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, 2002.

  [   ]   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
-------------------------------                ---------------------------------
(State or other jurisdiction of                (IRS Employer Identification No.)
 incorporation or organization)


700 W. Morris Street, P.O. Box 1602, 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 May 21, 2002 was  5,330,521,  of which 104,520
were voting stock.

Documents Incorporated by Reference:  None


                                     - 1 -
<PAGE>
                                TABLE OF CONTENTS


                                                                            Page
                                                                            ----
PART I
Item 1.    Business                                                           3
Item 2.    Properties                                                        16
Item 3.    Legal Proceedings                                                 17
Item 4.    Submission of Matters to a Vote of Security Holders               18

PART II
Item 5.    Market for Registrant's Common Equity and Related
           Stockholder Matters                                               19
Item 6.    Selected Consolidated Financial Data                              19
Item 7.    Management's Discussion and Analysis of Financial
           Condition and Results of Operations                               21
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                               50

PART III
Item 10.   Directors and Executive Officers of the Registrant                51
Item 11.   Executive Compensation                                            53
Item 12.   Security Ownership of Certain Beneficial Owners
           and Management                                                    54
Item 13.   Certain Relationships and Related Transactions                    55

PART IV
Item 14.   Exhibits, Financial Statement Schedules and Reports
           on Form 8-K                                                       57



                                     - 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 Company's debt
are forward-looking  statements.  A variety of factors could cause the Company's
actual  results  to  differ  from  the  reported   results   expressed  in  such
forward-looking  statements.  These  factors  are  discussed  in the  cautionary
statements   contained  in  Exhibit  99  to  this  filing.  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 54% market share and Michigan with 52% market share,  and one of
the largest in Illinois with 30% market share.  NWS' markets include Chicago and
Detroit, which are the second 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),  NWS Michigan, Inc. (NWS-Michigan), and United
States Beverage, L.L.C. (USB).

     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 Pernod Ricard. 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
     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  Kendall Jackson, featuring Kendall Jackson and LaCrema vines
     o  Banfi Vintners, featuring Riunite and other Italian and Chilean wines
     o  Canandaigua, featuring  Sebastiani, Inglenook, Paul  Masson, and Almaden
        wines
     o  Diageo, featuring premium European and California wines

     NWS operates 12 strategically  located distribution  facilities and a fleet
of  approximately  325  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 1998 to 2002,  NWS'  total  revenue  increased  steadily  from  $521.4
million to $681.6  million,  representing a compound annual growth rate of 6.9%,
while  NWS'  EBITDA  (i.e.   income  from  operations  plus   depreciation   and
amortization)  increased  from $16.7 million to $27.9  million,  representing  a
compound  annual  growth  rate  of  13.7%.  NWS  achieved  this  performance  by
successfully integrating several strategic acquisitions, 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 retail
sales of  approximately  $127.3  billion  in  calendar  2001.  Sales of wine and
spirits,  in which NWS primarily  competes,  accounted for approximately 15% and
30%, respectively, or $57.4 billion of total retail sales in 2001. In the United
States wine and spirits markets,  total consumption has increased since 1994 and
1998,  respectively.  During 2001,  wine and spirits  consumption  in the United
States grew 0.8% and 1.3%  respectively,  as compared to 2000.  In both the wine
and spirits industries,  consumer preference has been to purchase higher quality
and more expensive products; management believes this trend will continue.

     In June of 2000,  Seagram announced its intention to merge with Vivendi and
divest of their  wine and  spirits  business.  Subsequently,  Diageo  and Pernod
Ricard  jointly bid and agreed to  purchase  the brands  with the  intention  of
assigning them to their  respective  companies.  The most notable Seagram brands
that Diageo purchased were Crown Royal,  Seagrams V.O., 7 Crown,  Captain Morgan
and Myers's Rum. The notable brands Pernod  purchased  include Chivas Regal, The
Glenlivet, Martell Cognacs and Seagrams Gin. The purchase agreement was approved
by the Federal Trade Commission in December,  2001.  Absolut Vodka,  which had a
marketing  arrangement with Seagram,  has assigned the U.S.  marketing rights to
Future  Brands  L.L.C.,  a joint  venture with V & S (parent of Absolut) and Jim
Beam Brands.  Diageo, the largest supplier, has requested formal proposals (RFP)
from  distributors  for the right to  distribute  Diageo  brands  within a given
state.  Pernod  consolidated  the Seagram  brands that they purchased into their
existing distribution network. Other suppliers are developing strategies to deal
with the brand sales to Diageo and Pernod  Ricard.  Most  recently,  Bacardi and
Brown-Forman  have  entered  into an  alliance  (Gemini  Alliance)  intended  to
leverage their business to gain advantages through their distributor partners.



                                     - 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 or the retail sale,
or  both.  In open  states,  including  Indiana,  Illinois,  and  Kentucky,  the
distributors and retailers are privately owned businesses. In the open-franchise
states,  there are laws and regulations that restrict the suppliers'  ability to
change distributors.

     Given  the  three  tier   regulatory   structure,   the  wine  and  spirits
distribution  industry varies greatly from other industries such as food, drugs,
non-alcohol-based  beverages  and  paper  products.  As  suppliers  can  compete
directly with the distributors in these other industries by shipping directly to
retailers,  distributor  margins  can be much  lower  than those in the wine and
spirits  industry.  In  addition,  the  liquor  industry  as a whole has shown a
remarkable resilience to economic downturns relative to other industries.

Competitive Strengths

     Adoption and  promotion of NWS Core Values and  Operating  Imperatives

     Two important  internal efforts aimed at clarifying NWS' identity and goals
both  internally  and  externally  gained  traction  in  fiscal  2002,   further
differentiating  the company from  competitors:  The promotion of Corporate-wide
Core Values and Operating Imperatives.

     Core Values

     Recognizing  the need to empower the company  managers as well as the other
employees  and move away from a directive  management  style to a  decentralized
system that would operate on a common set of values, but centralized control and
accountability,  NWS  started a  company-wide  process in 2000 that  lasted nine
months  that  developed  a set of core  values.  Included  in the  process  were
employees  from all parts of the company  facilitated  by one of our  directors,
Professor Bill Cochrum from the Anderson  School of Business at UCLA. At the end
of the process which  included  substantial  and active  participation  from all
levels of the company, a set of values was determined which everyone bought into
and which form the basis for how we manage the business and how employees should
interact with each other. The values identified are:

     o  Customer and Supplier Focus
     o  Respect for the Individual
     o  Teamwork
     o  Citizenship
     o  Integrity
     o  Financial Responsibility to Stakeholders

     Operating Imperatives

     NWS has  documented  and now promotes its key Operating  Imperatives as the
corporate  "recipe  for  success,"  seeking  to leave  no doubt in the  minds of
suppliers,  customers and employees the company's  objectives.  These  Operating
Imperatives include:

     o  Focus - on the business - industry and geography
     o  Execution - of the core capabilities required for effective distribution
     o  Efficiency - in everything we do
     o  Technology Leadership - to  improve our information,  reduce lead  times
        and reduce costs
     o  Capital Structure - that  provides flexibility  and access to investment
        opportunities
     o  Innovation - to constantly improve the way we operate



                                     - 5 -
<PAGE>

     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
demonstrated in 1997 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  Smirnoff,  Absolut,  Captain Morgan, Jose Cuervo, Jim
Beam,  Crown  Royal,  and  Seagram's  Gin.  In  Illinois,  NWS is the  exclusive
distributor  of five  out of the top ten U.S.  brands.  NWS  also  represents  a
significant share of each of its major suppliers' total United States business.

     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 1.8% of NWS' 2002 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.

     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  334  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 plans to  invest  approximately  $4
million over the next 24 months to expand the 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 eight individuals who comprise NWS' senior
management  team  have  an  average  of  over  20  years  of  experience  in the
alcohol-based  beverage  industry  and 15  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,  all of NWS' major
facilities  have additional  capacity,  which positions NWS to take advantage of
future  expansion  opportunities  in these markets with  relatively  low capital
expenditures.



                                     - 6 -
<PAGE>

     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  infrequent 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.

     (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.

     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,  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.


                                     - 7 -
<PAGE>

<TABLE>
<CAPTION>
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 2002, 2001 and 2000 is as follows:

                                   Wine (in thousands)               Spirits (in thousands)               Other (in thousands)
                                   -------------------               ----------------------               --------------------
                               2002        2001       2000        2002        2001        2000        2002        2001        2000
                               ----        ----       ----        ----        ----        ----        ----        ----        ----

<S>                        <C>        <C>         <C>         <C>         <C>         <C>         <C>         <C>         <C>
Product sales ...........  $161,445   $ 160,840   $149,160    $408,199    $397,754    $377,437    $ 89,950    $ 78,285    $ 77,028
Distribution fees........       ---         ---        ---      21,963      21,573      20,770         ---         ---         ---
Percentage of total
Company revenue..........      23.7%       24.4%      23.9%       63.1%       63.7%       63.8%       13.2%       11.9%       12.3%
</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 2002,  2001, and 2000 was $360.0 million,  $355.0 million and $365.0
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
                                 Old Grand Dad              Knob Creek

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


Gin:                             Boodles                    Gilbey's
                                 Seagram's                  Gordons

Rum:                             Captain Morgan             Myers
                                 Malibu                     Ronrico

Tequila:                         Herradura                  Patron
                                 Jose Cuervo                Margaritaville



                                     - 8 -
<PAGE>

Cognacs/Brandy:                  Courvoisier                Martell
                                 Hine                       Paul Masson
                                 Remy Martin

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

Wine:                            Kendall Jackson            Inglenook
                                 Almaden                    Perrier Jouet
                                 Banfi                      Sebastiani
                                 Beringer                   Stags Leap
                                 Caymus                     Sterling
                                 Chateau Lafite             Veuve Clicquot
                                 Rothschild                 Rosemount
                                 Gundlach Bundschu          Ravenswood
                                 Penfolds                   Columbia Crest
                                 Mumm                       Chateau St. Michelle
                                 Hess Collection            Seagram Wine Coolers

Specialty Beer:                  Goose Island               Sierra Nevada
                                 Grolsch                    Hooper's Hooch
                                 K Cider

Non-Alcohol:                     Evian                      Stewart's
                                 Perrier                    Nantucket Nectars

     NWS has entered into written  distribution  agreements  with several of its
principal  suppliers  that  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.



                                     - 9 -

<PAGE>

     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 2001
case sales.

<TABLE>
<CAPTION>
                                                            Length of
                           U.S.                              Company
                           Rank    State Representation    Relationship
Supplier                    (1)    IN       IL       MI    (in years)(2)          Representative Brands
--------                    ---    --       --       --    -------------          ---------------------

<S>                         <C>    <C>      <C>      <C>        <C>         <C>
Diageo (3)...............   1      X                 X          27          Smirnoff, Jose Cuervo, Crown Royal
Fortune Brands...........   2      X        X        X          25            Jim Beam, DeKuyper's,  Absolut
Constellation (4)........   7      X        X                   28               Paul Masson Grande Amber
Pernod Ricard.........      8      X        X                   29              Chivas Regal, Wild Turkey

<FN>
(1)  Source: 2002 Adams Handbook Advance.

(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)  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 that remains a separate organization.

(4)  NWS does not represent the entire brand portfolio.
</FN>
</TABLE>

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

                                                     Length of
                           U.S.       State           Company
                           Rank   Representation    Relationship
Supplier                   (1)     IN       IL      (in years)(2)          Representative Brands
--------                   ----    --       --      -------------          ---------------------

<S>                         <C>     <C>     <C>         <C>           <C>
Constellation Brands.....    2      X       X           28             Inglenook, Paul Masson, Sebastiani
Beringer Wine Estates...     6      X                   27                    Beringer, Meridian
Banfi Vintners............   7      X       X           28                  Riunite, Concha y Toro
Diageo - UDV............     9      X       X           28                      Sterling, B&G
Southcorp Wines (3)...      10      X                   11               Lindeman's, Rosemount Estate
Kendall Jackson..........    8      X       X            3                  Kendall Jackson, LaCrema
Stimson Lane............    --      X                   16            Chateau St. Michelle, Columbia Crest

<FN>
(1)  Source: 2002 Adams Handbook Advance, 2002 Adams Wine & Spirits Industry and Marketing.

(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)  NWS does not represent the entire brand portfolio in Illinois.
</FN>
</TABLE>


                                     - 10 -
<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
$10.4  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,  for  which  NWS-Illinois  has  100%  voting
control.  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 became the exclusive sales
and marketing firm for the Goose Island brand  throughout the United States.  On
January 2, 2002 U.S. Beverage entered into a distribution  contract with Grolsch
International,  BV as the  exclusive  importer,  seller and  marketer of Grolsch
products  within the United  States.  Commencing  April 1, 2002,  U.S.  Beverage
became the exclusive  marketer and  distributor of Seagram's  Coolers and Rick's
Lemonade for the United States.

