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

                                FORM 1O-KSB/A

[X] ANNUAL REPORT UNDER  SECTION 13 OR 15(d) OF THE 
       SECURITIES EXCHANGE ACT OF 1934
       For the fiscal year ended December 31, 1996

[  ] TRANSITION REPORT PURSUANT TO SECTION 13 OF 15(d) OF THE
       SECURITIES EXCHANGE ACT OF 1934 
       For the transition period from ________ to ________

                      Commission File Number : 0-27458

                      NOR'WESTER BREWING COMPANY, INC.
              (Name of small business issuer in its charter)
                   OREGON                           93-1099661
       (State or other jurisdiction              (I.R.S. Employer 
       of incorporation or organization)         Identification No.)
                           66 SE MORRISON STREET
                          PORTLAND, OREGON  97214
          (Address of principal executive offices and zip code)
                               (503) 232-9771
                        (Issuer's telephone number)

SECURITIES REGISTERED UNDER SECTION 12(b) OF THE EXCHANGE ACT:   NONE
    SECURITIES REGISTERED UNDER SECTION 12(g) OF THE EXCHANGE ACT:
                        COMMON STOCK, NO PAR VALUE
                             (Title of Class)

Check whether the issuer (1) filed all reports required to be filed by 
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for 
such shorter period that the Registrant was required to file such reports), 
and (2) has been subject to such filing requirements for the past 90 days: 
Yes [ X ]    No [    ]

Check if there is no disclosure of delinquent filers in response to Item 405 
of Regulation S-B contained in this form, and no disclosure will be 
contained, to the best of registrant's knowledge, in definitive proxy or 
information statements incorporated by reference in Part III of the Form 
10-KSB or any amendment to this Form 10-KSB.  [   ]

Issuer's revenues for its most recent fiscal year were $6,820,691.  

The aggregate market value of voting stock held by non-affiliates of the 
registrant was $7,302,506 as of February 28, 1997,  based upon the last sales 
price ($2.625) as reported on the Nasdaq System-Small Cap Market. 

The number of shares outstanding of the Registrants Common Stock as of 
February 28, 1997 was 3,711,097 shares. 
The index to exhibits appears on page 28 of this document. 
Transitional Small Business Disclosure Format (check one):  Yes [   ]  No [ X ]

                      DOCUMENTS INCORPORATED BY REFERENCE

None.
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Items 6, 7 and 12 of the Annual Report on Form 10-KSB for Nor'Wester Brewing 
Company, Inc. are hereby amended to read in their entirety as follows:

                                      1

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ITEM 6.  MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS

FORWARD-LOOKING STATEMENTS

This Management's Discussion and Analysis of Financial Condition and Results 
of Operations and other sections of this Form 10-KSB contain forward-looking 
statements within the meaning of the Private Securities Litigation Reform Act 
of 1995. These forward-looking statements involve risks and uncertainties 
that are based on current expectations, estimates and projections about 
Nor'Wester's business, management's beliefs and assumptions made by 
management. Words such as "expects," "anticipates," "intends," "plans," 
"believes," "seeks," "estimates" and variations of such words and similar 
expressions are intended to identify such forward-looking statements. 
Therefore, actual outcomes and results may differ materially from what is 
expressed or forecasted in such forward-looking statements due to numerous 
factors, including, but not limited to, availability of financing for 
operations and payment of past due creditors, successful performance of 
internal operations, impact of competition, changes in distributor 
relationship or performance, successful completion of the planned 
consolidation of the Affiliated Companies and other risks detailed below as 
well as those discussed elsewhere in this Form 10-KSB and from time to time 
in Nor'wester's Securities and Exchange Commission filings and reports. In 
addition, such statements could be affected by general industry and market 
conditions and growth rates, and general domestic economic conditions.

RESULTS OF OPERATIONS
The following table reflects selected data from the Company's statements of 
operations stated as a percentage of net sales:

                                                 YEAR ENDED DECEMBER 31,
                                                 -----------------------
                                                     1996       1995
                                                   --------   --------
 Gross sales . . . . . . . . . . . . . . . . . .    104.5%     105.1%
 Less excise taxes . . . . . . . . . . . . . . .      4.5        5.1
                                                   --------   --------
 Net sales . . . . . . . . . . . . . . . . . . .    100.0      100.0
 Cost of goods sold. . . . . . . . . . . . . . .     79.1       61.9
 Selling, general and administrative expenses. .     69.7       25.2
                                                   --------   --------
 Operating income (loss) . . . . . . . . . . . .    (48.8)      12.9
                                                   --------   --------
 Income (loss) before income taxes and minority
    interest. . . . . . . . . . . .. . . . . . .    (48.1)      12.6
                                                   --------   --------
 Net income (loss) . . . . . . . . . . . . . . .    (42.2)%      7.9%
                                                   --------   --------
                                                   --------   --------


GROSS REVENUES.  Gross revenues from beer and retail products totaled $6.8 
million for the year ended December 31, 1996 and $5.9 million for the year 
ended December 31, 1995.  The increase in sales is primarily a result of a 
national roll-out of Nor'Wester branded beers.  This increase was offset by 
the challenges the Company faced both in its home markets, with increased 
competition and changing consumer tastes, and in other markets where the 
Company struggled to establish and maintain relationships with distributors. 
In addition, one of the Company's competitors began selling its Hefe Weizen 
beer in bottles into the Company's principal distribution channels in the 
Portland area during 1996, thus decreasing the Company's market share in its 
most significant market.  The Company's Saratoga Brewery began producing and 
selling beer in October 1996.


                                       2

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The Company's Portland Brewery currently has an annual production capacity of 
41,000 barrels.  The Company sold 35,287 barrels (including beer produced at 
the Affiliated Companies under Cooperative Brewing Agreements) and 32,375 
barrels during 1996 and 1995, respectively.

The Company's Saratoga Brewery currently has an annual production capacity of 
30,000 barrels and sold 1,041 barrels during 1996.

EXCISE TAXES.  Excise taxes increased to $296,609 (4.3 percent of gross sales) 
for the year ended December 31, 1996 from $283,979 (4.8 percent of gross 
sales) for the year ended December 31, 1995.  The decrease as a percent of 
gross sales is a result of the increase in sales to states in which no state 
excise tax is paid by the producer.

COST OF GOODS SOLD.  Cost of goods sold totaled $5.2 million (79 percent of 
net sales) for the year ended December 31, 1996 compared to $3.5 million (62 
percent of net sales) for the year ended December 31, 1995.  The increase in 
cost of goods sold as a percentage of net revenues is due primarily to the 
following factors:  1) purchasing beer from Affiliated Companies under 
Cooperative Brewing Agreements resulting in higher costs than could be 
incurred if the beer was produced by the Company; 2) the sale in the second 
quarter of 1996 of approximately 12,500 cases of beer at cost to a national 
beer club, for sale to its 25,000 members, as a national sales promotion 
strategy; 3) costs associated with the commencement (and subsequent 
cessation) of production of Nor'Wester beer at affiliated breweries under the 
Cooperative Brewing Agreements; 4)  additional storage costs resulting from 
the build-up of finished goods inventory produced to meet projected sales 
that never materialized; 5)  the write-down of approximately $110,000 for 
excess finished goods inventory that was moved through an alternate 
distribution channel; and 6) increased cost structure developed to meet 
projected sales volumes that never materialized.

SELLING, GENERAL AND ADMINISTRATIVE. Selling, general and administrative 
("SG&A") expenses increased to $4.6 million (70 percent of net sales) for the 
year ended December 31, 1996 from $1.4 million (25 percent of net sales) for 
the year ended December 31, 1995.  The increase in SG&A expenses is primarily 
attributable to 1) the addition of salaried sales personnel to establish and 
oversee the Company's anticipated growth in new markets; 2) increased shipping 
costs associated with bringing beer to markets located considerable distances 
away from the Portland Brewery; 3)  increased advertising costs as the Company 
expanded its sales efforts in order to quickly penetrate target markets 4) 
Start-up and operating costs of $202,000 associated with the construction and 
operation of the Saratoga Springs Brewery; and 5) the write-off of 
approximately $500,000 of point-of-sale materials and excess finished goods 
inventory.  In the third quarter of 1996, the Company restructured sales 
related compensation, implemented expense controls and reduced staff in an 
effort to reduce SG&A expenses while still increasing sales.

NET INCOME (LOSS). As a result of the individual line items discussed above, 
net loss was $2.8 million for the year ended December 31, 1996 compared to net 
income of $442,727 for the year ended December 31, 1995. 

                                      3

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SEASONALITY.  Beer consumption nationwide has historically increased by 
approximately 20% during the summer months.  In 1994 and 1995, seasonality had 
little measurable effect on sales as the Company experienced rapid growth in 
the sale of its products during those years.  In 1996, as a result of a 
downturn in the Company's sales following the introduction of bottled wheat 
(weizen) beers by one of the Company's competitors in May 1996, the Company 
has had difficulty measuring the impact of seasonality in 1996. Further, it is 
not clear to what extent seasonality will affect the Company as it expands its 
capacity at the Saratoga Springs Brewery.  The Company brews seasonal beers 
which augment sales during the periods in which they are available.

LIQUIDITY AND CAPITAL RESOURCES In January 1996, the Company completed an 
underwritten public offering (the "Offering"), resulting in the issuance of 
1,287,500 shares of Common Stock at $7.00 per share, generating net proceeds 
of approximately $7,694,000.  Prior to the Offering, the Company funded its 
operations and capital requirements through cash generated from two 
self-underwritten public stock offerings, sales from operations, and bank 
borrowings.  

Cash and cash equivalents decreased $24,758 to $252,049 at December 31, 1996 
from $276,807 at December 31, 1995.   The decrease is primarily a result of 
$7.7 million provided from the sale of common stock in the Offering and net 
proceeds from borrowings of $2.1 million, including $250,000 borrowed from Jim 
Bernau, the Company's President (see "Certain Relationships and Related 
Transactions") and $900,000 in bridge loans from United Brewers of America, 
Inc. ("UBA") (see "Subsequent Events" below), offset by cash used in 
operations of $870,401, purchases of property and equipment (primarily for 
the Saratoga Springs Brewery) of $7.9 million and advances to affiliates of 
$1.1 million.

Working capital deficit was $1.6 million at December 31, 1996 compared to a 
working capital deficit of $803,604 at December 31, 1995.   The current ratio 
decreased to .71:1 at December 31, 1996 from 1.4:1 at December 31, 1995. 
Advances to the Affiliated Companies increased $1.1 million to approximately 
$1.8 million at December 31, 1996 from $700,000 at December 31, 1995.  This 
increase resulted from the need to increasingly support the affiliated 
breweries throughout the year, each of which was engaged to cooperatively 
brew the Company's beer and each of which reported operating losses for the 
year ended December 31, 1996.

Capital expenditures for 1996 totaled $7.9 million.  The capital expenditures 
relate primarily to the costs associated with construction of the new brewery 
in Saratoga Springs, New York. The Company substantially completed 
construction of its Saratoga Springs Brewery in September 1996 at a total 
cost of approximately $7.0 million, including all brewing equipment and 
fermentation tanks.  Commercial brewing began in October 1996. Nor'Wester's 
investment in the Saratoga Spring's Brewery was approximately $8.7 million, 
which is approximately $4.7 million more than was originally planned.  There 
are three principal reasons for the increase in Nor'Wester's investment: (i) 
the decision of North Country Brewing, Inc., Nor'Wester's intended joint 
venture partner in the Saratoga Springs Brewery, to make its planned $2.55 
million capital contribution to the Saratoga Springs joint venture, (ii) the 
Company's inability to obtain $2.0 million in planned bank financing to 
finance construction and operation of the brewery, and (iii) an increase of 
approximately $200,000 in the cost of brewery construction and structural 
improvements to the leased building over initial estimates.

                                      4
<PAGE>

Accounts payable at December 31, 1996 totaled $2.4 million, compared to 
$870,731 at December 31, 1995.  Of the $2.4 million outstanding at December 
31, 1996, $1.9 million was past due.  As of the date of this report, $2.1 
million of accounts payable were past due. See also "Risk Factors - Amounts 
Past Due to Contractors, Suppliers and Equipment Vendors."


