As filed with the Securities and Exchange Commission on May __, 1996
Registration No. 33-95606
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
AMENDMENT NO. 2
FORM SB-2
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933

AVIATOR ALES, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
DELAWARE 2082 91-1633491
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD (IRS EMPLOYER
INCORPORATION OR ORGANIZATION) INDUSTRIAL CLASSIFICATION IDENTIFICATION
CODE NUMBER) NUMBER)

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

AVIATOR ALES, INC.
14316 N.E. 203RD STREET
WOODINVILLE, WA 98072
(206) 485-5432
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)

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

JACK W. SCHIFFERDECKER, JR.
ATER WYNNE HEWITT DODSON & SKERRITT
222 S.W. COLUMBIA, SUITE 1800
PORTLAND, OREGON 97201
(503) 226-1191

(Name, address, including zip code, and telephone number, including area code,
of agent for service)

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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon
as practicable after this Registration Statement becomes effective.

If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering.

/ /
--------------------------

If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement for the same offering.

/ /
--------------------------

If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box.
/ /
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CALCULATION OF REGISTRATION FEE

Title of each class of Proposed maximum offering Proposed maximum Amount of
securities to be registered Amount to be registered price per share aggregate offering price Registration Fee(1)
- --------------------------- ----------------------- ------------------------- ------------------------ -------------------

Shares of Common Stock, $.001
par value ("Common Stock") 820,000 $1.85 $1,517,000 $542

(1) Calculated pursuant to Rule 457.

THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
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AVIATOR ALES, INC.

CROSS REFERENCE SHEET

ITEM NO. CAPTION IN FORM SB-2 LOCATION IN PROSPECTUS
- -------- -------------------- ----------------------

1. Front of the Registration Statement and Outside Front Cover Page
of Prospectus . . . . . . . . . . . . . . . . . . . . . . . . . . . . Outside Front Cover Page
2. Inside Front and Outside Back Cover Pages of Prospectus . . . . . . . Inside Front and Outside Back Cover
Pages
3. Summary Information; Risk Factors . . . . . . . . . . . . . . . . . . Prospectus Summary; Risk Factors
4. Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . Use of Proceeds
5. Determination of Offering Price . . . . . . . . . . . . . . . . . . . Plan of Distribution
6. Dilution. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Dilution
7. Selling Securityholders . . . . . . . . . . . . . . . . . . . . . . . Not Applicable
8. Plan of Distribution. . . . . . . . . . . . . . . . . . . . . . . . . Plan of Distribution
9. Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . Business - Litigation
10. Directors, Executive Officers, Promoters and Control Persons. . . . . Management
11. Security Ownership of Certain Beneficial Owners and
Management. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Principal Shareholders
12. Description of Securities to be Registered. . . . . . . . . . . . . . Description of Common Stock
13. Interests of Named Experts and Counsel. . . . . . . . . . . . . . . . Not Applicable
14. Disclosure of Commission Position on Indemnification for Securities . Management - Director Indemnification and Act
Liabilities Limitation of Liability
15. Organization Within Last Five Years . . . . . . . . . . . . . . . . . Certain Transactions
16. Description of Business . . . . . . . . . . . . . . . . . . . . . . . Prospectus Summary; Historical and Planned
Operations; Business; Financial Statements
17. Management's Discussion and Analysis or Plan of Operation . . . . . . Business; Historical and Planned Operations;
Use of Proceeds
18. Description of Property . . . . . . . . . . . . . . . . . . . . . . . Business - Property
19. Certain Relationships and Related Transactions. . . . . . . . . . . . Certain Transactions
20. Market for Common Equity and Related Stockholder Matters. . . . . . . Description of Common Stock - Limitations on
Transfer of Shares
21. Executive Compensation. . . . . . . . . . . . . . . . . . . . . . . . Management - Director and Executive
Compensation
22. Financial Statements. . . . . . . . . . . . . . . . . . . . . . . . . Financial Statements
23. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosures . . . . . . . . . . . . . . . . . . . . . . Not Applicable

Prospectus [Company Logo]
AVIATOR ALES, INC.
(FORMERLY SEATTLE BREWING COMPANY)
14316 N.E. 203RD STREET
WOODINVILLE, WA 98072
(206) 485-5432
(800) 925-2739

820,000 SHARES OF COMMON STOCK

$1.85 PER SHARE

Aviator Ales, Inc. (the "Company") hereby offers 820,000 shares of the
Company's Common Stock (the "Shares") at a per share offering price of $1.85
(the "Offering"). The minimum subscription is 300 shares and the maximum
subscription is 30,000 shares unless waived by the Company. The offering prices
has been arbitrarily determined solely by the Company. See "Plan of
Distribution" for a description of the factors considered by the Company in
determining the offering price of the Shares. This Offering is a best-efforts,
self-underwritten offering; no broker-dealer has been retained to assist in the
sales effort. The Offering will terminate on or before May , 1997. The
Shares will be sold on a first come, first served basis, until all the Shares
are sold. There is no public market for the Shares and none is expected to
develop as a result of this Offering.

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
------------------

THIS OFFERING INVOLVES: SUBSTANTIAL RISKS CONCERNING THE COMPANY AND AN
INVESTMENT THEREIN INCLUDING LIMITED OPERATING HISTORY, IMMEDIATE SUBSTANTIAL
DILUTION, LACK OF PUBLIC MARKET FOR THE SHARES, AND CONTINUED CONTROL BY THE
COMPANY'S PARENT, WVI (SEE "RISK FACTORS BEGINNING ON PAGE HEREIN."). THE
COMPANY IS A DEVELOPMENT STAGE COMPANY. OFFERS ARE PERMITTED ONLY TO RESIDENTS
OF CERTAIN STATES WHO MEET CERTAIN QUALIFICATIONS (SEE "INVESTOR SUITABILITY").

Underwriting
Price to Discount and Proceeds to the
the Public Commissions (1) Company (2)
----------- ---------------- ----------------

Per Share . . . . $1.85 -- $1.85
Total Minimum (4) $ 650,000 $650,000
Total Maximum . . $1,517,000 -- $1,517,000

(1) The Shares will be offered and sold solely by the Company. No commissions
or other compensation will be paid to the officers of the Company in
connection with the Offering. No broker or dealer has been retained or is
under any obligation to purchase any Shares.

(2) Before deducting offering expenses payable by the Company estimated to be
$227,550 if all of the Shares are sold, including, among other expenses,
printing, mailing and marketing expenses and legal and accounting fees.

(3) Until a minimum of $650,000 worth of stock is sold (the "Minimum"), all
proceeds of the Offering will be held in an escrow account at First
Interstate Bank, N.A. (the "Escrow Account"). If the Minimum is not sold
by May __, 1997, the proceeds held in the Escrow Account shall be returned
to investors. If the Minimum is sold on or before May __, 1997, the
proceeds held in the Escrow Account will be disbursed to the Company and
the Escrow Account will be closed. After proceeds from the sale of the
Minimum are received and the Escrow Account is closed, the Company may
continue to sell Shares for the remaining term of the Offering and all the
proceeds from the sale of Shares will be paid directly to the Company.

THE DATE OF THIS PROSPECTUS IS MAY __, 1996.

TABLE OF CONTENTS
SUMMARY OF THE OFFERING. . . . . . . . . . . . . . . . . . . . . . . . . . 3
RISK FACTORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
INVESTOR SUITABILITY . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
USE OF PROCEEDS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
DILUTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
DIVIDEND POLICY. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
HISTORICAL AND PLANNED OPERATIONS. . . . . . . . . . . . . . . . . . . . . 21
BUSINESS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
MANAGEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
CERTAIN TRANSACTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
PRINCIPAL SHAREHOLDERS . . . . . . . . . . . . . . . . . . . . . . . . . . 58
DESCRIPTION OF COMMON STOCK. . . . . . . . . . . . . . . . . . . . . . . . 59
PLAN OF DISTRIBUTION . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
LEGAL MATTERS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
EXPERTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
ADDITIONAL INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . 64
FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . F-1

GLOSSARY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . G-1

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

AVIATOR ALES is a registered trademark of the Company. NOR'WESTER is a
registered trademark of Nor'Wester Brewing Company, Inc., TIMBERLINE is a
trademark of Mile High Brewing Company, and BAYHAWK is a trademark of Bayhawk
Ales, Inc.

SUMMARY OF THE OFFERING

The following summary is qualified in its entirety by, and should be read
in conjunction with, the more detailed information and financial statements
included elsewhere in this Prospectus.

THE COMPANY

Aviator Ales, Inc. (the "Company") was formed for the purpose of developing
and operating one or more breweries in Washington for the production of high
quality, hand-crafted ales for sale in bottle and draft. From 1990 to 1994, the
production of craft beer in Washington has experienced an average annual growth
rate of approximately 28%. In 1995, craft beer represented 8.7% of all beer
sold in Washington.

The Company has built a brewery (the "Brewery") in a leased industrial
building at 14316 N.E. 203rd Street in Woodinville, Washington. The Brewery
sits approximately two miles outside the proposed Woodinville Tourist District
where the Company has purchased a 1.3 acre parcel on which it plans to build a
pub and showcase brewing facility in the future. Woodinville is a city of
approximately 6,000 people located 20 miles northeast of Seattle. In recent
years, a cottage industry has developed in Woodinville of local vintners and
microbrewers, including Chateau Ste. Michelle Winery, Columbia Winery, Facelli
Winery, Paul Thomas Winery, Redhook Brewery and Silver Lake Sparkling Cellars.

The Company is a development stage company with a limited operating
history. The Company began brewing beer in August 1995 and began selling beer
in September 1995. Through March 31, 1996, the Company has generated total beer
sales of approximately $455,965. See "Risk Factors -- Limited Operating
History."

Since its organization in February 1994, the Company has successfully
undertaken the following steps, among others, to develop its business:

1. Constructed the Brewery in Woodinville in a leased industrial facility
and equipped it with (i) a 50 barrel brewhouse and fermentation tanks
currently capable of producing up to approximately 12,000 barrels per
year, and (ii) additional leasehold improvements to accommodate
equipment to increase potential annual production capacity to 125,000
barrels. See "Business - Brewing Facility."

2. Established a network of 43 independent distributors who distribute
the Company's beer throughout the state of Washington and in portions
of Idaho, Montana, Oregon and Alaska. In addition, the Company is in
the process of establishing distribution in California and Colorado
See "Business - Distribution."

3. Commenced production and sale of six distinct ales, including Hefe
Weizen, Amber Ale, Honey Brown Ale, Porter, India Pale Ale and Winter
Warmer with plans for the production of a berry weizen, and additional
ales as well. See "Business - Products."

4. Built a base of consumer owners by selling shares of the Company's
common stock in a public offering to approximately 3,100 record
shareholders. See "Business - Company Strategy - Consumer and
Shareholder Involvement" and "Business - Consumer Ownership."

5. Purchased a 1.3 acre parcel in the Woodinville Tourist District on
which the Company plans to construct a showcase brewing facility and
pub. See "Business - Brewing Facility."

OWNERSHIP AND AFFILIATED BREWERIES

James W. Bernau is the Company's President and Chairperson of its Board of
Directors. The Company was established, and is 51% owned, by Willamette Valley,
Inc. Microbreweries across America ("WVI"), a company formed by Mr. Bernau to
establish local craft breweries throughout the United States. Following
completion of the Offering and assuming all Shares are sold, WVI will own
approximately 44% of the Company's outstanding Common Stock.

In addition to the Company, WVI has established Mile High Brewing Company
in Denver, Colorado, producer of Timberline Ales ("Mile High Brewing") and
Bayhawk Ales, Inc. in Irvine, California, producer of Bayhawk-TM- Ales ("Bayhawk
Ales"). WVI is also in the process of establishing a brewery in Saratoga
Springs, New York, which will produce North Country-TM- Ales ("North Country
Brewery"). The North Country Brewery will be owned and operated as a joint
venture owned 61% by Nor'Wester Brewing Company, Inc. ("Nor'Wester") and 39% by
North Country Brewery, Inc., a wholly-owned subsidiary of WVI. The Company is
also affiliated with Nor'Wester, a craft brewery in Portland, Oregon that
produces and sells ales under the Nor'Wester-TM- label and with whom the Company
has a cooperative brewing agreement. See "Business -- Cooperative Brewing."
WVI, Mile High Brewing, Bayhawk Brewing, North Country

Brewery, and Nor'Wester are collectively referred to herein as the "Affiliated
Companies".

Each of the Affiliated Companies and Willamette Valley Vineyards, Inc.
("WVV"), a publicly-owned winery and vineyard near Salem, Oregon, is affiliated
with the Company in that James W. Bernau is also President and Chairperson of
the Board of Directors of each such affiliated company. For a description of
Mr. Bernau's background and his activities on behalf of the Company and its
affiliates , see "Management--Directors, Officers and Key Employees" and "--
Description of Mr. Bernau's and Mr. Tuski's Activities." Also see "Risk
Factors--Conflicts of Interest." Mr. Bernau is also a significant equity
owner of each Affiliated Company and of WVV either directly, as in the case of
Nor'Wester, WVI and WVV, in which Mr. Bernau owns interests of 27%, 62% and 31%,
respectively, or indirectly through his controlling interest in WVI, which in
turn owns a controlling interest in each of the Company (51%), Mile High Brewing
(51%), Bayhawk Brewing (57%) and North Country Brewery (100%). Each of the
Affiliated Companies was financed principally through local public stock
offerings similar to this Offering. Each of the Company, Nor'Wester, WVI, Mile
High Brewing, Bayhawk Brewing and WVV is subject to the periodic reporting
requirements of the Securities Exchange Act of 1934.

The Affiliated Companies have entered into a strategic alliance among one
another to promote and support the growth of each alliance member (the
"Alliance"). See "Business--Cooperative Brewing" and "Certain Transactions--
Strategic Alliance." Under the Alliance, each of the Affiliated Companies have
agreed to support the national expansion of Nor'Wester by cooperatively brewing
Nor'Wester beer for sale in targeted markets throughout the U.S. With the
exception of Nor'Wester's national expansion, each Alliance brewery is currently
focused on selling beer into its local market resulting in little competition
among the breweries. However, it is expected that competition among the
affiliates will increase as Nor'Wester proceeds with its expansion and as the
geographic market for the beer of other Alliance breweries expands into that of
another Alliance member.

The Company is a Delaware corporation. The mailing address and telephone
number for the principal offices of the Company are 14316 N.E. 203rd Street,
Woodinville, Washington 98072 (206) 485-5432, (800) 925-2739.

THE OFFERING

Common Stock Offered . . . . . . . 820,000 shares

Offering Price Per Share . . . . . $1.85.

Common Stock Outstanding
After the Offering . . . . . . . . 6,150,295 shares assuming that 820,000
shares are sold in the Offering.

Anticipated Use of Net
Proceeds (1) . . . . . . . . . . . $422,450 at the Minimum and $1,289,450
at the Maximum principally to provide
working capital, expand production
capacity and repay a loan from the
Company's parent, WVI. See "Use of
Proceeds."

Risk Factors . . . . . . . . . . . An investment in the Shares offered
hereby is subject to a high degree of
risk, including limited operating
history, immediate substantial dilution,
lack of a public market for the Shares
and continued effective control by WVI.
See "Risk Factors."

(1) After deducting $227,550 for estimated expenses payable by the Company in
connection with this offering, including among other expenses printing,
mailing and marketing expenses and legal and accounting fees.

This Offering is a best efforts self-underwritten offering sold directly by
the Company and not through an underwriter or broker. See "Plan of
Distribution".

RISK FACTORS

AN INVESTMENT IN THE COMPANY IS HIGHLY SPECULATIVE, AND SHOULD BE
CONSIDERED ONLY BY THOSE PERSONS WHO ARE ABLE TO AFFORD A LOSS OF THEIR ENTIRE
INVESTMENT. THE FOLLOWING SPECIFIC RISKS SHOULD BE CONSIDERED CAREFULLY IN
EVALUATING THE COMPANY AND ITS PROPOSED BUSINESS BEFORE PURCHASING SHARES OF
COMMON STOCK OFFERED BY THIS PROSPECTUS.

LIMITED OPERATING HISTORY. The Company was organized on February 14, 1994
completed its first public common stock offering in September 1994, completed
construction of its Brewery in August 1995, sold its first ales in September
1995, and has generated revenue from the sale of its beer of $455,965 through
March 31, 1996. The Company has expended significant resources constructing and
equipping its Brewery and developing distribution channels for its products.
The report of the Company's independent public accountants dated March 6, 1996,
issued in connection with the Company's audited financial statements as of
December 31, 1995 and 1994 and for the period from inception (February 14, 1994)
through December 31, 1995, includes an explanatory paragraph stating that there
is a substantial doubt about the Company's ability to continue as a going
concern. As a development stage company, the Company's operations are subject
to all the risks inherent in the establishment of a new business enterprise.
These include, but are not limited to, complications and delays frequently
encountered in connection with the development and introduction of new products,
the ability to recruit and retain accomplished management personnel,
competition, the need to expand production and distribution and the ability to
establish and sustain product quality.