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 1.8% of NWS' 2002 total  revenue.  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.

<TABLE>
<CAPTION>
     The following table summarizes NWS' customer base:

                                      Percentage
                                      of Company
          Type of Customer           2002 Revenue                   Representative Customers
          ----------------           ------------                   ------------------------

<S>                                      <C>           <C>
Off-Premise
    Package Stores                       40.6%         Gold Standard and Cap'n Cork

    Grocery stores, drug stores          25.3          Kroger, Dominicks, Marsh, American Stores (Osco),
      and mass merchandisers                           Walgreens, CVS, Sam's Club, Meijer

    Other                                 7.7          7-Eleven, White Hen, Village Pantry
                                         ----
         Percent of total                73.6%
                                         ====

On-Premise
    Restaurants and Bars                 21.7          Charlie Trotter's, Hard RockCafe, House of Blues,
                                                       Mortons, Lettuce Entertain U, Levy, Ruth's Chris

    Hotels, Entertainment                 2.7          Four Seasons, Hyatt, Hilton, the United Center

    Other                                 2.0          Crooked Stick Golf Course, American
                                         ----          Legion

         Percent of total                26.4%
                                         ====
</TABLE>

                                     - 11 -
<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

     Brand  Management.  NWS was one of the first  distributors to recognize the
benefits of a dedicated  approach to brand  management  and  separating  it from
sales  execution.  Our  approach  has  contributed  to  our  success.  Suppliers
appreciate  and  depend  upon  the  local  expertise  and  understanding  of the
intricacies of the market.  Our brand  managers,  through  interaction  with our
sales  teams  and  analysis  of the  competitive  landscape,  adjust  suppliers'
national brand strategies to plans that work in our respective states.

     Sales Teams.  NWS sales  organizational  design is predicated upon category
knowledge  and  expertise,  trade  channel  knowledge  and  effectiveness,   and
geographic  coverage.  Through its approximately  700-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
provides  its  customers  with a wide  variety of  services in addition to order
taking,  merchandising,  and delivery. These services include item selection and
SKU  optimization   using  space  and  financial  tools,   fact-based   business
presentations  to  capitalize  on fair share,  consumer  pull-through  marketing
programs and communicating business-building solutions.

     Sales, Marketing and Information Systems. Our investment in technology,  in
the areas of and sales and  marketing  is a critical  factor in our  success and
customer satisfaction.  NWS is generally recognized as an industry innovator and
leader in MIS in the wine and spirits  distribution  tier. Our proprietary sales
system  manages  sales data to the SKU level in all retail  accounts  we service
(approximately 36,000) and is refreshed nightly based on deliveries. This system
provides  our  brand  teams  the  necessary  information  to  develop  targeted,
effective brand plans. Moreover, our sales managers depend on the information to
monitor and control retail execution within their sales teams.  Most recently we
have moved this  information  to the  Internet  to allow for  greater  speed and
accessibility  to  management,  retail,  and  supplier  partners.  We have  also
invested to significantly improving our category management expertise.  This has
improved our service and effectiveness  particularly in the off-premise national
and regional chain accounts.

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.

     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  325 delivery  trucks,  consisting of 238 delivery
trucks,  15 tractors,  24 trailers,  44 vans and 4 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.



                                     - 12 -
<PAGE>

     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 and management 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

     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.

     The wine and spirits wholesale distribution business is highly competitive.
NWS' primary competition in Illinois includes Romano Brothers and Judge & Dolph,
and to a  lesser  degree  Pacific  Wine.  In  Indiana,  the only  competitor  of
consequence  is  Olinger  (a  partnership  of Glazer and  Romano).  The  Olinger
operation has become a more formidable  competitor in Indiana with the corporate
strength and relationships  that Glazer and Romano lend. None of the ten largest
United States distributors  competes with NWS in Michigan.  Distributors compete
for new  suppliers  or  brands  based on  reputation,  market  share,  access to
customers and ability to satisfy  supplier  demands.  This will be  particularly
relevant in the short term as the industry continues to consolidate as evidenced
by the sale of the Seagram  brands to Diageo in 2001.  Given its size,  supplier
relationships, effective sales and marketing organization and low cost efficient
distribution  networks,  NWS is well positioned to compete in Indiana,  Illinois
and Michigan.



                                     - 13 -
<PAGE>

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, 2002, NWS had approximately 1,618 employees.  Approximately
157 employees in Michigan and 465 employees in Illinois are represented by labor
unions. In Illinois, NWS has relationships with three unions:

     (1)  Teamsters Union Local 744, annual  agreements  expiring March 30, 2004
          and March 30, 2005;

     (2)  Liquor and Allied  Workers Union Local 3, annual  agreements  expiring
          September 30, 2004 and October 31, 2004; and

     (3)  Teamsters,  Chauffeurs & Helpers Union Local 50,  expiring  August 31,
          2004.

In Michigan, NWS has relationships with four unions:

     (1)  Teamsters Union Local 337, expiring March 4, 2005;

     (2)  Teamsters Union Local 406, expired March 1, 2002

     (3)  Teamsters Union Local 299, expiring March 2, 2004; and

     (4)  Teamsters Union Local 486, expiring March 5, 2004.

The  Company's  contract  with  Local  406 has been  ratified,  but has not been
finalized.  It is the  Company's  expectation  that both  parties  will sign the
contract by June 1, 2002, with an effective date of March 1, 2002. Employees are
currently operating under a renewable 30 day contract extension period.

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

NWS has not  experienced any work stoppages in more than 19 years as a result of
labor disputes and considers its employee relations to be good.



                                     - 14 -
<PAGE>

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 (BATF), as
well as by state and local  regulatory  agencies.  Suppliers,  distributors  and
customers must be properly licensed in order to sell alcohol-based beverages.

     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  that  produce   alcohol-based
          beverages and/or importers of alcohol-based beverages.

     (2)  Tier two is comprised of distributors, such as NWS.

     (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 BATF 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.



                                     - 15 -
<PAGE>

     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.

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

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.  NWS-Illinois  has 100%  voting  stock  ownership  in  NWS-LLC  and
economic ownership is 75% by NWS-Illinois and 25% by Mr. Bart. However, Mr. Bart
will  not  share  in  profits  of  NWS-LLC  until  preference   requirements  of
NWS-Illinois for operating advances have been repaid.  Mr. LaCrosse,  or a trust
for the benefit of his family, and Mrs. Johnston substantially wholly own NWS.

     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  351,000 square feet of warehousing space,  including a designated
temperature  controlled  area for  temperature-sensitive  products.  The Detroit
warehouse  consists of approximately  238,000 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.



                                     - 16 -
<PAGE>

<TABLE>
<CAPTION>
     The following  chart lists NWS'  warehouses  and delivery,  production  and
office facilities:

                                                       Total
                                         Owned/        Square
                       Location          Leased         Feet           Principal Function
                       --------          ------         ----           ------------------

<S>              <C>                     <C>          <C>         <C>
Indiana              Indianapolis        Owned        351,000        Master Warehouse/Office
                      South Bend         Owned         76,900         Hyper-Terminal/Office
                      Evansville         Owned          5,800        Cross-Docking Facility
                      Evansville         Owned          2,400                Office
                      Ft. Wayne          Leased         5,500                Office
                     Crown Point         Leased         7,900                Office
                     Indianapolis        Owned          3,500      Office - Leased to Perrier
                     Indianapolis        Owned         15,000     Warehouse - Leased to Perrier
                     Indianapolis        Owned         19,500        Leased Office Property

Connecticut            Stamford          Leased         5,700                Office

Illinois               Chicago           Owned        650,000        Master Warehouse/Office
                       Chicago           Leased         1,840        Leased Office Property
                      Champaign          Leased        50,000        Master Warehouse/Office
                        Peoria           Leased        56,000         Hyper-Terminal/Office
                     Collinsville        Leased        14,200     Cross-Docking Facility/Office
                       Rockford          Leased         5,000                Office
                     Springfield         Leased         1,000                Office

Michigan         Detroit (Brownstown)    Leased       238,000        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.

Item 3. Legal Proceedings

     The Company is a party to various 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.


                                     - 17 -
<PAGE>

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

     None.



                                     - 18 -
<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.



                                     - 19 -
<PAGE>

<TABLE>
<CAPTION>
                                                                Years Ended March 31,
                                              (Dollars and cases in thousands, except per case amount)
                                          -----------------------------------------------------------------
                                             2002          2001          2000          1999          1998
<S>                                       <C>           <C>           <C>           <C>           <C>
Statement of Income Data:
  Net product sales...................    $ 659,594     $ 636,879     $ 603,625     $ 535,355     $ 505,141
  Distribution fees...................       21,963        21,573        20,770        17,832        16,270
                                          ---------     ---------     ---------     ---------     ---------
  Total revenue.......................      681,557       658,452       624,395       553,187       521,411
  Cost of products sold...............      530,910       513,928       488,444       436,734       411,734
                                          ---------     ---------     ---------     ---------     ---------
  Gross profit........................      150,647       144,524       135,951       116,453       109,677
  Selling, general and
    administrative expenses...........      131,072       125,345       119,569       104,958       100,136
                                          ---------     ---------     ---------     ---------     ---------
  Income from operations..............       19,575        19,179        16,382        11,495         9,541
  Interest expense....................      (11,934)      (13,214)      (13,274)      (11,037)       (9,672)
  Gain on sale of assets                         47         7,835           173           188         4,139
  Other income........................         (228)          325         1,139           341         2,085
                                          ---------     ---------     ---------     ---------     ---------
  Income before extraordinary item....        7,460        14,125         4,420           987         6,093
  Extraordinary item..................          ---           ---           ---           318           ---
                                          ---------     ---------     ---------     ---------     ---------
  Net income..........................    $   7,460     $  14,125     $   4,420     $     669     $   6,093
                                          =========     =========     =========     =========     =========
Other Financial Data:
  EBITDA (1)..........................    $  27,850     $  28,069     $  25,287     $  19,869     $  16,656
  EBITDA margin.......................          4.1%          4.3%          4.0%          3.6%          3.2%
  Cash provided by operating
    activities........................       22,030         7,357        16,648         6,013         9,783
  Cash provided (used)
    by investing activities...........       (5,307)        2,717        (7,715)      (20,846)       (9,908)
   Cash provided (used) by
     financing activities.............       (9,082)       (9,539)       (7,282)       15,371        (1,900)
  Depreciation and amortization.......        8,275         8,890         8,905         8,374         7,115
  Capital expenditures(2).............        4,332         6,083         6,672         7,858        13,952
  Ratio of earnings to fixed charges..          1.5x          1.9x          1.3x          1.1x          1.5x
  Adjusted EBITDA (1).................       28,746        29,345        26,226        20,415        17,226
Operating Statistics:
  Product Sales Operations
  Cases shipped (spirits and wine)....        6,351         6,425         6,394         6,182         6,343
  Gross profit margin.................         19.5%         19.3%         19.1%         18.4%         18.5%
  Fee Operations
  Cases shipped (spirits).............        2,721         2,684         2,786         2,731         2,545
  Distribution fee per case...........    $    7.48     $    7.32     $    6.50     $    6.50     $    6.50


                                                                   As of March 31,
                                                                   (in thousands)
                                          -----------------------------------------------------------------
                                             2002          2001          2000          1999          1998

Balance Sheet Data
  Cash................................    $  11,735     $   4,094     $   3,559     $   1,908     $   1,370
  Total assets........................      201,405       192,290       188,197       178,868       168,084
  Total debt..........................      109,805       110,571       112,471       117,222       102,434
  Stockholders' equity ...............       23,095        24,669        18,183        16,266        13,564
</TABLE>


                                                   - 20 -
<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:

                                           Years Ended March 31
                                              (in thousands)
                        --------------------------------------------------------
                            2002        2001        2000        1999        1998

EBITDA................. $ 27,850    $ 28,069    $ 25,287    $ 19,869    $ 16,656
LIFO charge............      896       1,276         939         546         570
                        --------    --------    --------    --------    --------
   Adjusted EBITDA..... $ 28,746    $ 29,345    $ 26,226    $ 20,415    $ 17,226
                        ========    ========    ========    ========    ========


     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 senior 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:

                                           Years Ended March 31
                                              (in thousands)
                        --------------------------------------------------------
                            2002        2001        2000        1999        1998

Business expansion..... $  1,144    $  2,374    $  3,112    $  4,856    $ 10,758
Information systems....    1,418       1,750         970       1,281       1,781
Maintenance............    1,770       1,959       2,590       1,721       1,413
                        --------    --------    --------    --------    --------
                        $  4,332    $  6,083    $  6,672    $  7,858    $ 13,952
                        ========    ========    ========    ========    ========

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
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 Company's debt
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.