At December 31, 1996, the Company had outstanding $2.9 million under its bank 
credit facilities consisting of a $1 million revolving line of credit and a 
$1.9 million non-revolving credit facility.  The term loan bears interest at 
2.63% and calls for equal monthly installments over a 7-year period.  The 
revolving line of credit expired on December 31, 1996 and remains unpaid.  
Under the credit facilities, the Company must (i) maintain certain financial 
ratios, (ii) not incur further debt or create or assume any other lien on its 
property without the banks' prior approval, and (iii) make no payment of 
dividends without the bank's prior approval.  The Company is in violation of 
items (i) and (ii). The Company is involved in discussions with the lender in 
order to (i) renew the $1.0 million credit facility to mature on the earlier 
of September 30, 1997, or 10 days following closing of the investment by UBA 
and (ii) waive the loan covenants associated with these loans so long as the 
Company remains in compliance with all terms of the Investment Agreement and 
achieves reasonable progress toward closing the investment with UBA. However, 
formal approval of amendment to the bank's loan agreements has not yet been 
received.  See "Risk Factors--Risks of Debt and Default on Bank Loans."

In 1996, the Company utilized capital primarily to finance the construction 
and start-up of the Saratoga Springs Brewery and increases in brewing capacity 
to its existing facilities.  In addition, the Company required capital to 
finance operations and continues to require capital for ongoing operations.  
The recently completed construction and start-up of the Saratoga Springs 
Brewery and the Company's attempts to regain market share in the Portland area 
for its Nor'Wester branded products has had and is expected to continue to 
have a material impact on the Company's assets, liabilities, capital 
expenditure commitments, and liquidity.  

The Company believes that current working capital together with projected 
income from operations are not sufficient to meet the Company's cash needs 
over the next twelve months.

SUBSEQUENT EVENTS

PENDING CONSOLIDATION, BRIDGE LOANS, SUBSEQUENT INVESTMENT AND RENEGOTIATIONS 
OF THE TERMS

On January 30, 1997, the Company, WVI, Aviator Ales, Mile High Brewing and 
Bayhawk Ales (together the "Affiliated Companies"), entered into a definitive 
Investment Agreement (the "Investment Agreement") with United Breweries of 
America, Inc. ("UBA").  Under the terms of the Investment Agreement, UBA has 
agreed to invest $8.63 million in exchange for a 45 percent equity interest in 
the consolidated businesses of the Affiliated Companies.  UBA, an affiliate of 
The UB Group of Bangalore, India, was formed for the purpose of investing in 
the U.S. craft beer industry.  The UB Group is a diversified multi-national 
corporation whose major operations consist of the production and sale of beer 
and spirits through affiliated companies which operate in 20 countries on four 
continents.  

Under the terms of the Investment Agreement, the Affiliated Companies have 
each agreed to consolidate under the ownership of a new entity, United Craft 
Brewers, Inc. ("UCB").


                                      5
<PAGE>

UCB will serve as a holding company for companies which operate each of the 
five affiliated breweries--the Portland Brewery, the Saratoga Springs Brewery, 
the Seattle Brewery, the Denver Brewery and the Southern California Brewery.  
The proposed consolidation is a condition to receipt of UBA's investment which 
will be made directly in UCB.

CONSOLIDATION.  Under the proposed consolidation each of the Affiliated 
Companies will become a wholly-owned subsidiary of UCB pursuant to a merger 
and share exchange by which newly registered shares of UCB will be issued in 
exchange for outstanding shares of the Affiliated Companies based on the share 
exchange rates described below.  The merger and share exchange has been 
unanimously approved by the Boards of Directors of each of the Affiliated 
Companies but remains subject to approval by shareholders of each Affiliated 
Company.  Following completion of the consolidation, shareholders of each 
Affiliated Company will hold shares in UCB, which is intended to be listed for 
trading on the Nasdaq National Market System under the symbol "ALES".  The 
consolidation is primarily an administrative step designed to simplify the 
ownership structure of the Affiliated Companies, increase the operating 
efficiencies of each brewery, decrease the production, marketing and 
distribution costs of each brewery, increase the ability of the combined 
breweries to finance operations and possible growth and provide all 
shareholders with a liquid market for their shares.  

The outstanding shares of each of the Affiliated Companies will be exchanged 
for shares in UCB according to the following exchange ratios which are based 
on the average closing price of Nor'Wester's Common Stock for the 20 trading 
days immediately preceding January 30, 1997, the date of execution of the 
Investment Agreement:


COMPANY                          EXCHANGE RATIO
--------------------------      ----------------
Nor'Wester                             1:1
WVI                                 1.99159:1
Aviator Ales                        2.98739:1
Bayhawk Ales                        1.99159:1
Mile High Brewing                   2.98739:1

BRIDGE LOANS.  Under the Investment Agreement, UBA is obligated to provide 
Nor'Wester with up to $2.75 million in bridge loans as interim financing 
during the consolidation phase. Advances under the bridge loan are expected to 
be used by Nor'Wester to help cover operating expenses and pay existing 
creditors of the Affiliated Companies until closing of the investment, at 
which time the balance of UBA's $8.6 million investment is expected to be 
made.  Of the $2.75 million, $1.5 million has already been advanced and spent 
as of the date of this report.  All bridge loans are made pursuant to a Credit 
Agreement between Nor'Wester and UBA, the principal terms of which are as 
follows:

     (1)  The bridge loans will be made at times and in amounts mutually 
     determined by UBA and Nor'Wester based on a periodic review of the cash 
     flow needs and creditor demands of the Affiliated Companies;

     (2)  Interest on the bridge loan accrues at 11.25% per annum and is 
     payable to UBA in cash at closing of UBA's investment.


                                      6

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     (3)  All principal and interest is secured by the assets of North Country
     Joint Venture, LLC (owner and operator of the Saratoga Springs Brewery) 
     and by Nor'Wester's ownership interest in the joint venture LLC.  
     Repayment of all principal and interest is guaranteed personally by Jim 
     Bernau.

     (4)  As a condition to each advance under the bridge loan, neither Jim 
     Bernau nor any of the Affiliated Companies shall be in breach of any 
     representation, warranty or covenant under the credit documents or the 
     Investment Agreement and there shall not be any "material adverse effect" 
     in the businesses of the Affiliated Companies as a whole.

     (5)  Unless converte d at closing, all advances under the bridge 
     loan mature 60 days after termination of the Investment Agreement or the 
     occurrence of certain events of default under the credit documents 
     (including the breach by an Affiliated Company or Mr. Bernau of any 
     representation, warranty or covenant under the Investment Agreement), 
     except that the bridge loan becomes due immediately if a "material 
     adverse effect" occurs in the businesses of the Affiliated Companies as a 
     whole or there is a breach by any Affiliated Company or Mr. Bernau of any 
     representation, warranty or covenant under the credit documents.

INVESTMENT.  Following completion of the consolidation and assuming all 
closing conditions have been met as required under the Investment Agreement, 
UBA will invest an additional $5.88 million in cash combined with the 
anticipated conversion of the $2.75 million bridge loan in exchange for a 45 
percent equity interest in UCB.

Closing of the proposed investment remains subject to (i) approval by the 
shareholders of each of the Affiliated Companies, (ii) achievement of certain 
aggregate operating results by the breweries, (iii) maintenance of certain 
operating conditions and covenants, including that there shall be no "material 
adverse change" in the businesses of the Affiliated Companies taken as a 
whole, (iv) approval by the U.S. Bureau of Alcohol, Tobacco and Fire Arms and 
applicable state liquor control commissions, (v) registration with the U.S. 
Securities and Exchange Commission of the UCB shares to be exchanged in the 
consolidation; (vi) extension of Nor'Wester's $1.0 million line of credit 
through September 30, 1997, the bank shall have waived any defaults under the 
line of credit agreement and the line of credit shall have been converted to a 
term loan and (vii) such other customary conditions for transactions of this 
type.

As a further condition to UBA's investment, Jim Bernau has agreed to transfer 
to UBA 1,124,195 of the UCB shares he receives in the consolidation (or 
approximately 46% of his total UCB shares at consolidation).  This 
transfer, for which Mr. Bernau will receive no cash consideration, is being 
done principally to provide UBA with the necessary equity interest in UCB 
(45%) to cause UBA to make the investment.

Following completion of the consolidation and closing of UBA's investment, the 
approximate ownership interests in UCB will be as follows: (i) UBA -- 45.0%, 
(ii) Jim Bernau -- 10%, and (iii) the public shareholders of each Affiliated 
Company will own the following interests:  Nor'Wester--21.6%, WVI--7.1%, 
Aviator Ales--6.7%, Mile High Brewing--5.9%, and Bayhawk Ales--3.7%.  The 
initial Board of Directors of UCB will be composed of 7 members consisting of 
(i) one person appointed by Jim Bernau, (ii) four persons

                                      7

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appointed by UBA (one of whom shall be Vijay Mallya, Chairman of The UB Group, 
who shall be chairman) and (iii) two outside Directors who shall be mutually 
satisfactory to Jim Bernau and UBA.  The initial Board will serve until the 
next regular meeting of shareholders.  At that time, UBA, with its 45% 
interest, will be in a position to effectively elect all members of the Board 
of Directors and thereby control UCB and in turn its subsidiary breweries.

Subject to completion or waiver of all closing conditions, closing of UBA's 
investment will occur as soon as practicable following approval of the 
consolidation by the shareholders of each of the Affiliated Companies which is 
currently expected to occur in or about July 1997.  In the event that the 
investment is not closed by August 31, 1997, either party may terminate the 
transaction and repayment of any outstanding bridge loan is due 60 days 
thereafter.

While the Company is dependent upon the receipt of further loans under the 
credit facility and closing of the UBA investment, the Company does not 
control the business or operations of the other Affiliated Companies and can 
not assure that it or another Affiliated Company will not violate one or more 
covenants in the Investment Agreement or that a closing condition will not be 
met.  Accordingly, there can be no assurance that the Company will receive 
further bridge loan amounts or that the investment will ultimately close or 
will close on the terms set forth in the Investment Agreement.

RENEGOTIATION OF THE TERMS OF THE UBA INVESTMENT. In light of lower than 
anticipated 1996 results, lower than anticipated first quarter 1997 sales and 
other operating results and adverse conditions within the craft beer industry 
in general, representatives of UBA and management and the investment bankers 
of the Affiliated Companies are in the process of renegotiating the terms of 
the UBA investment. The renegotiation will reflect a significantly lower 
valuation for the Affiliated Companies, a reduction in the amount of cash to 
be invested by UBA to $5.5 million and a reduction of UBA's percentage 
ownership position in UCB to 40% following the consolidation. It is not 
anticipated that the $2.75 million bridge loan amount will be reduced.  The 
existing shareholders in the Affiliated Companies would retain a 60% interest 
in UCB.  The exact distribution of ownership interests among shareholders of 
the Affiliated Companies has not yet been determined.  Management will soon 
seek Board approval by each of the Affiliated Companies of any renegotiated 
terms.  Failure of the parties to reach a mutually agreeable renegotiated 
Investment Agreement could lead to a loss of the bridge loans and the 
remainder of the UBA investment which would materially and adversely affect 
the Company's financial condition and results of operations.

RISK FACTORS AND FORWARD-LOOKING STATEMENTS
This Management's Discussion and Analysis of Financial Condition and Results 
of Operation and other sections of this Form 10-KSB contain forward-looking 
statements within the meaning of the Private Securities Litigation Reform Act 
of 1995 that are based on current expectations, estimates and projections 
about the Company's business, management's beliefs and assumptions made by 
management.  Words such as "expects," "anticipates," "intends," "plans," 
"believes," "seeks," "estimates" and variations of such words and similar 
expressions are intended to identify such forward-looking statements.  
Therefore, actual outcomes and results may differ materially from what is 
expressed or forecasted in such forward-looking statements due to numerous 
factors, including, but not


                                      8
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limited to, those discussed below, as well as those discussed elsewhere in 
this Form 10-KSB and from time to time in the Company's Securities and 
Exchange Commission filings and reports, including but not limited to the 
Company's Prospectus dated January 18, 1996.  Copies of the Prospectus are 
available from the Company.  In addition, such statements could be affected by 
general industry and market conditions and growth rates, and general domestic 
economic conditions.