EFFECTIVE CONTROL BY WVI. Upon completion of the Offering, WVI will own
between 48% and 44% of the Common Stock and will be a "controlling person" for
purposes of liability under Section 15 of the Securities Act of 1933. By virtue
of its stock ownership, WVI will be in a position to effectively control the
election of the Board of Directors of the Company and thereby control the
management, policies and operations of the Company. James W. Bernau is the
beneficial owner of approximately 62% of the outstanding common stock of WVI.
Thus, Mr. Bernau is in a position to elect and control the Board of Directors of
WVI and thereby control the management, policies and operations of WVI.

ARBITRARY OFFERING PRICE. There is no public trading market for the
Company's Common Stock, and the price of the Shares offered hereby bears no
relationship to the assets, book value, net worth

or any other recognized criteria of value of the Company. The offering price of
the Shares was determined arbitrarily by management of the Company, and should
not be considered as an indication of the actual value of the Company. In
determining the offering price, the Company considered, among other things, the
Company's limited operating history, its limited financial resources, its growth
and profit potential, the amount of dilution to investors in this Offering, and
the risk of investing in the Company.

DILUTION. Investors participating in this Offering will incur immediate
substantial dilution in the net tangible book value of their shares. See
"Dilution."

LACK OF PUBLIC MARKET. There is no public market for the Company's Common
Stock and a public market is not expected to develop as a result of this
Offering. Accordingly, an investor in the Shares may not be able to sell his or
her Shares readily, if at all, and therefore must be able to bear the economic
risk of the investment for an indefinite period of time. The Company's stock
will not be quoted on Nasdaq or in the "pink sheets" or on the Over-the-Counter
Bulletin Board.

The Company intends to apply for listing of its Common Stock on the Nasdaq
SmallCap Market if and when the Company grows and meets Nasdaq SmallCap Market
listing requirements. The Company will not meet these listing requirements at
the completion of the Offering and no assurance can be given as to when or
whether the Company's Common Stock will qualify for listing on Nasdaq. For a
description of the minimum requirements for listing on the Nasdaq SmallCap
Market, see "Description of Common Stock - Limitations on Transfer of Shares."
If obtained, a Nasdaq listing provides no assurance that an active and liquid
trading market will develop or, if one does develop, that it will be sustained.

Further, if the Company's Common Stock were to qualify for Nasdaq listing
but trade at a price of less than $5.00, the stock would be subject to the
federal "penny stock" rules. These rules require a broker-dealer, prior to a
transaction in a penny stock not otherwise exempt from the rules, to deliver a
standardized risk disclosure document prepared by the Securities and Exchange
Commission that provides information about penny stocks and the nature and level
of risks in the penny stock market. The broker-dealer also must provide the
customer with bid and offer quotations for the penny stock, the compensation of
the broker-dealer and its salesperson in the transaction, and monthly account
statements showing the market value of each penny stock held in the customer's
account. In addition, the penny stock rules require that prior to a transaction
in a penny stock not otherwise exempt from such rules, the broker-dealer must
make a special written determination

that the penny stock is a suitable investment for the customer and receive the
customer's written agreement to the transaction. These disclosure requirements
may have the effect of reducing the level of trading activity in the secondary
market for a stock that becomes subject to the penny stock rules.

POSSIBLE LIABILITY RESULTING FROM FACILITATION OF TRADING MARKET IN COMPANY
SHARES. In connection with maintaining an informal trading market for the
Company's shares following completion of the Company's first public common stock
offering registered for sale under the Securities Act of 1933 on August 5, 1994
and completed on September 28, 1994, the prospectus for such offering included
the following statement: "The Company intends to facilitate trading [of its
shares] by making available to existing and potential shareholders the names and
addresses of persons interested in buying and selling the shares" (the
"Prospectus Statement"). The Company is unable to conclude with certainty that
the Prospectus Statement is not a solicitation of an offer to sell a security
requiring registration under Section 5 the Securities Act of 1933. If the
Prospectus Statement constitutes a solicitation of a nonregistered offer to sell
the Company's shares, the Company could be liable to purchasers who bought
shares in the informal trading market as a result of the Prospectus Statement.
The Company has determined that from the completion date of the offering through
March 31, 1996, a total of 43 persons have purchased 68,835 shares in the
informal trading market at an aggregate purchase price of $131,360. Assuming
that all 43 transactions resulted from the purchaser's awareness of the
Prospectus Statement, the Company could be liable for the entire $131,360 should
such purchasers bring suit against the Company seeking rescission of their
investment.

DEPENDENCE UPON OFFERING FOR NEAR-TERM OPERATIONS AND FURTHER EXPANSION.
The Company has accelerated its expansion plans by building a brewing facility
with a larger potential production capacity than initially planned. See "Plan
of Operations." As a result, the Company presently has limited working capital
and is dependent upon the proceeds from the Offering to provide sufficient
working capital to finance its near-term operations. Furthermore, the Company
is dependent upon the proceeds from the Offering to finance the planned increase
in the Brewery's annual fermentation capacity to 39,000 barrels. See "Use of
Proceeds."

LARGE PRODUCTION CAPACITY; DISTRIBUTION RISK. Currently, the Brewery has
an annual production capacity of approximately 12,000 barrels with planned
expansion to 39,000 barrels with proceeds from this Offering. The Company began
selling its craft beers through its network of distributors in Washington,
Idaho, Montana and Alaska in September 1995 and is currently producing and
selling beer at an annualized rate of approximately 5,750 barrels, below

its planned production capacity of approximately 39,000 barrels. Monthly beer
sales have increased from $10,345 in September 1995 to approximately $101,500 in
March 1996. However, the Company's sales history is too short to provide a
reliable indication of demand for the Company's products and there can be no
assurance that the Company will successfully penetrate its targeted microbrewed
beer markets to the extent necessary to utilize the Brewery's existing, let
alone expanded, production capacity.

DEPENDENCE ON THIRD-PARTY DISTRIBUTORS. Like most craft brewers, the
Company relies heavily on third-party distributors for the sale of its products.
The Company currently has distribution contracts with 43 independent
distributors servicing Washington, Idaho, Montana and Alaska. See "Business -
Distribution." The Company's most significant distributor, K & L Distributors,
Inc., which is responsible for distribution in the Seattle area, accounted for
approximately 54% of the Company's wholesale beer sales during 1995. The
Company estimates that K & L Distributors, Inc. will continue to account for a
significant percent of its wholesale revenues in the near future. The loss of
this distributor would have a material adverse effect on the Company's business,
financial condition and results of operations.

The Company's distributors often represent competing specialty beer brands,
as well as national beer brands, and are to varying degrees influenced by their
continued business relationships with other brewers. The Company's independent
distributors may be influenced by a large brewer if they rely on that brewer for
a significant portion of their sales. While the Company believes that its
relationships with its distributors are good, the relationships are relatively
new and untested and there can be no assurance that the Company's distributors
will continue to effectively market and distribute the Company's beer. The loss
of distributors or the inability to replace a poorly performing distributor in a
timely fashion could have a material adverse effect on the Company's business.

In October 1994, one of the Company's major competitors, Redhook Ale
Brewery ("Redhook"), established a "distribution alliance" with Anheuser-Busch,
Incorporated ("A-B"), which owns a 25% interest in Redhook. This alliance
purports to give Redhook access to A-B's domestic network of over 700 wholesale
distributors, including many of the Company's distributors. The independent
distributors through whom the Company markets its products are neither owned
nor controlled by A-B. However, many of the Company's distributors also carry
Redhook products. While the A-B/Redhook alliance is the first of its kind
between a craft brewer and a major industrial brewery, it has had no discernable
affect on the interest of the Company's distributors in selling the

Company's products. However, the Company is unable to predict whether the A-
B/Redhook alliance represents a market trend or what effects, if any, such
arrangements might have on the Company or the craft beer industry in general.

DEPENDENCE ON KEY PERSONNEL. The Company's success is substantially
dependent on the services of James W. Bernau, the Company's President and
Secretary, Brad J. Tuski, the Company's Vice President, and Dusty Wyant, the
Company's General Manager. Mr. Bernau holds similar executive positions with
Nor'Wester, WVI, MHBC, Bayhawk Brewing, North Country Brewery and WVV. Pursuant
to his Employment Agreement with Nor'Wester, Mr. Bernau is required to spend at
least 70% of his time performing services for Nor'Wester. In 1996, it is
expected that Mr. Bernau will spend approximately 5% of his time performing
services for the Company. Mr. Tuski is the Chief Operating Officer of WVI and a
Vice President of MHBC, Bayhawk Brewing and North Country Brewery. In 1996, it
is expected that Mr. Tuski will spend approximately 25% of his time performing
services for the Company. Mr. Wyant works full-time for the Company. See
"Management -- Description of Mr. Bernau's and Mr. Tuski's Activities." Loss of
the services of Mr. Bernau, Mr. Tuski or Mr. Wyant or any other key management
employee could have a material adverse effect on the Company's business,
financial condition and results of operations. The Company does not have
employment agreements with any of its key employees other than Mr. Wyant and
does not maintain key man life insurance policy for any of its key employees.

CONFLICTS OF INTEREST. Due to the relationships between the Company and
the Affiliated Companies both contractually and as a result of Mr. Bernau's
common ownership interests in, and management positions with, these companies,
conflicts of interest exist. Because of Mr. Bernau's interest in these
companies, he would have an inherent conflict of interest in negotiating the
terms of any contractual arrangements between the companies, including those
relating to the Alliance. All agreements relating to the Alliance have been
approved by a majority of the disinterested members of the boards of directors
of the Company, Nor'Wester and WVI, with Mr. Bernau participating in the
discussion, but abstaining from voting. With respect to future material
transactions with affiliates, including transactions with Alliance members, the
Company has established procedures for the review and approval of such
transactions by a committee of disinterested members of the Company's Board of
Directors. The Company has been advised that the other Alliance member
companies have established or intend to establish similar procedures and
committees. The Company and Mr. Bernau intend to comply with the requirements
of applicable law as to the consideration of related

party or "interested" transactions. See "Certain Transactions --Future
Transactions."

LIMITED PURPOSE. The Company was organized for the purpose of developing
and operating one or more craft breweries in Washington. Although the Company
expects to distribute its products throughout Washington and other western
states, if the Company desires to pursue other lines of business, or develop and
operate craft breweries outside of Washington, shareholder approval would be
required. There could be no assurance that such approval could be obtained
particularly since WVI will continue to own between 48% and 44% of the Company's
outstanding common stock after completion of the Offering.

COMPETITION. The Company has targeted a regional market for its products,
including the Western states (Washington, Idaho, Montana, Oregon, California and
Alaska). The beer industry is highly competitive and the Company expects
competition in the craft brewing segment of the industry to increase. The
Company's Brewery will compete with both domestic and foreign industrial
breweries as well as microbreweries (including those of the Affiliated
Companies) and brewpubs that produce and sell craft beer in the Company's
targeted markets. All industrial breweries and many regional specialty
breweries have significantly greater financial, production, distribution and
marketing resources than the Company. There can be no assurance that the
Company will be successful in penetrating its targeted market to the extent
necessary to become profitable. See "Business - Competition."

GROWTH OF THE MICROBREWING INDUSTRY. The sale and consumption of
microbrewed beer has increased dramatically over the past several years. There
can be no assurance that the demand for microbrewed beer will continue to grow
at the present rate or at all, or that circumstances could develop to cause the
demand for microbrewed beer to diminish. To meet the increasing demand for
microbrewed beer, new breweries, like the Company's, are being developed and
existing breweries are significantly increasing their production capacities. If
the demand for microbrewed beer does not keep up with increases in supply, the
Company's brewery will face heightened competition and may not be able to sell
sufficient quantities of its products to achieve profitability.

GOVERNMENT REGULATION; TAXATION. The manufacture and sale of alcoholic
beverages is a business that is highly regulated and taxed at the federal, state
and local levels. The Company's operations may be subject to more restrictive
regulations and increased taxation by federal, state and local governmental
agencies than are those of non-alcohol related businesses. For instance,
operation of the Brewery and the planned pub requires various federal, state and
local licenses, permits and approvals.

The loss or revocation of any existing licenses, permits or approvals, failure
to obtain any additional or new licenses, permits or approvals or the failure to
obtain approval for the transfer of any existing permits or licenses could have
a material adverse effect on the ability of the Company to conduct its business.
Furthermore, U.S. Treasury Department, Bureau of Alcohol, Tobacco and Firearms
("BATF") regulations prohibit, among other things, the payment of beer slotting
allowances to retailers. These regulations have the effect of preventing
competitors with greater financial resources from excluding smaller brewers from
retailers. Any repeal or substantial modification of these regulations could
have a material adverse effect on the Company's business, financial condition
and results of operations. Federal and state "tied-house" laws and regulations
prevent or restrict, to varying degrees, ownership or partial ownership by
brewers of beer retailers. If these laws or regulations were repealed or
substantially modified, there would likely be a material adverse effect on the
Company's business, financial condition and results of operations. In addition,
if federal or state excise taxes are increased, the Company may have to raise
prices to maintain present profit margins. The Company does not believe that a
price increase due to increased taxes will necessarily result in reduced unit
sales, but the actual effect will depend on the amount of any increase, general
economic conditions and other factors. Regardless, there can be no assurance
that higher taxes will not reduce overall demand for beer, thus negatively
impacting sales of the Company's products. See "Business -- Regulation."

DRAM SHOP LIABILITY. The serving of alcoholic beverages to a person known
to be intoxicated may, under certain circumstances, result in the server being
held liable to third parties for injuries caused by the intoxicated customer.
The Company sells beer to its customers at the Brewery and will serve beer and
wine to customers of the Planned Showcase Brewpub. If an intoxicated customer
is served beer or wine and subsequently commits a tort such as causing an
automobile accident, the Company may be held liable for damages to the injured
person or persons. The Company has obtained host liquor liability insurance
coverage and will continue such coverage if available at a reasonable cost.
Even though such coverage is available at a reasonable cost, future increases in
premiums may make it prohibitive for the Company to maintain adequate insurance
coverage. In addition, a large damage award against the Company, not adequately
covered by insurance, could adversely affect the Company's financial condition
and results of operation.

SINGLE PRODUCTION FACILITY AND UNINSURED LOSSES. The Company owns and
operates one production facility for which it has obtained comprehensive
insurance, including liability, fire and extended coverage, as is customarily
obtained for businesses similar to the Company. Certain types of losses of a
catastrophic

nature, however, such as losses resulting from floods, tornadoes, thunderstorms
and earthquakes, are either uninsurable or not economically insurable to the
full extent of potential losses. Such "Acts of God," work stoppages, regulatory
actions or other causes, could interrupt production and adversely affect the
Company's business and results of operations.

DEPENDENCE ON CERTAIN SUPPLIERS. The Company relies upon a limited number
of suppliers of raw materials used to make and package the Company's beers.
Although to date the Company has been able to obtain adequate supplies of these
ingredients and other raw materials in a timely manner from existing sources, if
the Company were unable to obtain sufficient quantities of ingredients or other
raw materials, delays or reductions in product shipments could occur which would
have a material adverse effect on the Company's business, financial condition
and results of operations. As with most agricultural products, the supply and
price of raw materials used to produce the Company's beers can be affected by a
number of factors beyond the control of the Company, such as frosts, droughts,
other weather conditions, economic factors affecting growing decisions, various
plant diseases and pests. If any of the foregoing were to occur, no assurance
can be given that such conditions would not have a material adverse effect on
the Company's business, financial condition and results of operations. In
addition, the Company's results of operations are dependent upon its ability to
accurately forecast its requirements of raw materials. Any failure by the
Company to accurately forecast its demand for raw materials could result in the
Company either being unable to meet higher than anticipated demand for its
products or producing excess inventory, either of which may adversely affect the
Company's results of operations.

ENERGY AND SUPPLY SHORTAGES AND ALLOCATIONS. Shortages or increased costs
of fuel, water, raw materials, power, or allocations by suppliers or
governmental regulatory bodies, could restrict the operations of the
microbrewery, or otherwise adversely affect the ability of the Company to meet
its objectives.

OPERATING HAZARDS. The Company's operations are subject to certain hazards
and liability risks faced by all brewers, such as potential contamination of
ingredients or products by bacteria or other external agents that may be
wrongfully or accidentally introduced into products or packaging. The Company's
products are not pasteurized. While the Company has never experienced a
contamination problem in its products, the occurrence of such a problem could
result in a costly product recall and serious damage to the Company's reputation
for product quality. The Company's operations also subject employees and others
to certain injury and liability risks normally associated with the operation and
possible malfunction of brewing and other equipment. Although the Company

maintains insurance against certain risks under various general liability and
product liability insurance policies, no assurance can be given that the
Company's insurance will be adequate to fully cover any incidents of product
contamination or injuries resulting from brewery operations.

PUBLIC ATTITUDES. The alcoholic beverage industry has become the subject
of considerable societal and political attention in recent years due to
increasing public concern over alcohol-related social problems including drunk
driving, underage drinking and health consequences from the misuse of alcohol,
including alcoholism. As an outgrowth of these concerns, the possibility exists
that advertising by beer producers would be restricted, that additional
cautionary labeling or packaging requirements might be imposed or that there may
be renewed efforts to impose increased excise or other taxes on beer sold in the
United States. No assurance can be given that any decrease in beer consumption,
particularly in the craft beer segment, or increase in governmental regulations
relating to the domestic beer industry would not have a material adverse effect
on the Company's business, financial condition and results of operations.