                                     - 21 -
<PAGE>

Overview

     National  Wine &  Spirits,  Inc.  ("The  Company")  is  one of the  largest
distributors of wine and spirits in the United States.  Substantially all of the
Company's current operations are in Illinois,  Indiana, Michigan,  Kentucky, and
from U.S. Beverage,  L.L.C.  (USB), the Company's national import and craft beer
marketing business. The Company's reported revenues include net product sales in
Indiana, Michigan,  Illinois, and from USB. Distribution fee revenue is from the
Michigan  operations that derives revenue from a per case charge for warehousing
and delivering products for the State of Michigan.

     The Company  increased  both product and  distribution  fee revenue for the
year ended March 31, 2002, as compared to the prior annual  period.  The revenue
increase was primarily from the increased  sales of premium priced products such
as higher end vodkas, brandies, rums, and fine wines. This was evidenced by flat
case sales for the year ended March 31, 2002 in the spirits and wine  categories
with revenue growth of 2.6% and 0.4%  respectively.  Revenue from wine sales was
adversely  affected by the  economic  downturn  that the United  States  economy
experienced during 2002 and 2001, and the depressed travel activity by consumers
which  affected the hotel and the  on-premise  sales.  Overall,  the Company was
pleased  with the results of the year ended March 31, 2002,  which  affirmed the
relative stability of the alcoholic beverage industry during periods of economic
uncertainty. Distribution fee revenue increased slightly due to the fee increase
of $0.16 per case  effective  February  1, 2002 and an  increase  in case volume
compared to the prior annual  period.  Gross margin on product  sales  increased
slightly  to 19.5% for the fiscal year ended March 31, 2002 as compared to 19.3%
for the prior year.  The increase in revenue and gross margin  offset  operating
expense increases,  resulting in operating income of $19.6 million,  an increase
of $0.4  million  over the results for fiscal 2001.  Net income  decreased  $6.7
million for the year ended  March 31,  2002,  as  compared  to the prior  annual
period.  The decrease was primarily due to the gain from the sale of the bottled
water  division of $7.5 million during the previous  annual period.  Net income,
excluding the gain from the sale of the bottled water division,  increased 13.0%
or $0.9  million  for the year ended  March 31,  2002,  as compared to the prior
annual period.

Outlook

     Dominating news specific to the wine and spirits  distribution  business is
the continued effect of the sale of the Seagram brands to Pernod and Diageo. The
sale of the Seagram's  brands from Vivendi to Diageo and Pernod Ricard  occurred
in early  2001 and was  approved  by the  Federal  Trade  Commission  ("FTC") in
December 2001.  Diageo,  the largest  supplier,  has requested  formal proposals
(RFP) through an RFP process for the right to  distribute  their brands within a
given state. NWS submitted  proposals mid March, 2002, which are currently being
evaluated  by Diageo.  The  Company  expects a decision  by Diageo by mid summer
2002.

     Pernod Ricard, as expected,  consolidated the Seagram brands they purchased
into  their  existing  distribution  network.  As a  result,  the  Company  will
discontinue representing Pernod Ricard brands during fiscal 2003 in Michigan but
continue to represent  them in Illinois and Indiana.  The Company  estimates the
fee  revenue  effect  from  the  loss  of  these  Pernod  Ricard  brands  to  be
approximately  $1.5  million for fiscal 2003.  Other  suppliers  are  developing
strategies  to deal  with the brand  sales to Diageo  and  Pernod  Ricard.  Most
recently,  Bacardi  and  Brown-Forman  have  entered  into an  alliance  (Gemini
Alliance)  intended to leverage their business to gain advantages  through their
distributor  partners.  NWS  management  has submitted  what we feel are winning
proposals  to  Diageo.  However,  if Diageo  does not  accept one or more of the
Company's proposals we anticipate acquiring the representation of some competing
brands. There can be no assurance, however, that the failure of Diageo to accept
the  proposals  of the Company  will not have a material  adverse  effect on the
business and financial condition of the Company.



                                     - 22 -
<PAGE>

<TABLE>
<CAPTION>
Results of Operations

     The following table includes  information  regarding total cases shipped by
NWS in 2002, 2001 and 2000:

                                                             Years ended March 31,
                                                             (Cases in thousands)
                                               -------------------------------------------------
                                                    2002                 2001              2000
                                               ---------------      ----------------      ------
                                                       Percent               Percent
                                                Cases   Change       Cases   Change       Cases

<S>                                            <C>      <C>         <C>       <C>         <C>
Wine (product sales operations)...........      2,952   (2.6)%       3,032    (0.4)%       3,044
Spirits (product sales operations)........      3,399    0.2%        3,393     1.3%        3,350
Spirits (distribution fee operations).....      2,721    1.4%        2,684    (3.7)%       2,786
  Total wine and spirits..................      9,072   (0.4)%       9,109    (0.8)%       9,180
Other*....................................      4,972   (1.0)%       5,021    17.5%        4,274
                                               ------   ----        ------    ----        ------
  Total...................................     14,044   (0.6)%      14,130     5.0%       13,454
                                               ======   ====        ======    ====        ======
<FN>
*U.S. Beverage's results are included in the other category for the current year and prior years.
</FN>
</TABLE>

Fiscal 2002 Compared with Fiscal 2001

     Revenue.  The Company  reported  product sales for the year ended March 31,
2002 of $659.6  million,  an increase of $22.7  million,  or 3.6% over the prior
year  period.  The  increase  was  primarily  the result of  continued  consumer
preference for premium-priced goods in both the spirits and wine categories. The
revenue growth was primarily from the spirits category, which experienced a 2.6%
increase in revenue on flat case sales for the  current  fiscal year as compared
to the prior annual period. Revenue from wine sales remained stable,  increasing
0.4% for the current fiscal year on slightly lower case sales as compared to the
prior annual  period.  The case sales  decline was  primarily  the result of the
Indiana  market,  which did not  represent  the Sutter Home line during the most
recent fiscal year,  which adversely  affected case sales by 115,000 as compared
to the prior annual period.  Distribution  fee revenue  remained stable at $22.0
million for the year ended  March 31,  2002,  compared to $21.6  million for the
pror annual period. A rate increase authorized by the State of Michigan of $0.16
per case was effective February 1, 2002.

     Gross Profit.  Gross profit dollars on product sales increased $5.7 million
for the year  ended  March 31,  2002,  an  increase  of 4.7% from the prior year
period.  Gross profit  percentage  on product sales was 19.5% for the year ended
March 31, 2002 versus  19.3% for the prior year  period.  The  increase in gross
margin dollars were primarily from increased  revenue in the Illinois market and
increased margin percentage on stable revenue for the Indiana market.

         Operating Expenses. Total operating expenses for the year ended March
31, 2002 increased $5.7 million, or 4.6% over the operating expenses for the
year ended March 31, 2001. The Company had stable warehouse and delivery costs,
while experiencing higher costs for professional fees, sales and marketing
wages, and casualty and health insurance.

     Warehouse and delivery expenses were essentially even with the prior year's
amounts,  decreasing  0.1% or $0.1  million for the year ended  March 31,  2002.
Total  warehouse  and  delivery  expenses,  as a  percentage  of total  revenue,
declined slightly to 5.8% during the current year period as compared to 6.0% for
the  prior  annual  period.  The  decrease  was  primarily  due to  the  savings
experienced   in  the  Indiana  market  from  lower  case  sales  of  water  and
non-alcoholic  products,  along with construction of more efficient  warehousing
facilities.

     Selling expenses increased $1.1 million to $46.8 million for the year ended
March 31,  2002 as  compared  to the prior  year  period.  Additional  sales and
marketing costs,  including staff and wage increases were primarily  responsible
for the greater selling expenses.



                                     - 23 -
<PAGE>

     Total  administrative  expense increased $4.6 million or 11.6% for the year
ended March 31,  2002  versus the prior  annual  period.  Increases  in health &
welfare   benefits,   casualty  and  workman's   compensation   insurance,   and
professional  fees were  primarily  responsible  for the increase from the prior
annual period.  The Company has experienced  higher costs for employee's  health
care throughout the current fiscal year, both in the partially self funded plan,
and by increases in  multi-employer  fully insured  plans that cover  bargaining
unit  employees.  The Company  renewed its property  and  casualty  insurance in
December,  2001 and expects to report  increased  costs for the  current  policy
period due to increased  rates on  facilities,  and excess  liability  coverage.
Professional  fees have increased from the comparable prior annual period due to
costs related to the  implementation of enhanced internal control procedures and
the change of auditors from the prior year.

     Income from Operations.  Total operating income increased $0.4 million,  or
2.1% for the year  ended  March 31,  2002,  over the prior  annual  period.  The
increase in operating  income was primarily  due to the  increased  gross profit
dollars and reduced operating  expenses by the Indiana market for the year ended
March 31, 2002 as compared to the prior annual period.

     Interest  Expense.  Interest expense decreased $1.3 million or 9.7% for the
year ended  March 31, 2002  compared to the prior year.  The Company was able to
take  advantage of LIBOR  pricing,  which reduced the Company's rate relative to
prime based pricing on its revolving line of credit. The Company's  reduction in
its average borrowings on the revolving line of credit and the reductions in the
prime rate were primarily responsible for the reduced expense for the year ended
March 31, 2002, compared to the prior annual period. The Company's revolver rate
was 4.75% at March 31, 2002 and was 8.5% at March 2001.

     Other  Income.  Other income  decreased  $8.3  million from the  comparable
annual  period,  primarily  due to the $7.5  million  gain  from the sale of the
bottled water division in June 2000,  increased  equity losses and impairment in
value  from  the  investment  in  eSkye,  and  reduced  interest  income  due to
reductions in balances of the shareholder notes in NWSC.

     Net Income.  Net income decreased $6.7 million for the year ended March 31,
2002, as compared to the prior annual period.  The decrease was primarily due to
the gain from the sale of the bottled water  division of $7.5 million during the
previous  annual  period.  Net income,  excluding  the gain from the sale of the
bottled water division, increased 13.0% or $0.9 million for the year ended March
31, 2002, as compared to the prior annual period.

     For  financial  analysis  purposes  only,  the  Company's  earnings  before
interest, taxes, depreciation and amortization (EBITDA) for the year ended March
31, 2002 was $27.9 million,  a decrease of $0.2 million,  or 0.8% as compared to
the prior annual period.

Fiscal 2001 Compared with Fiscal 2000

     Revenue.  The Company  reported  product sales for the year ended March 31,
2001 of $636.9  million,  an increase of $33.3  million,  or 5.5% over the prior
year  period.  The  increase  was  primarily  the result of consumer  demand for
premium-priced  spirits  and  wines,  along  with  growth of the  United  States
Beverage  division.  Price  increases on popular brands,  such as tequila,  also
contributed  to the revenue  increase  this year  versus the prior year  period.
Distribution fee revenue  increased 3.9% to $21.6 million,  primarily the result
of a rate  increase to $7.32 a case from $6.50 per case,  as  authorized  by the
State of Michigan.  Case volume from fee operations  declined due to the sale of
the Black  Velvet,  Christian  Brothers  (both in May  2000)  and  Arrow  brands
(February 2000) by Diageo.  The Company added the Allied Domecq line in Michigan
(July 2000);  however,  the case volume was not equal to the Diageo  brands that
were sold.

     Gross Profit.  Gross profit dollars on product sales increased $7.8 million
for the year  ended  March 31,  2001,  an  increase  of 6.7% from the prior year
period.  Gross profit  percentage  on product sales was 19.3% for the year ended
March 31, 2001 versus 19.1% for the prior year period.  The  increased  sales of
premium spirits and wines, which carry a higher gross profit  percentage,  along
with  the  growth  of  the  United  States  Beverage  division,  were  primarily
responsible for the gross margin dollar and percentage increase.



                                     - 24 -
<PAGE>

     Operating  Expenses.  Total operating expenses for the year ended March 31,
2001  increased $5.8 million,  or 4.8% over the operating  expenses for the year
ended March 31, 2000.  Expanded sales  operations in the United States  Beverage
division,  along with increased brand  promotion  costs in the product  markets,
were primarily responsible for the operating expense increase.

     Operating  expenses  for the annual  period ended March 31, 2001 in the fee
operations  increased  $1.7  million,  or  8.3%  from  the  prior  year  period.
Operational  costs  associated  with  increased  bottle  or less  than full case
orders, and expansion of the sales area were primarily  responsible for the cost
increases.

     Warehouse and delivery expenses increased 3.3% or $1.3 million for the year
ended March 31, 2001 versus the prior year period.  Operational costs associated
with the  increased  bottle  orders  in our fee  market  contributed  to  higher
warehouse costs. Total warehouse and delivery expenses, as a percentage of total
revenue, declined slightly to 6.0% during the current year period as compared to
6.2% for the prior annual period.