RECENT LOSSES.  During 1996, the Company incurred significant losses 
associated with efforts to increase production and distribution of its 
products through its Cooperative Brewing Agreements with Affiliated Companies 
and higher than expected costs associated with the construction and start-up 
of the Saratoga Springs Brewery.  In addition, as a result of the entry of a 
significant competitor in the bottled Hefe Weizen market in the second 
quarter of 1996, the Company has experienced a significant reduction in the 
sale of its flagship Hefe Weizen beer style in its principal Pacific 
Northwest market. As a consequence, although the Company experienced an 
increase in net sales of $6,524,082 in 1996 over sales of $5,587,758 in 1995, 
the Company also experienced historically high production, marketing, general 
and administrative, and one-time expenses which resulted in a loss in the 
second, third and fourth quarters of 1996 and for 1996 as a whole. 
Specifically, Nor'Wester experienced a net profit of $63,057 in the first 
quarter of 1996, but had net losses of $267,098, $869,821 and $1,774,447 in 
the second, third and fourth quarters, respectively, for an aggregate net 
loss of $2,974,423 in 1996 as compared to a profit of $442,727 in 1995.  
Although the Company has terminated efforts to cooperatively brew its beer 
through Affiliated Companies, management anticipates that the Company will 
continue to experience losses until sales at the Saratoga Springs Brewery 
have increased to a level sufficient to cover operating expenses at that 
facility and the Company has regained a portion of the market share for its 
products in the Pacific Northwest.  See "Management's Discussion and Analysis 
of Financial Conditions and Results of Operations -Results of Operations."

INCREASING COMPETITION.  The domestic market in which the Company competes is 
highly competitive due to the continuing proliferation of new craft brewers, 
efforts by regional craft brewers to expand their production capacities and 
distribution, the introduction of fuller-flavored products by certain major 
national brewers, and underutilized domestic brewing capacity, which 
facilitates expansion by existing contract brewers and the entry of new 
contract brewers.  Although it is difficult to predict, the Company 
anticipates that intensifying competition and increased capacity in the craft 
beer segment may cause pressure on the Company to reduce its prices in certain 
areas.  In addition, the larger national brewers have developed or are 
developing beer styles and brands to compete directly with craft beers.  These 
national competitors and many of the Company's other craft beer competitors 
have significant advantages such as lower production costs, larger marketing 
budgets, greater financial and other resources and more developed and 
extensive distribution networks than the Company.  There can be no assurance 
that Nor'Wester will be able to maintain its selling prices in existing 
markets or as it enters new markets. 

MATURING MARKETS.  55 percent of the Company's 1996 sales were in the states 
of Washington and Oregon.  The Company believes that craft beer sales in 1996 
accounted for approximately 12 percent of total beer sales in those states, 
compared to approximately 2.0 percent nationwide.  Craft beer sales in the 
states of Washington and Oregon


                                      9
<PAGE>

combined increased by 30 percent from 1994 to 1995, but have been estimated by 
the Company to have increased at a slower pace from 1995 to 1996.  No 
assurance can be given that the sales increases in the market will continue or 
even be maintained.  The Company anticipates that as the Washington and Oregon 
market matures, craft brewers may begin more aggressive pricing as a means of 
maintaining market share, which could adversely affect the Company's margins.  

DEPENDENCE UPON BRIDGE LOANS AND INVESTMENT FROM UNITED BREWERIES OF AMERICA, 
INC.  The Company has been and continues to be highly dependent upon the 
receipt of bridge loans and investment funds from UBA to pay creditors and 
sustain the Company's operations during the expected periods of loss until 
profitability is restored.  Since October 1996 through the date of this 
report, UBA has provided $1.5 million in bridge loans under the $2.75 million 
credit facility.  The receipt of additional advances under the credit facility 
and closing of the investment is subject to the Affiliated Companies' 
compliance with certain covenants and conditions set forth in the Investment 
Agreement and credit documents, including the condition that no "material 
adverse effect" occurs in the businesses of the Affiliated Companies as a 
whole.  While the Company is dependent upon the receipt of further bridge and 
closing of the UBA investment, the Company does not control the business or 
operations of the other Affiliated Companies and can not assure that it or 
another Affiliated Company will not violate one or more covenants in the 
Investment Agreement or that a closing condition will not be met.  
Accordingly, there can be no assurance that the Company will receive further 
bridge loan amounts or that the investment will ultimately close or will close 
on the terms set forth in the Investment Agreement. See "Management's 
Discussion and Analysis--Subsequent Events."

If for any reason, the Company is unable to pay past due creditors and finance 
working capital requirements through an investment by UBA, alternative methods 
of financing would have to be obtained.  No assurance can be given that 
alternative methods of financing would be obtained.  No assurance can be given 
that alternative methods of financing would be available on terms acceptable 
to the Company, or at all.  Having to develop alternative means of financing 
would likely slow development of the existing breweries and such alternative 
financing may be costly.  The inability of the Company to obtain additional 
capital would adversely affect the Company's business and results of 
operations.

AMOUNTS PAST DUE TO CONTRACTORS, SUPPLIERS AND EQUIPMENT VENDORS.  At December 
31, 1996 and as of the date of this report, the Company was past due on $1.9 
million and $2.1, respectively, of its accounts payable.  The Company has 
communicated with these creditors and has negotiated acceptable payment terms 
to be funded primarily through bridge loans from UBA.  If the Company does not 
have the cash needed to pay the amounts due and is not able to work out 
satisfactory alternative payment arrangements, these contractors, suppliers 
and vendors may seek to exercise their remedies, including the filing of liens 
against the Company's assets.  As of the date of this report, management is 
aware of three creditors who have filed liens to secure an aggregate of 
$414,103 owed.  See "Management's Discussion and Analysis of Financial 
Condition and Results of Operations."  Resolving the Company's payment 
obligations to its contractors, suppliers and vendors may distract Management 
from its other duties, involve additional expense, and result in production 
delays which in turn could have a material adverse impact on the Company's 
business, financial condition, and results of operations.


                                      10
<PAGE>

RISKS OF DEBT AND DEFAULT ON BANK LOANS.  As of the date of this report, 
Nor'Wester has incurred approximately $4.7 million in debt to finance 
operations of the Portland Brewery and Saratoga Springs Brewery, including 
$1.5 million of bridge loans from UBA.  The ratio of the Company's long-term 
debt to equity as of December 31, 1996, is .36 to 1.  See "Management's 
Discussion and Analysis of Financial Conditions and Results of 
Operations--Liquidity and Capital Resources."  Loan and lease payments for the 
Company's facilities must be paid regardless of the Company's revenue.  The 
Company is in default on its $1.0 million bank line of credit facility which 
was due on December 31, 1996.  Further,  the Company is not in compliance with 
certain loan covenants relating to both the $1.0 million line of credit 
facility and a $2.0 million term loan with the bank.  These loans are secured 
by substantially all of the Company's assets.  The Company is involved in 
discussions with the lender in order to (i) renew the $1.0 million line of 
credit facility to mature on the earlier of September 30, 1997, or 10 days 
following closing of the investment by UBA and (ii) waive the loan covenants 
associated with these loans so long as the Company remains in compliance with 
all terms of the Investment Agreement and achieves reasonable progress toward 
closing the investment with UBA.  However, final approval of amendment to the 
bank's loan agreements has not yet been received.  If final approval is not 
received or if received but the Company subsequently violates the terms of the 
amendment, then the Company would be in default of its loans which could lead 
to foreclosure and sale of all or an important part of the Company's assets.  
Such an event would have a material adverse impact on the Company's business, 
financial condition, and results of operations. 

VARIABILITY OF MARGINS AND OPERATING RESULTS.  The Company anticipates that 
margins will fluctuate and may decline as a result of many factors, including 
(i) disproportionately high operating costs when the Company's breweries are 
producing below maximum designed production capacity, which typically occurs 
upon commencing operations at a new facility such as the Saratoga Springs 
Brewery, (ii) increasing sales and marketing costs as the Company seeks to 
penetrate new markets and regain market share lost in its Northwest market, 
(iii) changes in product sales mix, including, for example, beers which 
contain costly fruit concentrates, or beer requiring longer conditioning time, 
or an increase in the percentage of sales derived from 12 ounce bottles, which 
have a much lower gross margin than 22 ounce bottles or kegs;  (iv) increased 
shipping costs, including where the Company must ship its products a 
substantial distance to supply a particular market; (v) further decreases in 
the Company's market share due to increased competition, and (vi) the possible 
need to lower prices for the Company's products to meet competition.  Many 
other factors could cause the Company's profit margins to decline, including, 
declining sales prices due to increasing competition, possible increases in 
the cost of packaging materials and brewing ingredients, potential increases 
in federal or state excise taxes and the impact of an increasing average 
federal excise tax rate as production levels increase.  In addition, the 
Company has historically operated with little or no sales backlog, and its 
ability to predict sales for an upcoming quarter is limited.  Significant 
fluctuations in the Company's quarterly results of operations may also result 
from the timing of expansion into new markets, new product introductions, 
seasonality of demand, increased competition and general economic conditions.  

                                      11
<PAGE>

ITEM 7.  FINANCIAL STATEMENTS

The information required by this item begins on page F-1 of this report.

ITEM 12.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
--------------------------------------------------------

    GENERAL.  Each of WVI, Aviator, Bayhawk and Mile High is affiliated with
Nor'Wester in that James W. Bernau, Nor'Wester's founder, President and
Chairperson of the Board of Directors, is also President and Chairperson of the
Board of Directors of each such affiliated company. Mr. Bernau is also a
significant equity owner of each affiliated company either directly, as in the
case of Nor'Wester, in which Mr. Bernau owns approximately 25% of the
outstanding capital stock, or indirectly through his controlling interest in WVI
(62%), which in turn owns a controlling interest in each of Aviator (51%),
Bayhawk (57%) and Mile High (51%). As a result of certain arrangements between
Nor'Wester and its affiliates, as well as Mr. Bernau's positions and/or
ownership interests in each of these companies, inherent conflicts of interest
exist with respect to the pricing of services, the sharing of resources and the
allocation of Nor'Wester's President's time.
 
    UNDERWRITER'S DISCOUNTS AND FEES.  In connection with serving as the 
managing underwriter of Nor'Wester's initial public offering completed on 
January 17, 1996 ("Nor'Westers' IPO"), Black & Company, a current significant 
stockholder, received compensation for its services as managing underwriter 
in the amount of (i) $367,500 in discounts and commissions, (ii) $152,088 as 
a management fee, (iii) $117,075 as a nonaccountable expense allowance, and 
(iv) warrants to purchase, at an exercise price of $8.40 per share 
(subsequently repriced to $1.75 per share), an aggregate of 115,000 shares of 
Nor'Wester's Common Stock exercisable on or before January 18, 2000.
 
    ADVANCES TO AFFILIATES.  In 1995 and 1996, Nor'Wester loaned or advanced 
$350,000 to each of Aviator and Mile High for working capital needs and for 
the purchase of brewing ingredients and raw materials to brew Nor'Wester beer 
under Nor'Wester's Cooperative Brewing Agreements with Aviator and Mile High 
entered into as part of the Alliance. In addition, in 1996, Nor'Wester also 
loaned $150,000 to Mile High to help pay for the construction of Mile High's 
pub. Furthermore, in 1995 and 1996, in support of the creation and 
development of the Alliance, Nor'Wester paid certain bills on behalf of WVI, 
Aviator, Mile High, Bayhawk and WVV and provided certain of these companies 
with services under the General Services Agreement also entered into as part 
of the Alliance. Each of these advances is unsecured and does not bear 
interest. For a description of the purposes and terms of the Alliance see 
"Strategic Alliance" below.

                                      12
<PAGE>

    LOAN FROM JIM BERNAU.  In the fourth quarter of 1996, Jim Bernau, President
and a Director of Nor'Wester, loaned Nor'Wester $250,000. The loan bears
interest at 10 percent and is payable on demand.

    PAYMENT TO AND FROM AFFILIATES.  The following table represents net amounts
received by Nor'Wester from (or paid by Nor'Wester to) its affiliates in 1995
and 1996 in connection with the repayment of loans/ advances or in payment of
services associated with creating and supporting the Alliance:
 
<TABLE>
<CAPTION>
                                                                      AMOUNTS RECEIVED (PAID)
                                                                      ------------------------
COMPANY NAME                                                             1996         1995
--------------------------------------------------------------------  -----------  -----------
<S>                                                                   <C>          <C>
WVI.................................................................  $  (146,364) $   516,620
                                                                                      (507,511)
Aviator.............................................................      --             9,107
Bayhawk.............................................................        6,000       18,040
Mile High...........................................................      --            62,854
North Country.......................................................      --               845
WVV.................................................................      --           --
                                                                      -----------  -----------
    Total...........................................................  $  (140,364)  $   99,955
                                                                      -----------  -----------
                                                                      -----------  -----------
</TABLE>
 
    AMOUNTS DUE FROM AFFILIATES AT DECEMBER 31, 1996.  As a result of the
above-described transactions, at December 31, 1996, Nor'Wester was owed the
following amounts by its affiliates: WVI--$418,821, Aviator--$570,090, Mile
High--$703,446, Bayhawk--$72,179 and WVV--$33,814. These amounts are unsecured,
do not bear interest, are payable on Nor'Wester's demand and are reflected as
"receivables from affiliated companies" on Nor'Wester's balance sheet.