ABSENCE OF DIVIDENDS. The Company has not declared or paid cash dividends
on its Common Stock. The Company does not anticipate paying cash dividends with
respect to the Common Stock in the foreseeable future.

INVESTOR SUITABILITY

Investment in the shares involves significant risks and is suitable only
for persons who have no need for immediate liquidity in their investment and who
can bear the economic risk of a loss of their entire investment. See "Risk
Factors." Only residents of the states of Washington, Oregon and such other
states in which the Company may choose to register this Offering under
applicable securities or Blue Sky laws may purchase the Shares offered hereby.
Each subscriber will be required to execute a Subscription Agreement which,
among other things, requires the subscriber to certify his or her state of
residence. A subscriber who is a resident of a state other than a state in
which the Shares have been qualified for sale may request that the Company
register the Shares in the state in which such subscriber resides. However, the
Company is under no obligation to do so, and may refuse any such request.

USE OF PROCEEDS

If this offering is fully subscribed, the net proceeds from the sale of
shares offered hereby will be approximately $1,289,450 after deducting estimated
offering expenses of $227,550. If only the Minimum number of shares are sold,
the net proceeds will be approximately $422,450 after deducting estimated
offering expenses of $227,550. The anticipated use of proceeds at the Minimum
and Maximum offering levels, in order of priority, is as follows:

IF MINIMUM IF MAXIMUM
AMOUNT IS SOLD % AMOUNT IS SOLD %
-------------- ---- -------------- ----

Total Proceeds . . . . . $ 650,000 100% $1,517,000 100%

Less: Offering
Expenses, including
legal, accounting,
printing and
advertising (1). . . . .
227,550 35% 227,550 15%
---------- ---- ---------- ----
Net Proceeds from
Offering . . . . . . . . $ 422,450 65% $1,289,450 85%
---------- ---- ---------- ----
---------- ---- ---------- ----
Use of Net Proceeds

Working Capital. . . . . $ 242,450 57% 719,450 77%

Fermentation /
Conditioning Tanks and
Brewing Equipment. . . . 130,000 31% 330,000 19%

Repay Loan from Parent . 50,000 12% 240,000 4%
---------- ---- ---------- ----
Total Use of Net
Proceeds . . . . . . . . $ 422,450 100% $1,289,450 100%
---------- ---- ---------- ----
---------- ---- ---------- ----

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

1 Also includes $3,783 at the Minimum and $8,829 at the Maximum in estimated
costs associated with purchase of the Shares by investors through the use
of credit cards.

DESCRIPTION OF THE USE OF PROCEEDS

WORKING CAPITAL. The Company plans to use $242,500 at the Minimum and
$719,450 at the Maximum to purchase raw materials, including brewing ingredients
and packaging materials, and to pay for selling and marketing expenses, rent,
general overhead, and administrative expenses that management believes are in
the best interests of the Company.

FERMENTATION/CONDITIONING TANKS. The Company plans to use $130,000 at the
Minimum and $33,000 at the Maximum to purchase and install 150-barrel uni-tanks
which serve as both fermentation and conditioning tanks. This will increase the
Company's annual fermentation capacity from approximately 12,000 barrels to
27,000 barrels at the Minimum and 39,000 barrels at the Maximum. If the Maximum
is raised, the Company plans to purchase and install miscellaneous brewing
equipment at a cost of approximately $30,000.

REPAYMENT OF LOAN FROM PARENT COMPANY. The Company has borrowed $240,000
from its parent corporation, WVI, to fund its working capital needs until
sufficient proceeds from the Offering are raised. At the Maximum, the Company
will repay the entire loan. At the Minimum, the Company will repay $50,000 of
the loan. Any principal amount not repaid following completion of the Offering
will be evidenced by a promissory note payable to WVI. For a description of the
terms of the loan and the promissory note to WVI, see "Certain Transactions."

The preceding description represents the Company's best estimate of its
expected use of the net offering proceeds based upon its present plans.
However, events may require changes, and the Company reserves the right to make
changes in the use of proceeds if, in management's opinion, it is in the best
interests of the Company. For example, following completion of the Company's
first public stock offering in September 1994, management elected to increase
the Brewery's maximum production capacity and develop a new facility capable of
accommodating a larger brewery. This resulted in a change of the use of
proceeds in that offering from the stated use of proceeds in the prospectus for
that offering. See "Historical and Planned Operations - - Capital
Expenditures."

DILUTION

The net tangible book value of the Company as of March 31, 1996 was
$1,907,812 or approximately $.36 per share of Common Stock. See "Certain
Transactions." Net tangible book value per share represents the amount of the
Company's shareholders' equity less intangible assets, divided by the number of
shares of Common Stock outstanding. As of March 31, 1996, the Company had
intangible assets valued at $4,829. Net tangible book value per share dilution
represents the difference between the amount per share paid by purchasers of
Shares in the Offering and the proforma net tangible book value per share after
the Offering.

The following table sets forth at both the Minimum and Maximum levels of
this Offering as of March, 1996, the difference between the Company's initial
shareholder, WVI, other existing shareholders and persons purchasing Shares in
this Offering at $1.85 per share with respect to the number of Shares purchased
from the Company, the total consideration paid, and the average price per share
paid.

SALE OF MINIMUM NUMBER OF SHARES

Shares Issued Total Consideration Price
------------- ------------------- Per
Number Percent Amount Percent Share
------ ------- ------ ------- -----

WVI . . . . . . . . . . 2,715,584 47.8% $ 100,000 2.8% $0.04

Other Existing
Shareholders . . . . . . 2,614,771 46.0% $2,870,000 79.3% $1.10

New Investors . . . . . 351,351 6.2% $650,000 17.9% $1.85
--------- ------ ---------- ------
Total. . . . . . . . . 5,681,646 100.0% $3,620,000 100.0%
--------- ------ ---------- ------
--------- ------ ---------- ------

SALE OF MAXIMUM NUMBER OF SHARES

Shares Issued Total Consideration Price
------------- ------------------- Per
Number Percent Amount Percent Share
------ ------- ------ ------- -----

WVI . . . . . . . . . . 2,715,584 44.2% $ 100,000 2.2% $0.04

Other Existing
Shareholders . . . . . . 2,614,771 42.5% $2,870,000 64.0% $1.10

New Investors . . . . . 820,000 13.3% $1,517,000 33.8% $1.85
--------- ------ ---------- ------
Total. . . . . . . . . 6,150,355 100.0% $4,487,000 100.0%
--------- ------ ---------- ------
--------- ------ ---------- ------

After giving effect to the sale by the Company of 351,351 Shares (Minimum)
and 820,000 Shares (Maximum) at purchase price of $1.85 per share the proforma
net tangible book value of the Company, the increase in net tangible book value
to the existing shareholder and the decrease in net tangible book value to
purchasers of Shares in the Offering are summarized in the following table:

Minimum Maximum
Proceeds Proceeds
-------- --------

Average offering price per share: $ 1.85 $ 1.85

Net tangible book value per share at
March 31, 1996: .36 .36

Net tangible book value increase to
existing shareholders .05 .16

Proforma net tangible book value per share
after the offering: .41 .52

Net tangible book value decrease (dilution)
to purchasers of shares in the offering: (1.44) (1.33)

DIVIDEND POLICY

The Company has not paid any dividends on its stock. The Company does not
expect to declare any dividends in the near future, but instead to retain
earnings, if any, in order to provide for the development and expansion of the
Company's business. Any future payment of dividends will depend on the
Company's earnings, capital requirements, financial condition, and other
relevant factors.

HISTORICAL AND PLANNED OPERATIONS

CAPITAL EXPENDITURES

The Company was organized in February 1994, completed its first public
common stock offering in September 1994, completed construction of its
Brewery in August 1995, and sold its first ales in September 1995. The
Company's working capital and the costs of leasehold improvements and
equipment for the Brewery have been funded principally by (i) $100,000
received from the sale of 4,845,455 shares of the Company's common stock to
its parent company, WVI, in February 1994 (2,129,871 shares of the 4,845,455
shares originally purchased by WVI have been returned to the Company. See
"Certain Transactions."), (ii) $2,474,240 in net proceeds from the sale of
2,609,091 shares of common stock in the Company's first public stock
offering, and (iii) $240,000 borrowed from WVI.

Proceeds from the Company's first public offering were intended to be used
to (i) purchase 1.3 acres of property in the Woodinville Tourist District and
construct a building a brewery and pub, (ii) purchase and install a 25-barrel
brewhouse with fermentation tanks capable of producing up to 14,000 barrels
of draft beer annually, and (iii) fund the Company's working capital needs.

Following completion of the first offering, however, two developments
occurred. First, the Company encountered unanticipated delays in the building
permitting process for its property in the Woodinville Tourist District.
Second, the Company decided to significantly increase the production capacity
of its brewing facility from 50,000 to 125,000 barrels. As a result, the
Company decided to develop a two-site strategy calling for the construction
of a smaller showcase brewery and pub on its existing property (the "Planned
Showcase Brewery") and a much larger production-only facility at a location
that could accommodate the brewing and bottling equipment necessary to
support the increased production (i.e. the Brewery). Due to the lengthy
delays in the permitting process for the Planned Showcase Brewery, the
Company elected to establish the larger production-only facility first.

In August 1995, the Company completed construction of the Brewery
consisting of a 50-barrel brewhouse in a 19,000 square foot leased facility
and began brewing beer. The Brewery has a current annual production capacity
of approximately 12,000 barrels and a planned capacity of 125,000 barrels.
The Brewery is located in an industrial complex in Woodinville, approximately
two miles northwest of the Company's existing property. The Company has
retained its property in the Woodinville Tourist District and

intends to construct the Planned Showcase Brewery on that site with cash from
operatiing revenue and/or bank borrowings. No timetable for construction of
the Planned Showcase Brewery currently exists.

As a result of the decision to build the larger brewery first, a portion of
the proceeds from the first offering initially earmarked for items (i) and
(iii) above, were reallocated to pay for a larger brewhouse and more costly
leasehold improvements associated with a larger facility. The leasehold
improvements will enable the Brewery to grow to a maximum annual brewing
capacity of 125,000 barrels when an option to lease additional space adjacent
to the Brewery is exercised and additional brewing equipment, fermentation
and conditioning tanks are purchased and installed. Proceeds from the first
offering were also reallocated to enable the Company to bottle its beer by
purchasing a high-speed bottling line rather than bottling its products
through its parent corporation, WVI, as originally planned. On-site bottling
capability gives the Company greater quality control and the ability to
better schedule production to meet demand. It also reduces transportation
costs and makes the Brewery a complete, stand-alone production facility.
Expanding capacity and developing a two-site strategy has resulted in the
need to raise additional capital through this Offering.

PLAN OF OPERATIONS

The Company is currently producing and selling beer at an annualized rate
below its current production capacity of approximately 12,000 barrels.
Monthly beer sales have increased from $10,345 in September 1995 to
approximately $101,500 in March 1996. However, the Company's sales history
is too short to provide a reliable indication of demand for the Company's
products.

In January 1996, the Company became party to a strategic alliance among
each of the Affiliated Companies. The Alliance was formed for the purpose of
promoting and supporting the growth of

each Alliance member. Under the Alliance, the Company will cooperatively
brew Nor'Wester beer for sale to distributors serving west coast markets.
The expected increase in production related to cooperative brewing will more
fully utilize the Company's production facility, resulting in lower overall
production costs for the Company's own products. Due to the combined efforts
of the Company and Alliance members, the Company also expects to experience a
reduction in sales and marketing costs as a percentage of revenue. In
addition, the Company believes that offering Nor'Wester beer with the
Company's beer will allow the Company's sales staff to present a variety of
complementary beer styles to distributors and retailers.

If the Minimum is sold, the net proceeds, after deducting offering
expenses, will be used to (i) fund working capital to sustain the Company's
operations for 12 months, (ii) purchase additional fermentation and
conditioning tanks to increase production capacity to 27,000 barrels, and
(iii) repay $50,000 of a $240,000 loan from the Company's parent, WVI. If
the Maximum is sold, in addition to the above uses, the net proceeds, will be
used to (i) provide a greater amount of working capital, (ii) purchase
additional fermentation and conditioning tanks to increase production
capacity to 39,000 barrels and purchase other miscellaneous brewing
equipment, and (iii) repay the entire $240,000 loan from WVI. For a
discussion of the priority in which the proceeds will be allocated, see "Use
of Proceeds."

The Company expects that proceeds from this Offering will be used over a
12-month period and will result in an increase in the Brewery's annual
fermentation capacity to 27,000 barrels if the Minimum is sold and 39,000
barrels if the Maximum is sold. Thereafter, and assuming sufficient product
demand exists, the Company plans to fund through operating revenue and/or
debt financing the purchase of additional brewing equipment and fermentation
and conditioning tanks to bring the Brewery's production capacity to its full
125,000 barrel potential and to construct the Planned Showcase Brewery. The
Company believes that proceeds from this Offering will satisfy the Company's
cash needs for the 12 month period commencing on the date of this prospectus.
If additional capital is required, there can be no assurance that revenues
will be sufficient to finance such growth and operations, or that additional
sources of financing would be available on terms favorable to the Company.

In connection with the Company's activities in maintaining an informal
trading market in it's shares following completion of the Company's first
public common stock offering, the Company may be liable to certain purchasers
who paid an aggregate of $131,360 to purchase shares in the aftermarket
following the offering. See "Risk Factors -- Possible Liability Resulting
From Facilitation of Trading Market in Company Shares.

BUSINESS

Aviator Ales, Inc. (the "Company") was formed in February 1994 for the
purpose of developing and operating one or more breweries in Washington for
the production of high quality, hand-crafted ales for sale in bottle and
draft. The Company has built a brewery (the "Brewery") in a leased
industrial building at 14316 N.E. 203rd Street in Woodinville, Washington.
Woodinville is a city of approximately 6,000 people located 20 miles
northeast of Seattle. In recent years, Woodinville has developed a cottage
industry of local vintners and microbrewers, including Chateau Ste. Michelle
Winery, Columbia Winery, Facelli Winery, Paul Thomas Winery, Redhook Brewery,
and Silver Lake Sparkling Cellars.

INDUSTRY BACKGROUND.

The craft brewing segment of the United States brewing industry is
comprised of regional craft brewers, contract brewers, microbreweries, such
as the Company, and brewpubs. See "Glossary" for a description of these
different types of craft brews. Craft beers are full-flavored beers, brewed
in traditional European brewing styles with quality hops, malted barley,
yeast and water. In 1994, shipments in the craft beer segment increased by
50% over the prior year to 2.5 million barrels. Craft beer shipments
represented approximately 1.4% of total domestic beer shipments of 180
million barrels, which had a retail value of $50 billion. Over the five-year
period ended December 31, 1994, U.S. craft beer shipments grew at a
compounded annual rate of approximately 39%. In contrast, total U.S. beer
industry shipments have remained relatively flat since the early 1980's.

The principal cause for the rapid growth in consumption of craft beer is
the consumer's rediscovery of more traditional, full-flavored beers. Prior
to Prohibition, the U.S. beer industry consisted of nearly 2,000 small
breweries that brewed distinctive beers delivered fresh to local markets.
Following Prohibition, fewer than 600 of these breweries reopened. In the
decades that followed, U.S. brewers narrowed their product offerings to
milder, lighter beers (principally lighter lagers), to appeal to the broadest
possible market segment. These beers use lower cost ingredients, are
typically pasteurized to prolong shelf life and are mass-produced to take
advantage of economies of scale in production. Historically, competition
among the industrial brewers has been primarily through costly advertising
campaigns and pricing rather than through product flavor and quality. By the
late 1970's, the U.S beer industry was characterized by a relatively
homogeneous selection of beers with significant brand recognition, but with
little differentiation in taste and a lack of freshness. As a result of
these competitive factors and improvements in brewing operations,
considerable industry consolidation occurred.

Today, the three largest domestic brewers account for approximately 81% of
domestic beer shipments.

Since the early 1980's consumers have migrated away from less flavorful
mass-marketed beers toward a broader variety of beers with greater taste.
Initially, this change in demand was met by imported industrial beers from
Holland, Germany, Canada and Mexico. However, in the mid 1980's, numerous
brewpubs emerged as state laws began to permit pub owners to brew and sell
beer on premise. Brewpubs were viewed as an alternative gathering place to
traditional restaurants and bars and often proved to be the setting where
consumers were first exposed to new craft beers. By the late 1980's, a
substantial number of microbreweries, representing a new segment in the U.S.
beer industry, had developed in response to consumer demand for microbrewed
beers on draft at restaurants, pubs and taverns and in bottles for home
consumption.

Beginning in California, Oregon and Washington and more recently in the
New England states, Colorado and other regions across the country, regional
craft brewers, contract brewers, microbreweries, and brewpubs emerged to form
the craft beer industry. Strong consumer demand has enabled certain craft
brewers, to quickly grow from microbreweries into regional craft brewers by
increasing the size of their breweries, while maintaining traditional
European brewing methods. Contract brewers, who generally do not have their
own brewing facilities, have taken advantage of growing demand by retaining
industrial brewers to perform contract brewing at otherwise under-utilized
industrial brewing facilities. Industrial brewers have also sought to appeal
to this growing demand for craft beers by introducing their own
fuller-flavored specialty beers or by acquiring or forming partnerships with
existing craft brewers.