     Selling expenses increased $4.6 million to $45.7 million for the year ended
March 31,  2001 as compared to the prior year  period.  Expansion  of the United
States  Beverage  sales  area  due to the  Grolsch  brand  addition  along  with
increased   brand  support  for  the  Hooper's  Hooch  products  were  primarily
responsible for the sales expense increase. Expenses for the brokerage operation
in our fee  market  increased  $0.3  million  from the prior year  period.  This
represents a leveling off for the  brokerage  expenses,  while  revenue from the
brokerage operation increased $0.2 million for the annual period ended March 31,
2001, versus the comparable year period.

     Total  administrative  expense  remained  stable  at  $40.0  million.  Cost
increases  in  casualty  and  health   insurance   were  offset  by  savings  on
communication and wages. Administrative expense as a percentage of total revenue
was 6.1% for the year ended  March 31,  2001,  down  slightly  from 6.4% for the
prior annual period.

     Income from Operations.  Total operating income increased $2.8 million,  or
17.1% for the year ended  March 31,  2001,  over the prior  annual  period.  The
revenue  gains and an  increased  gross profit  percentage  more than offset the
increases  in  operating  expenses.  Operating  income for the  product  markets
increased  $3.7  million,  or 23.3%  from the  prior  annual  period  due to the
increased  gross profit.  The fee operations  experienced a decline in operating
income  for the year  ended  March 31,  2001 of $0.9  million  due to  increased
operational costs and the decreased case sales from the prior annual period.

     Interest Expense. Interest expense remained stable, decreasing $0.1 million
for the year ended  March 31,  2001 over the prior  annual  period.  The Company
reduced  the balance  outstanding  on the  revolving  credit  facility  with the
proceeds  of the  sale of the  bottled  water  division,  and  was  able to take
advantage of LIBOR  pricing,  which reduced the Company's rate relative to prime
based  pricing.  The Company's  revolver rate was 9.5% at March 31, 2000 and was
8.5% during March 2001.

     Other  Income.  The gain from the sale from the bottled  water  division of
$7.5  million was the primary  reason for the  increase of $6.8 million in other
income for the year ended March 31, 2001 as compared to the prior annual period.
Rental income  increased  slightly due to facilities  rented to the purchaser of
the bottled water division and office facilities to eSkye Solutions, Inc.

     The  Company's  share of income from  Commonwealth  Wine & Spirits,  L.L.C.
increased  $0.2 million  during the year ended March 31, 2001 to $0.3 million as
compared to the prior annual period.  Distributions  received from  Commonwealth
were $0.8  million for the year ended March 31, 2001 as compared to $0.5 million
for the prior annual period.



                                     - 25 -
<PAGE>

     The Company's share of losses from eSkye  Solutions,  Inc. was $0.8 million
for the year ended March 31, 2001 an increase of $0.5 million as compared to the
prior annual period.

     Net Income.  Net income increased $9.7 million for the year ended March 31,
2001, as compared to the prior annual  period.  The increase was due to the gain
from the sale of the bottled water  division  along with  increased  revenue and
gross profit.  Net income from the product markets,  excluding the gain from the
sale of the bottled water division, increased 55.4% to $8.6 million for the year
ended March 31, 2001, as compared to $5.5 million for the prior annual period.

     For  financial  analysis  purposes  only,  the  Company's  earnings  before
interest, taxes, depreciation and amortization (EBITDA) for the year ended March
31, 2001  increased  $2.8 million,  or 11.0% to $28.1 million as compared to the
prior annual period.

Liquidity and Capital Resources

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

     NWS' working  capital and borrowings  under its revolving  credit  facility
fluctuate over the course of each year. In fiscal 2002, NWS' minimum and maximum
amount of borrowings under the current $60.0 million  revolving credit facility,
at any one time,  was $0.0 in March 2002 and $29.0 million in January,  2002. At
March  31,  2002  NWS' did not have a balance  outstanding  under its  revolving
credit facility.

     Net cash provided by operating activities for the year ended March 31, 2002
was $22.0  million,  as compared to $7.4 million for the prior year; an increase
of $14.6  million.  The $14.6  million  increase  primarily  resulted from $13.7
million in cash made  available by net changes for the year ended March 31, 2002
in certain  working  capital  accounts as compared to changes in those  accounts
during the prior year.

     Net cash used by investing  activities  increased $8.0 million for the year
ended March 31, 2002 as compared to the prior annual  period.  This net increase
in funds used was  primarily the result of the receipt of funds from the sale of
the bottled water division during the prior fiscal year and increased  purchases
of intangibles  during the current  fiscal year.  The intangible  purchases were
primarily to fund distribution agreements for USB. The Company was able to limit
spending on capital  expenditures  related to additional capacity or real estate
and the company  expects  capital  expenditures  in fiscal 2003 to be between $5
million and $6 million.

     Net cash used by financing  activities  was $9.1 million for the year ended
March 31, 2002, as compared to $9.5 million used during the prior annual period.
The Company had distributions to stockholders  during the year that were for tax
liabilities   and  used  to  repay   shareholder   receivables.   The  Company's
distributions  to  stockholders  were reduced by $2.1 million for the year ended
March 31, 2002 as compared to the prior annual period. Stockholder distributions
of $8.5  million  for the year ended  March 31,  2002 were  distributed  for the
following purposes: $5.7 million for stockholders' tax liabilities, $2.3 million
for the  repayment of  stockholder  debts to the Company,  and $0.5 million to a
stockholder  that has no obligation to the Company.  Payments of long-term  debt
increased primarily from the Company purchasing $2.1 million of its senior notes
from the open market during September, 2001.

     Total assets  increased to $201.4 million at March 31, 2002, a $9.1 million
increase  from the  prior  year.  This  increase  was  primarily  the  result of
increased  cash of $7.6 million and  inventories  of $2.3 million as compared to
the prior annual period. Total debt at March 31, 2002 of $109.8 million remained
constant with the prior year's ending balance of $110.6 million. The Company had
$60.0 million available under the revolving line of credit at March 31, 2002.



                                     - 26 -
<PAGE>

     The Company  believes that cash flow from  operations and existing  capital
resources, including cash and borrowings available under the Company's revolving
credit facility, will be sufficient to satisfy the Company's anticipated working
capital and debt service requirements and expansion plans.

Other

     As a matter of  policy,  the  Company  plans to  review  and  evaluate  all
professional  services firms every three to four years. This review will include
but is not limited to legal,  audit and information  systems services.  The next
scheduled review will occur during Fiscal 2003.

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.

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.

Recently Issued Accounting Pronouncements

     See Note 1 to the financial statements in Item 8.

Item 7a. Quantitative and Qualitative Disclosures About Market Risk

     The Company is exposed to fluctuations in interest rate risk as a result of
its indebtedness.  The Company's  objectives in managing its exposure to changes
in interest  rates are to limit the effect of interest  rate changes on earnings
and cash flows and to  minimize  the amount of  borrowings  under the  Company's
revolving line of credit.  This approach to managing interest rate risk does not
consider the changes in the Company's competitive environment indirectly related
to changes in interest rates and management's responses to these changes.


                                     - 27 -
<PAGE>

Item 8. Financial Statements and Supplementary Data


                    REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS


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

We have audited the accompanying  consolidated  balance sheet of National Wine &
Spirits, Inc. (an Indiana Corporation) and subsidiaries as of March 31, 2002 and
the related  consolidated  statement  of income,  stockholders'  equity and cash
flows for the year then  ended.  These  consolidated  financial  statements  and
schedule referred to below are the  responsibility of the Company's  management.
Our  responsibility  is to express an  opinion on these  consolidated  financial
statements and schedule based on our audit.

We conducted our audit 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 audit  provides a  reasonable  basis for our
opinion.

In our opinion, the consolidated  financial statements referred to above present
fairly,  in all  material  respects,  the  consolidated  financial  position  of
National Wine & Spirits, Inc., as of March 31, 2002 and the consolidated results
of their  operations  and their cash flows for the year then ended in conformity
with accounting principles generally accepted in the United States.

Our  audit  was  made  for the  purpose  of  forming  an  opinion  on the  basic
consolidated  financial statements taken as a whole. The schedule listed in Item
14(a) is presented for purposes of complying  with the  Securities  and Exchange
Commission's  rules  and is  not a  required  part  of  the  basic  consolidated
financial  statements.  The  information  as of and for the year ended March 31,
2002  contained in this schedule has been  subjected to the auditing  procedures
applied in our audit of the basic consolidated  financial statements and, in our
opinion,  is fairly  stated in all  material  respects  in relation to the basic
consolidated financial statements taken as a whole.



                                        ARTHUR ANDERSEN LLP

Indianapolis, Indiana,
May 21, 2002.



                                     - 28 -
<PAGE>

                         REPORT OF INDEPENDENT AUDITORS


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

We have audited the accompanying  consolidated  balance sheet of National Wine &
Spirits,  Inc. as of March 31, 2001 and the related  consolidated  statements of
income,  stockholders'  equity  and cash  flows for each of the two years in the
period ended March 31, 2001.  Our audits also included the  financial  statement
schedule  listed in the Index at Item 14 (a) for the years  ended March 31, 2001
and 2000. These financial  statements and schedule are the responsibility of the
Company's  management.  Our  responsibility  is to  express  an opinion on these
financial statements and schedule 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, 2001 and the consolidated  results of its operations
and its cash flows for each of the two years in the period  ended March 31, 2001
in  conformity  with  accounting  principles  generally  accepted  in the United
States.  Also, in our opinion,  the related financial statement  schedule,  when
considered  in  relation  to the basic  financial  statements  taken as a whole,
presents  fairly in all material  respects the information set forth therein for
the years ended March 31, 2001 and 2000.

The consolidated  financial  statements as of March 31, 2001 and for each of the
two years in the period ended March 31, 2001 have been adjusted retroactively to
adopt the equity method of accounting as described in Note 2.



                                        Ernst & Young LLP


Indianapolis, Indiana
June 26, 2001, except for
Note 2 as to which the
date is December 28, 2001.



                                     - 29 -
<PAGE>

<TABLE>
<CAPTION>
                                    National Wine & Spirits, Inc.
                                     Consolidated Balance Sheets


                                                                               March 31
                                                                       2002                2001
                                                                  -------------       -------------
<S>                                                               <C>                 <C>
Assets
Current assets:
  Cash and cash equivalents                                       $  11,735,000       $   4,094,000
  Accounts receivable, less allowance for doubtful
    accounts of $1,291,000 ($1,737,000 in 2001)                      37,557,000          36,738,000
  Inventory                                                          81,940,000          79,616,000
  Prepaid expenses and other                                          7,366,000           6,494,000
                                                                  -------------       -------------
Total current assets                                                138,598,000         126,942,000
Property and equipment, net                                          41,440,000          43,734,000
Other assets:
  Notes receivable                                                      462,000             811,000
  Cash surrender value of life insurance                              3,368,000           2,821,000
  Investment in Commonwealth Wine & Spirits, LLC                      6,611,000           6,609,000
  Investment in eSkye Solutions, Inc.                                   160,000           1,471,000
  Intangible assets, net of amortization                              9,342,000           9,290,000
  Deferred pension costs                                              1,198,000             487,000
  Deposits and other                                                    226,000             125,000

Total other assets                                                   21,367,000          21,614,000
                                                                  -------------       -------------
Total assets                                                      $ 201,405,000       $ 192,290,000
                                                                  =============       =============

Liabilities And Stockholders' Equity
Current liabilities:
  Accounts payable                                                $  40,795,000       $  35,739,000
  Accrued payroll and payroll taxes                                   7,676,000           6,913,000
  Excise taxes payable                                                6,053,000           5,401,000
  Other accrued expenses                                             12,108,000           8,510,000
  Current maturities of long-term debt                                      ---             571,000
                                                                  -------------       -------------
Total current liabilities                                            66,632,000          57,134,000

Deferred pension liability                                            1,873,000             487,000
Long-term debt, less current maturities                             109,805,000         110,000,000
                                                                  -------------       -------------
Total liabilities                                                   178,310,000         167,621,000

Stockholders' equity:
  Voting common stock, $.01 par value.  200,000 shares
    authorized, 104,520 shares issued and outstanding                     1,000               1,000
  Nonvoting common stock, $.01 par value.  20,000,000 shares
    authorized, 5,226,001 shares issued and outstanding                  53,000              53,000
  Additional paid-in capital                                         25,009,000          25,009,000
  Accumulated deficit                                                (1,293,000)           (224,000)
  Accumulated other comprehensive income-
    unrecognized net pension loss                                      (675,000)                ---
                                                                  -------------       -------------
                                                                     23,095,000          24,839,000
Notes receivable from stockholders, net                                     ---            (170,000)
                                                                  -------------       -------------
Total stockholders' equity                                           23,095,000          24,669,000
                                                                  -------------       -------------
Total liabilities and stockholders' equity                        $ 201,405,000       $ 192,290,000
                                                                  =============       =============

See accompanying notes.
</TABLE>

                                               - 30 -
<PAGE>

<TABLE>
<CAPTION>
                                              National Wine & Spirits, Inc.
                                            Consolidated Statements of Income


