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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, D.C. 20549
 Form 10-Q/A
  þ
    
    QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2005
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 for the transition period from  to
 COMMISSION FILE NUMBER 0-26542
 REDHOOK ALE BREWERY, INCORPORATED
  Washington
(State or other jurisdiction of
incorporation or organization)
    
    91-1141254
(I.R.S. Employer
Identification No.)14300 NE 145thStreet, Suite 210
Woodinville, Washington
(Address of principal executive offices)
    
    98072-9045
(Zip Code)
 (425) 483-3232
 þ o
 o þ
 o þ




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##### Table of Contents



Explanatory Note
   REDHOOK ALE BREWERY, INCORPORATED
 FORM 10-Q/A
 For The Quarterly Period Ended September 30, 2005
 TABLE OF CONTENTS
 PagePART I. Financial InformationITEM 1. Financial StatementsBalance Sheets as of September 30, 2005 and December 31, 2004
    
    
    3Statements of Operations for the Three and Nine Month Periods Ended September 30, 2005
and 2004
    
    
    4Statements of Cash Flows for the Nine Months Ended September 30, 2005 and 2004
    
    
    5Notes to Financial Statements
    
    
    6ITEM 2. Managements Discussion and Analysis of Financial Condition
and Results of Operations
    
    
    11ITEM 3. Quantitative and Qualitative Disclosures about Market Risk
    
    
    28ITEM 4. Controls and Procedures
    
    
    28PART II. Other InformationITEM 6. Exhibits
    
    
    28EXHIBIT 31.1EXHIBIT 31.2EXHIBIT 32.1EXHIBIT 32.2
 2




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PART I.
 
 ITEM 1. Financial Statements
 REDHOOK ALE BREWERY, INCORPORATED
 
 BALANCE
SHEETS
 September 30,
    
    
    December 31,2005
    
    
    2004(Restated; See Note 2)
    
    
    (Restated; See Note 2)ASSETSCurrent Assets:Cash and Cash Equivalents
    
    $
    5,321,293
    
    
    $
    5,589,621Accounts Receivable
    
    
    1,842,328
    
    
    
    1,123,475Trade Receivable from Craft Brands
    
    
    736,827
    
    
    
    398,707Inventories
    
    
    3,295,801
    
    
    
    3,000,309Other
    
    
    515,658
    
    
    
    506,328Total Current Assets
    
    
    11,711,907
    
    
    
    10,618,440Fixed Assets, Net
    
    
    61,227,336
    
    
    
    63,018,806Receivable from Craft Brands
    
    
    
    
    
    
    277,144Investment in Craft Brands
    
    
    154,986
    
    
    
    192,857Other Assets
    
    
    13,833
    
    
    
    20,977Total Assets
    
    $
    73,108,062
    
    
    $
    74,128,224LIABILITIES AND COMMON STOCKHOLDERS EQUITYCurrent Liabilities:Accounts Payable
    
    $
    2,185,589
    
    
    $
    1,815,380Trade Payable to Craft Brands
    
    
    371,311
    
    
    
    431,089Accrued Salaries, Wages and Payroll Taxes
    
    
    1,232,145
    
    
    
    1,220,248Refundable Deposits
    
    
    2,211,111
    
    
    
    2,526,088Other Accrued Expenses
    
    
    403,019
    
    
    
    515,123Current Portion of Long-Term Debt
    
    
    450,000
    
    
    
    450,000Total Current Liabilities
    
    
    6,853,175
    
    
    
    6,957,928Long-Term Debt, Net of Current Portion
    
    
    4,837,500
    
    
    
    5,175,000Deferred Income Taxes, Net
    
    
    699,798
    
    
    
    769,798Other Liabilities
    
    
    113,580
    
    
    
    64,903CommitmentsCommon Stockholders Equity:Common Stock, Par Value $0.005 per Share, Authorized, 50,000,000
Shares; Issued and Outstanding, 8,220,768 Shares in 2005 and
8,188,199 Shares in 2004
    
    
    41,104
    
    
    
    40,941Additional Paid-In Capital
    
    
    68,824,363
    
    
    
    68,761,766Retained Earnings (Deficit)
    
    
    (8,261,458
    )
    
    
    (7,642,112
    )Total Common Stockholders Equity
    
    
    60,604,009
    
    
    
    61,160,595Total Liabilities and Common Stockholders Equity
    
    $
    73,108,062
    
    
    $
    74,128,224
  3




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REDHOOK ALE BREWERY, INCORPORATED
 