GROWTH IN SALES OF MICROBREWED BEER. The sale of microbrewed beer has
increased substantially in recent years. The following tables and graphs
indicate, in barrels, the sales volume, sales growth and market share as a
percentage of the total beer market represented for microbreweries located in
Washington and the United States as a whole, over the five year period ending
in 1994.(1) The production, sale and consumption of microbrewed beer has
increased over the past several years in Washington. There can be no
assurance, however, that the demand for microbrewed beer will continue to
grow at the present rate or at all. Furthermore, no

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

(1) The data in the table labeled "All US Craft Breweries" includes sales in
barrels for the four segments of the craft beer industry: brewpubs,
microbreweries, regional specialty breweries and contract brewing companies.
"Regional Specialty Breweries" include the following companies: Anchor Brewing
Co. (beginning 1985); Sierra Nevada Brewing Co. and Redhook Ale Brewery
(beginning 1989); Widmer Brewing Co. and Full Sail Brewing Co. (beginning 1991);
Hart Brewing Co. (beginning 1992); Rockies Brewing Co., Portland Brewing Co. and
Bridgeport Brewing Co. (beginning 1993); Abita Brewing Co., Deschutes Brewery,
New Belgium Brewing Co., Nor'Wester Brewing Co., Dubuque Brewing & Bottling
Co./Breadevor USA Inc., Catamount Brewing Co. and Celis Brewing (beginning
1994).

assurance can be given that the Company will experience sales growth or market
penetration levels consistent with that reflected in the tables and graphs
below.

The following graph and table indicate the growth in sales by all U.S. craft
breweries in terms of sales revenue and barrels.

[GRAPH]

ALL U. S. CRAFT BREWERIES
(Sales in Barrels)

ANNUAL MARKET
YEAR SALES SALES SHARE
GROWTH
---- --------- ------ ------
1994 2,512,476 50.45% 1.33%
1993 1,669,982 40.42% 0.89%
1992 1,189,260 39.20% 0.63%
1991 854,337 34.56% 0.45%
1990 634,889 29.20% 0.34%

The industrial beer segment has experienced declines in both sales and
market share over this same six-year period as illustrated in the following
table:

U. S. INDUSTRIAL BREWERIES
(Sales in Barrels)

ANNUAL MARKET
YEAR SALES SALES SHARE
GROWTH
---- ----------- ------ ------

1994 180,212,645 (0.26)% 93.52%

1993 180,682,968 (0.08)% 96.10%
1992 180,824,250 (0.34)% 96.39%
1991 181,449,379 (1.64)% 96.58%
1990 184,473,833 2.83% 95.81%

WASHINGTON BEER INDUSTRY. The following tables, which are derived
from data produced by the Washington State Liquor Control Board shows beer sales
in Washington over the last five years by category of producer. Sales of beer
in Washington are dominated by the major domestic producers, such as Anheuser-
Busch, Miller Brewing Co. and Coors Brewing Co. Nevertheless, the market share
of craft beer in Washington has increased over the years, from 1.91% in 1990 to
6.46% in 1994. This growth in market share by Washington microbreweries has
been primarily at the expense of large industrially brewed beers. Per capita
beer consumption in Washington has remained generally steady from 1984 to 1994
at approximately 21 gallons per year. However, consumption of higher priced
microbrewed beers has increased significantly.

TOTAL BEER SALES IN WASHINGTON
(IN BARRELS)

Foreign Major Major
Craft Craft Market Domestic Domestic
Year Beer Market Share Foreign Beer Share Beer Market Share
- ---- ------ ------------ ------------ ------- --------- ------------

1994 232,786 6.46% 177,600 4.93% 3,192,330 88.61%
1993 179,192 5.04% 142,543 4.01% 3,231,218 90.94%
1992 120,139 3.28% 132,409 3.61% 3,412,542 93.11%
1991 84,682 2.42% 126,204 3.61% 3,284,174 93.97%
1990 67,312 1.91% 137,103 3.90% 3,313,185 94.19%

Approximately 96% of the microbrewed beer sold in Washington in 1994 was
produced by the five largest microbreweries in Washington.

Although the consumption of microbrewed beer has increased markedly over
the past several years, particularly in states such as Washington, there can be
no assurance that the demand for microbrewed beer will continue to grow. If the
demand for microbrewed beer in Washington does not continue to increase, the
Company's business could be adversely affected.

COMPANY STRATEGY

The Company's principal business objective is to become a leading brewer of
high-quality, full-flavored microbrewed beer in Washington and other targeted
markets. The Company intends to achieve its objectives by implementing the
following key strategies:

PRODUCTION OF HIGH QUALITY, LOCALIZED STYLE MICROBREWED BEERS. The
Company intends to focus on the production of high-quality, full-flavored
microbrewed beer designed to appeal to consumers located in Washington and
nearby states, the Company's principal target market. The Company brews its
beer in small batches using traditional European brewing methods and styles,
carefully selected ingredients, and technologically advanced brewing equipment.
In addition, the Company has hired brewing staff with extensive experience in
quality control practices.

BRAND AWARENESS. The Company's promotional strategies are designed to
create strong brand awareness built on superior products, customer service and
strong imaging that reflects the qualities and lifestyle of the Pacific
Northwest. The Company's brand name "Aviator-TM-" has strong ties to the local
area. Specific attention is being paid to the historical accuracy of the
Company's product imagery and its relationship to the Pacific Northwest. For
example, the "F" series B-17 bomber depicted on the Company's Amber Ale is the
type that was produced in Washington by Boeing Aircraft Industries. The Company
uses bold, distinctive graphics in its packaging and marketing materials, which
are designed to set the Company's products apart and promote consumer
recognition and product identity. The Company believes that word-of-mouth
reputation and product tastings are the principle factors influencing consumers
in their selection of a craft beer. The Company holds open houses and
celebratory events at the Brewery

encouraging people to visit so they can learn about and sample the Company's
products. Through tours of the Brewery, meetings with the brewing staff and
local tastings, the Company actively educates local distributors and retailers
(including restaurants, pubs and taverns) about the ingredients, brewing process
and brand imagery associated with the Company's products and craft beers in
general. The Company further assists its retailers with a comprehensive point-
of-sale advertising program to facilitate the promotion of its products. The
Company also seeks to increase product awareness by participating in local beer
tastings and beer festivals, charitable fundraisers and community sports and
cultural events.

CONTRACTS WITH DISTRIBUTORS. The Company's success is dependent upon its
ability to develop and maintain relationships with key distributors to market
the Company's beers. The Company has established a network of 43 independent
distributors who sell the Company's beer in addition to beers produced by other
domestic and international brewers. This network of distributors serves the
entire state of Washington as well as portions of Idaho, Montana, Oregon and
Alaska. The Company is in the process of establishing distribution agreements
with independent distributors in California and Colorado. See "Risk Factors -
Dependence on Third-Party Distributors."

CONSUMER AND SHAREHOLDER INVOLVEMENT. The Company has developed and
intends to expand its base of consumers who will promote the Company's beers.
The Company believes that its shareholders strengthen its marketing capabilities
as they actively promote the Company's products to their friends, business
acquaintances and favorite retail establishments. To build and maintain this
consumer base the Company holds open houses, and offers opportunities for
consumer involvement in the Brewery's activities.

STRATEGIC ALLIANCE WITH NOR'WESTER BREWING COMPANY, INC. The Company has
entered into the Alliance with Nor'Wester under which it will cooperatively brew
Nor'Wester beer. See "-- Cooperative Brewing" and "Certain Transactions."

NEW PRODUCT DEVELOPMENT. To meet varying consumer style and flavor
preferences, the Company continually engages in the development and testing of
new products. The Company's existing brewing equipment permits the brewing of
small batches of new products for sampling at the Brewery as well as in
community tastings. As part of its product development effort, the Company
performs numerous tastings and surveys with distributors and consumers on beer
styles and brand imagery. The Company has found that consumers provide the most
important feedback on matters of beer taste and style, while distributors
provide critical information on market trends and opportunities. The Company

believes that the continued success of craft brewers will increasingly depend on
their ability to be innovative and attentive to consumer desire for new and
distinctive tasting products.

PRODUCTS

The Company currently produces six different styles of beer, one of which
is a seasonal. All of the Company's beers are hand-crafted in small batches
using high quality hops, a variety of malts, and other natural ingredients.
Each beer is cold conditioned at near freezing temperatures to produce a smooth,
flavorful finish. The Company's beers are typically unfiltered to preserve the
unique, natural flavors and aromas of the ingredients. The Company's current
product offerings are as follows:

HEFE WEIZEN. Hefe Weizen is an unfiltered beer with a rich flavor and
texture, cold conditioned an extra week to produce a smooth and refreshing ale.
Locally grown wheat and barley malts give it a light palate and golden color.

AMBER ALE. Amber ale is characterized by a deep amber color and rich
caramel flavors from our blend of roasted malts. A generous portion of cascade
hops finish this robust ale with crisp and enjoyable aromas. Top fermentation
and cold conditioning gives this ale a well-rounded finish.

HONEY BROWN ALE. Local blackberry honey is brewed into our English brown
ale making it a deliciously smooth ale with a malty depth, a nutty, toasted
aroma and deep mahogany color.

PORTER. Chocolate and espresso flavors characterize this full-bodied
traditional ale which has a slight sweetness from the abundance of roasted malts
and smooth finish.

INDIA PALE ALE. This is a Crisp and refreshing golden ale with delicious
spicy aromas from Tettnang and Cascade hops. This recipe is a classic 1700's
British style producing very distinct flavors.

WINTER WARMER. This seasonal ale will have a unique recipe each year. The
1995 edition of Winter Warmer is a hearty ale with a hint of sweetness. Its
rich malty character is complemented with a hint of molasses.

The Company believes there is a growing market for hard cider and brewed
sodas and may produce these products in the future.

The Company's ales are made from selected high-quality local grains and
hops, with occasional use of European hops for selected beer styles. All of
the Company's recipes are owned exclusively by the Company. Under the terms of
the Alliance, alliance members are prohibited from using the Company's
proprietary information or technology to produce beer having the same flavor
profile or appearance as the Company's. See "Cooperative Brewing."

BREWING FACILITY

The Brewery, which was completed and started brewing beer in August 1995,
is located in an approximately 19,000 square foot leased facility in
Woodinville, Washington. Woodinville is a city known for a thriving cottage
industry of craft brewers and vintners. It is home to five wineries and one
other brewery, namely Chateau Ste. Michelle Winery, Columbia Winery, Facelli
Winery, Paul Thomas Winery, Redhook Brewery, and Silver Lake Sparkling Cellars.
The Brewery utilizes a three vessel 50-barrel brewhouse and uni-tank fermenters
ranging in size from 50 to 150 barrels that provide an initial annual production
capacity of approximately 12,000 barrels. With the increased fermentation tanks
which the Company intends to purchase with the Maximum proceeds from this
Offering, the Brewery will be capable of annually producing up to approximately
39,000 barrels. The Company has constructed the Brewery with sufficient
leasehold improvements to enable it to grow to a maximum annual brewing capacity
of 125,000 barrels. To reach maximum capacity, an option to lease additional
space adjacent to the Brewery must be exercised and additional brewing
equipment, fermentation and conditioning tanks must be purchased and installed.
The Company also has purchased a high-speed Krones bottling line and labeler and
will purchase additional kegs, and other necessary equipment as demand for the
Company's products increases.

In addition to its principal facility, the Company has purchased a 1.3 acre
parcel in the Woodinville Tourist District on which it intends to build the
Planned Showcase Brewery, including a specialty draft-only brewhouse and
pub/restaurant. The Company does not expect to develop this site until
expansion of the principal production facility is complete and development can
be funded with operating revenue or other available sources. However, the
Company believes that a showcase retail facility in the heart of the Woodinville
Tourist District will be valuable in two ways. First, it will feature the
Company's products in a prominent location and attractive setting where
consumers can enjoy the Company's products. The Company also believes that the
location will lend to many tourists patronizing the Planned Showcase

Brewery. Moreover, such a setting will give the Company's brewers new and
valuable insights into product development through meeting consumers and
learning their tastes and preferences firsthand. Second, the smaller, more
concentrated scale of the showcase facility will allow the Company to experiment
with new beer styles and types with greater economy. For these reasons, the
Company considers the Woodinville Tourist District site a valuable investment.

Under its cooperative brewing agreement with Nor'Wester, Nor'Wester has
provided at its expense, additional equipment at the Brewery, including
fermenting and conditioning tanks, a yeast propagator and a Hop Jack, which will
be dedicated to the production of Nor'Wester products. The addition of this
Nor'Wester-owned equipment gives the Company the capacity to produce up to
23,000 barrels of Nor'Wester beer annually by the end of 1996. The cooperative
brewing agreement may be terminated by the Company if its own production needs
require use of the space occupied by Nor'Wester's equipment. See "Certain
Transactions -- Strategic Alliance."

The Company has executed a 20-year lease for the Brewery that runs until
August 1, 2015, with the right to renew the lease for two additional terms of
ten years each. The leased facility comprises approximately 19,000 square feet,
and the Company also has an option on additional adjacent space of approximately
10,000 square feet that is exercisable between years 2 and 5 of the current
lease.

BREWING OPERATIONS

INGREDIENTS. The Company uses four basic natural ingredients in brewing
its beers: malted grains, hops, brewers' yeast and water filtered through
activated charcoal filters. The Company uses malted wheat and barley grains to
produce its beers. Wheat and barley malts are typically used in brewing because
they germinate easily and provide fresh, distinctive flavors. All malts used by
the Company are of high quality, including specialty malts selected to provide
desired flavor and color characteristics. Top quality hops are carefully
selected and used in varying combinations to add seasoning to the brew. Some
varieties confer bitterness which imparts a crisp finish to beer, while others
add herbal or spicy notes to the aroma. To ensure consistent product quality
and flavor, the Company's brewers use yeasts which are specially selected for
their unique ability to provide the distinctive character of the Company's
products. The Company does not use rice, corn or stabilizers or water dilution
used by industrial brewers to lighten beer for mass production.

The Company typically purchases all of its malted barley and wheat from one
supplier, although it has several alternative suppliers. The Company purchases
its hops through two major brokers. To achieve special hop character in certain
of its beers, the Company augments its hops supply with small lots of hops from
Bavaria and other European hop growing regions. The Company believes that
alternative sources of malted grains and hops are available at competitive
prices. The Company currently cultivates its own yeast supply. Multiple
competitive sources of supply for most packaging materials, such as bottles,
labels, six-pack carriers, crowns and shipping cases are available to the
Company. The Company expects to achieve cost savings as a result of cooperative
purchasing of certain raw materials through the Alliance.

THE BREWING PROCESS. Prior to commencement of the brewing process, the
malt supplier soaks the wheat or barley grain in water, thereby facilitating
germination, and then dries and cures the grain through roasting. This
"malting" process breaks down complex carbohydrates and proteins so they can be
easily extracted. The malting process creates the color and distinctive flavor
characteristics imparted by the grain to the beer. The cured grain, referred to
as "malt," is then delivered to the brewery. Brewing typically consists of five
steps or stages at the brewery: "milling," "lautering," "boiling," "fermenting"
and "conditioning." The following graphic generally illustrates the process
employed by the Company in brewing its craft beers:

MILLING. In the milling process, the malted grain is cracked open and the
kernels crushed into "grist." The grist is collected and measured in the grist
case in preparation for lautering.

LAUTERING. The grist is then mixed with hot water in the lauter tun. The
hot water activates natural enzymes in the malt, converting starches in the
grains into fermentable sugars, which in turn are dissolved in water forming a
sugar solution called "wort" (pronounced wert). The wort is separated from the
husks and insoluble particles in the lautering process.

BOILING. The wort is then boiled and flavored with hops which are added to
the brewkettle by hand. After boiling, the hops are strained from the wort and
the wort is clarified in a "whirlpool" separator and cooled in preparation for
fermentation.

FERMENTATION. The cooled wort is aerated and a pre-determined amount of
pure cultured yeast is added. The yeast metabolizes the fermentable sugars in
the wort thereby producing alcohol and carbon dioxide while the non-fermentable
or residual sugars impart "body" to the final product. The rate of fermentation
is controlled by

accurately controlling the temperature in the fermenter and this rate, together
with the strain of yeast, is critical in determining the quality and character
of the final product. Fermentation typically takes five to seven days after
which the "young" beer is further cooled to a lower temperature for
"conditioning."

CONDITIONING. Conditioning or "maturation" generally takes about seven
days for ales and 21 days for lagers. During this period lower, near freezing
temperatures are maintained resulting in clarification as well as full flavor
and character development.

FINISHING. Depending on the style of product, the fully conditioned beer
may be filtered for clarity and/or carbonated in readiness for bottling or keg
racking.

KEGGING AND BOTTLING. The Company packages its craft beers in kegs and in
12 and 22-ounce bottles. The Company has installed a high-speed bottling line
and labeler for this purpose.