                                                                                   Years Ended March 31
                                                                  -----------------------------------------------------
                                                                       2002                2001                2000
                                                                  -------------       -------------       -------------

<S>                                                               <C>                 <C>                 <C>
Net product sales                                                 $ 659,594,000       $ 636,879,000       $ 603,625,000
Distribution fees                                                    21,963,000          21,573,000          20,770,000
                                                                  -------------       -------------       -------------
Total revenue                                                       681,557,000         658,452,000         624,395,000
Cost of products sold                                               530,910,000         513,928,000         488,444,000
                                                                  -------------       -------------       -------------

Gross profit                                                        150,647,000         144,524,000         135,951,000
Selling, general and administrative expenses:
  Warehouse and delivery                                             39,610,000          39,657,000          38,401,000
  Selling                                                            46,840,000          45,691,000          41,072,000
  Administrative                                                     44,622,000          39,997,000          40,096,000
                                                                  -------------       -------------       -------------
                                                                    131,072,000         125,345,000         119,569,000
                                                                  -------------       -------------       -------------

Income from operations                                               19,575,000          19,179,000          16,382,000

Interest expense:
  Related parties                                                      (258,000)           (405,000)           (425,000)
  Third parties                                                     (11,676,000)        (12,809,000)        (12,849,000)
                                                                  -------------       -------------       -------------
                                                                    (11,934,000)        (13,214,000)        (13,274,000)
Other income (expense):
  Gain on sales of assets                                                47,000           7,835,000             173,000
  Interest income                                                       286,000             738,000             892,000
  Rental and other income                                               390,000              59,000             371,000
  Equity in income of Commonwealth Wine & Spirits, LLC                  407,000             315,000             131,000
  Equity in losses of eSkye Solutions, Inc.                          (1,311,000)           (787,000)           (255,000)
                                                                  -------------       -------------       -------------

Total other income (expense)                                           (181,000)          8,160,000           1,312,000
                                                                  -------------       -------------       -------------

Net income                                                        $   7,460,000       $  14,125,000       $   4,420,000
                                                                  =============       =============       =============

See accompanying notes.
</TABLE>

                                                         - 31 -
<PAGE>

<TABLE>
<CAPTION>
                                                    National Wine & Spirits, Inc.
                                           Consolidated Statements of Stockholders' Equity


                                $.01 Par Value                                         Accumulated
                                  Common Stock        Additional                          Other
                             --------------------      Paid-in       Accumulated      Comprehensive
                              Voting   Non-Voting      Capital         Deficit           Income        Stockholders       Equity
                             -------   ----------    -----------    -------------     -------------    ------------    ------------

<S>                          <C>        <C>          <C>            <C>               <C>              <C>             <C>
Balance at April 1, 1999     $ 1,000    $ 53,000     $25,009,000    $  (3,391,000)    $      ---       $ (5,406,000)   $ 16,266,000

  Net income                     ---         ---             ---        4,420,000            ---                ---       4,420,000
  Decrease in notes
    receivable from
    stockholders, net            ---         ---             ---              ---            ---          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       (3,768,000)           ---         (3,112,000)     18,183,000

  Net income                     ---         ---             ---       14,125,000            ---                ---      14,125,000
  Decrease in notes
    receivable from
    stockholders, net            ---         ---             ---              ---            ---          2,942,000       2,942,000
  Distributions to
    stockholders                 ---         ---             ---      (10,581,000)           ---                ---     (10,581,000)
                             -------    --------     -----------    -------------     ----------       ------------    ------------

Balance at March 31, 2001      1,000      53,000      25,009,000         (224,000)           ---           (170,000)     24,669,000

  Net income                     ---         ---             ---        7,460,000            ---                ---       7,460,000
  Unrecognized net
    pension loss                 ---         ---             ---              ---       (675,000)               ---        (675,000)
  Comprehensive Income                                                                                                 ------------
  Decrease in notes                                                                                                       6,785,000
    receivable from
    stockholders, net            ---         ---             ---              ---            ---            170,000         170,000
  Distributions to
    stockholders                 ---         ---             ---       (8,529,000)           ---                ---      (8,529,000)
                             -------    --------     -----------    -------------     ----------       ------------    ------------
Balance at March 31, 2002    $ 1,000    $ 53,000     $25,009,000    $  (1,293,000)    $ (675,000)      $        ---    $ 23,095,000
                             =======    ========     ===========    =============     ==========       ============    ============

See accompanying notes.
</TABLE>

                                                               - 32 -
<PAGE>

<TABLE>
<CAPTION>

                                            National Wine & Spirits, Inc.
                                        Consolidated Statements of Cash Flows


                                                                                Years Ended March 31
                                                                        2002             2001              2000
                                                                  --------------    --------------    --------------

<S>                                                               <C>               <C>               <C>
Operating activities:
Net income                                                        $    7,460,000    $   14,125,000    $    4,420,000
Adjustments to reconcile net income to net cash provided  by
operating activities:
  Depreciation of property and equipment                               6,561,000         7,046,000         7,270,000
  Amortization of intangible assets                                    1,714,000         1,844,000         1,635,000
  Equity in losses  of eSkye  Solutions, Inc.                          1,311,000           787,000           255,000
  Equity in earnings of Commonwealth Wine & Spirits, LLC                (407,000)         (315,000)         (131,000)
  Provision for bad debt expense                                         552,000           599,000           544,000
  Gain on sales of assets                                                (47,000)       (7,835,000)         (174,000)
    Increase in cash surrender value of life insurance                  (547,000)         (552,000)         (413,000)
  Other                                                                   32,000               ---               ---
  Changes in operating assets and liabilities
    Accounts receivable                                                  892,000         2,307,000        (7,908,000)
    Inventories                                                       (2,324,000)       (9,310,000)       (3,206,000)
    Prepaid expenses and other receivables                            (3,135,000)         (677,000)        2,036,000
      (Increase) decrease in deposits and other                         (101,000)           56,000           (42,000)
    Accounts payable                                                   5,056,000        (2,196,000)       10,329,000
    Accrued expenses and taxes                                         5,013,000         1,478,000         2,033,000
                                                                  --------------    --------------    --------------
Net cash and cash equivalents provided by operating activities        22,030,000         7,357,000        16,648,000

Investing activities:
Purchases of property and equipment                                   (4,332,000)       (6,083,000)       (6,672,000)
Purchases of intangible assets                                        (1,841,000)       (1,156,000)       (1,996,000)
Acquisition of R.M. Gilligan, Inc., net of cash received                     ---               ---        (1,630,000)
Proceeds from sale of property and equipment                             112,000        10,860,000         2,242,000
Investment in eSkye Solutions, Inc.                                          ---        (2,013,000)         (500,000)
Distributions from Commonwealth Wine & Spirits, LLC                      405,000           778,000           497,000
Collections on notes receivable                                          349,000           331,000           344,000
                                                                  --------------    --------------    --------------
Net cash and cash equivalents (used) provided by investing
activities                                                            (5,307,000)        2,717,000        (7,715,000)

Financing activities:
Proceeds from line of credit borrowings                              146,900,000       149,250,000       140,000,000
Principal payments on line of credit borrowings                     (146,900,000)     (150,250,000)     (143,700,000)
Principal payments on long-term debt                                  (2,653,000)         (900,000)       (1,079,000)
Proceeds of borrowings from stockholder                                  258,000           284,000            97,000
Repayments on borrowings from stockholders                              (253,000)         (191,000)         (205,000)
Receipts on notes receivable from stockholders and others              2,095,000         2,849,000         2,402,000
Distributions to stockholders                                         (8,529,000)      (10,581,000)       (4,797,000)
                                                                  --------------    --------------    --------------
Net cash and cash equivalents used by financing activities            (9,082,000)       (9,539,000)       (7,282,000)
                                                                  --------------    --------------    --------------
Net increase in cash and cash equivalents                              7,641,000           535,000         1,651,000
Cash and cash equivalents, beginning of year                           4,094,000         3,559,000         1,908,000
                                                                  --------------    --------------    --------------
Cash and cash equivalents, end of year                            $   11,735,000    $    4,094,000    $    3,559,000
                                                                  ==============    ==============    ==============

See accompanying notes.
</TABLE>

                                                        - 33 -
<PAGE>

                          National Wine & Spirits, Inc.

                   Notes to Consolidated Financial Statements

                                 March 31, 2002

1. Nature of Business and Summary of Significant Accounting Policies

Nature of Business and Principles of Consolidation

National Wine & Spirits,  Inc.  (NWS or the Company) is a holding  company which
operates primarily in the wine and liquor wholesale distribution business. Based
in  Indianapolis,  National  Wine & Spirits  Corporation  (NWSC) is a  wholesale
distributor of liquor and wines throughout  Indiana and also operates a division
for the distribution of cigars and accessories.  Based in Chicago,  NWS-LLC is a
wholesale distributor of liquor and wines throughout Illinois. NWSM and NWSM-LLC
are distributors of liquor and non-alcoholic products throughout Michigan. Based
in Connecticut,  USB distributes and markets import,  craft,  and specialty beer
products throughout the United States.

The  consolidated  financial  statements  include  the  accounts  of NWS,  NWSC,
NWS-LLC,  NWSM, NWSM-LLC,  and USB, all of which NWS wholly owns or owns 100% of
the voting stock. 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. NWS performs  periodic
credit evaluations of its customers'  financial condition and generally does not
require collateral.

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.

Fair Value of Financial Instruments

The Company's  cash,  accounts  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.



                                     - 34 -
<PAGE>

Cash and Cash Equivalents

For purposes of the Consolidated  Statement of Cash Flows, the Company considers
all highly liquid debt instruments  purchased with an original maturity of three
months or less to be cash equivalents.

Inventory

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

Inventory  primarily  consists  of  packaged  beer,  wine,  liquor,  cigars  and
accessories. The Company also has an interest in certain bulk 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  $1,452,000 and $1,421,000 of the total inventory balance at March
31, 2002 and 2001, respectively.

Advertising Costs

Advertising costs are charged to operations when incurred.  Advertising  expense
was $3,610,000, $4,767,000 and $4,322,000 in 2002, 2001 and 2000, 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:

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




                                     - 35 -
<PAGE>

<TABLE>
<CAPTION>
Intangible Assets

Intangible assets consist of the following, net of accumulated amortization:

                                                     March 31,
                                              2002               2001
                                         --------------     --------------

<S>                                        <C>               <C>
Deferred loan financing costs              $ 3,740,000       $ 4,505,000
Goodwill                                     1,251,000         1,355,000
Deferred Distribution Rights                 3,997,000         2,616,000
Other                                          354,000           814,000
                                           -----------       -----------
                                           $ 9,342,000       $ 9,290,000
                                           ===========       ===========
</TABLE>

These costs are being amortized by the straight-line method (which, for deferred
financing  costs,  also  approximates  the yield  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  $6,866,000  and
$5,194,000 at March 31, 2002 and 2001, respectively.

On  January 2, 2002 the  Company's  USB  division  entered  into a  distribution
contract with Grolsch  International,  BV as the exclusive importer,  seller and
marketer  of Grolsch  products  within  the  United  States.  The  Company  paid
$1,746,000 for this contract and recorded this amount as an intangible  asset to
be amortized over the life of the five year contract.

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.

<TABLE>
<CAPTION>
Other Accrued Expenses

                                                         March 31,
                                                   2002             2001
                                              ------------      -----------
<S>                                           <C>               <C>
       Deferred revenue                       $  3,348,000      $   131,000
       Accrued personal property taxes           2,361,000        2,111,000
       Accrued interest expense                  2,296,000        2,374,000
       Accrued health claims                     1,046,000          720,000
       Other-accrued expense                     3,057,000        3,174,000
                                              ------------      -----------
                                              $ 12,108,000      $ 8,510,000
                                              ============      ===========
</TABLE>

Deferred  revenue  represents cash advances from customers for certain  imported
wines that are in their aging phase.



                                     - 36 -
<PAGE>

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,  NWS-LLC,  NWSM-LLC,  and USB  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.

Net sales and  distribution  fees are  recognized at the time product is shipped
which is when title  passes.  Shipping  and  handling  charged to  customers  is
included in Net Product  Sales.  For the years ended March 31, 2002,  2001,  and
2000, the Company incurred  delivery expenses of $16,533,000,  $16,474,000,  and
$16,759,000, respectively, which are included in warehouse and delivery expenses
in the accompanying Consolidated Statements of Income.

Recently Issued Accounting Pronouncements

The Company  adopted SFAS No. 133,  Accounting  for Derivative  Instruments  and
Hedging  Activities  as amended  by SFAS 137 and SFAS 138,  as of April 1, 2001.
These  standards  require  that all  derivative  instruments  be recorded on the
balance  sheet at fair value.  The adoption of these  standards  did not have an
affect on the Company's annual results of operations or its financial position.