 STATEMENTS OF OPERATIONS
 Three Months Ended September 30,
    
    
    Nine Months Ended September 30,2005
    
    
    2004
    
    
    2005
    
    
    2004Sales
    
    $
    9,497,771
    
    
    $
    8,789,773
    
    
    $
    26,563,961
    
    
    $
    29,623,658Less Excise Taxes
    
    
    946,680
    
    
    
    878,253
    
    
    
    2,681,531
    
    
    
    2,601,464Net Sales
    
    
    8,551,091
    
    
    
    7,911,520
    
    
    
    23,882,430
    
    
    
    27,022,194Cost of Sales
    
    
    7,429,086
    
    
    
    6,950,722
    
    
    
    20,754,426
    
    
    
    21,004,133Gross Profit
    
    
    1,122,005
    
    
    
    960,798
    
    
    
    3,128,004
    
    
    
    6,018,061Selling, General and Administrative Expenses
    
    
    1,905,135
    
    
    
    1,310,395
    
    
    
    5,299,473
    
    
    
    6,384,759Income from Equity Investment in Craft Brands
    
    
    673,606
    
    
    
    657,705
    
    
    
    1,624,604
    
    
    
    657,705Craft Brands Shared Formation Expenses
    
    
    
    
    
    
    (2,947
    )
    
    
    
    
    
    
    534,628Operating Income (Loss)
    
    
    (109,524
    )
    
    
    311,055
    
    
    
    (546,865
    )
    
    
    (243,621
    )Interest Expense
    
    
    71,882
    
    
    
    48,332
    
    
    
    198,796
    
    
    
    134,732Other Income (Expense)  Net
    
    
    20,555
    
    
    
    58,990
    
    
    
    84,893
    
    
    
    82,730Income (Loss) before Income Taxes
    
    
    (160,851
    )
    
    
    321,713
    
    
    
    (660,768
    )
    
    
    (295,623
    )Income Tax Provision (Benefit)
    
    
    9,578
    
    
    
    10,000
    
    
    
    (41,422
    )
    
    
    20,000Net Income (Loss)
    
    $
    (170,429
    )
    
    $
    311,713
    
    
    $
    (619,346
    )
    
    $
    (315,623
    )Basic Earnings (Loss) per Share
    
    $
    (0.02
    )
    
    $
    0.04
    
    
    $
    (0.08
    )
    
    $
    (0.05
    )Diluted Earnings (Loss) per Share
    
    $
    (0.02
    )
    
    $
    0.04
    
    
    $
    (0.08
    )
    
    $
    (0.05
    )
  4




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REDHOOK ALE BREWERY, INCORPORATED
 
 STATEMENTS OF CASH FLOWS
 Nine Months Ended September 30,2005
    
    
    2004Operating ActivitiesNet Income (Loss)
    
    $
    (619,346
    )
    
    $
    (315,623
    )Adjustments to Reconcile Net Income (Loss) to Net Cash
(Used in) Provided by Operating Activities:Loss on Disposal of Fixed Assets
    
    
    14,879
    
    
    
    Depreciation and Amortization
    
    
    2,194,505
    
    
    
    2,212,611Income from Equity Investment in Craft Brands in
Excess of Cash Distribution
    
    
    (19,755
    )
    
    
    (48,564
    )Deferred Income Taxes, Net
    
    
    (70,000
    )
    
    
    Net Change in Operating Assets and Liabilities
    
    
    (1,083,101
    )
    
    
    (300,950
    )Net Cash (Used in) Provided by Operating Activities
    
    
    417,182
    
    
    
    1,547,474Investing ActivitiesExpenditures for Fixed Assets
    
    
    (415,731
    )
    
    
    (76,991
    )Investment in Craft Brands
    
    
    
    
    
    
    (250,100
    )Note Receivable from Craft Brands
    
    
    
    
    
    
    (150,000
    )Other, Net
    
    
    4,961
    
    
    
    (3,750
    )Net Cash (Used in) Provided by Investing Activities
    
    
    (410,770
    )
    
    
    (480,841
    )Financing ActivitiesPrincipal Payments on Debt
    
    
    (337,500
    )
    
    
    (337,500
    )Issuance of Common Stock
    
    
    62,760
    
    
    
    260,300Net Cash (Used in) Provided by Financing Activities
    
    
    (274,740
    )
    
    
    (77,200
    )Increase (Decrease) in Cash and Cash Equivalents
    
    
    (268,328
    )
    
