson           42      Corporate Executive Vice President, Sales
                               & Marketing

Norma M. Johnston      71      Director
Percy N. Stone         69      Director
William Cockrum        62      Director
Vaughn D. Bryson       61      Director


     James E.  LaCrosse  has  served as  Chairman,  President,  Chief  Executive
Officer  and  a  Director  of  NWS  since   December,   1998.   He  assumed  the
responsibilities  of Chief  Financial  Officer  in May,  2000.  Previously,  Mr.
LaCrosse  served as Chairman and  Director  NWS-Indiana  since its  formation in
1973,  and  prior to 1973 was  employed  by  various  companies  in a  financial
capacity.  Mr. LaCrosse received an MBA from Harvard Business School in 1961 and
a BA in economics from Wesleyan University in 1957.

     Martin H. Bart has served as Senior Vice  President,  Vice  Chairman  and a
Director  of NWS  since  December,  1998.  Previously  Mr.  Bart  served as Vice
Chairman  of NWSI from 1995 to 1998.  Prior to joining  NWS,  Mr. Bart served in
various  positions  with the Joseph E.  Seagram & Son Company from 1956 to 1993,
and  retired as  Executive  Vice  President  of Sales and  Marketing.  Mr.  Bart
received a BA in economics New York University in 1955.

     J. Smoke Wallin has served as Executive  Vice  President,  Secretary  and a
Director of NWS since December,  1998. He served as Chief Financial Officer from
December  1998 until April  2000.  Mr.  Wallin  joined NWS in 1988 and served as
Executive Vice President, Corporate Group, from 1993 to 1998. He received an MBA
in finance,  marketing and operations from Vanderbilt  University-Owen School of
Management in 1993 and a BS in economics  from Cornell  University in 1989.  Mr.
Wallin is Mr. LaCrosse's son-in-law.

     Catherine  LaCrosse has served as Director of NWS since  December  1998 and
Vice President, Sales & Marketing, of NWS since March, 2000. Ms. LaCrosse joined
NWS in  1991  and has  served  in  various  sales  and  marketing  positions  in
NWS-Indiana,  NWS-Illinois  and  NWS-Michigan.  Ms.  LaCrosse  received  a BA in
history from Indiana University in 1990. She is Mr. LaCrosse's daughter.

     James Beck has served as Director of NWS since  December 1998 and President
of NWS-Indiana since 1992. Mr. Beck joined NWS in 1972 and has served in various
positions,  including  Executive  Vice  President of Sales for 14 years prior to
being  named  President  of  NWS-Indiana.  He has been a  Director  of NWS since
December,  1998. Mr. Beck received a BS in education from Ball State  University
in 1968.


                                       48

<PAGE>

     Mitchell  Stoltz  has served as  Director  of NWS since  December  1998 and
President of NWS-Illinois since 1995. Prior to becoming President,  he served as
Executive Vice President of Sales and Marketing for NWS-Illinois. Before joining
NWS in 1992,  Mr.  Stoltz  served as Vice  President  and  General  Manager  for
Magnolia  Marketing  Company and as President for Admiral Wine  Company.  He has
been a Director of NWS since  December,  1998. Mr. Stoltz  received an M.M. from
Northwestern  University  Kellogg Graduate School of Management in 1985 and a BA
in Business from Notre Dame University in 1976.

     Norma M.  Johnston  has been a Director of  NWS-Indiana  since 1976,  and a
Director of NWS since December,  1998. Mrs.  Johnston served as Secretary of NWS
from 1976 to 1998.

     Percy N. Stone has served as Director of NWS since July 1999. He retired as
General Manager of New Business  Development  from Continental Can in 1984 after
working in various  capacities from 1957. Mr. Stone received an MBA from Harvard
Business  School  in  1957  and a BA in  chemistry  and  biology  from  Wesleyan
University in 1952.

     William  Cockrum has served as Director of NWS since July 1999. He has been
an Adjunct  Professor of Finance in the UCLA Anderson  School of Business  since
1984,  teaching   entrepreneurial   finance,   business  ethics  and  investment
management.  Mr. Cockrum was recognized as top entrepreneurial  professor in the
nation by Business  Week  magazine in 1998.  Prior to joining  UCLA, he spent 25
years in investment  banking,  serving as a corporate officer at Becker Paribas,
Inc. until it was acquired by Merrill Lynch in 1984. Mr. Cockrum received an MBA
in  finance  and  marketing  from  Harvard  Business  School in 1961 and a BA in
economics from DePauw University in 1959.