                                  13

<PAGE>

STRATEGIC ALLIANCE
In January 1996, the Company established a strategic alliance with Aviator 
Ales, Mile High Brewing, Bayhawk Ales and WVI (the "Alliance").  The Alliance 
is created through a Strategic Alliance Agreement among the Alliance members, 
a General Services Agreement between the Company and WVI and separate 
Cooperative Brewing Agreements between Nor'Wester and each of Aviator Ales, 
Mile High Brewing and Bayhawk Ales (the "Cooperative Brewers").

The terms of the Strategic Alliance Agreement, the Cooperative Brewing 
Agreements and the General Services Agreement are four years, unless earlier 
terminated under limited circumstances.  However, due to the fact that the 
Portland Brewery is not currently operating at capacity as well as the fact 
that the Company has changed its strategy and is not currently attempting to 
develop other regional markets for its products, the Cooperative Brewing 
Agreement is not being utilized.  Certain other aspects of the Strategic 
Alliance Agreement are also not being utilized due to industry and individual 
company circumstances that have changed since the Strategic Alliance 
Agreement was put in place.

In addition, should the consolidation occur as described under "Subsequent 
Events", all such agreements will terminate.

Details of the agreements are as follows (although, as indicated, many of the 
terms are no longer applicable):

STRATEGIC ALLIANCE AGREEMENT.  Under the terms of the Strategic Alliance 
Agreement, each Alliance member has agreed to (i) support the expansion of 
the Nor'Wester's products into the Alliance member's market by cooperatively 
brewing Nor'Wester's beer and facilitating Nor'Wester's access to local 
distributors; (ii) employ at least one Nor'Wester trained brewer at all times 
during the term of the Agreement; and (iii) use the services, expertise and 
personnel available within the Alliance before obtaining such resources from 
outside sources.  The Strategic Alliance Agreement does not preclude an 
Alliance member from promoting its products in markets served by other 
Alliance members.  The Agreement provides that no Alliance member will use 
the proprietary information or technology of another Alliance member to 
produce any beer with a flavor profile or appearance of such other Alliance 
member's beer.  With the consent of all Alliance members, additional entities 
owning and/or operating brewing facilities may be added as parties to the 
Alliance.  

COOPERATIVE BREWING AGREEMENTS.  Under the terms of the Cooperative Brewing 
Agreements, each of the Cooperative Brewers has agreed to produce 
Nor'Wester's beer, in the amounts and packaged as specified in firm orders 
submitted by the Nor'Wester on a periodic basis. All orders made by 
Nor'Wester are subject to certain volume limits.  The Cooperative Brewer's 
production of Nor'Wester beer must comply with Nor'Wester's specifications 
concerning recipes, quality control procedures, flavor profile and 
appearance.  Nor'Wester has a right to reject beer not meeting its 
specifications. Pricing for the purchase of beer produced under Cooperative 
Brewing Agreements are at the lesser of cost plus 10% or Nor'Wester's average 


                                      14
<PAGE>

cost of production at its Portland Brewery, plus a mark-up of 10%. The 
Agreement provides that no Alliance Member will use the proprietary 
information or technology of another Alliance Member to produce any beer with 
a flavor profile or appearance that is substantially similar to such Alliance 
Member's beer.

GENERAL SERVICES AGREEMENT.  The General Services Agreement requires that WVI 
perform for the Company and WVI's subsidiaries certain services relating to 
(i) human resources support; (ii) stock transfer and (iii) investor 
relations.  Under the General Services Agreement, Nor'Wester is to provide 
WVI and its subsidiaries certain services relating to (i) accounting and 
finance support; (ii) sales and marketing management; (iii) executive 
services; and (iv) production management; (v) point of sale and advertising 
services; and (vi) centralization and coordination among the Alliance members 
of certain operational and purchasing matters.  Nor'Wester, in turn 
subcontracts with WVV for point of sale and advertising services and certain 
sales and marketing management support services.

The Company paid WVI and WVV $48,600 and $17,550, respectively, for services 
under the General Services Agreement during 1996.  Amounts charged under the 
General Services Agreement by the Company to each of its affiliates during 
1996 are as follows:

Company Name                                Amount
-------------------------------------    -----------
WVI                                     $   49,025
Aviator Ales                                52,550
Bayhawk Ales                                16,350
Mile High Brewing                           51,500
WVV                                         22,800
                                         -----------
    Total                               $  192,225
                                         -----------
                                         -----------


 
NORTH COUNTRY JOINT VENTURE AGREEMENT AND TERMINATION THEREOF
 
    On January 1, 1996, Nor'Wester and North Country Brewing, a wholly owned 
subsidiary of WVI entered into an Operating Agreement which details the 
respective rights and obligations of the owners in a joint venture to 
develop, own and operate a brewery in Saratoga Springs, New York (the "North 
Country Joint Venture"). Nor'Wester's initial contribution to the North 
Country Joint Venture consisted of (i) $3,500,000 in cash; (ii) deposits 
toward the purchase of equipment with a value of approximately $500,000; 
(iii) use of Nor'Wester's beer recipes pursuant to a licensing agreement 
between Nor'Wester and the North Country Joint Venture. North Country 
Brewing's initial contribution consisted of (i) an unsecured, non-interest 
bearing $2,550,000 promissory note payable by North Country to the North 
Country Joint Venture on or before the completion of North Country Brewing's 
planned self-underwritten public stock offering or October 1, 1996, whichever 
occurs first; (ii) use of North Country Brewing's beer recipes pursuant to a 
licensing agreement between the North Country Joint Venture and North Country 
Brewing; and (iii) North Country Brewing's brewery development efforts 
consisting of a business and operating plan for the Saratoga Springs Brewery, 
a lease agreement for the facility in which the brewery will be established, 
and a local brand name and imagery. Nor'Wester's and North Country Brewing's 
capital accounts with the North Country Joint Venture were credited with 
$4,000,000 and $2,550,000, respectively, upon formation.

                                      15
<PAGE>

 
    The North Country public offering was canceled in September 1996 and North
Country Brewing did not pay the $2,550,000 due under the note. Accordingly, on
October 1, 1996, North Country Brewing withdrew from the North Country Joint
Venture Agreement and transferred its interest to Nor'Wester. Concurrently,
Nor'Wester executed a promissory note payable to WVI evidencing the purchase
price for North Country Brewing's membership interest in the amount of $192,358,
which amount represents WVI's out of pocket development expenses to establish
the Saratoga Springs Brewery and to develop North Country Brewing's beer recipes
and brand imagery.
 
ARMS LENGTH TRANSACTIONS
 
    Nor'Wester believes that the Alliance and the transactions set forth above
were made on terms no less favorable to Nor'Wester than could have been obtained
from unaffiliated third parties. All future transactions between Nor'Wester and
its officers, directors, principal shareholders and affiliates will be approved
by a majority of the independent outside members of Nor'Wester's Board of
Directors who do not have an interest in the transactions, and will be on terms
no less favorable to Nor'Wester than could be obtained from unaffiliated third
parties.





                                      16
<PAGE>


SIGNATURES

In accordance with the requirements of the Securities and Exchange Act of 
1934, the registrant this report to be signed on its behalf by the 
undersigned, thereunto duly authorized.

Dated:   May 14, 1997         NOR'WESTER BREWING COMPANY, INC.


                              By:/s/ JAMES W. BERNAU
                              ----------------------
                              James W. Bernau
                              Chairperson of the Board, President and Secretary
                              

Pursuant to the requirements of the Securities Exchange Act of 1934, this 
report has been signed below by the following persons on behalf of the 
Registrant and in their capacities on May 14, 1997:
          
Signature                     Title


/s/JAMES W. BERNAU            Chairperson of the Board, President and Secretary
------------------
James W. Bernau               (Principal Executive Officer and Principal 
                              Financial and Accounting Officer)  



/s/WINSER P. ACTON            Director                           
------------------
Winser P. Acton               



/s/ WILLIAM V. CROSS          Director                           
--------------------
William V. Cross              



/s/ ANDREW C. KERR            Director                           
--------------------
Andrew C. Kerr      



/s/ DONALD E. VOORHIES        Director                           
--------------------
Donald E. Voorhies       


                                      17

<PAGE>

NOR'WESTER BREWING
COMPANY, INC.
REPORT AND CONSOLIDATED
FINANCIAL STATEMENTS
DECEMBER 31, 1996, 1995 AND 1994




<PAGE>

NOR'WESTER BREWING COMPANY, INC.

INDEX TO FINANCIAL STATEMENTS
-------------------------------------------------------------------------------

Report of Independent Accountants. . . . . . . . . . . . . . . . . . . .   F-1

Consolidated Balance Sheet . . . . . . . . . . . . . . . . . . . . . . .   F-3

Consolidated Statement of Operations . . . . . . . . . . . . . . . . . .   F-4

Consolidated Statement of Shareholders' Equity . . . . . . . . . . . . .   F-5

Consolidated Statement of Cash Flows . . . . . . . . . . . . . . . . . .   F-6

Notes to Consolidated Financial Statements . . . . . . . . . . . . . . .   F-7





<PAGE>

                        REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors and Shareholders
of Nor'Wester Brewing Company, Inc.

In our opinion, the accompanying consolidated balance sheet and the related
consolidated statements of operations, of changes in shareholders' equity and of
cash flows present fairly, in all material respects, the financial position of
Nor'Wester Brewing Company, Inc. and its subsidiary at December 31, 1996 and
1995, and the results of their operations and their cash flows for each of the
three years in the period ended December 31, 1996, in conformity with generally
accepted accounting principles.  These financial statements are the
responsibility of the Company's management; our responsibility is to express an
opinion on these financial statements based on our audits.  We conducted our
audits of these statements in accordance with generally accepted auditing
standards which require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation.  We believe that our
audits provide a reasonable basis for the opinion expressed above.

The accompanying financial statements have been prepared assuming the Company
will continue as a going concern.  As discussed in Note 1 to the financial
statements, the Company has incurred significant losses in 1996, has negative
working capital of $1,563,506 at year end, is not in compliance with its debt
covenants, and has limited access to capital with which to fund future
operations.  Such factors, among others, raise substantial doubt as to its
ability to continue as a going concern.  Management's plans in regard to these
matters are also described in Note 1.  The financial statements do not include
any adjustments that might result from the outcome of this uncertainty.

As discussed in Note 12 to the financial statements, the Company entered into an
investment agreement subsequent to December 31, 1996 to be merged with other
affiliated companies and convert its stock into shares of a new publicly traded
entity.

Nor'Wester Brewing Company, Inc. is a member of a group of affiliated companies
and, as disclosed in the financial statements, has extensive transactions and
relationships with members of the group.  Because of these relationships, it is
possible that the terms of these transactions are not the same as those that
would result from transactions among wholly unrelated parties.


                                       F-1
<PAGE>

To the Board of Directors and Shareholders
of Nor'Wester Brewing Company, Inc.
Page 2


As discussed in Note 14, the Company has restated its 1996 financial statements
to reflect the Company's revised share of the net losses of North Country Joint
Venture, LLC, which was purchased by the Company in October 1996 from WVI, an
affiliated Company.


PRICE WATERHOUSE LLP
Portland, Oregon
March 21, 1997, except as to
Note 13 which is as of March 24, 1997



                                       F-2
<PAGE>

NOR'WESTER BREWING COMPANY, INC.