    
    989,433Cash and Cash Equivalents:Beginning of Period
    
    
    5,589,621
    
    
    
    6,123,349End of Period
    
    $
    5,321,293
    
    
    $
    7,112,782Issuance of 1,808,243 Shares of Common Stock to A-B
and $2,000,000 payable to A-B in Exchange for
1,289,872 Shares of Series B Preferred Stock Held by A-B
    
    $
    
    
    
    $
    16,232,655
  5




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REDHOOK ALE BREWERY, INCORPORATED
 
 NOTES TO FINANCIAL STATEMENTS
 1. Basis of Presentation
    2. Restatement of Financial Statements
  As of September 30, 2005As
Previously Reported
    
    
    As RestatedDeferred Income Taxes, Net
    
    $
    398,798
    
    
    $
    699,798Retained Earnings (Deficit)
    
    
    (7,960,458
    )
    
    
    (8,261,458
    )Total Common
Stockholders Equity
    
    
    60,905,009
    
    
    
    60,604,009Total Liabilities and Common
Stockholders Equity
    
    
    73,108,062
    
    
    
    73,108,062
 As of December 31, 2004As
Previously Reported
    
    
    As RestatedDeferred Income Taxes, Net
    
    $
    468,798
    
    
    $
    769,798Retained Earnings (Deficit)
    
    
    (7,341,112
    )
    
    
    (7,642,112
    )Total Common
Stockholders Equity
    
    
    61,461,595
    
    
    
    61,160,595Total Liabilities and Common
Stockholders Equity
    
    
    74,128,224
    
    
    
    74,128,224
 3. Inventories
  September 30,
    
    
    December 31,2005
    
    
    2004Raw materials
    
    $
    1,305,218
    
    
    $
    1,122,290Work in process
    
    
    1,023,393
    
    
    
    833,846Finished goods
    
    
    455,359
    
    
    
    350,543Promotional merchandise
    
    
    353,903
    
    
    
    480,338Packaging materials
    
    
    157,928
    
    
    
    213,292$
    3,295,801
    
    
    $
    3,000,309
  4. Craft Brands Alliance LLC
    6




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REDHOOK ALE BREWERY, INCORPORATED
 NOTES TO FINANCIAL STATEMENTS (Continued)
    Consolidation of
Variable Interest Entities  an Interpretation of ARB No. 51 The Equity Method of Accounting for Investments in Common Stock
   7




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REDHOOK ALE BREWERY, INCORPORATED
 NOTES TO FINANCIAL STATEMENTS (Continued)
     5. Refundable Deposits
  6. Convertible Redeemable Preferred Stock
  7. Common Stockholders Equity
  8. Earnings (Loss) per Share
 Earnings
per Share
 8




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REDHOOK ALE BREWERY, INCORPORATED
 NOTES TO FINANCIAL STATEMENTS (Continued)
    Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2005
    
    
    2004
    
    
    2005
    
    
    2004Basic earnings (loss) per share computation:Numerator:Net income (loss)
    
    $
    (170,429
    )
    
    $
    311,713
    
    
    $
    (619,346
    )
    
    $
    (315,623
    )Preferred stock accretion
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (22,200
    )Income (loss) available to common
stockholders
    
    $
    (170,429
    )
    
    $
    311,713
    
    
    $
    (619,346
    )
    
    $
    (337,823
    )Denominator:Weighted average common shares
    
    
    8,216,971
    
    
    
    8,181,966
    
    
    
    8,201,071
    
    
    
    6,906,812Basic earnings (loss) per share
    
    $
    (0.02
    )
    
    $
    0.04
    
    
    $
    (0.08
    )
    
    $
    (0.05
    )Diluted earnings (loss) per share computation:Numerator:Net income (loss)
    
    $
    (170,429
    )
    
    $
    311,713
    
    
    $
    (619,346
    )
    
    $
    (315,623
    )Preferred stock accretion
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (22,200
    )Income (loss) available
to common stockholders
    
    $
    (170,429
    )
    
    $
    311,713
    
    
    $
    (619,346
    )
    
    $
    (337,823
    )Denominator:Weighted average common shares
    
    
    8,216,971
    
    
    
    8,181,966
    
    
    
    8,201,071
    
    
    
    6,906,812Effect of dilutive securities:Series B convertible preferred stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Stock options, net
    
    
    
    
    
    
    292,456
    
    
    
    
    
    
    