QUALITY CONTROL. The Company's lead brewer monitors all major parameters
in brewing the Company's Ale to ensure compliance with the Company's
specifications and to maintain consistent quality and taste from brew to brew.
The brewery has an on-site laboratory where the lead brewer oversees on-site
yeast propagation, monitors product quality, tests products, measures color and
bitterness and tests for oxidation and unwanted bacteria.

DISTRIBUTION

The Company's products are purchased by consumers on draft and in bottles
at restaurants, brewpubs, bars and taverns, as well as in bottles at
supermarkets, warehouse clubs, convenience stores and liquor stores. The
Company's products are currently delivered to these retail outlets through a
network of 43 independent local distributors. Distributors selected to date
include distributors whose primary products are produced by Anheuser-Busch as
well as beers of other domestic and international brewers. See "RISK FACTORS --
Dependence on Third-Party Distributors." The Company spends considerable time
and effort to establish, maintain and support its relationship with
distributors. Management believes that product education, principally through
brewery tours and on-site training and tastings, is a key element in building
successful relationships with distributors. The Company also offers its
products directly to consumers at the Company's brewery in Woodinville.

The Company sells its products to distributors who serve the entire the
state of Washington as well as portions of the states of Idaho, Montana, Oregon
and Alaska. The Company's most significant

distributor, K & L Distributors, Inc., which is responsible for distribution in
the Seattle area, accounted for approximately 54% of the Company's wholesale
beer sales during 1995. The Company estimates that K & L Distributors will
continue to account for a significant percent of its wholesale revenues in
Washington in the near future. See "Risk Factors - Dependence on Third-Party
Distributors." The Company is in the process of establishing relationships with
distributors in California and Colorado. As the Company expands its
distribution to other states, the Company expects the percentage of sales
represented by K & L Distributors will decline.

The Company demonstrates its commitment to its independent distributors in
many ways, including its refusal to sell directly to retail accounts and, where
permitted by law, involving sales representatives and drivers of each
distributor in the Company's distributor incentive program whereby they each are
"gifted" a nominal number of shares of the Company's Common Stock, are given
personalized Company business cards and are included on the Company's mailing
list.

Each of the Company's distribution agreements covers a specific geographic
area, and appoints the distributor as the exclusive distributor in that
geographic area, subject in certain cases to the Company's rights to engage in
certain limited retailing activities. The distribution agreements provide that
payment shall be made in full not less than 30 days after the date of delivery.
The distribution agreements also provide for general cooperation among the
distributors and the Company in marketing, merchandising and promotional
efforts. Each distribution agreement may be terminated by either party 60 days
after written notice of dissatisfaction with performance specifying the grounds
for such dissatisfaction if the specified deficiencies have not been cured by
the end of the 60-day period.

Microbrewed beers generally sell at a price premium relative to domestic
industrial beers, with retail prices for microbrewed beers typically ranging
from $4.99 to $7.99 per six pack of 12 ounce bottles versus approximately $2.99
to $3.99 for industrial beers. This price premium provides generally higher
profit margins for the distributors and retailers that offer microbrewed beers.
The Company believes that distributors and retailers are eager to increase their
sales of higher margin craft beers, as industrial brewers continue to wage price
wars to gain market share in this flat growth segment thereby decreasing
distributor's and retailer's margins.

To further increase retail product sales, the Company periodically offers
"post-offs," or price discounts to its

distributors. Distributors and retailers often participate in these price
discounts.

The Company is in the process of finalizing a purchase order agreement with
Beer Across America, Inc. ("BAA"), a nationwide mail-order subscription service
for craft beer enthusiasts. Each month BAA subscribers receive a twelve-pack of
beer that features the products of two specially selected craft breweries. The
Company has tentatively agreed to supply BAA with a minimum of 15,000 cases of
Aviator Ales for its July 1996 shipment. Product literature describing the
Company and its brewing philosophy will also be included in each shipment of
bottled product. This form of direct access to microbrewed beer consumers
around the country will allow the Company to present its products not only in
its target markets, but in other markets as well.

MARKETING AND SALES

The Company's promotional strategies are designed to create strong brand
awareness built on quality products, service to its distributors and product
imaging that reflects the quality and lifestyle of the Pacific Northwest. The
"Aviator" name is well suited to the Puget Sound area. Special attention is
given to the Company's labels and point of sale material to ensure that this
promotional material is historically representative of the importance of
aviation to the area.

The Company believes that grass roots promotion and word-of-mouth
reputation are the principal elements influencing consumer product selection.
As a result, the Company devotes considerable effort, through tastings and
brewery tours, to educating consumers and distributors as to the distinctive
qualities of its products. For example, the Company has established a Brewer's
Night Educational Program designed to inform shareholders and interested persons
about the basics of brewing and how the Company's beer differs from that of many
other microbreweries. The Company also participates in localized promotions
designed to enhance its reputation. The Company has a sales and marketing staff
whose efforts are focused principally on distributor training and assistance,
local promotions, and programs for on-premises consumer and retailer education.
To build brand recognition in its target markets, the Company sponsors or
participates in cultural and community events, music and other entertainment
performances and microbrewed beer festivals.

Since distributors and retailers typically sell higher volumes of
industrial and imported beer brands, and also sell other specialty and craft
beer brands, and in some cases other alcoholic beverages, an important function
of the Company's sales and

marketing staff is to elevate distributor and retailer awareness of the
distinctive qualities of microbrewed beer and the Company's products in
particular. This is accomplished primarily through educational tours and on-
site training at the Company's brewery, direct contact with restaurants, pubs
and taverns, and by supplying distributors with distinctive point-of-sale
materials, including custom tap handles, neon signs, posters, table tents,
coasters, glassware, and promotional flyers. The Company's sales staff meets
frequently with the distributor's sales representatives and drivers to jointly
visit retail accounts to educate retailers about the freshness and quality of
its products. This, in turn, allows retailers to assist in educating consumers.

The Company's brand name "Aviator" has strong ties to the local area.
Specific attention is being paid to the historical accuracy of the Company's
product imagery and its relationship to the Pacific Northwest. For example, the
"F" series B-17 bomber depicted on the Company's Amber Ale is the type that was
produced in Washington by Boeing Aircraft Industries. The Company uses
distinctive graphics in its packaging and marketing materials designed to set
the Company's products apart and promote strong brand recognition. The Company
also makes extensive use of direct mail advertising to market its products to
its shareholders and consumers. See "Consumer Ownership."

The Brewery also plays a significant role in increasing consumer awareness
of the Company's products and enhancing its image as a local brewer. Visitors
may tour the Brewery during business hours by appointment. The Company also
sells various items of apparel and memorabilia bearing the Company's trademarks,
which create further awareness of the Company's beers and reinforce the
Company's quality image. When completed, the pub will serve the Company's
products and a selection of light menu items and the Company believes that the
pub will further increase its brand recognition in the greater Seattle area.

COOPERATIVE BREWING

The Company recently became party to the Alliance with Nor'Wester and the
Affiliated Companies. For a description of the terms of the Alliance, see
"Certain Transactions." Under the Alliance, the Company will cooperatively brew
Nor'Wester beer principally for sale to distributors serving west coast markets.
The expected increase in production related to cooperative brewing will more
fully utilize the Company's production facility, resulting in lower overall
production costs for the Company's own products. In the Company's markets, the
Company and Nor'Wester will each have separate distribution agreements with the
distributors. The Company believes that its beers are complementary to
Nor'Wester's established beers, allowing the

Company's sales staff to present a book of complementary brands and beer styles
to distributors and retailers. Multiple brands promote multiple images enabling
the Company to appeal to a broader spectrum of consumers. Distributors will
place orders for Nor'Wester products directly with Nor'Wester which will
coordinate production and shipping. Alliance members are prohibited from using
the Company's proprietary information or technology to produce beer under their
own brand name which would have the same flavor profile or appearance as the
Company's beer. Although there are some similarities in the styles of beer
produced by each Alliance member, for example each member produces a Hefe Weizen
style beer, no two Hefe Weizen products are exactly alike. Each member has its
own unique, proprietary Hefe Weizen recipe which results in a Hefe Weizen that
varies from those of other members with respect to taste (i.e. fullness,
crispness and bitterness) and appearance (i.e. cloudiness). In brewing beer,
the ingredients (e.g. the amount and types of hops) and brewing methods (e.g.
the brewing temperatures and conditioning time) used by each Alliance member are
uniquely formulated by its lead brewer, representing his distinctive and
creative style of brewing. In addition, each Alliance member strives to achieve
the flavor and appearance best suited to the member's local market as determined
by distributor feedback and survey's and tastings performed by the member
brewery.

CONSUMER OWNERSHIP

Broad-based consumer ownership has been and will continue to be an
important part of the Company's marketing strategy. The Company has
approximately 3,100 shareholders of record. The Company believes that many of
its shareholders are microbrewed beer consumers and believes that this Offering
will further increase the number of its consumer owners. In addition to serving
as loyal consumers, the Company believes that its shareholders strengthen its
marketing capabilities as they actively promote the Company's products to their
friends, business acquaintances and favorite retail establishments. Through its
shareholders, the Company has established a grass roots marketing campaign.
Shareholders are encouraged to promote the Company's products by providing them
with special privileges including:

(1) admission to special events at the Brewery, such as special tastings;

(2) priority in purchasing limited production or commemorative beers;

(3) opportunities to help the lead manager/brewer, staff festivals and
assist marketing efforts;

(4) discounts on all Company products and services below any prices offered
by the Company to the general public;

(5) admission to brewing seminars, competitions and training sessions
hosted by the Company's brewing staff;

(6) personalized brewery business cards; and

(7) reports on Company developments seeking shareholder feedback and
involvement.

The value these special privileges may have to shareholders cannot be
quantified and, in any event, will vary widely from shareholder to shareholder
depending largely on an individual shareholder's circumstances. Accordingly,
the availability of these privileges should not be considered as part of a
prospective investor's decision to purchase shares of Common Stock.

The Company's expectations regarding the benefits of broad-based consumer
ownership are based on the experience of Nor'Wester. Nor'Wester was founded by
James W. Bernau, the President of the Company and was initially financed through
local public stock offerings similar to this Offering. Nor'Wester is a
publicly-held company listed for trading on the Nasdaq Stock Market under the
symbol "ALES."

The Company's Groundbreaking Celebration in September 1994 was attended by
over 800 shareholders, family and friends, and the Company's first Brewmaster's
Reception in April 1995 attracted over 450 sshareholders. In October 1995, over
2000 people attended a Shareholder Kick-Off Party which, with the help of many
shareholder volunteers, resulted in over $17,000 in retail sales. Since the
Company's first survey of its shareholders, over 150 shareholders have
volunteered to help with events, office work and marketing support. For
example, shareholders have assisted in festivals and have participated in beer
tastings, retail sales, product development, event organization, and other
Company activities. Shareholders have also provided leads to over 50 retail
accounts in Washington which the Company is now pursuing. Shareholders have
been instrumental in staffing events giving the Company the ability to become
involved in events that are held hundreds of miles from the Brewery.
Shareholders also provide the majority of shipping labor to fill orders from the
Company's retail catalog.

COMPETITION

The beer industry is highly competitive and the Company expects competition
in the craft beer segment of the industry to increase. The Company's
microbrewery will compete with large domestic and foreign industrial breweries,
as well as microbreweries (including those of the Affiliated Companies) that
produce high quality ale and lager beers for distribution and sale in
Washington.

Domestic beer production is dominated by large American industrial
breweries, all of which have greater financial, production, distribution and
marketing resources than the Company. The major domestic breweries accounted
for approximately 93% of the beer produced in the United States in 1994. In
response to the significant growth in the craft beer industry, industrial
brewers have begun producing and bottling products that are marketed as premium
beer. The Company does not believe that these "look alike" beers will
ultimately appeal to the knowledgeable and sophisticated consumer of microbrewed
beer. The Company believes these consumers will be attracted to locally
produced craft beers rather than industrial beers "dressed up" to look like
local craft beers.

Within the microbrewing industry, the Company believes that its principal
competitors will be Washington breweries that produce high quality ales.
Several Washington microbreweries are well established and have developed
significant brand awareness. The Company expects that its other major
competitors will also undertake expansion within the next year. In addition,
the same network of distributors who market the Company's products will also
distribute Nor'Wester-TM- ales produced by the Company's affiliate, Nor'Wester.
At least for the foreseeable future, sales of the Company's products will
comprise a small portion of the total beer market.

The principal means of competition in the craft beer segment are product
quality, taste, consistency and freshness, brand and product differentiation,
distribution methods and area coverage, promotional methods, packaging,
development of new products and, to a lesser extent, pricing. The Company
believes that its competitive position is enhanced by its dedication to product
quality, its flexible independent distribution, its grass roots marketing
through consumer owners, its use of bold and innovative point-of-sale materials
and its commitment to developing new beer styles.

REGULATION

The Company's business is highly regulated at federal, state and local
levels. Various permits, licenses and approvals necessary to the Company's
brewery and planned pub operations and the sale of alcoholic beverages are
required from various agencies, including the U.S. Treasury Department, Bureau
of Alcohol, Tobacco and Firearms (the "BATF"); the United States Department of
Agriculture; the United States Food and Drug Administration; state alcohol
regulatory agencies in the states in which the Company sells its products; and
state and local health, sanitation, safety, fire and environmental agencies. In
addition, the beer industry is subject to substantial federal and state excise
taxes.

Management believes that the Company currently has all licenses, permits
and approvals necessary for its current operations and is in material compliance
with all applicable government regulations. However, existing permits or
licenses could be revoked if the Company were to fail to comply with the terms
of such permits or licenses, and additional permits or licenses could in the
future be required for the Company's existing or expanded operations. If
licenses, permits or approvals necessary for the Company's brewery or planned
pub operations were unavailable or unduly delayed, or if any such permits or
licenses were revoked, the Company's ability to conduct its business could be
substantially and adversely affected.

ALCOHOLIC BEVERAGE REGULATION AND TAXATION. The Company's brewery and
planned pub are subject to licensing and regulation by a number of governmental
authorities. The Company's brewery is operated under federal licensing
requirements imposed by the BATF. The BATF requires the filing of a "Brewer's
Notice" upon the establishment of a new commercial brewery. In addition,
commercial brewers are required to file an amended Brewer's Notice every time
there is a material change in the brewing process or brewing equipment, change
in the brewery's location, change in the brewery's management or a material
change in the brewery's ownership. The labels on all bottles and kegs of the
Company's products must be approved by the BATF prior to sale. The operations
of the Company are subject to audit and inspection by the BATF at any time.

In addition to the regulations imposed by the BATF, the Company's brewery
is subject to various regulations concerning retail sales, pub operations,
deliveries and selling practices in states in which the Company sells its
products. Failure to comply with applicable federal or state regulations could
result in limitations on the Company's ability to conduct its business. The
BATF's permits can be revoked for failure to pay taxes, to keep proper accounts,
to pay fees, to bond premises, and to abide by

federal alcoholic beverage production and distribution regulations, or if
holders of 10% or more of a corporation's equity securities are found to be of
questionable character. Permits from state regulatory agencies can be revoked
for many of the same reasons.

Further, existing laws prohibit payments by brewers or distributors to
their customers for certain slotting allowances and allocation of tap handles
for beer products. Federal and state "tied-house" laws and regulations prevent
or restrict, to varying degrees, ownership or partial ownership by brewers of
beer retailers. If these laws or regulations were repealed or substantially
modified, there would likely be a material adverse effect on the Company's
business and operating results.

The U.S. federal government currently imposes an excise tax of $18 per
barrel on every barrel of beer produced for consumption in the United States.
However, any brewer with production under 2 million barrels per year instead
pays federal excise tax in the amount of $7 per barrel on the first 60,000
barrels it produces annually. While the Company is not aware of any plans by
the federal government to reduce or eliminate this benefit to small brewers, any
such reduction in a material amount could have an adverse effect on the Company.
In addition, the Company will lose the benefit of this rate structure if it
exceeds the 2 million barrel production threshold. Individual states also
impose excise taxes on alcoholic beverages in varying amounts, which have also
been subject to change. It is possible that excise taxes will be increased in
the future by both the federal government and several states. In addition,
increased excise taxes on alcoholic beverages have been considered in connection
with various governmental budget-balancing or funding proposals. Any such
increases in excise taxes, if enacted, could adversely affect the Company.

STATE AND FEDERAL ENVIRONMENTAL REGULATION. The brewery operations of the
Company are subject to environmental regulations and local permitting
requirements regarding, among other things, air emissions, water discharges and
the handling and disposal of wastes. While the Company has no reason to
believe the operations of its facilities violate any such regulation or
requirement, if such a violation were to occur, the Company's business,
financial condition and results of operations may be adversely affected. In
addition, if environmental regulations were to become more stringent in the
future, the Company could be adversely affected. Certain states, including
California and Oregon, and a small number of local jurisdictions, have adopted
restrictive beverage packaging laws and regulations that require deposits on
beverage containers. Congress and a number of additional state or local
jurisdictions may adopt similar legislation in the future, and in such event,
the Company may be required to incur significant expenditures in order to comply
with such legislation.