     Vaughn D. Bryson has served as  Director of NWS since July 1999.  He serves
on the boards of several public companies, particularly in the biotech industry.
Mr. Bryson retired as Vice Chairman in 1996 from Vector Securities International
(now Prudent  Vector).  Prior to that,  he worked for Eli Lilly and Company from
1961 to 1993  serving as  President  and CEO from 1991 to 1993,  Executive  Vice
President from 1986 to 1990, and Board Member from 1984 to 1993. Mr. Bryson is a
graduate of the Stanford Sloan Program,  Stanford Graduate School of Business in
1967 and  received a BS in pharmacy  from the  University  of North  Carolina in
1960.

     David  Wilson has served as Corporate  Executive  Vice  President,  Sales &
Marketing,  since March 2000.  Mr. Wilson joined the NWS in 1996 and  previously
served as Executive  Vice  President of Spirits for  NWS-Illinois.  His previous
experience  includes 17 years with the Joseph E. Seagram  Corporation in various
management  positions  including Vice President,  on-premise,  North America and
state general manager in Arizona-New  Mexico,  Indiana and Illinois.  Mr. Wilson
received  an MBA  from  Bellarmine  College  in 1983 and a BBA in  business  and
economics from the University of Kentucky in 1979.

                                       49

<PAGE>

Item 11. Executive Compensation

Compensation of Directors

     Only outside Directors of NWS receive  compensation per year for serving as
directors.  Each outside  director  received  $60,000 for the fiscal year ending
March 31, 2000 for serving on the board.

Executive Compensation

     The  following  table sets forth the  compensation  paid by NWS to James E.
LaCrosse,  Chief  Executive  Officer,  and to  each  of  the  four  most  highly
compensated executive officers of NWS for 2000:

<TABLE>
<CAPTION>

                                           Summary Compensation Table

                                                                      Annual Compensation
                                               ----------------------------------------------------------------
                                                                                Other Annual       All Other
Name and Principal Position                    Year      Salary       Bonus     Compensation    Compensation(1)
<S>                                            <C>      <C>         <C>          <C>             <C>
James E. LaCrosse                              2000     $438,711    $249,000     $ 2,210(3)      $ 220,585(2)
   Chairman, President,
     Chief Financial Officer, and CEO
James Beck                                     2000      159,035     255,000        1,017(3)           7,788
   President, NWS-Indiana
J. Smoke Wallin                                2000      278,231      19,000        2,775(3)          10,591
   Executive Vice President and Secretary
Mitchell Stoltz                                2000      202,884      60,000        6,693(4)           8,596
   President, NWS-Illinois
David Wilson                                   2000      219,923      50,000                           4,305
   Corporate Executive Vice President,
   Sales & Marketing


<FN>

(1)  Includes employer 401(k) Plan contributions in the following  amounts:  Mr. LaCrosse,  $9,585;  Mr. Wallin,
     $7,973; Mr. Beck, $7,788; Mr. Stoltz, $8,596; and Mr. Wilson, $4,305. Also includes company paid portion of
     medical premiums in the following amounts: Mr. Wallin, $2,618.

(2)  Includes  $211,000 of life insurance  premiums paid by NWS on behalf of Mr.  LaCrosse and for the benefit of
     the  LaCrosse  family trust for estate  planning  purposes.  NWS expects the premiums  paid on behalf of Mr.
     LaCrosse  in the  future  will  remain at their  current  annual  rate.  Upon the death of Mr.  LaCrosse  or
     termination of the life insurance policies, NWS is entitled to repayment out of the proceeds of the policies
     of all  premiums  paid on behalf of Mr.  LaCrosse  for the benefit of the  LaCrosse  family  trust since the
     inception of the policy in 1994.

(3)  Represents personal use of a company supplied automobile.

(4)  Consists of $3,093  representing  personal use of a  company-supplied  automobile,  and $3,600  representing
     payments by NWS of country club dues.

</FN>
</TABLE>

                                                        50

<PAGE>

Item 12.   Security Ownership of Certain Beneficial Owners and Management

     NWS has two authorized  classes of capital  stock,  voting common stock and
non-voting common stock. The following table sets forth the beneficial ownership
of NWS' voting common stock:

     (1)  By each  person  known by NWS to  beneficially  own 5% or more of NWS'
          voting common stock, and

     (2)  By all executive officers and directors of NWS as a group.