In June 2001,  the Financial  Accounting  Standards  Board issued  Statements of
Financial  Accounting Standards No. 141, "Business  Combinations",  and No. 142,
Goodwill and Other Intangible Assets, effective for fiscal years beginning after
December 15, 2001. Under the new rules,  goodwill (and intangible  assets deemed
to have  indefinite  lives) will no longer be  amortized  but will be subject to
annual  impairment  tests in accordance  with the Statements.  Other  intangible
assets will  continue to be amortized  over their useful  lives.  The Company is
adopting the new rules on accounting  for goodwill and other  intangible  assets
effective  April 1, 2002.  The adoption of this  statement is expected to reduce
annual  amortization  expense  approximately  $100,000.  During fiscal 2003, the
Company will perform the first of the required  impairment tests of goodwill and
indefinite lived intangible  assets. The Company has not yet determined what the
effect of these tests will have on its earnings and financial position.



                                     - 37 -
<PAGE>

In June 2001,  the  Financial  Accounting  Standards  Board issued SFAS No. 143,
Accounting for Asset  Retirement  Obligations with an effective date of June 15,
2002 which  becomes  effective  for the Company on April 1, 2003.  This standard
requires  obligations  associated  with  retirement of  long-lived  assets to be
capitalized as part of the carrying value of the related asset. The Company does
not believe the adoption of this  standard  will have an impact on its financial
statements.

FASB Statement No. 144,  Accounting for the Impairment or Disposal of Long-Lived
Assets (Statement 144),  requires impairment losses to be recorded on long-lived
assets used in operations  when  indicators  of  impairment  are present and the
undiscounted  cash flows estimated to be generated by those assets are less than
the assets'  carrying  amount.  Statement 144 also  addresses the accounting for
expected disposals of long-lived assets. The Company will adopt Statement 144 in
the first quarter of fiscal 2003 and, based on current  circumstances,  does not
believe the effect of adoption will be material.

In April,  2002 the Financial  Accounting  Standards Board issued  Statement No.
145:  Rescission  of FASB  Statements  No.  4,  44,  and 64,  Amendment  of FASB
Statement  No.  13,  and  Technical  Corrections.  This  Statement  amends  FASB
Statement No. 13, Accounting for Leases,  to eliminate an inconsistency  between
the  required  accounting  for  sale-leaseback  transactions  and  the  required
accounting for certain lease  modifications  that have economic effects that are
similar  to  sale-leaseback  transactions.  This  Statement  also  amends  other
existing  authoritative  pronouncements to make various  technical  corrections,
clarify meanings,  or describe their  applicability  under changed conditions as
well  as   addresses   the   classifications   of  gains  and   losses  on  debt
extinguishment.  The Company does not  anticipate  that there will be a material
impact on its financial statements.

On January 1, 2002,  the Company  adopted the  Emerging  Issues Task Force Issue
01-09: Accounting for Consideration Given by a Vendor to a Customer (Including a
Reseller of the Vendor's  Products).  This statement  provides  guidance on when
consideration  received by a customer  from a vendor  should be  reflected  as a
reduction of revenue or cost in the  statement of income.  Upon adoption of this
statement,  financial  statements  for prior periods  presented for  comparative
purposes were reclassified to comply with the provisions of this statement. As a
result of adopting this statement, $2,029,000 of consideration paid to customers
was  reflected as a reduction of revenue in the statement of income for the year
ended March 31,  2002.  For the years ended March 31, 2001 and 2000,  $2,361,000
and  $1,362,000,  respectively,  was  reclassed  from selling  expense to reduce
revenue in the Consolidated Statements of Income. These reclasses have no effect
on net income for any of the periods presented.

Reclassifications

Certain amounts in the 2001 and 2000 consolidated financial statements have been
reclassified to conform to the 2002 presentation.



                                     - 38 -
<PAGE>

2. Investment in Unconsolidated Subsidiaries

eSkye Solutions, Inc.

Prior to December 28, 2001,  the Company has been  accounting for its investment
in eSkye Solutions,  Inc. (eSkye) on the cost method. On December 28, 2001 eSkye
redeemed  a  significant  portion  of  its  outstanding  preferred  stock  at  a
significant  discount.  Since the  Company  elected not to  participate  in this
redemption,  its  voting  control  increased  to over 20% of  voting  stock.  In
accordance with Accounting  Principles Board Opinion No. 18 The Equity Method of
Accounting  for  Investments  in Common  Stock  (APB 18),  the  Company  adopted
retroactively  the equity  method of  accounting.  Accordingly,  the years ended
March 31, 2002, 2001 and 2000,  have been adjusted to reflect this adoption.  In
addition,  APB 18 also requires the Company to evaluate whether or not an "other
than temporary"  decline in value of an investment has occurred.  As a result of
this evaluation,  the Company recorded an impairment  charge of $530,000 for the
year  ended  March 31,  2002,  which is  included  in "Equity in losses of eSkye
Solutions,  Inc." in the Consolidated Statements of Income. In addition,  losses
applying the equity method are $781,000 for the year ended March 31, 2002, which
is included in "Equity in losses of eSkye  Solutions,  Inc." in the Consolidated
Statements  of Income.  The Company  believes its  remaining  carrying  value of
$160,000 approximates the current fair value of the investment.

Commonwealth Wine & Spirits, LLC

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").  NWSC has accounted for its investment in Commonwealth Wine &
Spirits,  LLC using the equity method. Under the terms, NWSC invested $7,500,000
in exchange  for a 25%  interest in the new  company.  Vertner and  Kentucky W&S
equally own the remaining 75%. A portion of NWSC's initial investment related to
a franchise  fee paid by NWSC on behalf of the new  distributorship.  As part of
the  operating  agreement,  NWSC's  initial  cash  distributions  from  the  new
distributorship  are  treated  as  return of NWSC's  original  investment.  As a
result,  the amortization of this franchise fee is allocated 100% to NWSC and is
reflected in the  Company's  recorded  equity in income of  Commonwealth  Wine &
Spirits,  LLC in the accompanying  consolidated  income  statement.  The Company
received distributions of $405,000, $778,000 and $497,000 from Commonwealth Wine
& Spirits, LLC in 2002, 2001 and 2000 respectively.


                                     - 39 -
<PAGE>

<TABLE>
<CAPTION>
Summary financial information for eSkye Solutions,  Inc. and Commonwealth Wine &
Spirits, LLC is as follows:

                                              Years Ended March 31,
                                      2002            2001             2000
                                 -------------    -------------    ------------
<S>                              <C>              <C>              <C>
    Sales                        $  86,365,000    $  82,632,000    $  79,173,000
    Operating Income (Loss)        (18,076,000)     (14,742,000)         765,000
    Net Loss                       (16,132,000)     (15,043,000)      (1,308,000)

                                            March 31,
                                      2002             2001
                                 -------------    -------------
    Current Assets               $  25,056,000    $  47,021,000
    Non-current Assets               4,311,000       10,940,000
    Current Liabilities              8,545,000        9,035,000
    Non-current Liabilities            209,000        2,445,000
    Minority Interest                  102,000              ---
    Redeemable Stock                20,055,000       58,905,000
</TABLE>

3. Sale of Bottled Water Division

Effective June 5, 2000, NWSC sold certain of its licensed brands, trademarks and
trade names of its bottled water division for  approximately  $10,440,000.  NWSC
received $9,960,000 for the sale of the assets at the sale date, and the balance
of  $480,000  was  received  in  September  2000.  NWSC  recognized  a  gain  of
approximately $7,524,000 from the sales of the related assets and liabilities.

4. 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 of $253,000,  and the remaining $1,547,000 was allocated
to goodwill and recorded in intangible assets,  based upon the fair market value
at the date of acquisition.


                                     - 40 -
<PAGE>

5. Inventory

Inventory at March 31 is comprised of the following:

                                     2002             2001
                                 -------------    -------------

         Inventory at FIFO       $  92,597,000    $  89,377,000
         Less: LIFO reserve         10,657,000        9,761,000
                                 -------------    -------------
                                 $  81,940,000    $  79,616,000
                                 =============    =============

If the Company had used the first-in,  first-out  (FIFO) inventory  method,  net
income would have been $896,000,  $1,276,000 and $939,000  greater in 2002, 2001
and 2000, respectively.

<TABLE>
<CAPTION>
6. Property and Equipment

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

                                         2002             2001
                                    -------------    -------------

<S>                                 <C>              <C>
   Land and improvements            $   1,473,000    $   1,473,000
   Buildings and improvements          31,474,000       30,298,000
   Furniture and equipment             15,256,000       15,070,000
   Warehouse equipment                 28,076,000       27,650,000
   Automobiles and trucks               6,327,000        5,850,000
   Construction in progress                   ---          427,000
                                    -------------    -------------
                                       82,606,000       80,768,000
   Less: Accumulated depreciation      41,166,000       37,034,000
                                    -------------    -------------
                                    $  41,440,000    $  43,734,000
                                    =============    =============
</TABLE>



                                     - 41 -
<PAGE>

<TABLE>
<CAPTION>
7. Debt

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

                                                           2002                2001
                                                       -------------      -------------
<S>                                                    <C>                <C>
Senior notes payable (A)                               $ 107,875,000      $ 110,000,000
Bank revolving line of credit (B)                                ---                ---
Notes payable to stockholders, net (see Note 11)           1,930,000                ---
Term note payable (repaid September, 2001)                       ---            500,000
Other                                                            ---             71,000
                                                       -------------      -------------
                                                         109,805,000        110,571,000
Less:  current maturities                                        ---            571,000
                                                       -------------      -------------
                                                       $ 109,805,000      $ 110,000,000
                                                       =============      =============
<FN>
(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 either wholly owned or the Company owns 100% of
     the voting stock and there are no  non-guarantor  subsidiaries.  The guarantees are
     full, unconditional and joint and several.

     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.

     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.

     The  Company  purchased  $2,125,000  of its senior  notes  from the open  market on
     September 28, 2001. The notes were purchased for $2,082,500  plus accrued  interest
     of $46,617.  Related unamortized  issuance costs of $74,391 were written off due to
     the purchase of the senior  notes.  The Company  initially  utilized its  revolving
     credit  facility  to fund the  purchase  of the senior  notes.  The net loss on the
     purchase of $32,000 is included in other income and expenses.



                                     - 42 -
<PAGE>

(B)  On January 25, 1999,  the Company  entered into a credit  agreement that provides a
     revolving line of credit for borrowings of up to  $60,000,000  through  January 25,
     2004, all of which are available at March 31, 2002.  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 LIBOR rate
     or the higher of the prime  lending rate or the federal funds  effective  rate plus
     0.5%. At March 31, 2000, all  borrowings  were being charged the prime lending rate
     plus 0.5%. The Company also pays a commitment fee ranging from 0.25% to 0.5% of its
     undrawn  portion  of its line of credit.  The  Company  must  comply  with  certain
     financial covenants and as of March 31, 2002 the Company was in compliance with all
     such covenants.

     Credit  borrowings  are secured by the  accounts  receivable  and  inventory of the
     Company and its subsidiaries and are guaranteed by NWS' subsidiaries.  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.
</FN>
</TABLE>

Principal payments due on debt at March 31, 2002 are as follows:

                  2003               $         ---
                  2004                         ---
                  2005                         ---
                  2006                         ---
                  2007                         ---
                  Thereafter           109,805,000
                                     -------------
                                     $ 109,805,000
                                     =============

Cash paid for interest was  $11,754,000,  $13,212,000  and  $13,116,000 in 2002,
2001 and 2000, respectively.

8. 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.


                                     - 43 -
<PAGE>

9. 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 2011.  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, 2002 are as follows:

           2003                     $  4,150,000
           2004                        3,397,000
           2005                        2,871,000
           2006                        2,522,000
           2007                        2,235,000
           Thereafter                  1,102,000
                                    ------------
                                    $ 16,277,000
                                    ============

Rent expense was  $4,800,000,  $4,738,000 and $4,171,000 in 2002, 2001 and 2000,
respectively.

10. Pension Plans

The Company sponsors a defined benefit pension plan covering  substantially  all
of its  warehousemen  and drivers.  The Company makes  contributions to the plan
based on amounts permitted by law.