CONSOLIDATED BALANCE SHEET
-------------------------------------------------------------------------------

<TABLE>
<CAPTION>

                                                                              DECEMBER 31,
                                                                        1996                  1995
                                                                    ------------        ------------
                                                                    (RESTATED -NOTE 14)
<S>                                                                 <C>                 <C>
ASSETS
Current assets:
  Cash and cash equivalents                                         $    252,049        $    276,807
  Accounts receivable                                                    606,642             582,584
  Income taxes receivable                                                103,761             103,761
  Receivables from affiliates (Note 9)                                 1,798,350             200,000
  Inventories (Note 2)                                                   720,507             663,058
  Assets held for sale (Note 1)                                                -             218,000
  Marketing supplies                                                      77,530             134,452
  Deferred stock offering costs                                                -             386,573
  Prepaid expenses and other current assets                              221,223             123,407
                                                                    ------------        ------------
    Total current assets                                               3,780,062           2,688,642
Property and equipment, net (Note 3)                                  11,968,471           4,117,558
Advances to affiliates (Note 9)                                                -             500,000
Other noncurrent assets                                                   40,000              67,244
                                                                    ------------        ------------
Total assets                                                        $ 15,788,533        $  7,373,444
                                                                    ------------        ------------
                                                                    ------------        ------------

LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
  Line of credit (Note 4)                                           $  1,041,000        $    500,000
  Current portion of long-term debt and capital leases (Note 5)          285,318              41,182
  Notes payable (Note 4)                                               1,150,000                   -
  Accounts payable                                                     2,427,073             870,731
  Container deposits                                                     130,921              50,000
  Accrued stock offering costs                                                 -             206,000
  Accrued payroll and other liabilities                                  309,256             217,125
                                                                    ------------        ------------
    Total current liabilities                                          5,343,568           1,885,038

Long-term debt and capital leases (Note 5)                             1,664,796           1,474,339
Deferred tax liability (Note 8)                                                -             189,964
                                                                    ------------        ------------
    Total liabilities                                                  7,008,364           3,549,341
                                                                    ------------        ------------
Commitments and Contingencies (Notes 5, 10, 12 and 13)

Shareholders' equity (Notes 6, 7, 12 and 13):
  Preferred stock, 15,000,000 shares authorized in 1996,
    no shares issued and outstanding                                           -                   -
  Common stock, no par value, 10,000,000 shares
    authorized, 3,711,097 and 2,421,554 shares issued
    and outstanding at December 31, 1996 and 1995                     11,064,480           3,356,488
  Retained earnings (accumulated deficit)                             (2,284,311)            467,615
                                                                    ------------        ------------
    Total shareholders' equity                                         8,780,169           3,824,103
                                                                    ------------        ------------

Total liabilities and shareholders' equity                          $ 15,788,533        $  7,373,444
                                                                    ------------        ------------
                                                                    ------------        ------------
</TABLE>

   The accompanying notes are an intergal part of these financial statements.


                                       F-3
<PAGE>

NOR'WESTER BREWING COMPANY, INC.

CONSOLIDATED STATEMENT OF OPERATIONS
-------------------------------------------------------------------------------

<TABLE>
<CAPTION>

                                                                                YEAR ENDED DECEMBER 31,
                                                                    1996                1995                1994
                                                               ------------        ------------        ------------
                                                           (RESTATED -NOTE 14)
<S>                                                        <C>                     <C>                 <C>

Gross revenues (Notes 9 and 11)                                $  6,820,691        $  5,871,737        $  2,564,994
Less excise taxes                                                  (296,609)           (283,979)           (112,079
                                                               ------------        ------------        ------------
Net revenues                                                      6,524,082           5,587,758           2,452,915

Cost of goods sold (Note 9)                                       5,159,889           3,459,902           1,434,139
                                                               ------------        ------------        ------------

Gross margin                                                      1,364,193           2,127,856           1,018,776

Selling, general and administrative expenses (Note 9)             4,545,559           1,409,023             741,712
                                                               ------------        ------------        ------------

Income (loss) from operations                                    (3,181,366)            718,833             277,064

Interest and other income (expense), net                             38,943             (17,152)             19,840
                                                               ------------        ------------        ------------

Income (loss) before income taxes and
  minority interest in losses of consolidated
  subsidiary companies                                           (3,142,423)            701,681             296,904

Income tax (benefit) expense (Note 8)                              (168,000)            258,954               4,900
                                                               ------------        ------------        ------------

Net income (loss) before minority interest in losses
  of consolidated subsidiary companies                           (2,974,423)            442,727             292,004

Minority interest in losses of consolidated
  subsidiary companies                                              222,497                   -                   -
                                                               ------------        ------------        ------------

Net income (loss)                                              $ (2,751,926)       $    442,727        $    292,004
                                                               ------------        ------------        ------------
                                                               ------------        ------------        ------------

Net income (loss) per common share                             $      (0.74)       $       0.18        $       0.12
                                                               ------------        ------------        ------------
                                                               ------------        ------------        ------------

Weighted average number of common shares
  outstanding                                                     3,696,041           2,420,787           2,339,849
                                                               ------------        ------------        ------------
                                                               ------------        ------------        ------------

</TABLE>

   The accompanying notes are an intergal part of these financial statements.


                                       F-4
<PAGE>

NOR'WESTER BREWING COMPANY, INC.

CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
-------------------------------------------------------------------------------

<TABLE>
<CAPTION>

                                                                                                   RETAINED
                                                                                                   EARNINGS
                                                                     COMMON STOCK                (ACCUMULATED
                                                           -------------------------------
                                                             SHARES              DOLLARS            DEFICIT)               TOTAL
                                                           -----------       -------------       -------------       -------------
<S>                                                        <C>               <C>                 <C>                 <C>
Balances at December 31, 1993                                2,233,799       $   2,260,038       $    (267,116)       $  1,992,922

Net cash proceeds from common stock
  offerings (Note 6)                                           183,198           1,083,609                   -           1,083,609

Issuance of common stock to employees
  and distributors (Note 7)                                      3,276               5,616                   -               5,616

Net income                                                           -                   -             292,004             292,004
                                                           -----------       -------------       -------------       -------------
Balances at December 31, 1994                                2,420,273           3,349,263              24,888           3,374,151

Issuance of common stock to employees
  and distributors (Note 7)                                      1,281               7,225                   -               7,225

Net income                                                           -                   -             442,727             442,727
                                                           -----------       -------------       -------------       -------------
Balances at December 31, 1995                                2,421,554           3,356,488             467,615           3,824,103

Net proceeds from common stock offering
  (Note 6)                                                   1,287,500           7,693,916                   -           7,693,916

Issuance of common stock to employees
  and distributors (Note 7)                                      2,043              14,076                   -              14,076

Net loss                                                             -                   -          (2,751,926)         (2,751,926)
                                                           -----------       -------------       -------------       -------------
Balances at December 31, 1996
  (Restated - Note 14)                                       3,711,097       $  11,064,480        $ (2,284,311)      $   8,780,169
                                                           -----------       -------------       -------------       -------------
                                                           -----------       -------------       -------------       -------------
</TABLE>

   The accompanying notes are an intergal part of these financial statements.


                                       F-5
<PAGE>

NOR'WESTER BREWING COMPANY, INC.

CONSOLIDATED STATEMENT OF CASH FLOWS
-------------------------------------------------------------------------------

<TABLE>
<CAPTION>

                                                                                YEAR ENDED DECEMBER 31,
                                                                     1996                 1995                 1994
                                                                 ------------        ------------        ------------
                                                            (RESTATED - NOTE 14)
<S>                                                             <C>                  <C>                 <C>
Cash flows from operating activities:
  Net income (loss)                                              $ (2,751,926)        $   442,727         $   292,004
  Adjustments to reconcile net income (loss) to net
    cash provided by (used for) operating activities:
      Depreciation                                                    438,388             198,464             133,572
      Amortization                                                     12,032               6,912               4,362
      Deferred income tax expense (benefit)                          (168,000)            174,900              (6,900)
      Stock grants                                                     14,076               7,225               5,616
      Changes in assets and liabilities:
        Accounts receivable                                           (24,058)           (179,661)           (362,012)
        Other receivables                                                   -            (116,173)             (3,997)
        Inventories                                                   (57,449)           (383,161)           (169,642)
        Assets held for sale                                                -            (218,000)                  -
        Marketing supplies                                             56,922             (80,545)            (53,907)
        Prepaid expenses and other current assets                    (119,780)            (55,172)              2,171
        Accounts payable                                            1,556,342             675,182            (108,299)
        Container deposits                                             80,921               4,984              45,016
        Accrued payroll and other liabilities                          92,131             157,897              (1,011)
                                                                 ------------        ------------        ------------
Net cash provided by (used for) operating activities                 (870,401)            635,579            (223,027)
                                                                 ------------        ------------        ------------
Cash flows from investing activities:
  Purchases of equipment                                           (7,873,255)         (2,094,388)         (1,000,086)
  Advances to affiliates                                           (1,098,350)           (700,000)                  -
  Increase in other noncurrent assets                                       -             (33,055)            (18,199)
                                                                 ------------        ------------        ------------
Net cash used for investing activities                             (8,971,605)         (2,827,443)         (1,018,285)
                                                                 ------------        ------------        ------------
Cash flows from financing activities:
  Stock offering proceeds, net                                      7,693,916                   -           1,083,609
  Increase in deferred stock offering costs                                 -            (386,573)                  -
  Increase in accrued stock offering costs                                  -             206,000                   -
  Principal payments on capital lease obligation                       (2,261)               (633)                  -
  Proceeds from long-term debt and line of credit                   2,125,593           2,000,000                   -
                                                                 ------------        ------------        ------------
Net cash provided by financing activities                           9,817,248           1,818,794           1,083,609
                                                                 ------------        ------------        ------------

Net decrease in cash and cash equivalents                             (24,758)           (373,070)           (157,703)

Cash and cash equivalents - beginning of period                       276,807             649,877             807,580
                                                                 ------------        ------------        ------------
Cash and cash equivalents - end of period                        $    252,049        $    276,807        $    649,877
                                                                 ------------        ------------        ------------
                                                                 ------------        ------------        ------------
</TABLE>

   The accompanying notes are an intergal part of these financial statements.


                                       F-6
<PAGE>

NOR'WESTER BREWING COMPANY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
-------------------------------------------------------------------------------

1.   SUMMARY OF OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES

     ORGANIZATION AND OPERATIONS
     Nor'Wester Brewing Company, Inc. (the Company) is engaged in the production
     and sale of high-quality, hand-crafted ales which are sold primarily to
     distributors in the State of Oregon and at the Company's public house in
     Portland, Oregon.  The Company was organized in December 1992 in the State
     of Oregon under the name Willamette Valley Brewing Company.  The Company
     was considered a development stage enterprise until December 31, 1993.
     Through December 31, 1993, the Company devoted significant efforts to
     raising capital, acquiring property and equipment, and developing viable
     ales and a market for those ales.  The Company recognized its first sales
     in November 1993.  The Company's products are marketed under the
     "Nor'Wester" label.

     The Company has recorded significant losses in the current year, has
     negative working capital of $1,563,506, is not in compliance with its debt
     covenants, and has limited access to capital with which to fund future
     operations.  There can be no assurance that the Company will produce and
     sell its products on a profitable basis to sustain operations.  Such
     factors, among others, raise substantial doubt as to its ability to
     continue as a going concern.  Subsequent to December 31, 1996 the Company
     entered into an investment agreement to be merged with other affiliated
     companies and convert its stock into shares of a new publicly traded entity
     as discussed in Note 12.

     USE OF ESTIMATES IN THE PREPARATION OF FINANCIAL STATEMENTS
     The accompanying financial statements have been prepared in accordance with
     generally accepted accounting principles which require management to make
     certain estimates and assumptions.  These estimates and assumptions affect
     the reported amounts of assets and liabilities, the disclosure of
     contingent assets and liabilities as of the date of the financial
     statements, and the reported amounts of revenues and expenses during the
     reporting period.  Actual results could differ from those estimates.

     PRINCIPLES OF CONSOLIDATION
     The consolidated financial statements include the accounts of Nor'Wester
     Brewing Company and its subsidiary, North Country Joint Venture (NCJV) (see
     Note 9).  NCJV was formed in January 1996.  For the first nine months of
     1996, the Company owned 61% of NCJV and the remaining 39% was owned by
     North Country Brewing Company, Inc., an affiliated company.  In October
     1996, NCJV became a wholly-owned subsidiary of the Company.  All
     significant intercompany accounts and transactions have been eliminated in
     consolidation.

     REVENUE RECOGNITION
     The Company recognizes revenue upon shipment of its product to customers.
     Sales are recorded as trade accounts receivable and no collateral is
     required.

     INVENTORIES
     Inventories are stated at the lower of cost (first-in, first-out basis) or
     market.  Cost includes the purchase price of materials, direct labor and an
     allocation of indirect production expenses.


                                       F-7
<PAGE>

NOR'WESTER BREWING COMPANY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
-------------------------------------------------------------------------------

1.   SUMMARY OF OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

     ASSETS HELD FOR SALE
     Assets held for sale at December 31, 1995 consisted of unused brewing
     equipment.  Management was unable to sell these assets; therefore, they
     were shipped to an affiliated brewery in the State of Washington for use in
     the cooperative brewing agreement (see Note 9).  These assets are included
     with property, plant and equipment at December 31, 1996.