Except for Mr. LaCrosse and Mrs.  Johnston,  who have sole voting and investment
power with respect to their voting common stock, no other  executive  officer or
director owns any shares of NWS' voting common stock.


                                                             Number of
Name and Address                                              Shares    Percent
----------------                                              ------    -------

James E. LaCrosse
     700 West Morris Street
     Indianapolis, Indiana 46225..........................   86,520       83%

Norma M. Johnston
     700 West Morris Street
     Indianapolis, Indiana 46225..........................   18,000       17

All executive officers and directors as a group
     (11 persons).........................................  104,520      100


     The stockholders of NWS have entered into stockholder  agreements with each
other and NWS. Such  agreements  contain  restrictions  relating to transfers of
stock and  provide for rights to  purchase  and sell stock of each  corporation,
among other matters. In particular,  the stockholder  agreement with NWS governs
the  transferability  of Mrs.  Johnston's  stock in NWS. The LaCrosse  family is
obligated to purchase Mrs.  Johnston's stock at her death or during her lifetime
should  she  decide to sell.  NWS  becomes  obligated  to  purchase  only if the
LaCrosse  family refuses or fails to purchase.  The LaCrosse family and NWS also
have the right to purchase Mrs.  Johnston's  stock at the death of Mr. LaCrosse.
Any obligation of NWS to purchase the stock owned by Mrs. Johnston is subject to
the terms of the  indenture  and the new credit  facility.  No right to purchase
stock owned by Mr.  LaCrosse or a trust for the benefit of his family  exists in
favor of Mrs. Johnston.

     The  stockholders  have also  agreed  not to take any  action or effect any
transfer that would cause NWS or any of its  subsidiaries  to fail to qualify as
an S corporation or other  pass-through  entity for federal income tax purposes.
In addition, the stockholders have entered into a tax indemnification  agreement
whereby they have agreed to indemnify NWS and its subsidiaries for any loss that
may arise in the event NWS or any of its  subsidiaries  should  fail to maintain
its pass-through status.

     The LaCrosse  family and NWS own life insurance  policies on behalf of Mrs.
Johnston in face amount of $4.0 million and $0.5 million, respectively.


                                       51

<PAGE>

Item 13.  Certain Relationships and Related Transactions

J. Smoke Wallin, a Director of the Company,  is the Chairman and Chief Executive
Officer of eSkye.com, Inc. The Company received 1,500,000 shares of common stock
in eSkye.com,  Inc. upon inception,  representing  founders  stock.  The Company
accounts for its  investment  in eSkye.com,  Inc.  using the equity  method.  In
October,  1999, the Company invested $500,000 in convertible  preferred stock of
eSkye.com,  Inc. The Company  invested an additional  $2,012,500 in  convertible
preferred stock in May 2000.

NWS leases facilities and certain office equipment to eSkye.com,  Inc. under the
terms of a three-year operating lease. NWS received rent from eSkye.com, Inc. of
$151,000  in 2000.  eSkye.com,  Inc.  reimbursed  the  Company  for  $384,000 of
expenses  paid on its behalf  during  2000.  The Company  paid  eSkye.com,  Inc.
$20,000 for consulting services in 2000.

From time to time,  NWS-Indiana has loaned money to its principal  shareholders,
James E.  LaCrosse and Norma M.  Johnston,  the primary  purpose of which was to
provide the necessary  funds to finance  start-up  expenses and working  capital
needs of NWS-Illinois,  an affiliated  company owned prior to the reorganization
by Mr. LaCrosse,  Mrs.  Johnston and Martin H. Bart. As of March 31, 2000, total
indebtedness of Mr. LaCrosse and Mrs.  Johnston to NWS-Indiana was $7.6 million.
The  indebtedness,  which is presently  due upon demand,  bears  interest at the
prime  lending rate of the Company's  principal  lending  institution  (9.00% at
March 31,  2000).  The proceeds of the loans were  provided by Mr.  LaCrosse and
Mrs.  Johnston  to  NWS-Illinois  in the  form of loans  or  additional  capital
contributions.  This  indebtedness  to Mr.  LaCrosse  and Mrs.  Johnston,  which
matures in 2009, is  subordinated  to the senior notes and the credit  facility,
and bears  interest at 9.00% (prime rate at March 31,  2000).  At the closing of
the senior notes and the credit facility,  NWS-Indiana distributed approximately
$1.8 million to Mr. LaCrosse and Mrs. Johnston. Additionally, the obligations of
NWS-Illinois  under the subordinated  shareholder notes are expressly subject to
timely  payment by Mr.  LaCrosse and Mrs.  Johnston of their  obligations  under
their notes to NWS-Indiana.