DRAM SHOP LAWS. The serving of alcoholic beverages to a person known to be
intoxicated may, under certain circumstances, result in the server's being held
liable to third parties for injuries caused by the intoxicated customer. The
Company plans to address this concern by establishing early closing hours at its
pub and by implementing employee training and designated-driver programs. In
addition, the Company has obtained host liquor and legal liquor liability
insurance coverage and intends to continue such coverage if it remains available
at a reasonable cost. Future increases in premiums could make it prohibitive
for the Company to maintain adequate insurance coverage. Any large uninsured
damage awards against the Company could have a material adverse affect on the
Company's business and financial condition.

TRADEMARKS

The Company has obtained federal trademark registration of its brand name,
"Aviator." In addition, the Company plans to obtain federal trademark
registration for several of its specific product names which will generally
relate to the Company's aviation brand theme.

EMPLOYEES

As of April 30, 1996, the Company had 13 employees, including 8 in
production, 4 in sales and marketing, and one in administration. Of these
employees, 2 are part-time. None of the Company's employees are represented by
a labor union. The Company has experienced no work stoppages and believes its
relations with its employees to be very good.

The Company has entered into a Management Agreement with WVI. Under the
Management Agreement, WVI will provide management services to the Company,
including accounting (payroll, accounts receivable, accounts payable, financial
statements and audit support), human resources, safety, purchasing, quality
assurance, management oversight and regulatory reporting (primarily state and
federal alcohol production requirements). WVI may also provide sales and
marketing services. WVI provides these services to the Company at WVI's cost
plus a reasonable mark-up, not in excess of 18%. The agreement may be
terminated by either party on 90 days notice. Certain of the services provided
under the Management Agreement, including accounting, sales and marketing and
production management services will be provided by Nor'Wester personnel pursuant
to a General Services Agreement between Nor'Wester and WVI.

LITIGATION

There are no material legal proceedings pending to which the Company is a
party or to which any of its property is subject, and the Company's management
does not know of any such action being contemplated.

QUALIFIED SMALL BUSINESS ISSUER -- CAPITAL GAINS TAX EXCLUSION

IRC Section 1202 provides a 50% exclusion of any gain from the sale of
"qualified small business stock." For the Shares to qualify for the exclusion,
several tests must be met. For instance, the Shares must be purchased directly
from the Company, not in any later trading market, and the Shares must be held
for more than five years.

A "qualified small business" must have not more than $50 million in assets
at all times before issuance of stock and immediately thereafter. Further, at
least 80% of the assets must be used "in the active conduct of one or more
qualified trades or businesses" throughout the holding period. A "qualified
trade or business" does not include "operating a hotel, motel, restaurant, or
similar business." The Internal Revenue Services has not yet issued regulations
or other interpretations of this law, and it is uncertain whether the Company's
operation of its pub/restaurant will prevent it from meeting the definition of
"qualified small business" during all or any part of a five-year holding period
for the Shares.

THERE ARE ALSO POTENTIAL LIMITATIONS ON THE PERSONS WHO MAY USE THE
EXCLUSION AND THE AMOUNT OF THE EXCLUSION. PROSPECTIVE INVESTORS SHOULD CONSULT
THEIR OWN TAX ADVISORS AS TO THE AVAILABILITY OF THE EXCLUSION.

MANAGEMENT

DIRECTORS, OFFICERS, AND KEY EMPLOYEES

The director, officers and key employees of the Company, and their ages are
as follows:

Name Positions Age
---- --------- ---

James W. Bernau President, Secretary and Director 42

Brad Tuski Vice President 36

Dustin Wyant General Manager 26

Brendan Smith Lead Brewer 37

William Gates* Director 51

Jim Gregory** Director 46

Howard Lovering** Director 58

David McCray* Director 39

Bonnie Pladson* Director 54

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

* Serves on Audit Committee which
also reviews all transactions with Affiliated Companies
** Serves on Compensation Committee

JAMES W. BERNAU. Mr. Bernau has served as the Company's President and
Secretary as well as a director since its inception. Since its inception, Mr.
Bernau has also served as President of WVI, the Company's parent corporation.
Since 1992, Mr. Bernau has also served as the President, Secretary and
Chairperson of the Board of Directors of Nor'Wester. In addition, since 1988,
Mr. Bernau has served as President, Secretary and Chairperson of the Board of
Directors of WVV. Mr. Bernau is also President and a director of Mile High
Brewing Company, Bayhawk Ales and North Country Brewery, each of which is a
majority owned subsidiary of WVI. From 1981 to September 1989, Mr. Bernau was
Director of the Oregon Chapter of the National Federation of Independent
Business (NFIB), an association of 13,500 independent businesses in Oregon. Mr.
Bernau has been a member of the Institute for Brewing

Studies, a division of the Association of Brewers, Inc., a nonprofit
organization in Boulder, Colorado, since 1992.

BRAD TUSKI. Mr. Tuski serves as the Company's Vice President. Together
with the Company's General Manager, Mr. Tuski oversees the production and sales
operations of the Brewery. Since May 1994, Mr. Tuski has served as Chief
Financial Officer of WVI, and in April 1995 he became WVI's Chief Operating
Officer. As Chief Operating Officer, Mr. Tuski is responsible for overseeing
the operations of each of WVI's subsidiary breweries, including the Company.
From 1988 until joining WVI in May 1994, Mr. Tuski served as a certified public
accountant with Price Waterhouse LLP in Portland, Oregon, most recently as an
accounting manager. Mr. Tuski received his degree in accounting from Southern
Oregon State College in 1987.

DUSTIN WYANT. Mr. Wyant serves as the Company's General Manager. Mr.
Wyant has been responsible for overseeing the design, construction and
development of the Brewery. In his role as General Manager, he manages the
Company's production, administration and sales. In addition, Mr. Wyant will act
as issuer salesperson for the Company in connection with this Offering. From
January 1994 to January 1995, Mr. Wyant served as Retail Manager for Nor'Wester
and WVV. During 1993, Mr. Wyant was an independent sales representative for
WVV. From 1990 to 1992, Mr. Wyant was obtaining his commerce degree at the
University of Virginia and Bath University in England.

BRENDAN SMITH. Mr. Smith serves as lead brewer for the Company. Mr. Smith
is responsible for overseeing production of the Company's products. From 1994
to 1995, Mr. Smith was assistant brewmaster at Nor'Wester Brewing Company, Inc.
From 1992 to 1994, Mr. Smith served as a brewer for Portland Brewing Company,
and from 1986 to 1992 he served as a brewer for Yakima Brewing and Malting
Company.

WILLIAM GATES. Mr. Gates has served as a Director of the Company since
June 1995. Since 1983, Mr. Gates has served as Assistant Vice President for
Merrill Lynch. From 1969 to 1983 Mr. Gates worked for the Weyerhaeuser Company.
He is currently serving on the King County Library Board of Directors, the
Tacoma News Tribune Advisory Council, Federal Way Rotary Club and is a past
president of the Federal Way Chamber of Commerce.

JIM GREGORY. Mr. Gregory has served as a Director of the Company since
June 1995. Since December 1995, Mr. Gregory has served as a manager of Contra
Costa Newspapers, Inc., a group of San Francisco Bay Area newspapers owned by
Knight-Ridder

Corporation. From January 1994 to December 1995, Mr. Gregory was
senior partner of JG Associates, a business he established to provide marketing
and management consulting services. From 1982 to January 1994, Mr. Gregory was
Director of Marketing and Circulation for THE HERALD, a daily circulation
newspaper in Everett, Washington.

HOWARD LOVERING. Mr. Lovering has served as a Director of the Company
since June 1995. Since January 1992, Mr. Lovering has been the owner and
president of LOGIC Incorporated, a museum and visitor attraction consulting
company. From 1977 to 1991, Mr. Lovering was the Executive Director of the
Museum of Flight Foundation in Seattle.

DAVID MCCRAY. Mr. McCray has served as a Director of the Company since
June 1995. From 1984 through January 1996, Mr. McCray was Vice President and
Chief Financial Officer of Larry's Markets, Inc. a Seattle based supermarket
chain. His responsibilities have included budget management, bank relations,
cash management, inventory control, and business negotiations. Currently, Mr.
McCray is Director of Finance and Management Information Systems for West Coast
Paper Corporation. Mr. McCray is a certified public accountant and a certified
management accountant.

BONNIE PLADSON. Ms. Pladson, a lawyer, has been a Senior Trust Officer
with Safeco Trust Company in Seattle since August 1995. Prior to joining
Safeco, she spent six years as a Vice President with Laird, Norton Trust
Company. She is active as a Board Member of the Bellevue Community College
Foundation, Chairperson of the Bellevue Arts Commission and a member of the
Washington State Bar Association. Ms. Pladson has served as a Director of the
Company since June 1995.

The members of the Board of Directors were appointed by the Company's
parent corporation, WVI, and hold office until the next annual shareholders
meeting or until their successors have been elected and qualified. The Company
expects to hold its first annual meeting of shareholders in July of 1996.
Officers are appointed by, and serve at the pleasure of, the Board of Directors.

DESCRIPTION OF MR. BERNAU'S AND MR. TUSKI'S ACTIVITIES

Mr. Bernau, the Company's President, and Mr. Tuski, the Company's Vice
President, are not employed on a full-time basis and are compensated based on
the amount of time devoted to the Company's affairs each month. See "Director
and Executive Compensation." Each of the Company's officers will have the same

fiduciary obligations to the Company and its shareholders as if employed on a
full-time basis.

As President of the Company and each of the Affiliated Companies (WVV,
Nor'Wester, WVI, MHBC, Bayhawk Ales and North Country Brewery), Mr. Bernau
generally assists in developing the strategic plan for each company and provides
leadership and general management oversight to the company's operations. Mr.
Bernau chairs each company's board of directors. He provides leadership
principally by establishing goals and objectives and setting policies for each
company in a collaborative process with the respective company's board of
directors and lead managers. He communicates the goals, objectives and policies
to the company's lead managers who are charged with developing and implementing
efficient management systems designed to achieve the defined goals or support
the stated policies as the case may be.

Pursuant to the terms of his employment agreement with Nor'Wester, Mr.
Bernau is required to spend at least 70% of business time and attention on the
affairs of Nor'Wester. Much of Mr. Bernau's daily time, therefore, is spent
overseeing the operations of Nor'Wester. In addition, he works with the General
Managers of WVV and the lead managers at WVI on the specific issues they face.
Mr. Tuski, who serves as Chief Operating Officer of WVI and Vice President of
each of WVI's subsidiary breweries (including the Company, MHBC, Bayhawk Ales
and North Country Brewery) is directly responsible for implementing the
operating plan and overseeing the operations of each subsidiary brewery. Mr.
Tuski reports and is directly responsible to Mr. Bernau. It is expected that
Messrs. Bernau and Tuski will spend approximately 5% and 25%, respectively, of
their time on matters directly related to the Company's business.

Mr. Bernau is involved in the process of recruiting, hiring, evaluating and
motivating the lead managers of each company. He reviews, approves and monitors
budgets for each of the companies prepared by the companies' accounting staff
and reviewed by Mr. Tuski and, together with Mr. Tuski, he sets financial
performance goals for each company. Mr. Bernau reviews each companies'
operations to determine the level and adequacy of performance with respect to
production, financial, administrative and sales activities. He makes sales
calls on distributors and retail accounts to learn firsthand of market
conditions, works with the media and community groups to build brand recognition
and increase sales, and reviews and approves government applications for
licensing and label approval. He also works with each General Manager to
develop brand imagery and point-of-sale materials.

DIRECTOR INDEMNIFICATION AND LIMITATION OF LIABILITY

The Company has entered into an agreement with its directors and has
included provisions in its Certificate of Incorporation providing for their
indemnification by the Company to the maximum extent permitted under applicable
law, including the advancement of expenses incurred by a director in any suit in
which the directors are involved. In addition, the Company's Certificate of
Incorporation contains provisions limiting a director's liability for monetary
damages for breach of fiduciary duty, except in circumstances involving certain
wrongful acts. The Company believes that such actions will assist it in
attracting and retaining qualified individuals to serve as directors.
Prospective investors should be aware, however, that the cost associated with
indemnifying a director could be significant and, if not covered by insurance,
could adversely affect the Company's projected performance. Furthermore, in
situations where the Company has advanced litigation expenses to a director and
the director is required to repay the expenses because it is ultimately adjudged
that the director is not entitled to indemnification, the director may not have
sufficient cash or assets to repay the expenses advanced. The Company does not
currently maintain officers and directors liability insurance and does not
intend to obtain such insurance in the foreseeable future.

Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors of the Company pursuant to the
aforementioned agreements and provisions of the Company's Certificate of
Incorporation, the Company has been informed that in the opinion of the
Securities and Exchange Commission such indemnification is against public policy
as expressed in the Act, and is therefore unenforceable.

DIRECTOR AND EXECUTIVE COMPENSATION

Members of the Company's Board of Directors are not presently compensated
for their service to the Company.

The table below sets forth certain compensation paid or accrued by the Company
and its affiliates to the Company's President, James W. Bernau (the "named
executive officer"), for the fiscal year ending December 31, 1995. No other
executive officer was paid more than $100,000 for the years shown.

ANNUAL COMPENSATION
NAME EMPLOYER YEAR SALARY BONUS
---- -------- ---- ------ -----
James W. Bernau Aviator Ales, Inc. 1995 $2,640 -0-
James W. Bernau All affiliated companies
except Aviator Ales, Inc.(1) 1995 $93,360 $10,882

(1) Consists of Nor'Wester, WVI, Mile High Brewing, Bayhawk Ales, North Country
Brewery and WVV.

Mr. Bernau serves as the President of each of the Company, Nor'Wester, WVI,
Aviator Ales, Mile High Brewing, Bayhawk Ales and North Country Brewery and
WVV. Each of these companies pays a pro rata portion of Mr. Bernau's monthly
salary based on the amount of time which Mr. Bernau has devoted to the
respective company's business in that month. In 1995, Mr. Bernau received a
total annual combined salary and cash bonus of $106,882 as compensation for his
services to these companies. Of this amount, the Company paid Mr. Bernau an
aggregate of $2,640. Pursuant to his employment agreement with Nor'Wester, it
is anticipated that Mr. Bernau will spend at least 70% of his time in service to
Nor'Wester in future periods. See "Certain Transactions." In 1996, Mr. Bernau
will receive a total combined annual salary of $96,000 as compensation for his
services to the companies. In addition to his salary, Mr. Bernau may receive an
annual bonus from each company based on the respective company's performance and
Mr. Bernau's contribution to such company as determined solely by the company's
board of directors.

The Company has entered into an employment agreement with its General
Manager of the Brewery, Dustin Wyant, under which the Company pays Mr. Wyant an
annual salary of $60,000 with possible performance bonuses to be awarded by the
Board of Directors. The agreement creates an at-will employment relationship,
accordingly, it may be terminated by either party at any time.

The Company has adopted a 1995 Stock Incentive Plan and reserved 250,000
shares of the Company's common stock for issuance thereunder (the "Plan"). The
Plan provides for the grant of incentive stock options to employees of the
Company and nonqualified stock options, stock sales and stock grants to
employees, directors and consultants of the Company. The Plan is administered
by the Board of Directors subject to limitations set forth in the Plan. As of
the date of this Prospectus, the Company had granted options covering 144,000
shares under the Plan.

CERTAIN TRANSACTIONS

TRANSACTIONS WITH WVI

On March 4, 1996, WVI, by resolution of its Board of Directors, elected to
reduce its ownership percentage in the Company, from approximately 65% to
approximately 51%, by returning 2,129,871 shares of the Company's Common Stock
as an additional capital contribution to the Company.

In February 1996, WVI, the Company's parent corporation, loaned the Company
$240,000 to fund its working capital needs until sufficient proceeds from the
Offering are raised. The loan, which initially carries no interest and is
unsecured, is evidenced by a Loan Agreement between the Company and WVI. The
Loan Agreement provides that the loan shall be repaid as follows. As soon as
the Minimum of $650,000 in gross proceeds are raised in the Offering, the
Company will repay $50,000 of the loan. When the Maximum of $1,517,000 in gross
proceeds are raised in the Offering, the Company will repay the remaining
$190,000 of the loan. If, upon completion of the Offering, the Company has
failed to raise $1,517,000 in gross proceeds, any amount of the loan which is
then unpaid shall be evidenced by the terms of an 18-month installment note of
the Company payable to WVI under the terms described below. Regardless of the
amount of the loan that is unpaid, the principal amount of the installment note
will bear interest at 10% per annum from the date of completion of the Offering
until paid. All principal and accrued interest will be secured by all of the
Company's assets. The Loan Agreement provides that note installment payments,
in an amount to be negotiated between the parties following completion of the
Offering, will be paid monthly with any remaining unpaid principal and accrued
interest due at the end of the 18th month following issuance of the note.

In June 1994, the Company and WVI, entered into two agreements, a
Management Agreement and a Licensing Agreement. Under the Management Agreement,
WVI provides management services to the Company, including accounting (payroll,
accounts receivable, accounts payable, financial statements, securities law
reporting and audit support), human resources, safety, purchasing, quality
assurance, management oversight and regulatory reporting (primarily state and
federal alcohol production requirements). WVI also provides sales and marketing
services to the Company.