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

                                                            2002            2001             2000
                                                        -----------      ----------      ------------

<S>                                                     <C>              <C>             <C>
Service cost-benefits earned during the year            $   263,000      $  231,000      $    270,000
Interest on projected benefit obligation                    288,000         255,000           248,000
Expected return on plan assets                             (305,000)       (337,000)         (267,000)
Amortization of unrecognized net transition asset            20,000          20,000            20,000
Amortization of loss                                            ---         (40,000)              ---
Amortization of prior service cost                           53,000          35,000            35,000
                                                        -----------      ----------      ------------
Net periodic pension cost                               $   319,000      $  164,000      $    306,000
                                                        ===========      ==========      ============
</TABLE>



                                     - 44 -
<PAGE>

<TABLE>
<CAPTION>
The change in the projected benefit obligation,  plan assets,  funded status and
amounts recognized in the accompanying  consolidated balance sheets at March 31,
2002 and 2001 for the defined benefit pension plan are as follows:

                                                             2002                  2001
                                                        -------------        --------------
<S>                                                     <C>                  <C>
Change in projected benefit obligation:
  Benefit obligation at beginning of year               $   3,802,000        $    3,483,000
    Service cost                                              263,000               231,000
    Interest cost                                             288,000               255,000
    Actuarial changes                                         807,000                44,000
    Benefits paid                                            (198,000)             (211,000)
                                                        -------------        --------------
  Benefit obligation at end of year                     $   4,962,000        $    3,802,000
                                                        =============        ==============

                                                             2002                  2001
                                                        -------------        --------------
Change in plan assets:
  Fair value of plan assets at beginning of year        $   3,552,000        $    3,953,000
  Actual return on plan assets                               (345,000)             (600,000)
  Company contributions                                       578,000               410,000
  Benefits paid                                              (198,000)             (211,000)
                                                        -------------        --------------
  Fair value of plan assets at end of year              $   3,587,000        $    3,552,000
                                                        =============        ==============

Funded status of the plan (under-funded)                $  (1,375,000)       $     (250,000)
Unrecognized net actuarial gain                             1,086,000              (372,000)
Unrecognized prior service cost                               700,000               752,000
Unrecognized transition obligation                             87,000               107,000
                                                        -------------        --------------
Prepaid benefit cost                                    $     498,000        $      237,000
                                                        =============        ==============

Weighted-average assumptions:
  Discount rate                                                  7.00%                 7.75%
  Expected return on plan assets                                 8.50%                 8.50%

Balance Sheet Classification:
  Prepaid benefit cost                                  $    (498,000)       $     (237,000)
  Noncurrent deferred additional liability              $   1,873,000               487,000
                                                        -------------        --------------
  Minimum liability                                     $   1,375,000        $      250,000
                                                        =============        ==============

  Deferred pension costs (intangible asset)             $   1,198,000        $      487,000
  Accumulated other comprehensive income -
    unrecognized net pension loss                       $     675,000        $          ---
</TABLE>


                                     - 45 -
<PAGE>

As of March 31,  2002 and 2001,  the  Company  recorded  an  additional  minimum
pension  liability  of  $1,873,000  and  $487,000,  respectively.  This  minimum
liability  represents the excess of the unfunded  accumulated benefit obligation
over the fair market  value of plan assets as of the  measurement  date.  As the
minimum  liability  exceeded the related  unrecognized  prior service cost,  the
excess was recorded in Accumulated Other Comprehensive  Income as a reduction of
stockholders'  equity of $675,000 as of March 31, 2002. An  intangible  asset of
$1,198,000  and $487,000 was recorded at March 31, 2002 and 2001,  respectively.
The change in the  pension  liability  at March 31, 2002 over the  liability  at
March 31, 2001 was  primarily  caused by the  difference in the actual return on
assets  compared to the expected  return on assets and the 0.75% decrease in the
discount rate assumption.

It is the Company's policy to make  contributions to the plan sufficient to meet
the  funding  requirements  of  applicable  laws  and  regulations,   plus  such
additional amounts as deemed appropriate.

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  $1,411,000,  $1,215,000 and $1,293,000 in 2002, 2001 and
2000, respectively.

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 61% of NWS-LLC's workforce and 52% of NWSM's
workforce. Contributions charged to expense were $665,000, $588,000 and $668,000
in 2002,  2001 and 2000,  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.

11. Related Party Transactions

NWSC has notes  receivable  from its two  stockholders  totaling  $2,628,000 and
$4,723,000 at March 31, 2002 and 2001, respectively.  The notes earn interest at
the prime  lending  rate.  Interest  income  earned was  $222,000,  $635,000 and
$809,000 in 2002, 2001, and 2000, 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,  were  reflected  net of
notes  payable to  stockholders  as a reduction of  stockholders'  equity in the
consolidated  balance  sheets at March 31, 2001 as it is the  Company's  present
intent to satisfy these receivables through future stockholder distributions.



                                     - 46 -
<PAGE>

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,  2001,  the notes
payable to  stockholders  (principal  plus  accrued  interest)  have been offset
against  the  notes  receivable  from  stockholders,   with  the  resulting  net
receivable  reflected as a reduction of  stockholders'equity  at March 31, 2001.
The notes  payable  outstanding  as of March 31,  2002  have  been  offset  with
corresponding   notes  receivable  and  reflected  in   long-term-debt   in  the
accompanying  Consolidated  Balance Sheet. The total of the  subordinated  notes
payable was $4,558,000  and $4,553,000 at March 31, 2002 and 2001,  respectively
with the principal  balance due in 2009.  These notes bear interest at the prime
lending  rate.  Interest  expense on these  notes was  $258,000,  $405,000,  and
$425,000 in 2002, 2001, and 2000, respectively.

The Company  paid  $218,000,  $230,000,  and  $286,000 in 2002,  2001,  and 2000
respectively for consulting fees to a minority stockholder of NWS-LLC.

A Director of the Company is the Chairman and Chief Executive  Officer of eSkye.
The Company  received  6,000,000 shares of common stock in eSkye upon inception,
representing  founders stock.  The Company  accounts for its investment in eSkye
using the equity  method.  In October  1999 and May 2000,  the Company  invested
$500,000 and $2,013,000 in convertible preferred stock of eSkye, respectively.

NWS leases facilities and certain office equipment to eSkye under the terms of a
three-year  operating lease. NWS received rent from eSkye of $270,000,  $262,000
and $151,000 during the years ended March 31, 2002, 2001 and 2000  respectively.
eSkye  reimbursed the Company for $384,000 of expenses paid on its behalf during
the year ended March 31, 2000.



                                     - 47 -
<PAGE>

12. 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>
                                                      2002             2001              2000
                                                  -------------    -------------    -------------

<S>                                               <C>              <C>              <C>
Revenue from external customers
  Product sales                                   $ 659,594,000    $ 636,879,000    $ 603,625,000
  All other                                          21,963,000       21,573,000       20,770,000
Interest expense
  Product sales                                      10,309,000       11,599,000       11,698,000
  All other                                           1,625,000        1,615,000        1,576,000
Depreciation expense
  Product sales                                       4,505,000        4,941,000        5,205,000
  All other                                           2,056,000        2,105,000        2,065,000
Amortization expense
  Product sales                                       1,170,000        1,300,000        1,243,000
  All other                                             544,000          544,000          392,000
Equity in earnings of Commonwealth
Wine & Spirits, LLC
  Product sales                                         407,000          315,000          131,000
Equity in losses of eSkye Solutions, Inc.
  Product sales                                      (1,311,000)        (787,000)        (255,000)
  All other                                                 ---              ---              ---
Segment income (loss)
  Product sales                                       9,155,000       16,111,000        5,524,000
  All other                                          (1,695,000)      (1,986,000)      (1,104,000)
Segment assets
  Product sales                                     190,585,000      180,383,000      174,411,000
  All other                                          10,820,000       11,907,000       13,786,000
Investments in equity method investees
  Product sales                                       6,771,000        8,080,000        7,317,000
  All other                                                 ---              ---              ---
Expenditures on long-lived assets
  Product sales                                       5,142,000        7,117,000        6,465,000
  All other                                           1,031,000          122,000        3,833,000
</TABLE>



                                     - 48 -
<PAGE>

13. Concentration of Risk

Products  purchased from four suppliers  amounted to approximately  62%, 66% and
70% of all purchases in 2002, 2001 and 2000, respectively.

During  December 2001, one supplier,  which accounted for  approximately  18% of
2002 revenues was acquired by two unrelated  third parties.  The Company,  along
with other competitors,  are currently in the process of submitting proposals to
the new parties to market and  distribute the acquired  brands.  There can be no
assurance,  however, that the failure of the new parties to accept the proposals
of the  Company  will not have a material  adverse  effect on the  business  and
financial condition of the Company.

14. Litigation

The  Company is a party to  various  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 annual results of operations of the
Company.



                                     - 49 -
<PAGE>

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

Previously reported.


                                     - 50 -
<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        69    Chairman, President, Chief Executive Officer,
                               Chief Financial Officer and Director
Martin H. Bart           69    Vice Chairman, Senior Vice President and Director
David R. Wilson          44    Corporate Executive Vice President,
                               Sales & Marketing
Catherine M. LaCrosse    35    Corporate Vice President of Sales-Indiana
                               Fine Wine Division and Director
John J. Baker            32    Executive Vice President, Chief Operating Officer
J. Smoke Wallin          35    Executive Vice President, Secretary and Director
James R. Beck            58    President, NWS-Indiana and Director
David H. Bart            37    President, NWS-Illinois
Joseph J. Fisch          53    President, U.S. Beverage
Mitchell T. Stoltz       48    Director
Norma M. Johnston        73    Director
William M. Cockrum       64    Director
Vaughn D. Bryson         63    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.

     David R. 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.

     Catherine M. LaCrosse has served as Director of NWS since December 1998 and
is currently  Vice  President of Sales of the Indiana  Fine Wine  Division.  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.



                                     - 51 -
<PAGE>

     John J. Baker has served as Executive  Vice  President and Chief  Operating
Officer  since  1999.  Mr.  Baker  joined the  Company in 1993 and has also held
positions  as Director of  Corporate  Logistics,  Director  of  Purchasing,  and
Operations  Specialist.  Prior to that,  he served as a  Financial  Analyst  for
Comdata  Corporation and Freight  Forwarding  Assistant for A.W. Fenton Company.
Mr. Baker received an MBA in operations from Vanderbilt  University-Owen  School
of  Management  in 1994 and a BS in economics  and  international  business from
Miami University in 1992.

     J. Smoke Wallin has served as Executive  Vice  President  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.

     James R.  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.

     David H. Bart became  President  of  NWS-Illinois  in April 2001.  Mr. Bart
joined the company in 1993 and most recently  served as Executive Vice President
of Spirits in Illinois.  He has also held  positions of Executive Vice President
of Wines,  district manager of Hamburg  Distributing and the On-Premise Division
as well as area manager in the Chain Wine Division and General Market.  Mr. Bart
received a JD from Emory University School of Law in 1990 and a BS in managerial
economics from Carnegie-Mellon University in 1987. He is Martin Bart's son.

     Joseph J. Fisch has served as  President/CEO  of U.S.  Beverage,  a premium
import/craft  and specialty beer marketer and sales company,  based in Stamford,
Connecticut, since its inception in 1997. His previous experience with Joseph E.
Seagram  Corporation  from 1971 through 1996 includes market  research  analyst;
vice  president  and  division  manager,  General Wine & Spirits  Company;  vice
president/general    manager,   eastern   region,   House   of   Seagram;   vice
president/general manager, House of Seagram; president, Seagram Beverage Company
He received a BS in business  administration  and  marketing  from Bowling Green
University, Ohio, in 1971.

     Mitchell T. Stoltz has served as Director of NWS since  December  1998. Mr.
Stoltz  served as President of  NWS-Illinois  from 1995 to April 2001,  at which
time he resigned from that position but continues as a Director of NWS. 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.  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 -
Indiana from 1976 to 1998.

     William M.  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.


                                     - 52 -
<PAGE>

     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.

     Percy N. Stone  served as  Director  of NWS from July 1999  until  February
2002,  when he  died.  A  replacement  for  this  directorship  has not yet been
selected.

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 ended
March 31, 2002 for serving on the board.

<TABLE>
<CAPTION>
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 fiscal 2002 and 2001:

                                            Summary Compensation Table
                                            --------------------------

                                                                         Annual Compensation
                                                     ------------------------------------------------------------
                                                                                 Other Annual       All Other
Name and Principal Position                  Year      Salary        Bonus      Compensation(3)   Compensation(1)
---------------------------                  ----      ------        -----      ---------------   ---------------

<S>                                          <C>     <C>          <C>             <C>              <C>
James E. LaCrosse                            2002    $ 407,000    $ 249,000       $  6,772         $ 219,864 (2)
  Chairman, President, Chief Financial
  Officer, and CEO                           2001      407,000      249,000          2,168           233,114 (2)

James R. Beck                                2002      194,212      275,000          2,407             9,039
  President, NWS-Indiana                     2001      157,627      200,000          1,114             6,940

David H. Bart                                2002      161,200      120,000         14,044             8,769
  President, NWS-Illinois

David R. Wilson                              2002      262,500       60,000          6,847             8,668
  Corporate Executive Vice President,
  Sales & Marketing                          2001      250,000       50,000            -0-             8,920

Joseph J. Fisch                              2002      225,000       60,000            -0-             4,500
  President/CEO, U.S. Beverage               2001      250,000       35,000            -0-             5,000

<FN>
(1)  Includes 2002 employer 401(k) Plan  contributions in the following amounts:  Mr. LaCrosse,  $8,500; Mr. Beck,
     $9,039;  Mr. Bart,  $8,769; Mr. Wilson,  $8,668;  and Mr. Fisch,  $4,500.  Includes 2001 employer 401(k) Plan
     contributions in the following amounts: Mr. LaCrosse,  $8,000; Mr. Beck, $6,940; Mr. Wilson,  $8,920; and Mr.
     Fisch, $5,000.