On July 27, 1998, Mr. LaCrosse  transferred  substantially all of his non-voting
stock to a family trust for estate-planning purposes. As a part of this transfer
and in addition to normal  distributions for tax purposes,  NWS distributed $3.5
million to the family trust and Mrs.  Johnston in the annual  period ended March
31,  2000.  These  distributions  were made  within  the  terms  and  conditions
contained in the Company's  indenture  governing the senior notes (including the
limitation on restricted  payments)  and the credit  facility.  The family trust
remitted  these  funds to Mr.  LaCrosse in  repayment  of  indebtedness  for the
non-voting  stock that was  purchased  on July 27, 1998.  Mr.  LaCrosse and Mrs.
Johnston then remitted $3.5 million to NWS-Indiana to reduce their  indebtedness
described above.

NWS-Indiana and NWS-Illinois have operated as S corporations  under the Internal
Revenue Code of 1986 (Code), and their respective subsidiaries have all operated
as qualified  subchapter S subsidiaries  under the Code or other similarly taxed
pass-through entities (the "S Corp. Businesses").  NWS has elected to be treated
as an S corporation under the Code and has elected or will elect for each of its
subsidiaries to be treated as qualified  subchapter S subsidiaries.  The S Corp.
Businesses have not been subject to tax on their respective net taxable incomes,
and the shareholders of the S Corp. Businesses have been directly subject to tax
on their respective proportionate shares of such net taxable income. NWS-Indiana
and NWS-Illinois have historically made cash distributions to Mr. LaCrosse, Mrs.
Johnston and Mr. Bart in amounts equal to or greater than their  respective  tax
obligations  related to the S Corp.  Businesses.  The aggregate  amount of these
distributions  during 1998,  1999, and 2000 were $2.8 million,  $5.0 million and
$4.8  million,  respectively.  The  terms of the  senior  notes  and the  credit
facility does permit NWS to make  distributions to shareholders  with respect to
their tax liabilities  subject to certain conditions and limitations each of the
fiscal years ending 1998, 1999 and 2000.

                                       52

<PAGE>

NWS-Illinois  also paid a company owned by Mr. Bart $0.2 million during 1998 for
certain consulting  services provided by Mr. Bart to NWS-Illinois.  During 1998,
NWS-Indiana  entered  into a five-year  non-compete  agreement  with James Beck,
president of  NWS-Indiana  and a Director of NWS,  under which Mr. Beck was paid
$0.3 million by the Company.  NWS-Indiana  obtained certain  inventory and other
property  related  to  the  wholesale  cigar  distribution  business  previously
operated by Mr. Beck.

The Company pays  "split-dollar"  insurance premiums on eight insurance policies
on the life of Mr. LaCrosse. See Item 11-Executive Compensation.  The Company is
entitled to receive  reimbursement  for all premiums paid out of the proceeds of
these policies upon Mr. LaCrosse's death.

NWS pays  "split-dollar"  insurance  premiums on seven insurance policies with a
fair value of $14.0 million on the lives of Mr. LaCrosse and Mrs. Johnston.  NWS
is entitled to receive  reimbursement  for all premiums paid out of the proceeds
of these  policies upon the death of Mr.  LaCrosse and Mrs.  Johnston.  Premiums
paid by NWS were $328,000 in 2000,  and $320,000 in 1999,  and $264,000 in 1998.
The LaCrosse Family Trust is the  beneficiary of those  policies.


                                       53

<PAGE>

                                     PART IV

 Item 14.  Exhibits, Financial Statements, Schedules and Reports on Form 8-K

     (a)  Documents filed as part of this Report.

          1.   Financial Statements

                                                                      Page(s) in
                                                                     this Report

                                                                     -----------

               Report of Independent Auditors                            28

               Consolidated balance sheets - March 31, 2000 & 1999       29

               Consolidated statements of income - Years
               ended March 31, 2000, 1999, & 1998                        30

               Consolidated statements of stockholder's equity
               - Years ended March 31, 2000, 1999, & 1998                31

               Consolidated statements of cash flows - Years
               ended March 31, 2000, 1999, & 1998                        32


               Notes to consolidated financial statements             33 to 46


          2.   Financial Statement Schedule:

               Included as outlined in Item 8 of Part II of this Report.