     DEFERRED STOCK OFFERING COSTS
     As of December 31, 1995, the Company had deferred stock offering costs
     aggregating $386,573 in connection with a public stock offering which was
     declared effective by the United States Securities and Exchange Commission
     (SEC) in January 1996; see also Note 6.  In January 1996, these deferred
     costs were charged against the proceeds received from the common stock
     offering.

     PROPERTY AND EQUIPMENT
     Property and equipment are stated at cost and are depreciated on the
     straight-line basis over their estimated useful lives as follows:

          Leasehold improvements             5-21 years
          Machinery and equipment            5-15 years

     Expenditures for repairs and maintenance are charged to operating expenses
     as incurred.  Expenditures for additions and improvements are capitalized.
     Leasehold improvements are depreciated over the life of the lease or the
     life of the asset, whichever is shorter.

     In March 1995, the Financial Accounting Standards Board issued Statement of
     Financial Accounting Standards No. 121, "Accounting for the Impairment of
     Long-Lived Assets and for Long-Lived Assets to Be Disposed Of."  The
     Company adopted the statement in fiscal 1996; however, the adoption has not
     had a significant impact on the Company's financial statements.  Management
     expects the Company's long-lived assets to be used by the newly formed
     public company (see Note 12).

     INCOME TAXES
     The Company accounts for income taxes using the asset and liability
     approach prescribed by Statement of Financial Accounting Standards No. 109,
     "Accounting for Income Taxes."  Under this approach, deferred income taxes
     are calculated for the expected future tax consequences of temporary
     differences between the book basis and tax basis of the Company's assets
     and liabilities.

     NET INCOME (LOSS) PER COMMON SHARE
     All share and per share amounts have been restated to reflect the .602-for-
     1 reverse stock split discussed in Note 6.


                                       F-8
<PAGE>

NOR'WESTER BREWING COMPANY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
-------------------------------------------------------------------------------

1.   SUMMARY OF OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

     NET INCOME (LOSS) PER COMMON SHARE (CONTINUED)
     Net income (loss) per common share is computed based on the weighted
     average number of common shares outstanding, including common stock
     equivalent shares from stock options if their effect is dilutive.

     STATEMENT OF CASH FLOWS
     The Company considers short-term investments which are highly liquid, are
     readily convertible into cash and have original maturities of fewer than
     three months to be cash equivalents for the purposes of cash flows.  For
     the years ended December 31, 1996, 1995, and 1994, the Company paid
     interest of $85,166, $56,249, and $0, respectively.  Income tax payments of
     $0, $191,000, and $18,500 were made in 1996, 1995, and 1994, respectively.
     During 1996, $218,000 in equipment previously recorded as assets held for
     sale were transferred into the property, plant and equipment balance (see
     Note 1).  In addition, certain equipment was transferred to the Company
     from affiliated companies.  These non-cash transactions have been excluded
     from the accompanying statement of cash flows.  During 1995, the Company
     obtained approximately $15,000 of assets under a capital lease obligation.

     FAIR MARKET VALUE OF FINANCIAL INSTRUMENTS
     The fair market value of the Company's recorded financial instruments
     approximates their respective recorded balances, as the recorded assets and
     liabilities are stated at amounts expected to be realized or paid, or carry
     interest rates commensurate with current rates for instruments with a
     similar duration and degree of risk.

     STATEMENT OF FINANCIAL ACCOUNTING STANDARDS NO. 123
     The Company adopted Statement of Financial Accounting Standards No. 123
     (SFAS 123), "Accounting for Stock-Based Compensation," for its year ended
     December 31, 1996.  SFAS 123 was issued by the Financial Accounting
     Standards Board in October 1995, and allows companies to choose whether to
     account for stock-based compensation under the current intrinsic method as
     prescribed in Accounting Principles Board Opinion No. 25 (APB 25) or use
     the fair value method prescribed in SFAS 123.  The Company plans to
     continue to follow the provisions of APB 25.  The impact of adoption does
     not have a significant effect on the Company's financial position or
     results of operations (see Note 7).

     RECLASSIFICATIONS
     Certain reclassifications have been made to the 1995 financial statements
     to conform with financial statement presentation for the year ended
     December 31, 1996.  These reclassifications have no effect on previously
     reported results of operations or shareholders' equity.


                                       F-9
<PAGE>

NOR'WESTER BREWING COMPANY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
-------------------------------------------------------------------------------

2.   INVENTORIES

     Inventories consist of:
                                                             December 31,
                                                         1996             1995
                                                     ----------     -----------
      Beer-making and packaging materials            $  460,423     $   378,384
      Work in process (costs relating to
        unprocessed or unbottled beer products)          75,553          68,101
      Finished goods (beer and related products)        184,531         216,573
                                                     ----------     -----------
                                                     $  720,507      $  663,058
                                                     ----------     -----------
                                                     ----------     -----------


3.    PROPERTY AND EQUIPMENT

      Property and equipment consist of:
                                                             DECEMBER 31,
                                                         1996            1995
                                                     ----------     -----------
      Land and improvements                          $  243,071     $   237,072
      Leasehold improvements                          2,338,391         485,200
      Equipment                                       9,612,828       3,034,972
      Construction in progress                          547,792         705,568
                                                   ------------    ------------
                                                     12,742,082       4,462,812

      Less accumulated depreciation                    (773,611)       (345,254
                                                   ------------    ------------)
                                                   $ 11,968,471     $ 4,117,558
                                                   ------------    ------------
                                                   ------------    ------------

4.   LINE OF CREDIT AND SHORT TERM NOTES PAYABLE

     In October 1995, the Company obtained a $1,000,000 revolving line of credit
     bearing interest at the bank's reference rate plus 0.5% (8.75% at December
     31, 1996).  This revolving line of credit expired on December 31, 1996.  It
     is secured by the Company's assets, and contains certain covenants and
     restrictions (see Note 5).  At December 31, 1996 and 1995, $1,000,000 and
     $500,000, respectively, was outstanding under this line of credit.  In
     addition, the Company's North Country subsidiary obtained a $50,000 line of
     credit in 1996 bearing interest at 9.75% of which the outstanding balance
     was $41,000 at December 31, 1996.

     In October 1996, the president of the Company loaned the Company $250,000
     at 10% interest. Repayment of the loan is required upon completion of the
     proposed merger with UBA (see Note 12).

     As of December 31, 1996 the Company had also obtained $900,000 at 11.25% in
     bridge loans related to an investment agreement the Company entered into
     (see Note 12).


                                      F-10
<PAGE>

NOR'WESTER BREWING COMPANY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
-------------------------------------------------------------------------------

5.   LONG-TERM DEBT

     In October 1995, the Company obtained a non-revolving credit facility which
     permits borrowings up to $2,000,000 bearing interest at the bank's
     reference rate plus 0.5% (8.63% at December 31, 1996).  Amounts borrowed
     under this facility are payable in equal monthly instalments over seven
     years.  At December 31, 1996, $1,936,831 was borrowed under this facility.
     This non-revolving credit facility and the revolving credit facility
     discussed in Note 4 are secured by the Company's assets and contain
     covenants which require the Company to maintain certain financial ratios
     and prohibit the Company from making any dividend payments without the
     bank's approval.

     At December 31, 1996, the Company was not in compliance with certain of its
     loan covenants relating both to the non-revolving credit facility and the
     revolving line of credit discussed in Note 4.  The Company is involved in
     discussions with the lender in order to (i) renew the $1 million revolving
     line of credit facility to mature on the earlier of September 30, 1997, or
     10 days following closing of the investment by UBA (see Note 12) and (ii)
     waive the loan covenants associated with these loans so long as the Company
     remains in compliance with all terms of the investment agreement and
     achieves reasonable progress toward closing the investment with UBA.
     However, final approval of amendment to the lender's loan agreements has
     not yet been received.  If final approval is not received or if received
     but the Company subsequently violates the terms of the amendment, then the
     Company would be in default of its loans which could lead to foreclosure
     and sale of all or an important part of the Company's assets.  Such an
     event would have a material adverse impact on the Company's business,
     financial condition and results of operations.

     During 1995, the Company also entered into a capital lease obligation
     related to the acquisition of certain assets.  This lease requires monthly
     payments of $248 through 2002.  Principal payments under the Company's
     credit facility and capital lease are summarized as follows:


<TABLE>
<CAPTION>

 YEAR ENDED                              CAPITAL LEASES                                 DEBT                TOTAL
                        ---------------------------------------------------        --------------------------------
 DECEMBER 31,             PRINCIPAL         INTEREST                TOTAL            PRINCIPAL            PRINCIPAL
---------------         -----------        ------------        ------------        ------------        ------------
<S>                     <C>                <C>                 <C>                 <C>                 <C>
   1997                 $     1,878        $      1,051        $      2,929        $    283,440        $    285,318
   1998                       2,056                 888               2,944             283,440             285,496
   1999                       2,239                 712               2,951             283,440             285,679
   2000                       2,443                 521               2,964             283,440             285,883
   2001                       2,657                 313               2,970             283,440             286,097
   Thereafter                 2,010                  90               2,100             519,631             521,641
                        -----------        ------------        ------------        ------------        ------------
                        $    13,283        $      3,575        $     16,858        $  1,936,831           1,950,114
                        -----------        ------------        ------------        ------------
                        -----------        ------------        ------------        ------------
   Less current
     portion                                                                                                285,318
                                                                                                       ------------

                                                                                                       $  1,664,796
                                                                                                       ------------
                                                                                                       ------------
</TABLE>


                                      F-11
<PAGE>

NOR'WESTER BREWING COMPANY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
-------------------------------------------------------------------------------

6.   SHAREHOLDERS' EQUITY

     The Company is authorized to issue 10,000,000 shares of its common stock.
     Each share of common stock entitles the holder to one vote.  At its
     discretion, the Board of Directors may declare dividends on shares of
     common stock, although the Board does not anticipate paying dividends in
     the foreseeable future.

     In November 1995, the Board of Directors authorized, and the shareholders
     subsequently approved, a .602-for-1 reverse stock split of the Company's
     common stock.  All share and per share amounts in the accompanying
     financial statements have been adjusted to retroactively reflect this
     reverse stock split.

     During 1994, the Company sold 183,198 shares at $6.89 per share,
     respectively, pursuant to a Regulation A public offering filed with the
     U.S. Securities and Exchange Commission.  Cash proceeds, net of offering
     expenses of $178,625 aggregated $1,083,609 during 1994.

     On January 18, 1996, the Company completed a public offering of 1,115,000
     shares of common stock at $7.00 per share.  On February 7, 1996, the
     underwriters exercised an over-allotment option for an additional 172,500
     shares of common stock at $7.00 per share. Proceeds to the Company totaled
     approximately $7,693,000, after offering expenses of approximately
     $1,320,000.

     In January 1996, the shareholders of the Company authorized 15,000,000
     shares of preferred stock to be available for issuance, the terms of which
     the Board of Directors have the authority to establish.  There are no
     current agreements or understandings for the issuance of any shares of
     preferred stock.


7.   STOCK INCENTIVE AND STOCK GRANT PLANS

     In 1993, the Board of Directors established a pool of 128,482 shares for a
     stock incentive plan for issuance to employees, consultants, distributors
     and their employees, and directors of the Company pursuant to the exercise
     of stock options granted under the plan or stock grants or stock sales.
     Administration of the plan, including determination of the number of shares
     to be issued, the term of exercise of any option, the option exercise
     price, and type of options to be granted, lies with the Board of Directors
     or a duly authorized committee of the Board of Directors.  At December 31,
     1994, 39,129 options issued under this plan were outstanding.  Of these,
     33,687 have an exercise price of $1.99 per share, and 5,442 have an
     exercise price of $6.89 per share.  The options began vesting ratably over
     a five- to ten-year period beginning in January 1995.  During the year
     ended December 31, 1995, an additional 71,110 options were granted and
     40,950 were subsequently cancelled.  Of the options granted in 1995, 68,100
     had an exercise price of $7.00 per share, 30,000 of which vest ratably over
     ten years and 38,100 of which vest ratably over five years; 3,010 had an
     exercise price of $6.65 per share and a vesting period of five years.


                                      F-12
<PAGE>

NOR'WESTER BREWING COMPANY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
-------------------------------------------------------------------------------

7.   STOCK INCENTIVE AND STOCK GRANT PLANS (CONTINUED)

     During the year ended December 31, 1996, 77,750 options were granted, and
     20,500 were subsequently canceled.  Of the options granted in 1996 and
     still outstanding at December 31, 1996, 17,500 have an exercise price of
     $7.00 per share and a vesting period of five years, 1,250 have an exercise
     price of $7.00 per share and a vesting period of two years; 18,500 have an
     exercise price of $6.75 per share and a vesting period of ten years; 15,000
     have an exercise price of $6.75 per share and a vesting period of five
     years; 2,000 have an exercise price of $5.75 per share and a vesting period
     of ten years; and 3,000 have an exercise price of $5.75 and a vesting
     period of one year.