WVI provides these services to the Company at WVI's cost plus a reasonable
mark-up not in excess of 18%. For this purpose WVI's cost includes all direct
labor and other direct costs as well as a portion of WVI's general and
administrative costs based on the portion of WVI's total labor cost attributable
to services provided under the Agreement. For the year ended December 31, 1995,
the Company paid WVI approximately $169,000 for services provided under the
Management Agreement. Although there has been no independent determination of
the fairness and reasonableness of the terms of the Management Agreement, the
Company believes that the terms of the Agreement are no less favorable to the
Company than could be obtained from an unaffiliated third party. The agreement
may be terminated by either party on 90 days notice. Certain of the services
provided under the Management Agreement, including accounting, sales and
marketing and production management services are provided by Nor'Wester
personnel pursuant to a General Services Agreement between Nor'Wester and WVI.

The Licensing Agreement gives the Company rights to use certain strategies
developed by WVI for capitalizing consumer-owned businesses. These proprietary
strategies include sales and marketing methods, mailing lists, professional
affiliations and the like. WVI licensed the use of these strategies to the
Company for this Offering. The only consideration being given for the use of
these strategies is that WVI can retain and use any additional strategies or
enhancements to its existing strategies and mailing lists which result from this
Offering.

STRATEGIC ALLIANCE

In January 1996, the Company became party to a strategic alliance among
Nor'Wester, MHBC, Bayhawk Ales, North Country Brewery and WVI. 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 the Company, MHBC and Bayhawk
Ales (the "Cooperative Brewers").

The purpose of the Alliance is to promote and support the growth of the
Company and each of the Alliance members. 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. By increasing production
at each Cooperative Brewer's facility and supporting the entry of Nor'Wester's
products into new markets, the Alliance is designed to enable Nor'Wester and
each Cooperative Brewer to (i) produce high quality craft beer for local
distribution, thereby increasing product freshness and reducing shipping costs;
(ii)

strengthen their respective brand positions with distributors by allowing them
to offer multiple brands and complementary product styles; (iii) capitalize on
consumer affinity for locally produced products; and (iv) increase operating
efficiencies through a sharing of certain resources.

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, which include material breach in the
case of the Cooperative Brewing Agreements.

STRATEGIC ALLIANCE AGREEMENT. Under the terms of the Strategic Alliance
Agreement, the Company has agreed to (i) support the further expansion of
Nor'Wester products into the Company's market by cooperatively brewing
Nor'Wester's beer and facilitating Nor'Wester's access to the Company's
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, including the Company, 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
Agreement, the Company produces Nor'Wester's beer, in the amounts and packaged
as specified in firm orders submitted by Nor'Wester to the Company on a periodic
basis. All orders made by Nor'Wester are subject to certain volume limits. The
Company'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. Nor'Wester has advanced $250,000 to the Company for it to
purchase the ingredients and packaging for the initial production of Nor'Wester
beer under the agreement. All advanced funds must be repaid to Nor'Wester upon
termination of the Cooperative Brewing Agreement.

Pricing for Nor'Wester's purchase of each type of beer produced by the
Company under the Cooperative Brewing Agreement for the first six months of
production is based on Nor'Wester's average cost of production for such type at
the Nor'Wester Brewery, plus a mark-up of 10%. Initial pricing of beer for
which Nor'Wester has no cost-of-production data will be as agreed by the Company
and

Nor'Wester. Pricing for subsequent production periods is based on the lesser of
Nor'Wester's average cost of production at the Nor'Wester Brewery for the then
preceding calendar quarter, or the Company's average cost of production for the
then preceding calendar quarter, plus a mark-up of 10%. If the Company's
average production cost for any product style exceeds 110% of Nor'Wester's
average production cost for such product style over any three-month period, then
Nor'Wester will have the option of increasing the price for such product to
equal the Company's average cost and, if Nor'Wester elects not to increase the
price, then the Company may elect to discontinue production of that product
style on 60-day's notice. All pricing will be adjusted quarterly.

Under the terms of the Cooperative Brewing, Nor'Wester has installed at the
Company's brewery certain specified Nor'Wester-owned brewing equipment for the
Company's use in producing Nor'Wester's beer. To the extent that this equipment
is not needed for the production of Nor'Wester beers, the Company may, upon
notice to Nor'Wester, use this equipment to produce its own beer subject to
paying the Company an agreed upon fee. Nor'Wester may, at its cost, remove or
replace its equipment at any time if market conditions or other circumstances
make such action desirable. The Cooperative Brewing Agreement requires that the
Company maintain Nor'Wester's equipment and that Nor'Wester insure this
equipment. The agreement may be terminated by the Company upon 120 days' notice
if the Company's own production needs require use of the space occupied by
Nor'Wester's equipment. The Company does not believe that it will require this
space in the foreseeable future.

Under the terms of all of the Cooperative Brewing Agreement, the Company
and Nor'Wester are each subject to requirements regarding the maintenance of
confidential information, and restrictions on the use of tradenames, trademarks
and trade secrets. The agreement requires that the Company and Nor'Wester each
indemnify the other for damages and losses in connection with the agreement.
The agreement may be terminated for material breach.

Management believes that the terms of the transactions described herein are
at least as fair as could have been obtained from unaffiliated third parties.

On December 26, 1995, Nor'Wester entered into an Employment Agreement with
James W. Bernau, the Company's President as well as the President of Nor'Wester.
Under the Employment Agreement, Mr. Bernau must spend not less than 70% of his
business time and attention on the affairs of the Nor'Wester and in
consideration therefor, he will receive a salary of $67,200 per year. The
initial term of the Employment Agreement extends through December

26, 1996, however the agreement will automatically be extended each year for an
additional one year period unless notice of termination is provided by either
party within 60 days prior to the anniversary date. In addition, the agreement
may be terminated at any time by the Nor'Wester's Board of Directors upon 120
days prior written notice thereof.

FUTURE TRANSACTIONS

Under applicable Delaware law, a contract or transaction between a
corporation and one or more of its directors or officers, or between a
corporation and any other corporation in which one or more of its directors or
officers are directors or officers or have a financial interest is not void or
voidable solely for that reason or solely because the director or officer is
present or participates in the meeting of the board or committee which
authorizes the contract or transaction or solely because his or their votes are
counted for such purpose if: (i) the material facts of the relationship or
interest were disclosed or known to the board of directors or a committee of the
board of directors and the board of directors or committee authorized, approved
or ratified the transaction by the affirmative vote of a majority of the
disinterested directors; (ii) the material facts of the relationship or interest
were disclosed or known to the shareholders entitled to vote thereon and the
contract or transaction is specifically approved in good faith by vote of the
shareholders; or (iii) the contract or transaction is fair to the corporation as
of the time it is authorized, approved or ratified, by the board of directors, a
committee thereof, or the shareholders. The Company and Mr. Bernau intend to
comply with the requirements of Delaware law as to the consideration of all
interested transactions.

With respect to future material transactions with affiliates, including
transactions with Alliance members, which the Company expects to continue to
occur in the foreseeable future, the Company intends to establish procedures for
the review and approval of such transactions by a committee of disinterested
members of the Company's Board of Directors. The Company's Board of Directors
have reviewed and approved the Alliance agreements. The Company has been
advised that the other Alliance member companies have established or intend to
establish similar procedures and committees.

PRINCIPAL SHAREHOLDERS

The following table sets forth certain information with respect to
beneficial ownership of the Company's Common Stock as of December 31, 1995,
after the retiring of 2,129,871 shares contributed from WVI, by (i) each person
who beneficially owns more than 5% of the Company's Common Stock, (ii) the named
executive officer, (iii) each director of the Company and (iv) all directors and
executive officers as a group.

Percent After Stock
Offering
Percent --------
Number of Before Stock
Beneficial Owner Shares Offering Minimum Maximum
- ---------------- --------- ------------ ---------------------

Willamette Valley,
Inc. Microbreweries
across America
66 S.E. Morrison
Portland, OR 97214 . . . 2,715,584(1) 51% 48% 44%

James W. Bernau (2)
66 S.E. Morrison
Portland, OR 97214 . . . 2,715,584 51% 48% 44%

William T. Gates, III
514 S.W. 331 Street
Federal Way, WA
98023. . . . . . . . . . 1,925 * * *

James G. Gregory
18944 Mount Lassen
DriveCastro Valley, CA
94552. . . . . . . . . . 3,000 * * *

Howard Lovering
4615 N.E. 54th St.
Seattle, WA 98105. . . . 1,000 * * *

David M. McCray
6815 Ripley Lane
North
Renton, WA 98056. . . . 1,000 * * *

Bonnie A. Pladson
15429 S.E. 47th Place
Bellevue, WA 98006. . . 450 * * *

All Directors and
Executive Officers as
a Group (7 persons)
(1). . . . . . . . . . . 2,722,959 51% 48% 44%

- -----------------------------
* Less than 1.0%

(1) Reflects the return in February 1996 of 80 shares of Common Stock
previously granted to distributors, and the return in March 1996 of
2,129,871 shares of Common Stock previously issued to WVI. See "Certain
Transactions."

(2) Under the rules of the Securities and Exchange Commission relating to the
presentation of information in this table, Mr. Bernau is deemed to be the
beneficial owner of all of the 2,715,584 shares of the Company's Common
Stock owned by WVI as a result of his ownership of approximately 62% of the
outstanding common stock of WVI. Mr. Bernau does not own any shares of the
Company's Common Stock directly.

DESCRIPTION OF COMMON STOCK

COMMON STOCK

The Company is authorized to issue 10,000,000 shares of Common Stock, of
which 5,330,295 shares were issued and outstanding at March 31, 1996. Each
shareholder is entitled to one vote per share on all matters to be voted on by
shareholders, without any right to cumulate their votes. Shareholders have no
preemptive rights and have no liability for further calls or assessments on
their shares. The shares of Common Stock are not subject to repurchase by the
Company or conversion into any other securities. All outstanding shares of
Common Stock are, and those to be outstanding upon completion of the Offering,
will be fully paid and nonassessable.

Shareholders are entitled to receive such dividends as may be declared by
the Board of Directors of the Company out of funds legally available therefor
and, upon the liquidation, dissolution or winding up of the Company, are
entitled to share ratably in all net assets available for distribution to such
holders after satisfaction of all obligations of the Company. It is not
anticipated that any dividends will be paid by the Company in the foreseeable
future since the Company intends to follow the policy of retaining its earnings
to finance the growth of its business. Future dividend policies will depend
upon the Company's earnings, financial needs and other pertinent factors.

The Certificate of Incorporation limits the purpose of the Company to
construct and operate a brewery in the Seattle, Washington Metropolitan area.
This purpose could later be expanded by a vote of the shareholders of the
Company. Following the completion of this Offering, WVI will own approximately
44% of the outstanding common stock, assuming all of the Shares are sold.

The Bylaws acknowledge that the officers and directors of the Company may
have other interests in similar and/or competing businesses, and authorize the
officers and directors to pursue such other interests without violating
applicable corporate opportunity doctrines, so long as such interests do not
relate to the construction of a brewery in Woodinville, Washington.

LIMITATIONS ON TRANSFER OF SHARES

There is currently no public market for the Company's Common Stock and
there can be no assurance that a public market will develop in the future. The
Registration Statement of which this Prospectus is a part has been declared
effective by the United

States Securities and Exchange Commission pursuant to the Securities Act of 1933
and, as such, the Shares are freely tradeable under the Federal securities laws.
The Shares, however, have been registered in only a limited number of states,
and may not be sold or otherwise transferred to persons who are residents of any
state in which the Shares have not been registered unless they are subsequently
registered or there exists an exemption from the applicable state's registration
requirements with respect to such sale or transfer.

The Company intends to apply for listing of its Common Stock on the Nasdaq
SmallCap Market if and when the Company grows and meets the listing
requirements of the Nasdaq SmallCap Market. One of the primary requirements is
that the Company must have $4 million in assets and $2 million in equity.
Although the Company will have approximately $2 million in equity, it will not
have $4 million in assets until it grows and accumulates additional capital
assets and/or retains earnings from operations. The principle requirements for
listing on the Nasdaq SmallCap Market are that the Company must have $4 million
in assets, $2 million in stockholders' equity, a minimum bid price for its
common stock of $3.00 and two brokers who will serve as market makers for its
common stock. At December 31, 1995, the Company had total assets of $2,747,668
and stockholders' equity of $2,139,742. Accordingly, the Company does not meet
the Nasdaq listing requirements and no assurance can be given as to when or
whether the Company's Common Stock will be listed on the Nasdaq SmallCap Market.

DELAWARE BUSINESS COMBINATION STATUTE

The Company is subject to the provisions of Section 203 of the Delaware
General Corporation Law. In general, Section 203 provides that if a person (an
"Interested Shareholder") acquires voting stock of a Delaware corporation in a
transaction resulting in such person owning 15% or more of the total voting
stock of such corporation (a "Share Acquisition"), then the corporation and the
Interested Shareholder (or any affiliated entity) may not engage in certain
business combination transactions for a period of three years following the date
of the Share Acquisition. "Business combination transactions" for this purpose
include certain mergers, consolidations, asset sales, transfers, loans and other
transactions resulting in a financial benefit to the Interested Shareholder.
These restrictions do not apply if (i) the Interested Shareholder, as a result
of the Share Acquisition, owns at least 85% of the outstanding voting stock of
the corporation (excluding shares owned by directors who are also officers, and
certain employee benefit plans), (ii) prior to completion of the Share
Acquisition the Board of Directors approves either the business combination
transaction or the Share Acquisition, or (iii) after completion of the Share
Acquisition the Board of Directors and the holders of at least two-thirds of the
outstanding voting stock of the corporation (excluding shares owned by the
Interested Shareholder) approve the business combination transaction.

A corporation may provide in its articles of incorporation or bylaws that
Section 203 does not apply to its shares. The Company has not adopted such a
provision and does not currently intend to do so. The law may make the Company
less attractive for takeover, and thus shareholders may not benefit from a rise
in the price of the Common Stock that a takeover could cause.

TRANSFER AGENT AND ANNUAL REPORT

The Company will serve as its own transfer agent for its Common Stock.
Each year the Company will prepare and distribute to Shareholders an Annual
Report which will describe the nature and scope of the Company's business and
operations for the prior year and contain a copy of the Company's audited
financial statements for its most recent fiscal year.

PLAN OF DISTRIBUTION

The Shares will be sold at $1.85 per share. The minimum subscription is
300 shares. The maximum subscription, subject to waiver by the Company, is
30,000 shares. The Company reserves the right to reject any order for the
purchase of Shares in whole or in part for any reason.

This Offering is a best efforts, self-underwritten offering. The Shares
will be offered and sold solely by the Company primarily through direct mail
solicitation. No broker or dealer has been or will be retained to sell the
Shares, nor is any broker or dealer under any obligation to purchase any Shares.
Subject to applicable federal and state securities laws, the Company's officers
and employees may participate in the selling effort. In this regard, Dustin
Wyant, the Company's General Manager, may engage in oral solicitations of
prospective investors at meetings or events organized by the Company. The
Company's officers will not receive any underwriting discounts, commissions or
other compensation from the Company in connection with the offering of the
Shares.

Shares may be purchased by completing and delivering a Subscription
Agreement along with the purchase price by check or VISA or Mastercard charge to
the Company. Checks should be made payable to "First Interstate Bank/Aviator
Ales, Inc." Shares purchased by VISA or Mastercard charge represent lawful
final sales once accepted by the Company and may not be cancelled by the
purchaser.

All subscription proceeds received before the Minimum is reached will be
deposited by the Escrow Agent into an interest bearing account at First
Interstate Bank (the "Escrow Account"). If the Minimum is not sold by May ,
1997, all proceeds held in the Escrow Account, without deduction for expenses of
establishing and maintaining the Escrow Account, will be returned to the
investors. If the Minimum is sold and proceeds

thereon are received into the Escrow Account, the Escrow Account will be closed
and all proceeds thereof will be delivered to the Company. At that time,
investors will receive stock certificates representing the number of Shares they
have purchased. After the Escrow Account is closed, the Company may continue
the Offering for the remaining term and all proceeds from the sale of Shares
will be paid directly to the Company and will be immediately available for use
by the Company for the purposes described herein.

There is no public trading market for the Company's Common Stock. See
"Description of Common Stock -- Limitations on Transfer of Shares." The
offering price of the Shares was determined arbitrarily by management of the
Company, and should not be considered as an indication of the actual value of
the Company. In determining the offering price, the Company considered, among
other things, the Company's limited operating history, its limited financial
resources, its growth and profit potential, the amount of dilution to investors
in this Offering, and the risk of investing in the Company.

LEGAL MATTERS

The validity of the Common Stock offered hereby will be passed upon for the
Company by Ater Wynne Hewitt Dodson & Skerritt, 222 S.W. Columbia, Suite 1800,
Portland, Oregon 97201.

EXPERTS

The financial statements of the Company as of December 31, 1995 and 1994
and for the period from inception (February 14, 1994) through December 31, 1995
included in this Prospectus have been so included in reliance upon the report of
Price Waterhouse LLP, independent accountants, given on the authority of said
firm as experts in auditing and accounting.