               Schedule II - Valuation & Qualifying
               Accounts & Reserves                                       55

               Schedules other than those listed above are omitted
               as they are not required, or not  applicable,  or the
               information is shown in the Notes to the  Consolidated
               Financial Statements.

          3.   Exhibits

               See the Index to Exhibits on pages 57 & 58 of this
               Form 10-K,  which is incorporated by reference herein.

     (b)  Reports on Form 8-K. None.

     (c)  See the Index to Exhibits on pages 57 & 58 of this Form 10-K, which is
          incorporated by reference herein.

     (d)  See Exhibit 27

                                       54

<PAGE>
<TABLE>
<CAPTION>

                                       NATIONAL WINE & SPIRITS, INC.
                                                SCHEDULE II
                               VALUATION AND QUALIFYING ACCOUNTS AND RESERVES


                                                               Additions
                                                               ---------
                                           Balance at   Charged to   Charged to                 Balance at
                                           Beginning    Costs and      Other                        End
                  Description              of Period     Expenses     Accounts   Deductions     of Period
                  -----------              ----------   ----------   ----------  ----------     ----------

<S>                                        <C>          <C>          <C>         <C>            <C>
Year ended March 31, 2000 Deducted
from asset account:
       Allowance for doubtful accounts     $1,298,000   $  544,000   $      --   $ 430,000(1)   $1,412,000
       LIFO reserve                         7,546,000      939,000          --          --       8,485,000
                                           ----------   ----------   ---------   ---------      ----------
                                   Total   $8,844,000   $1,483,000   $      --   $ 430,000      $9,897,000
                                           ==========   ==========   =========   =========      ==========


Year ended March 31, 1999 Deducted
from assets account:
       Allowance for doubtful accounts     $  900,000   $  504,000   $      --   $ 106,000(1)   $1,298,000
       LIFO reserve                         7,000,000      546,000          --          --       7,546,000
                                           ----------   ----------   ---------   ---------      ----------
                                   Total   $7,900,000   $1,050,000   $      --   $ 106,000      $8,844,000
                                           ==========   ==========   =========   =========      ==========


Year ended March 31, 1998
Deducted from assets account:
       Allowance for doubtful accounts     $  926,000   $  601,000   $      --   $ 627,000(1)   $  900,000
       LIFO reserve                         6,430,000      570,000          --          --       7,000,000
                                           ----------   ----------   ---------   ---------      ----------
                                   Total   $7,356,000   $1,171,000   $      --     627,000      $7,900,000
                                           ==========   ==========   =========   =========      ==========


<FN>
(1)      Uncollectible accounts written off, net of recoveries.
</FN>
</TABLE>


                               (Remainder of page intentionally left blank.)


                                                     55

<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, on June 27, 2000.


                                   NATIONAL WINE & SPIRITS, INC.


                                          /s/ James E. LaCrosse
                                   By:  ----------------------------------------
                                        James E. LaCrosse, Chairman, President,
                                        Chief Executive Officer, and
                                        Chief Financial Officer


     Pursuant to the  requirements  of the  Securities  Act,  this  Registration
Statement has been signed on the 27th day of June, 2000 by the following persons
in the capacities indicated:

            SIGNATURE                              TITLE

  /s/ James E. LaCrosse
---------------------------------       Chairman,  President, Chief Executive
       James E. LaCrosse                Officer (Principal Executive Officer),
                                        and Chief Financial Officer (Principal
                                        Financial Officer and Principal
                                        Accounting Officer)

---------------------------------       Director, Executive Vice President,
        J. Smoke Wallin*                and Secretary


---------------------------------       Director
         Martin H. Bart*


---------------------------------       Director
          James Beck*

---------------------------------       Director
        Mitchell Stoltz

---------------------------------       Director
        William Cockrum

---------------------------------       Director
        Percy N. Stone*


---------------------------------       Director
      Norma M. Johnston*


---------------------------------       Director
       Vaughn D. Bryson


---------------------------------       Director
 Catherine LaCrosse Wallentine*



*By: /s/ James E. LaCrosse
     --------------------------
          ATTORNEY-IN-FACT


                                       56

<PAGE>

                                INDEX TO EXHIBITS


Exhibit No.                                  Description

-----------                                  -----------


    3.1             Amended and Restated  Articles of  Incorporation of National
                    Wine & Spirits, Inc.

    3.2             Amended and Restated Bylaws of National Wine & Spirits, Inc.

    3.3             Articles  of   Incorporation  of  National  Wine  &  Spirits
                    Corporation  (incorporated  by reference  Exhibit 3.3 to the
                    Company's  Registration Statement no. 333-74589 on Form S-4,
                    filed May 13, 1999).