     No compensation expense has been recorded as a result of granting any of
     the options as all such options were granted with an exercise price equal
     to the market price on the date of grant.  No options have been exercised
     to date.

     In January 1996, the shareholders of the Company approved an increase to
     the number of shares available under the Company's stock incentive plan to
     360,000 shares.  In January 1996, the shareholders also approved the
     adoption of a non-employee director's stock option plan and the reservation
     of 40,000 shares thereunder.  Additionally, the Company grants shares of
     common stock to distributors and their employees to establish the Company's
     distribution network.  Eligible persons receive seven shares of stock each.
     During the years ended December 31, 1996, 1995, and 1994, the Company
     granted 2,043, 1,281, and 3,276 shares, respectively, to distributors and
     their employees.  Selling, general and administrative expenses for the
     years ended December 31, 1996, 1995, and 1994 include $14,076, $7,225, and
     $5,616, respectively, related to the grant of these shares.

     The Company has elected to account for its stock-based compensation under
     Accounting Principles Board Opinion No. 25.  The Company has determined
     that the pro forma effects of applying SFAS 123 would have resulted in a
     pro forma net loss of $2,812,822 ($0.76 per share) for the year ended
     December 31, 1996 and pro forma net income of $404,959 ($0.17 per share)
     for the year ended December 31, 1995.  The effects of applying SFAS 123 for
     providing pro forma disclosure for 1996 and 1995 are not likely to be
     representative of the effects in reported net income and earnings per share
     for future years since options vest over several years and additional
     awards are made each year.  This determination was made using the Black-
     Scholes option pricing model.  The weighted average assumptions used for
     stock option grants for 1996 and 1995 were a risk-free interest rate of
     6.27% and 5.88%, respectively, an expected dividend yield of 0% and 0%,
     respectively, an expected life of 7.07 years and 7.55 years, respectively,
     and an expected volatility of 57% and 54%, respectively.  The weighted
     average fair value of stock options granted in 1996 and 1995 was $4.06 and
     $4.01, respectively.

     Options were assumed to be exercised upon vesting for purposes of this
     valuation.  Adjustments are made for options forfeited prior to vesting.
     For the years ended December 31, 1996 and 1995, the total value of the
     options granted was computed to be $317,289 and $285,151, respectively,
     which would be amortized on a straight-line basis over the vesting period
     of the options.


                                      F-13
<PAGE>

NOR'WESTER BREWING COMPANY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
-------------------------------------------------------------------------------

7.   STOCK INCENTIVE AND STOCK GRANT PLANS (CONTINUED)

     Note that all options granted by the Company are expected to be converted
     to options of the new company expected to be formed at the same conversion
     rate as the conversion of common stock as discussed in Note 12.

8.   INCOME TAXES

     The provision for income taxes consists of:
                                           YEAR ENDED DECEMBER 31,
                                      1996            1995           1994
                                   ----------      ---------      ---------
     Current tax expense:
          Federal                  $        -      $  75,740      $   8,100
          State                             -          8,314          3,700
                                   ----------      ---------      ---------
                                            -         84,054         11,800
                                   ----------      ---------      ---------

     Deferred (benefit):
          Federal                    (148,905)       155,660         (4,800)
          State                       (19,095)        19,240         (2,100)
                                   ----------      ---------      ---------
                                     (168,000)       174,900         (6,900)
                                   ----------      ---------      ---------
                                   $ (168,000)     $ 258,954      $   4,900
                                   ----------      ---------      ---------
                                   ----------      ---------      ---------

     The benefit for income taxes differs from the amount of incomes taxes
     determined by applying the U.S. statutory graduated federal rate due to the
     following:

                                                      YEAR ENDED DECEMBER 31,
                                                     1996        1995     1994
                                                   -------     -------   ------
          Federal statutory rate (graduated)          34.0%       33.3%    33.4%
          State taxes, net of federal benefit          4.2%        3.8      4.4
          Reserve of net deferred tax assets         (33.1)%         -        -
          Permanent differences                       (0.4)%       0.5        -
          Utilization of fully reserved tax assets       -           -    (36.1)
          Other                                        0.3        (0.7)        -
                                                   -------     -------   ------
                                                       5.0%       36.9%     1.7%
                                                   -------     -------   ------
                                                   -------     -------   ------


                                      F-14
<PAGE>

NOR'WESTER BREWING COMPANY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
-------------------------------------------------------------------------------

8.   INCOME TAXES (CONTINUED)

     Deferred tax assets (liabilities) consist of:

<TABLE>
<CAPTION>

                                                                         DECEMBER 31,
                                                                   1996               1995
                                                                -----------         -----------
<S>                                                             <C>                 <C>
    Tax credit carryforwards                                    $    10,109         $    10,108
    Fixed assets                                                          -                   -
    Net operating loss carryforward                               1,639,738                   -
    Other                                                            20,489              11,856
                                                                -----------         -----------
    Gross deferred tax assets                                     1,670,336              21,964
                                                                -----------         -----------
    Fixed assets                                                   (558,839)            189,964
                                                                -----------         -----------
    Gross deferred tax liabilities                                 (558,839)            189,964
                                                                -----------         -----------
    Deferred tax asset (liability) before
      valuation allowance                                         1,111,497            (168,000)

    Deferred tax valuation allowance                             (1,111,497)                   -
                                                                -----------         -----------
    Net deferred (liability)                                    $         -          $ (168,000)
                                                                -----------         -----------
                                                                -----------         -----------
   Deferred tax assets (liabilities) are classified as follows:

                                                                          DECEMBER 31,
                                                                    1996               1995
                                                                -----------         -----------
    Non-current asset                                           $         -        $          -
    Non-current liability                                                 -            (189,964)
    Current asset                                                                        21,964
                                                                -----------         -----------
                                                                $         -         $  (168,000)
                                                                -----------         -----------
                                                                -----------         -----------

</TABLE>

     The current deferred tax asset at December 31, 1995 is included in prepaid
     expenses and other current assets in the accompanying balance sheet.

     As of December 31, 1996, the Company had a net operating loss carryforward
     aggregating approximately $4,168,000 for federal income tax purposes, which
     may be used to offset future taxable income, if any.  The annual
     utilization of this carryforward may be limited after the Company undergoes
     the ownership change anticipated by management or fails to meet the
     continuity of business requirements defined by the Internal Revenue Code
     (see Note 12).  The Company's net operating loss carryforward expires in
     2012.


                                      F-15
<PAGE>

NOR'WESTER BREWING COMPANY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
-------------------------------------------------------------------------------

9.   RELATED PARTIES

     NATURE OF RELATED PARTIES
     The Company's president partially owns and controls Willamette Valley
     Vineyards (WVV), a winery in Oregon, and Willamette Valley Inc.
     Microbreweries across America (WVI), a company organized to establish
     microbreweries throughout the United States.  Additionally, the Company's
     president is the president of each of the following subsidiaries of WVI:
     Aviator Ales, Inc. (AAI); Mile High Brewing Company (MHBC); Bayhawk Ales,
     Inc. (BAI); and North Country Brewing Company, Inc. (NCBCI), development
     stage companies located in Washington, Colorado, California, and New York,
     respectively.  As a result of certain arrangements between the Company and
     its affiliates, as well as the Company president's positions with and/or
     ownership interests in each of these companies, inherent conflicts of
     interest exist with respect to the pricing of services, the sharing of
     resources and the allocation of the Company president's time.

     RELATED PARTY TRANSACTIONS
     The Company has purchased management services from WVV and WVI, consisting
     of secretarial, accounting, marketing, administrative, stock transfer, and
     brewery payroll services provided on a cost-plus fee basis.  WVV provided
     such services through June 1994, at which time WVI began providing these
     services.  In 1994, charges for services provided to the Company by WVV and
     WVI aggregated approximately $260,000, of which approximately $218,000 is
     included in selling, general and administrative expenses, and $42,000 has
     been charged against stock offering proceeds in the 1994 financial
     statements.  At December 31, 1995, accounts payable include approximately
     $45,000 owed to WVI as a result of these transactions.  During the year
     ended December 31, 1995, charges for services provided to the Company by
     WVI aggregated approximately $363,000 of which approximately $51,000 is
     included in deferred stock offering costs, and approximately $312,000 is
     included in selling, general and administrative expenses in the statement
     of operations for the year ended December 31, 1995.  During 1996, charges
     for services provided to the Company by WVI and WVV aggregated
     approximately $66,000 all of which is included in selling, general and
     administrative expenses in the 1996 statement of operations.

     The Company continues to purchase certain management and administrative
     services from WVI and WVV.  In 1996, the Company began providing certain
     management and administrative services to WVI and WVV as well as to AAI,
     MHBC, BAI, and NCBCI.

     The Company purchased brewery equipment costing approximately $72,500 in
     1994 from one of its shareholders.  The Company also purchased brewing
     equipment costing approximately $53,000 in 1995 from MHBC.  In addition,
     for the years ended December 31, 1996, 1995, and 1994, the Company paid
     approximately $0, $15,000, and $21,500, respectively, to a shareholder,
     officer, and member of the Board of Directors for marketing consulting
     services.


                                      F-16
<PAGE>

NOR'WESTER BREWING COMPANY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
-------------------------------------------------------------------------------

9.   RELATED PARTIES (CONTINUED)

     STRATEGIC ALLIANCE AND COOPERATIVE BREWING AGREEMENTS
     In December 1995, the Company entered into a Strategic Alliance (the
     "Alliance") with AAI, MHBC, BAI, NCBCI, and WVI.  The Company, AAI, MHBC,
     BAI, NCBCI, and WVI are collectively referred to as "Alliance members," and
     the Company, AAI, MHBC, and BAI are collectively referred to as the
     "Cooperative Brewers" and individually referred to as a "Cooperative
     Brewer."  The purpose of the Alliance is to promote and support the growth
     of all of the Alliance members by increasing production at each Cooperative
     Brewer's facility and supporting the entry of Nor'Wester products into new
     markets.  To achieve this goal, each Cooperative Brewer has agreed to
     cooperatively brew Nor'Wester's products, and to support the entry of these
     products into new markets by facilitating Nor'Wester's access to the
     Cooperative Brewer's network of distributors.

     The Alliance is created through a Strategic Alliance Agreement between
     Nor'Wester and AAI, MHBC and BAI.  The terms of the Strategic Alliance
     Agreement and the Cooperative Brewing Agreements are four years, unless
     earlier terminated under limited circumstances, which include material
     breach in the case of the Cooperative Brewing Agreements.  The Agreements
     are subject to renewal.  Pricing for the purchase of beer produced under
     the Cooperative Brewing Agreement is at the lesser of cost plus 10% or
     Nor'Wester's average cost of production at its Nor'Wester Brewery, plus a
     mark-up of 10%.  The Agreement provides that no Alliance member will use
     the proprietary information or technology of another Alliance member to
     produce any beer with a flavor profile or appearance that is substantially
     similar to such Alliance member's beer.  With the consent of all Alliance
     members, additional parties may be added to the Alliance.

     Under the terms of the Cooperative Brewing Agreements, each cooperative
     brewer will produce Nor'Wester beer, in the amounts and packaging as
     specified in firm orders submitted by Nor'Wester on a periodic basis.  Each
     cooperative brewer's production of Nor'Wester beer must comply with
     specifications concerning recipes, quality control procedures, flavor
     profile and appearance.  Nor'Wester has a right to reject beer not meeting
     its specifications.

     Nor'Wester has acquired certain specified brewing equipment for use of AAI
     and MHBC in producing Nor'Wester's beer.  To the extent that this equipment
     is not needed for the production of Nor'Wester beers, AAI and MHBC may,
     upon notice to Nor'Wester, use this equipment to produce their own beer
     subject to the payment of an agreed-upon lease fee.

     The Cooperative Brewing Agreement requires that the Cooperative Brewer
     maintain the equipment supplied by Nor'Wester, that Nor'Wester insure this
     equipment, and that the Cooperative Brewer and Nor'Wester each indemnify
     the other for damages and losses in connection with the Agreement.
     Nor'Wester may, at its cost, remove or replace its equipment at any time if
     market conditions or other circumstances make such action desirable 
     to Nor'Wester.