    Denominator for diluted earnings (loss)
per share
    
    
    8,216,971
    
    
    
    8,474,422
    
    
    
    8,201,071
    
    
    
    6,906,812Diluted earnings (loss) per share
    
    $
    (0.02
    )
    
    $
    0.04
    
    
    $
    (0.08
    )
    
    $
    (0.05
    )
 9. Stock-Based Compensation
 Accounting for Stock Issued to Employees Accounting for Stock-Based Compensation
 9




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REDHOOK ALE BREWERY, INCORPORATED
 NOTES TO FINANCIAL STATEMENTS (Continued)
  Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2005
    
    
    2004
    
    
    2005
    
    
    2004Net income (loss), as reported
    
    $
    (170,429
    )
    
    $
    311,713
    
    
    $
    (619,346
    )
    
    $
    (315,623
    )Add: Stock-based employee
compensation expense as reported
under APB 25
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Less: Stock-based employee
compensation expense determined
under fair value based method for
all options, net of related tax
effects
    
    
    (36,595
    )
    
    
    (44,883
    )
    
    
    (70,110
    )
    
    
    (153,383
    )Pro forma net income (loss)
    
    $
    (207,024
    )
    
    $
    266,830
    
    
    $
    (689,456
    )
    
    $
    (469,006
    )Earnings (loss) per share:Basic  as reported
    
    $
    (0.02
    )
    
    $
    0.04
    
    
    $
    (0.08
    )
    
    $
    (0.05
    )Basic  pro forma
    
    $
    (0.03
    )
    
    $
    0.03
    
    
    $
    (0.08
    )
    
    $
    (0.07
    )Diluted  as reported
    
    $
    (0.02
    )
    
    $
    0.04
    
    
    $
    (0.08
    )
    
    $
    (0.05
    )Diluted  pro forma
    
    $
    (0.03
    )
    
    $
    0.03
    
    
    $
    (0.08
    )
    
    $
    (0.07
    )
 10




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ITEM 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
  Overview
     11




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Critical
Accounting Policies and Estimates
  Income Taxes. Accounting for Income Taxes
 12




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Long-Lived Assets. Accounting for the Impairment or Disposal of Long-Lived Assets
 Investment in Craft Brands Alliance LLC. Consolidation of Variable
Interest Entities  an Interpretation of ARB No. 51 The Equity Method of Accounting for Investments in Common Stock.
 13




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Revenue Recognition.
 Results of Operations
  Three Months Ended
    
    Nine Months EndedSeptember 30,
    
    September 30,2005
    
    2004
    
    2005
    
    2004Sales
    
    
    111.1
    %
    
    
    111.1
    %
    
    
    111.2
    %
    
    
    109.6
    %Less Excise Taxes
    
    
    11.1
    
    
    
    11.1
    
    
    
    11.2
    
    
    
    9.6Net Sales
    
    
    100.0
    
    
    
    100.0
    
    
    
    100.0
    
    
    
    100.0Cost of Sales
    
    
    86.9
    
    
    
    87.9
    
    
    
    86.9
    
    
    
    77.7Gross Profit
    
    
    13.1
    
    
    
    12.1
    
    
    
    13.1
    
    
    
    22.3Selling, General and Administrative Expenses
    
    
    22.3
    
    
    
    16.5
    
    
    
    22.2
    
    
    
    23.6Income from Equity Investment in Craft Brands
    
    
    7.9
    
    
    
    8.3
    
    
    
    6.8
    
    
    
    2.4Craft Brands Shared Formation Expenses
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2.0Operating Income (Loss)
    
    
    (1.3
    )
    
    
    3.9
    
    
    
    (2.3
    )
    
    
    (0.9
    )Interest Expense
    
    
    0.8
    
    
    
    0.6
    
    
    
    0.8
    
    
    
    0.5Other Income (Expense)  Net
    
    
    0.2
    
    
    
    0.8
    
    
    
    0.3
    
    
    
    0.3Income (Loss) before Income Taxes
    
    
    (1.9
    )
    
    
    4.1
    
    
    
    (2.8
    )
    
    
    (1.1
    )Income Tax Provision (Benefit)
    
    
    0.1
    
    
    
    0.2
    
    
    
    (0.2
    )
    
    
    0.1Net Income (Loss)
    
    
    (2.0
    )%
    
    
    3.9
    %
    
    
    (2.6
    )%
    
    
    (1.2
    )%
 14




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Three Months Ended September 30, 2005 Compared to Three Months Ended September 30, 2004
  Three Months EndedSeptember 30,
    