    3.4             Bylaws of National Wine & Spirits Corporation  (incorporated
                    by  reference  Exhibit  3.4  to the  Company's  Registration
                    Statement no. 333-74589 on Form S-4, filed May 13, 1999).

    3.5             Articles of  Incorporation  of NWS,  Inc.  (incorporated  by
                    reference   Exhibit  3.5  to  the   Company's   Registration
                    Statement no. 333-74589 on Form S-4, filed May 13, 1999).

    3.6             Bylaws of NWS, Inc.  (incorporated by reference  Exhibit 3.6
                    to the Company's  Registration  Statement  no.  333-74589 on
                    Form S-4, filed May 13, 1999).

    3.7             Articles   of   Incorporation   of   NWS   Michigan,    Inc.
                    (incorporated  by  reference  Exhibit  3.7 to the  Company's
                    Registration  Statement no. 333-74589 on Form S-4, filed May
                    13, 1999).

    3.8             Bylaws of NWS  Michigan,  Inc.  (incorporated  by  reference
                    Exhibit  3.8 to the  Company's  Registration  Statement  no.
                    333-74589 on Form S-4, filed May 13, 1999).

    3.9             Articles of Organization of NWS-Illinois,  LLC (incorporated
                    by  reference  Exhibit  3.9  to the  Company's  Registration
                    Statement no. 333-74589 on Form S-4, filed May 13, 1999).

    3.10            Operating  Agreement of NWS-Illinois,  LLC  (incorporated by
                    reference   Exhibit  3.10  to  the  Company's   Registration
                    Statement no. 333-74589 on Form S-4, filed May 13, 1999).

    4.1             Indenture  relating  to  the  Exchange  Notes,  dated  as of
                    January 25,  1999 among  National Wine & Spirits,  Inc., the
                    Subsidiary  Guarantors and Norwest Bank Minnesota,  N.A., as
                    trustee (including  cross-reference sheet regarding sections
                    310 through 318(a) of the Trust Indenture Act) (incorporated
                    by  reference  Exhibit  (4b) to the  Company's  Registration
                    Statement no. 333-74589 on Form S-4, filed March 17, 1999).

    4.2             A/B  Exchange  Registration  Rights  Agreement,  dated as of
                    January 25,  1999, among National Wine & Spirits,  Inc., the
                    Subsidiary    Guarantors   and   the   Initial    Purchasers
                    (incorporated  by reference  Exhibit  4(b) to the  Company's
                    Registration  Statement  no.  333-74589  on Form S-4,  filed
                    March 17, 1999).

    4.3             Form  of  Exchange  Notes  (including   related   Subsidiary
                    Guarantors)  (incorporated by reference  Exhibit 4(c) to the
                    Company's  Registration Statement no. 333-74589 on Form S-4,
                    filed March 17, 1999).

    4.4             Guaranty  entered  into  as  of  January 25,   1999  by  all
                    Subsidiary  Guarantors  (incorporated  by reference  Exhibit
                    4(d) to the Company's  Registration  Statement no. 333-74589
                    on Form S-4, filed March 17, 1999).



                                       57

<PAGE>

Exhibit No.                                  Description

-----------                                  -----------

    10.1            Purchase Agreement,  dated January 20,  1999, among National
                    Wine & Spirits,  Inc.,  the  Subsidiary  Guarantors  and the
                    Initial Purchasers  (incorporated by reference Exhibit 10(a)
                    to the Company's  Registration  Statement  no.  333-74589 on
                    Form S-4, filed March 17, 1999).

    10.2            Credit  Agreement,  dated January 25, 1999,  among  National
                    Wine & Spirits,  Inc., the Subsidiary Guarantors and NBD, as
                    agent.  (incorporated  by  reference  Exhibit  10(b)  to the
                    Company's  Registration Statement no. 333-74589 on Form S-4,
                    filed March 17, 1999).

    12              Statement regarding computation of ratios

    21              List of subsidiaries  (incorporated by reference  Exhibit 21
                    to the Company's  Registration  Statement  no.  333-74589 on
                    Form S-4, filed March 17, 1999).

    24              Powers of Attorney  (contained  in  signature  pages of this
                    Registration Statement)

    27              Financial Data Schedule



                                       58