                                      F-17
<PAGE>

NOR'WESTER BREWING COMPANY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
-------------------------------------------------------------------------------

9.   RELATED PARTIES (CONTINUED)

     Cooperative brewing purchases totaled $1,375,000, which is 27% of the
     Company's cost of goods sold.  Because of the pricing terms surrounding
     cooperative brewing discussed above, sales of cooperative-brewed beer
     resulted in reduced margins for the Company.  In addition, a significant
     portion of the beer brewed by AAI and MHBC and purchased by the Company was
     determined to be unusable.  Accordingly, both AAI and MHBC ceased
     cooperative brewing of Nor'Wester beers in January 1997.

     ADVANCES TO AFFILIATES
     In connection with the Cooperative Brewing Agreements with AAI and MHBC
     described above, Nor'Wester advanced $250,000 to each of AAI and MHBC in
     December 1995 for the purchase of ingredients and packaging materials for
     the cooperative brewers' initial production of Nor'Wester's products.  In
     1996, the Company advanced $100,000, $250,000 and $50,000 to AAI, MHBC and
     WVI, respectively, for cooperative brewing purchases and for operating
     expenses.  These advances remain outstanding although the cooperative
     brewing agreement has been terminated.  Because these advances will
     eventually be eliminated when the proposed merger occurs, as discussed in
     Note 12, these advances have been classified as current receivables from
     affiliates at December 31, 1996.

     JOINT VENTURE AGREEMENT
     On March 5, 1996, the Company entered into a joint venture agreement with
     NCBCI.  Under the terms of the agreement, the Company contributed
     $4,000,000 in cash and equipment which was used to construct and operate a
     brewery in Saratoga Springs, New York, as well as certain intangible assets
     for a 61% interest in the joint venture known as North Country Joint
     Venture, LLC (NCJV).  The Company also advanced $2,550,000 to the joint
     venture.  NCBCI was to repay the Company $2,550,000 in cash by October 1996
     for its 39% of the joint venture in accordance with the agreement.  NCBCI
     did not repay the Company by the date required per the agreement.

     Accordingly, NCBCI's rights to NCJV terminated and Nor'Wester became the
     100% owner of NCJV.  NCBCI owned 39% of NCJV for the first nine months of
     the year.  Accordingly, the minority interest share in the first-year loss
     of NCJV is included in the accompanying statement of operations.  Because
     Nor'Wester owned 100% of NCJV at December 31, 1996, no minority interest is
     recorded in the accompanying balance sheet.  The Saratoga Springs brewery
     makes up approximately 57% of the Company's net fixed assets, and it
     contributed approximately $154,000 in net revenues since production began
     in September 1996.  The Saratoga Springs brewery has generated losses
     totaling approximately $979,000 since its inception.  The losses are
     primarily related to start-up expenses and a low level of production during
     1996.

     RECEIVABLES FROM AFFILIATES
     The Company has not been repaid for a significant portion of the services
     provided and cash advanced to the affiliated companies.  Accordingly, the
     Company has recorded on the accompanying balance sheet receivables from
     affiliates aggregating $1,798,350.  Because these receivables are


                                      F-18
<PAGE>

NOR'WESTER BREWING COMPANY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
-------------------------------------------------------------------------------

9.   RELATED PARTIES (CONTINUED)

     expected to be eliminated or received in cash after the expected merger
     with UBA occurs (see Note 12), these receivables have been classified as
     current at December 31, 1996.  Receivables from each of the affiliated
     companies are as follows:

               WVV                     $    33,814
               WVI                         323,590
               AAI                         570,090
               MHBC                        703,446
               BAI                          72,179
               NCBCI                        95,231
                                       -----------
                                       $ 1,798,350
                                       -----------
                                       -----------

     These balances are not expected by management to be fully collected in
     cash.  Instead, a portion will be collected when the assets of MHBC are
     sold subsequent to December 31, 1996, and the remainder will be considered
     when the companies are merged into the new company expected to be formed
     (see Note 12).


10.  COMMITMENTS AND CONTINGENCIES

     COMMITMENTS
     The Company has signed five-year leases for its brewery and pub facilities
     in Oregon and New York which expire on January 31, 2000 and February 15,
     2002, respectively.  The term of the lease in Oregon is renewable for an
     additional 10 years.  The New York lease has three five-year renewal
     options.  The Company has also entered into a one-year lease, which has a
     one-year renewal option for storage in Oregon.  Annual payments under this
     lease are $10,800.  Annual payments under the leases total $178,740 plus
     net charges for property taxes, fire insurance, and utilities.  Rent
     payments are adjusted annually based on increases in the consumer price
     index, limited to no more than a four percent annual increase.  The Company
     paid lease consideration of $50,000 in 1995 to hold the New York facility
     until construction began.  This payment was capitalized and is being
     amortized over a period of five years.

     Approximate future minimum lease payments for both facilities, including
     payments under the renewal terms, are:

               1997                    $   178,740
               1998                        178,740
               1999                        167,940
               2000                        167,940
               2001                        167,940
               Thereafter                1,226,417
                                       -----------
                                       $ 2,087,717
                                       -----------
                                       -----------


                                      F-19
<PAGE>

NOR'WESTER BREWING COMPANY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
-------------------------------------------------------------------------------

10.  COMMITMENTS AND CONTINGENCIES (CONTINUED)

     Rent expenses aggregated approximately $190,000, $91,000, and $82,000 for
     the years ended December 31, 1996, 1995, and 1994, respectively, and are
     allocated between cost of goods sold and selling, general and
     administrative expenses in the accompanying statement of operations.

     The Company has entered into agreements with independent distributors for
     the distribution of the Company's products throughout the United States of
     America.  These agreements contain normal distribution provisions and are
     cancelable by either the Company or the distributors.

     In addition, due to the nature of the industry the Company operates in, the
     Company is exposed to certain hazards and liability risks resulting from
     brewery operations which could impact the Company negatively.

     IMPAIRMENT OF ASSETS AT MHBC
     The Company has assets with a net book value of approximately $400,000
     located in Denver, Colorado at the MHBC brewery for use by MHBC for
     cooperative brewing.  Subsequent to December 31, 1996, the management of
     MHBC formulated a plan to sell all of the operating assets of MHBC.
     Potential buyers may wish to purchase assets owned by Nor'Wester located at
     the MHBC brewery.  Management of the Company and of MHBC intend to
     reimburse Nor'Wester in cash at net book value for any of the Company's
     assets which are sold.  The financial statements do not include any
     adjustments to reflect the outcome of this uncertainty.


11.  SIGNIFICANT CUSTOMERS

     In 1996, the Company sold approximately 47% of its products to wholesale
     distributors located in Oregon.  Sales to the Company's largest customers
     represented 16% of total revenues.  For the year ended December 31, 1995,
     sales to the Company's largest customer represented 19% of total revenues,
     respectively.  For the year ended December 31, 1994, sales to the Company's
     largest customer represented 28% of total revenues.


12.  PROPOSED MERGER AND INVESTMENT BY UBA

     Subsequent to December 31, 1996 the Company and its subsidiary (NCJV) along
     with its affiliates (WVI, AAI, MHBC and BAI) entered into an investment
     agreement with United Breweries of America, Inc. (UBA), an entity
     controlled by the UB Group of Bangalore, India. The agreement provides for
     Nor'Wester, WVI, AAI, MHBC and BAI to consolidate into a company to be
     known as United Craft Brewers, Inc. (UCB).  This merger will result in the
     issuance of newly registered shares of UCB common stock in exchange for
     shares of Nor'Wester, WVI and its subsidiaries.  The merger and share
     exchange will require approval by the Boards of Directors and shareholders
     of each of the entities.  Following consolidation, all shareholders in the
     Nor'Wester/WVI alliance will hold shares in UCB, a company which is
     intended to be listed for trading on the Nasdaq National Market system


                                      F-20
<PAGE>

NOR'WESTER BREWING COMPANY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
-------------------------------------------------------------------------------

12.  PROPOSED MERGER AND INVESTMENT BY UBA (CONTINUED)

     under the symbol ALES. Proposed exchange ratios for each of the entities
     are as follows, based on an average closing price of $2.63 for Nor'Wester's
     common stock for the 20 trading days immediately preceding execution of the
     merger:

                 COMPANY                   EXCHANGE RATIO
               ----------                  --------------
               Nor'Wester                           1:1
               WVI                            1.99159:1
               AAI                            2.98739:1
               BAI                            1.99159:1
               MHBC                           2.98739:1


     Following the merger, UBA has proposed to invest $8.63 million in exchange
     for a 45% equity interest in the new entity, UCB.  Of the $8.63 million
     proposed investment by UBA, $2.75 million is in the form of bridge loans
     conditionally available to Nor'Wester during the consolidation phase.  As
     of March 21, 1997, $1,500,000 has already been loaned to Nor'Wester, the
     majority of which has been advanced to North Country.  At closing, it is
     anticipated that the bridge loans will be converted into shares of UCB and
     the remaining $5.88 million cash investment will be made directly in shares
     of UCB (see Note 13).

     All principal and interest related to the bridge loans is secured by the
     assets of North Country Joint Venture, the Company's wholly-owned
     subsidiary, and by the Company's ownership interest in North Country Joint
     Venture.  Repayment of all principal and interest is guaranteed personally
     by the Company's president.

     The closing of the proposed investment remains subject to (i) approval by
     the shareholders of each of the companies, (ii) achievement of certain
     operating results at each of the breweries, (iii) maintenance of certain
     operating conditions and covenants, including that there shall be no
     material adverse change in the businesses of the affiliated breweries taken
     as a whole, (iv) approval by federal and state liquor control agencies, (v)
     registration with the U.S. Securities and Exchange Commission of UCB shares
     to be exchanged in the merger, (vi) extension of the Company's $1 million
     revolving line of credit through September 30, 1997 (see Note 4); and the
     lender shall have waived any defaults under the line of credit agreement
     and the line of credit shall have been converted to a term loan (see Note
     5), and (vii) such other customary conditions for transactions of this
     type.

     Immediately following the proposed investment by UBA, UBA would own 45% and
     the Company's president would own 10% of UCB.  The public shareholders of
     Nor'Wester, WVI, and WVI's subsidiaries would own the remaining 45% of UCB
     (see Note 13).


                                      F-21
<PAGE>

NOR'WESTER BREWING COMPANY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
-------------------------------------------------------------------------------

13.  SUBSEQUENT EVENTS

     In light of lower than anticipated 1996 results, lower than anticipated
     first quarter 1997 sales and other operating results and adverse conditions
     within the craft beer industry in general, representatives of UBA and
     management and the investment bankers of the affiliated companies are in
     the process of renegotiating the terms of the UBA investment discussed in
     Note 12.  The renegotiation will reflect a significantly lower valuation
     and a change in the exchange ratios for the affiliate companies, a
     reduction in the total amount of cash to be invested by UBA to $5.5 million
     and a reduction of UBA's percentage ownership position in UCB to 40%
     following the consolidation.  It is anticipated that the $2.75 million
     bridge loan amount will not be reduced.  The existing shareholders in the
     affiliated Companies would retain a 60% interest in UCB.  The exact
     distribution of ownership interests among shareholders of the affiliated
     companies has not yet been determined.  Management will soon seek Board
     approval by each of the affiliated companies of any renegotiated terms.
     Failure of the parties to reach a mutually agreeable renegotiated
     investment agreement could lead to a loss of the bridge loans and the
     remainder of the UBA investment which would materially and adversely affect
     the Company's financial condition and results of operations.  There can be
     no assurance that the proposed merger will be completed or that the Company
     will obtain the capital needed to sustain operations.


14.  RESTATEMENT OF FINANCIAL STATEMENTS

     The accompanying 1996 consolidated financial statements have been restated
     to revise the Company's share of the losses sustained by North Country
     Joint Venture, LLC, which was purchased by the Company in October 1996 from
     WVI, an affiliated company.  The effects of this restatement on the
     consolidated financial statements are summarized below:

                                                   AS OF AND FOR THE YEAR ENDED
                                                        DECEMBER 31, 1996
                                                  AS PREVIOUSLY
                                                      REPORTED       AS RESTATED
                                                  -------------   -------------
  Consolidated balance sheet:
     Receivables from affiliates                  $   1,575,853   $   1,798,350
     Retained earnings (accumulated deficit)         (2,506,808)     (2,284,311)

  Consolidated statement of operations:
     Selling, general and administrative expenses     4,768,056       4,545,559
     Net loss                                        (2,974,423)     (2,751,926)
     Net loss per share                                    (.80)          (0.74)



                                      F-22