(2)  Includes $211,364 and $225,114 for fiscal 2002 and 2001, respectively, 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.
</FN>
</TABLE>

                                   (Remainder of page intentionally left blank.)



                                     - 53 -
<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.

<TABLE>
<CAPTION>
                                                      Number of
Name and Address                                        Shares        Percent
----------------                                        ------        -------

<S>                                                    <C>              <C>
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%
</TABLE>

     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.

                  (Remainder of page intentionally left blank.)



                                     - 54 -
<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 Solutions, Inc. The Company received 1,500,000 shares
of common stock in eSkye  Solutions Inc. upon inception,  representing  founders
stock. eSkye Solutions,  Inc. subsequently issued a 4 to 1 split, thus 6,000,000
shares are  currently  held by NWS. The Company  accounts for its  investment in
eSkye  Solutions,  Inc. using the equity method.  In October,  1999, the Company
invested  $500,000 in convertible  preferred stock of eSkye Solutions,  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 Solutions, Inc.
under the terms of a three-year  operating  lease.  NWS received rent from eSkye
Solutions,  Inc. of $270,000 and  $262,000  during the year ended March 31, 2002
and 2001,  respectively.  eSkye  Solutions,  Inc.  reimbursed  the  Company  for
$384,000 of expenses paid on its behalf during 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, 2001,  total  indebtedness of Mr. LaCrosse and Mrs.  Johnston to NWS-Indiana
was $4.7 million.  The indebtedness,  which is presently due upon demand,  bears
interest  at  the  prime  lending  rate  of  the  Company's   principal  lending
institution (8.5% at March 31, 2001). 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 of $4.5 million,  which matures in 2009, is  subordinated to the senior
notes and the credit  facility,  and bears interest at 8.0% (prime rate at March
31,  2001).  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 part of this
transfer  and  in  addition  to  normal  distributions  for  tax  purposes,  NWS
distributed $3.6 million to Mr. LaCrosse, the family trust, and Mrs. Johnston in
the annual period ended March 31, 2001. These distributions were made within the
terms and conditions  contained in the Company's  indenture governing its 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 $3.6 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 2002, 2001, and
2000 were $8.5 million, $10.6 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 2002, 2001
and 2000.


                                     - 55 -
<PAGE>

     NWS-Illinois also paid a company owned by Mr. Bart $0.2 million during each
of fiscal years 2002, 2001 and 2000 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.

     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.
See Item 11-Executive Compensation. 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 for each of the
annual periods ended March 31, 2002, 2001 and 2000. The LaCrosse Family Trust is
the beneficiary of those policies.

                  (Remainder of page intentionally left blank.)



                                     - 56 -
<PAGE>

                                     PART IV

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

     (a)  Documents filed as part of this Report.

                                                                     Page(s) in
                                                                     this Report
                                                                     -----------
          1.   Financial Statement

               Reports of Independent Auditors                                28

               Consolidated balance sheets -
               March 31, 2002 & 2001                                          30

               Consolidated statements of income -
               Years ended March 31, 2002, 2001 & 2000                        31

               Consolidated statements of stockholders'
               equity - Years ended March 31, 2002, 2001 & 2000               32

               Consolidated statements of cash flows -
               Years ended March 31, 2002, 2001 & 2000                        33

               Notes to consolidated financial statements               34 to 49

          2.   Financial Statement Schedule:

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

               Schedule II - Valuation & Qualifying Accounts & Reserves       58

               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 60 & 61 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 60 & 61 of this Form 10-K, which is
          incorporated by reference herein.



                                     - 57 -
<PAGE>
<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>    <C>
Year ended March 31, 2002
Deducted from assets account:
  Allowance for doubtful accounts              $   1,737,000    $    552,000    $    ---    $   998,000 (1)    $   1,291,000
  LIFO reserve                                     9,761,000         896,000         ---            ---           10,657,000
                                               -------------    ------------    --------    -----------        -------------
                                       Total   $  11,498,000    $  1,448,000    $    ---    $   998,000        $  11,948,000
                                               =============    ============    ========    ===========        =============

Year ended March 31, 2001
Deducted from asset account:
  Allowance for doubtful accounts              $   1,412,000    $    599,000    $    ---    $   274,000 (1)    $   1,737,000
  LIFO reserve                                     8,485,000       1,276,000         ---            ---            9,761,000
                                               -------------    ------------    --------    -----------        -------------
                                       Total   $   9,897,000    $  1,875,000    $    ---    $   274,000        $  11,498,000
                                               =============    ============    ========    ===========        =============

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
                                               =============    ============    ========    ===========        =============

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


                                        (Remainder of page intentionally left blank.)
</FN>
</TABLE>

                                     - 58 -
<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 May 24, 2002.

                                     NATIONAL WINE & SPIRITS, INC.



                                     By: /s/ James E. LaCrosse
                                         ---------------------------------------
                                         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 24th day of May, 2002 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


/s/ J. Smoke Walllin
--------------------------------     Director, Executive Vice President, and
J. Smoke Wallin                      Secretary


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


/s/ James R. Beck
--------------------------------     Director
James R. Beck


/s/ Mitchell T. Stoltz
--------------------------------     Director
Mitchell T. Stoltz


/s/ Williiam M. Cockrum
--------------------------------     Director
William M. Cockrum


/s/ Norma M. Johnson
--------------------------------     Director
Norma M. Johnston


/s/ Vaughn D. Bryson
--------------------------------     Director
Vaughn D. Bryson


/s/ Catherine M. LaCrosse
--------------------------------     Director
Catherine M. LaCrosse



                                     - 59 -
<PAGE>

                                INDEX TO EXHIBITS
                                -----------------


    Exhibit No.                               Description
    -----------                               -----------

        3.1         Amended and Restated  Articles of  Incorporation of National
                    Wine & Spirits,  Inc.  (Incorporated by reference to exhibit
                    3.1 to the  Company's  annual  report  Form 10K for the year
                    ended March 31, 2000.)

        3.2         Amended and Restated Bylaws of National Wine & Spirits, Inc.
                    (Incorporated  by reference to exhibit 3.2 to the  Company's
                    annual report Form 10K for the year ended March 31, 2000.)

        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).



                                     - 60 -
<PAGE>

        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).

        10.3        First  Amendment  to  Revolving   Credit   Facility,   dated
                    September 28, 2001, among National Wine & Spirits, Inc., the
                    Subsidiary  Guarantors and NBD, as agent.  (incorporated  by
                    reference  Exhibit  10 to the  Company's  Form  10-Q for the
                    quarter ended September 30, 2001).

        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).

        99.1        Forward  -  Looking  Statements

        99.2        Arthur  Andersen  LLP Representation Letter




                                     - 61 -
<PAGE>

<TABLE>
<CAPTION>
Statement regarding computation of ratios
Exhibit (12)

                                                           Years Ended March 31,
                                                              (in thousands)
                                         ---------------------------------------------------------
                                             2002        2001        2000        1999         1998

<S>                                      <C>         <C>         <C>         <C>         <C>
Consolidated pretax income
  from continuing operations.........    $  7,460    $ 14,125    $  4,420    $    987    $   6,093

Interest.............................      11,934      13,214      13,274      11,037        9,672

Net amortization of debt
  discount and premium
  and issuance expense...............         628         629         628         385          325

Interest portion of rental
  expense............................       1,440       1,422       1,251       1,122        1,120
                                         --------    --------    --------    --------    ---------
Earnings.............................    $ 21,462    $ 29,390    $ 19,573    $ 13,531    $  17,210
                                         ========    ========    ========    ========    =========


Interest.............................    $ 11,934    $ 13,214    $ 13,274    $ 11,037    $   9,672

Net amortization of debt
  discount and premium
  and issuance expense...............         628         629         628         385          325

Interest portion of rental
  expense............................       1,440       1,422       1,251       1,122        1,120
                                         --------    --------    --------    --------    ---------
Fixed Charges........................    $ 14,002    $ 15,265    $ 15,153    $ 12,544    $  11,117
                                         ========    ========    ========    ========    =========

Ratio of earnings to fixed
  charges............................         1.5         1.9         1.3         1.1          1.5
                                         --------    --------    --------    --------    ---------
</TABLE>


                                     - 62 -
<PAGE>

List of subsidiaries
Exhibit (21)
                                                                     State of
         Companies                         Doing business as       Incorporation
         ---------                         -----------------       -------------

National Wine & Spirits Corporation               Same                Indiana
35-0540650
700 West Morris Street
Indianapolis, IN 46225
(317) 636-6092

National Wine & Spirits, Inc.                     Same                Indiana
35-2064429
700 W. Morris Street
Indianapolis, IN 46225
(317) 636-6092

NWS - Illinois, LLC                      Union Beverage Company      Illinois
36-4266415
2600 West 35th Street
Chicago, IL 60632
(773) 254-9000

NWS, Inc.                                         Same               Illinois
36-3784235
2600 West 35th Street
Chicago, IL 60632
(773) 254-9000

NWS Michigan, Inc.                                Same               Michigan
38-3319025
17550 Allen Road
Brownstown, MI 48192
(734) 324-3000

United States Beverage, LLC                       Same               Illinois
36-4150241
700 Canal
Stamford, CT 06902
(203) 961-8215

National Wine & Spirits, LLC           National Wine & Spirits       Michigan
38-3467586                                 of Michigan, LLC
17550 Allen Road
Brownstown, MI 48192
(734) 324-3000



                                     - 63 -
<PAGE>

Forward-Looking Statements
Exhibit (99.1)

     From  time  to  time,  the  Company  may  make or  publish  forward-looking
statements  relating  to such  matters  as  anticipated  financial  performance,
business  prospects,  technological  developments,  new  products,  and  similar
matters. Such statements are necessarily estimates reflecting the Company's best
judgment based on current information.  The Private Securities Litigation Reform
Act of  1995  provides  a  safe  harbor  for  forward-looking  statements.  Such
statements  are  usually  identified  by the  use of  words  or  phases  such as
"believes,"  "anticipates,"  "expects,"  "estimates,"  "planned," "outlook," and
"goal." Because forward-looking statements involve risks and uncertainties,  the
Company's  actual results could differ  materially.  In order to comply with the
terms of the safe  harbor,  the  Company  notes that a variety of factors  could
cause the Company's actual results and experiences to differ materially from the
anticipated   results  or  other   expectations   expressed  in  the   Company's
forward-looking statements.

     While  it is  impossible  to  identify  all such  factors,  the  risks  and
uncertainties  that may affect the  operations,  performance  and results of the
Company's business include the following:

     (1)  economic  and  competitive  conditions  in the  markets  in which  the
          Company operates;

     (2)  strikes or other work  stoppages  affecting  the  Company or its major
          customers or suppliers;

     (3)  the  Company's  ability to continue to control and reduce its costs of
          storage and distribution;

     (4)  the  level of  consumer  demand in the  states  in which  the  Company
          operates for the Company's line of alcohol-based beverages;

     (5)  supplier  consolidation could result in brand realignment and the loss
          of certain products and customers;

     (6)  the risks  associated  with the  reliance on one or a few  significant
          suppliers;

     (7)  the impact of significant price increases or decreases in availability
          of certain alcohol-based beverages distributed by the Company;

     (8)  the  nature  and extent of any  current  or future  state and  federal
          regulations regarding the distribution of alcohol-based beverages;

     (9)  changes  in  financial  markets  affecting  the  Company's   financial
          structure and the Company's costs of capital and borrowed money;

     (10) any other  factors  which may be  identified  from time to time in the
          Company's periodic SEC filings and other public announcements.

Should  one or more of  these  risks or  uncertainties  materialize,  or  should
underlying assumptions prove incorrect,  actual results may vary materially from
those described in the forward-looking  statements.  The Company does not intend
to update forward-looking statements.



                                     - 64 -
<PAGE>

Arthur Andersen LLP Representation Letter
Exhibit (99.2)

Securities and Exchange Commission
Washington, D.C.

Arthur  Andersen LLP has  represented to National Wine & Spirits,  Inc. that its
audit was subject to Andersen's  quality control system for the U.S.  accounting
and auditing  practice to provide  reasonable  assurance that the engagement was
conducted  in  compliance  with  professional   standards  and  that  there  was
appropriate   continuity  of  Andersen   personnel  working  on  the  audit  and
availability  of national  office  consultation.  Availability  of  personnel at
foreign affiliates of Andersen is not relevant to the audit.



/s/ JAMES E. LACROSSE
--------------------------
James E. LaCrosse



                                     - 65 -