    
    Increase/
    
    
    %2005
    
    
    2004
    
    
    (Decrease)
    
    
    ChangeSales
    
    $
    9,497,771
    
    
    $
    8,789,773
    
    
    $
    707,998
    
    
    
    8.1
    %Less Excise Taxes
    
    
    946,680
    
    
    
    878,253
    
    
    
    68,427
    
    
    
    7.8Net Sales
    
    
    8,551,091
    
    
    
    7,911,520
    
    
    
    639,571
    
    
    
    8.1Cost of Sales
    
    
    7,429,086
    
    
    
    6,950,722
    
    
    
    478,364
    
    
    
    6.9Gross Profit
    
    
    1,122,005
    
    
    
    960,798
    
    
    
    161,207
    
    
    
    16.8Selling, General and Administrative Expenses
    
    
    1,905,135
    
    
    
    1,310,395
    
    
    
    594,740
    
    
    
    45.4Income from Equity Investment in Craft Brands
    
    
    673,606
    
    
    
    657,705
    
    
    
    15,901
    
    
    
    2.4Craft Brands Shared Formation Expenses
    
    
    
    
    
    
    (2,947
    )
    
    
    2,947
    
    
    
    100.0Operating Income (Loss)
    
    
    (109,524
    )
    
    
    311,055
    
    
    
    (420,579
    )
    
    
    (135.2
    )Interest Expense
    
    
    71,882
    
    
    
    48,332
    
    
    
    23,550
    
    
    
    48.7Other Income (Expense)  Net
    
    
    20,555
    
    
    
    58,990
    
    
    
    (38,435
    )
    
    
    (65.2
    )Income (Loss) before Income Taxes
    
    
    (160,851
    )
    
    
    321,713
    
    
    
    (482,564
    )
    
    
    (150.0
    )Income Tax Provision (Benefit)
    
    
    9,578
    
    
    
    10,000
    
    
    
    (422
    )
    
    
    (4.2
    )Net Income (Loss)
    
    $
    (170,429
    )
    
    $
    311,713
    
    
    $
    (482,142
    )
    
    
    (154.7
    )%Beer Shipped (in barrels)
    
    
    61,600
    
    
    
    57,100
    
    
    
    4,500
    
    
    
    7.9
    %
 Sales.
 Shipments
  15




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Pricing and Fees.
     Retail Operations and Other Sales
 Excise Taxes
 16




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##### Table of Contents



Cost of Sales.
 Widmer Hefeweizen Widmer Hefeweizen
 Selling, General and Administrative Expenses
 Income from Equity Investment in Craft Brands.
  Interest Expense.
 17




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Other Income (Expense) Net
 Income Taxes.
 Craft Brands Alliance LLC
 The Equity Method of Accounting for Investments in Common Stock Exhibits and Financial Statement Schedules
  Sales.
 Cost of Sales.
 Selling, General and Administrative Expenses
 Net Income
 18




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Nine Months Ended September 30, 2005 Compared to Nine Months Ended September 30, 2004
  Nine Months EndedSeptember 30,
    
    
    Increase/
    
    
    %2005
    
    
    2004
    
    
    (Decrease)
    
    
    ChangeSales
    
    $
    26,563,961
    
    
    
    29,623,658
    
    
    $
    (3,059,697
    )
    
    
    (10.3
    )%Less Excise Taxes
    
    
    2,681,531
    
    
    
    2,601,464
    
    
    
    80,067
    
    
    
    3.1Net Sales
    
    
    23,882,430
    
    
    
    27,022,194
    
    
    
    (3,139,764
    )
    
    
    (11.6
    )Cost of Sales
    
    
    20,754,426
    
    
    
    21,004,133
    
    
    
    (249,707
    )
    
    
    (1.2
    )Gross Profit
    
    
    3,128,004
    
    
    
    6,018,061
    
    
    
    (2,890,057
    )
    
    
    (48.0
    )Selling, General and Administrative Expenses
    
    
    5,299,473
    
    
    
    6,384,759
    
    
    
    (1,085,286
    )
    
    
    (17.0
    )Income from Equity Investment in Craft Brands
    
    
    1,624,604
    
    
    
    657,705
    
    
    
    966,899
    
    
    
    147.0Craft Brands Shared Formation Expenses
    
    
    
    
    
    
    534,628
    
    
    
    (534,628
    )
    
    
    (100.0
    )Operating Income (Loss)
    
    
    (546,865
    )
    
    
    (243,621
    )
    
    
    (303,244
    )
    
    
    124.5Interest Expense
    
    
    198,796
    
    
    
    134,732
    
    
    
    64,064
    
    
    
    47.5Other Income (Expense)  Net
    
    
    84,893
    
    
    
    82,730
    
    
    
    2,163
    
    
    
    2.6Income (Loss) before Income Taxes
    
    
    (660,768
    )
    
    
    (295,623
    )
    
    
    (365,145
    )
    
    
    123.5Income Tax Provision (Benefit)
    
    
    (41,422
    )
    
    
    20,000
    
    
    
    (61,422
    )
    
    
    (307.1
    )Net Income (Loss)
    
    $
    (619,346
    )
    
    $
    (315,623
    )
    
    $
    (303,723
    )
    
    
    96.2Beer Shipped (in barrels)
    
    
    174,800
    
    
    
    169,200
    
    
    
    5,600
    
    
    
    3.3
    %
 Sales.
 Shipments
  19




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##### Table of Contents



Pricing and Fees
     20




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##### Table of Contents



Retail Operations and Other Sales
 Excise Taxes
 Cost of Sales.
 Widmer Hefeweizen Widmer Hefeweizen
 Selling, General and Administrative Expenses
 Income from Equity Investment in Craft Brands.
 21




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##### Table of Contents



Craft Brands Shared Formation Expenses.
 Interest Expense.
 Other Income (Expense) Net
 Income Taxes
 Craft Brands Alliance LLC
  Sales.
 Cost of Sales.
 Selling, General and Administrative Expenses
 22




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##### Table of Contents



Net Income
 Liquidity and Capital Resources
      23




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##### Table of Contents



Required by
    
    
    Quarter EndedTerm Loan
    
    
    September 30, 2005(Restated; See Note 2)Greater thanTangible Net Worth
    
    $
    60,000,000
    
    
    $
    60,590,177Capital Ratio
    
    Less than: 1.25:1
    
    
    0.21:1Greater thanWorking Capital
    
    $
    1,900,000
    
    
    $
    4,858,733Fixed Charge Coverage Ratio
    
    Greater than 1.15:1
    
    
    1.754:1
 Certain Considerations: Issues and Uncertainties
  Relationship with Anheuser-Busch, Incorporated and Craft Brands Alliance LLC.
 24




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##### Table of Contents



Craft Brands Alliance LLC.
  Dependence on Distributors.
 Effect of Competition on Future Sales.
 Sales Prices.
 Dependence on Sales in Washington State
 25




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##### Table of Contents



Variability of Gross Margin and Cost of Sales.
 Advertising and Promotional Costs
 Customer Acceptance, Consumer Trends and Public Attitudes.
 26




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##### Table of Contents



Effect of Sales Trends on Brewery Efficiency and Operations Accounting for the Impairment or Disposal of Long-Lived Assets
 Income
Tax Benefits
  Recent Accounting Pronouncements
 Inventory Costs  an Amendment of ARB No. 43,
Chapter 4
 Share-Based Payment
 27




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##### Table of Contents



ITEM 3. Quantitative and Qualitative Disclosures about Market Risk
   
 ITEM 4. Controls and Procedures
    
 PART II.
 
 ITEM 6. Exhibits
  31.1
    
    Certification of Chief Executive Officer of Redhook Ale Brewery,
Incorporated pursuant to Exchange Act Rule 13a-14(a)31.2
    
    Certification of Chief Financial Officer of Redhook Ale Brewery,
Incorporated pursuant to Exchange Act Rule 13a-14(a)32.1
    
    Certification of Chief Executive Officer of Redhook Ale Brewery,
Incorporated pursuant to Exchange Act 13a-14(b) and 18 U.S.C. Section
135032.2
    
    Certification of Chief Financial Officer of Redhook Ale Brewery,
Incorporated pursuant to Exchange Act 13a-14(b) and 18 U.S.C. Section
1350
 28




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##### Table of Contents



SIGNATURES
  REDHOOK ALE BREWERY, INCORPORATEDMarch 31, 2006
    BY:  /s/ David J. MickelsonDavid J. MickelsonPresident,
Chief Financial Officer
 and Chief Operating OfficerMarch 31, 2006
    BY:   /s/ Lorri L. JonesLorri L. JonesController and Treasurer,
Principal Accounting Officer 29