ADDITIONAL INFORMATION

A Registration Statement on Form SB-2 (the "Registration Statement"), under
the Securities Act of 1933, as amended (the "Securities Act"), relating to the
securities offered hereby has been filed by the Company with the principal
offices of the Securities and Exchange Commission (the "Commission"). This
Prospectus does not contain all of the information set forth in the Registration
Statement and the exhibits and schedules thereto. For further information with
respect to the Company and the securities offered hereby, reference is made to
such Registration Statement, exhibits and schedules. Statements contained in
this Prospectus as to the contents of any contract or other document referred to
are complete in material terms. In each instance, reference is made to the copy
of such contract or other document filed as exhibits to the Registration
Statement, each such statement being qualified in all respects by such
reference. A copy of the Registration Statement may be inspected without charge
at the Commission's principal offices in Washington, D.C. at 450 Fifth Street,
N.W., Room 1024, Washington, D.C. 20549, and copies of all or any part thereof
may be obtained from the Commission upon the payment of certain fees prescribed
by the Commission.

Following the Offering, the Company will be subject to the informational
requirements of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), and in accordance therewith will file periodic reports, proxy statements
and other information with the Commission. Such reports, proxy statements and
other information concerning the Company may be inspected or copied at the
public reference facilities of the Commission located at 450 Fifth Street, N.W.,
Room 1024, Washington, D.C. 20549. Copies of such documents can be obtained at
the public reference section of the Commission at 450 Fifth Street N.W.,
Washington, D.C. 20549, at prescribed rates.

The Company intends to furnish its shareholders with annual reports
containing audited financial statements certified by an independent public
accounting firm.

In connection with this Offering, no person has been authorized to give any
information or to make any representations other than those contained in this
Prospectus and, if given or made, such other information or representations
should not be relied upon as having been authorized by the Company. This
Prospectus does not constitute an offer to sell, or a solicitation of an offer
to buy, Shares in any state where the offer and sale of the Shares is not
lawful. Until completion of this Offering, the Company will update this
Prospectus for any material changes to the information contained herein.

GLOSSARY

Ale: The traditional European beer, characterized by fragrance,
occasional cloudiness, and fruity and malty flavors that are
the result of warm fermentation using a fast-working, top-
fermenting yeast. Common ale styles include Bitter, Porter,
Stout and Weizen. Ales are rarely pasteurized and are most
flavorful when served fresh and at cellar temperature.

Barrel: A unit of measurement - precisely 31 gallons - used in
discussing brewing capacity. A barrel is equivalent to
approximately two American Kegs or 13.8 cases of twenty-four
12-ounce bottles of beer.

Beer: Any fermented beverage made primarily from malted grain and
seasoned with hops.

Bitter: A traditional English-pub style of ale. The characteristic
dry flavor derives from the resins and essential oils in the
hops.

Brewhouse: The location within a brewery where the brewing takes place.
It often consists of vessels called the mash tun, the lauter
tun and the brew kettle.

Brewpub: A combination restaurant and brewery for on-site
consumption. Annual production is usually under 2,500
barrels.

Contract Brewer: A company that formulates and markets products brewed by
third-party mass-production breweries.

Craft Beer: Full-flavored ales and lagers in the European style that are
brewed using the highest-quality hops, malted barley and
yeast, without adjuncts such as rice, corn or other
sweeteners.

G-1

Craft Brewer: A brewer that uses traditional European methods and styles.
This category consists of Regional Specialty Brewers,
Contract Brewers, Microbreweries and Brewpubs.

Hop Jack: A processing machine that strains the hops from the wort.

Hops: An aromatic vine whose female flowers have been used since
the 15th century to season and clarify beer. Washington and
Oregon are second and third, respectively, in world hops
production. Germany is the world's leading producer of
hops.

Lager: A bottom-fermented beer. This is the style of beer brewed
by most American industrial mass-producers.

Malted Barley: Barley grain that has been sprouted, kiln-roasted and
perhaps even caramelized, thereby facilitating the release
of enzymes that break starches down into sugars in a
lautering process. Malted barley determines a beer's body,
color, sweetness, fruitiness and strength.

Microbrewery: A craft brewery that produces under 15,000 barrels a year,
principally for off-site consumption. Products are usually
distributed locally by third party distributors.

Porter: Porter is made with highly roasted malt and possesses a less
pronounced hop flavor with a slightly sweet taste.

Regional Specialty A craft brewer that produces between 15,000
Brewer: and 1,000,000 barrels a year principally for off-site
consumption. Products are usually distributed to both local
and distant regional markets by third-party distributors.

Stout: Stout is an ale with a dark color due to the highly roasted
malt and a rich malt flavor combined with a strong, bitter
hops taste.

G-2

Yeast: Used in the fermentation process to convert sugars to
alcohol and carbon dioxide. Top-fermenting yeast, used in
brewing ales, rises to the top of the vessel during
fermentation.

Weizen: A famous Bavarian unfiltered wheat beer that retains a
natural cloudiness, such as the Company's Hefeweizen.

Wheat Malt Grist: Crushed wheat malt.

G-3

AVIATOR ALES, INC.
(A DEVELOPMENT STAGE COMPANY)
INDEX TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------

Report of Independent Accountants. . . . . . . . . . . . . . . . . . . . F-2

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

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

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

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

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

F-1

REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors and Shareholders
of Aviator Ales, Inc.
(A Development Stage Company)

In our opinion, the accompanying balance sheet and the related statements of
operations, of shareholders' equity and of cash flows present fairly, in all
material respects, the financial position of Aviator Ales, Inc. (formerly
Seattle Brewing Company and a development stage company) at December 31, 1995
and 1994, and the results of its operations and its cash flows for the year
ended December 31, 1995, for the period from inception (February 14, 1994) to
December 31, 1994 and for the period from inception (February 14, 1994) to
December 31, 1995, 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 is a development stage enterprise which has only a
limited and unprofitable operating history. Such factors, among others, raise
substantial doubt about 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.

Aviator Ales, 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.

PRICE WATERHOUSE LLP

Portland, Oregon
March 6, 1996

F-2

AVIATOR ALES, INC.
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEET
- --------------------------------------------------------------------------------

DECEMBER 31, MARCH 31,
1994 1995 1996
------------ ------------ ------------
(Unaudited)

ASSETS
Current assets:
Cash and cash equivalents $ 2,490,777 $ 226,401 $ 8,746
Accounts receivable, trade - 48,870 120,852
Inventories (Note 2) 10,485 244,273 252,858
Prepaid and other current assets 32,770 57,912 44,311
------------ ------------ ------------
Total current assets 2,534,032 577,456 426,767

Property and equipment (Notes 3 and 4) 102,637 2,153,851 2,229,258
Deferred stock offering costs - - 10,513
Other non-current assets 1,009 16,361 15,828
------------ ------------ ------------

$ 2,637,678 $ 2,747,668 $ 2,682,366
------------ ------------ ------------
------------ ------------ ------------

LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 22,554 $ 202,312 $ 93,360
Accrued liabilities - 29,552 48,078
Payables to parent and affiliated companies
(Note 8) 41,612 28,111 271,835
------------ ------------ ------------
Total current liabilities 64,166 259,975 413,273

Mortgage note payable (Note 4) 50,000 50,000 50,000
Advance from affiliate (Note 8) - 250,000 250,000
Deferred rent (Note 10) - 47,951 56,453
------------ ------------ ------------
114,166 607,926 769,726
------------ ------------ ------------
Commitments and contingencies (Note 10)

Shareholders' equity (Notes 6, 7 and 8):
Common stock, $.001 par value, 10,000,000 shares
authorized, 7,454,546, 7,460,226 and 5,330,355
shares issued and outstanding 7,455 7,461 5,331
Additional paid-in capital 2,566,785 2,577,649 2,579,779
Deficit accumulated during development stage (50,728) (445,368) (672,470)
------------ ------------ ------------
Total shareholders' equity 2,523,512 2,139,742 1,912,640
------------ ------------ ------------

Total liabilities and shareholders' equity $ 2,637,678 $ 2,747,668 $ 2,682,366
------------ ------------ ------------
------------ ------------ ------------

The accompanying notes are an integral part of this statement.

F-3

AVIATOR ALES, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF OPERATIONS
- --------------------------------------------------------------------------------

CUMULATIVE
AMOUNTS
PERIOD FROM FROM
INCEPTION THREE INCEPTION
(FEBRUARY 14, MONTHS (FEBRUARY 14,
1994) TO YEAR ENDED ENDED 1994) TO
DECEMBER 31, DECEMBER 31, MARCH 31, MARCH 31,
1994 1995 1996 1996
------------ ------------ ----------- -----------
(Unaudited) (Unaudited)

Gross sales (Note 9) $ 43,698 $ 186,818 $ 274,105 $ 504,621

Less excise taxes - (4,852) (15,355) (20,207)
------------ ------------ ----------- -----------
Net sales 43,698 181,966 258,750 484,414

Cost of goods sold 23,487 165,006 329,640 518,133
------------ ------------ ----------- -----------
Gross margin 20,211 16,960 (70,890) (33,719)

Selling, general and administrative
expenses (Notes 6 and 8) 110,230 490,646 157,019 757,895
------------ ------------ ----------- -----------
Loss from operations (90,019) (473,686) (227,909) (791,614)

Other income (expense):
Interest income 41,541 83,546 1,932 127,019
Interest expense (2,250) (4,500) (1,125) (7,875)
------------ ------------ ----------- -----------
Loss before income taxes (50,728) (394,640) (227,102) (672,470)

Income taxes (Note 5) - - - -
------------ ------------ ----------- -----------

Net loss $ (50,728) $ (394,640) (227,102) $ (672,470)
------------ ------------ ----------- -----------
------------ ------------ ----------- -----------

Pro forma net loss per common share
(Note 1) $ (0.07) (0.04)

Pro forma weighted average number of
common shares outstanding (Note 1) 5,326,209 5,330,275

The accompanying notes are an integral part of this statement.

F-4

AVIATOR ALES, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF SHAREHOLDERS' EQUITY
PERIOD FROM INCEPTION (FEBRUARY 14, 1994) TO MARCH 31, 1996 (UNAUDITED)

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

DEFICIT
ACCUMULATED
ADDITIONAL DURING THE
COMMON STOCK PAID-IN DEVELOPMENT
SHARES AMOUNT CAPITAL STAGE TOTAL
----------- ------------ ------------ ------------ ------------

Balances, February 14, 1994 - $ - $ - $ - $ -

Stock issued to Willamette Valley, Inc. 4,845,455 4,846 95,154 - 100,000

Proceeds from stock offering 2,609,091 2,609 2,471,631 - 2,474,240

Net loss - - - (50,728) (50,728)
----------- ------------ ------------ ------------ ------------
Balances, December 31, 1994 7,454,546 7,455 2,566,785 (50,728) 2,523,512

Shares granted to distributors (Note 6) 5,680 6 10,864 - 10,870

Net loss - - - (394,640) (394,640)
----------- ------------ ------------ ------------ ------------
Balances, December 31, 1995 7,460,226 7,461 2,577,649 (445,368) 2,139,742

Shares retired (Note 6) (2,129,871) (2,130) 2,130 - -

Net loss - - - (227,102) (227,102)
----------- ------------ ------------ ------------ ------------
----------- ------------ ------------ ------------ ------------

Balances, March 31, 1996 (Unaudited) 5,330,355 $ 5,331 $ 2,579,779 $ (672,470) $ 1,912,640
----------- ------------ ------------ ------------ ------------
----------- ------------ ------------ ------------ ------------

The accompanying notes are an integral part of this statement.

F-5

AVIATOR ALES, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF CASH FLOWS
- --------------------------------------------------------------------------------

Cumulative
amounts
PERIOD FROM FROM
INCEPTION THREE INCEPTION
(FEBRUARY 14, MONTHS (FEBRUARY 14,
1994) TO YEAR ENDED ENDED 1994) TO
DECEMBER 31, DECEMBER 31, MARCH 31, MARCH 31,
1994 1995 1996 1996
------------ ------------ ----------- -----------
(Unaudited) (Unaudited)

Cash flows from operating activities:
Net loss $ (50,728) $ (394,640) $ (227,102) $ (672,470)
Reconciliation of net loss to cash
used by operating activities:
Shares granted to distributors - 10,870 - 10,870
Depreciation and amortization - 45,580 39,099 84,679
Deferred rent - 47,951 8,502 56,453
Increases in current assets and
current liabilities:
Accounts receivable - (48,870) (71,982) (120,852)
Inventories (10,485) (233,788) (8,585) (252,858)
Prepaid and other assets (32,770) (25,142) 13,601 (44,311)
Accounts payable 22,554 179,758 (108,952) 93,360
Accrued liabilities - 29,552 18,526 48,078
------------ ------------ ----------- -----------
Net cash used by operating activities (71,429) (388,729) (336,893) (797,051)
------------ ------------ ----------- -----------

Cash flows from investing activities:
Capital expenditures (52,637) (2,096,559) (113,973) (2,263,169)
Increase in other non-current assets (1,009) (15,587) - (16,596)
------------ ------------ ----------- -----------
Net cash used by investing activities (53,646) (2,112,146) (113,973) (2,279,765)
------------ ------------ ----------- -----------

Cash flows from financing activities:
Sale of common stock to
parent company 100,000 - - 100,000
Net proceeds from common stock
offering 2,474,240 - - 2,474,240
Net borrowings and advances from
parent and affiliated companies 41,612 236,499 243,724 521,835
Increase in deferred stock offering costs - - (10,513) (10,513)
------------ ------------ ----------- -----------
Net cash provided by financing activities 2,615,852 236,499 233,211 3,085,562
------------ ------------ ----------- -----------

Net increase (decrease) in cash 2,490,777 (2,264,376) (217,655) 8,746
Cash and cash equivalents, beginning
of period - 2,490,777 226,401 -
------------ ------------ ----------- -----------
Cash and cash equivalents,
end of period $ 2,490,777 $ 226,401 $ 8,746 $ 8,746
------------ ------------ ----------- -----------
------------ ------------ ----------- -----------

The accompanying notes are an integral part of this statement.

F-6

AVIATOR ALES, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------

1. SUMMARY OF OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES

ORGANIZATION, OPERATIONS AND BASIS OF PRESENTATION
Aviator Ales, Inc. (the Company) was formed on February 14, 1994 to produce
and sell hand-crafted ales in the state of Washington. Prior to January
1996, the Company's name was Seattle Brewing Company. The Company has
built and is currently operating a brewery in a leased facility in
Woodinville, Washington. The Company is one of four majority or wholly
owned subsidiaries of Willamette Valley, Inc. Microbreweries across America
(WVI), a company located in Oregon, organized to establish microbreweries
throughout the United States. At December 31, 1994 and 1995, WVI owned
approximately 65% of the Company's common stock; see also Note 6.

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.

The Company is a development stage company that was organized under the
laws of the state of Delaware. From the date of inception (February 14,
1994) through March 31, 1996, the Company's efforts have been directed
primarily toward organizing and issuing public offerings of shares of its
common stock and building and equipping its brewery. The brewery began
producing and selling beer in September 1995.

The Company has only a limited and unprofitable operating history but
believes that it will continue as a going concern as it has successfully
raised capital in a 1994 public stock offering of 2,609,091 shares and is
currently attempting to raise additional capital in a second public
offering (see Note 6). There can be no assurance that the Company will
successfully raise proceeds in its second public offering or that it will
produce and sell its products on a profitable basis to sustain operations.

INVENTORIES
Inventories are stated at the lower of cost (first-in, first-out basis) or
market.

INTERIM FINANCIAL DATA
The interim financial data for the three months ended March 31, 1996 is
unaudited; however, in the opinion of the Company, the interim data
includes all adjustments consisting only of normal recurring adjustments,
necessary for a fair statement of the results for the interim period.
Operating results and cash flows for the three months ended March 31, 1996
are not necessarily indicative of the results to be achieved for the full
year.

PROPERTY AND EQUIPMENT
Property and equipment are stated at cost and are depreciated over their
estimated useful lives using the straight-line method, beginning at the
time the assets are placed in operation, as follows:

Leasehold improvements 5-15 years
Equipment, furniture and vehicles 5-15 years

Expenditures for repairs and maintenance are charged to expense as
incurred, and expenditures for additions and betterments are capitalized.
Leasehold improvements are depreciated over the shorter of the life of the
asset or the lease.

F-7

AVIATOR ALES, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------

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

PROPERTY AND EQUIPMENT (CONTINUED)
In March 1995, the Financial Accounting Standards Board issued the
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 will adopt the statement in fiscal 1996; however, the
adoption is not expected to have a significant impact on the Company's
financial statements.

OTHER NONCURRENT ASSETS
The Company has capitalized the fees and related legal costs of
organization which are included in other noncurrent assets in the
accompanying balance sheet. The Company is amortizing such costs on the
straight-line basis over a two year period.

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. The Company files a stand-alone federal income tax
return.

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

PRO FORMA NET LOSS PER COMMON SHARE
Pro forma net loss per common share is calculated based on the weighted
average number of common shares outstanding after giving retroactive effect
to the shares retired in March 1996, as if such shares were retired on
January 1, 1995; see Note 6. No common stock equivalents with a dilutive
effect were outstanding during 1995 or for the three months ended March 31,
1996. Shares held in escrow are included in the weighted average number of
common shares outstanding.

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 period from inception (February 14, 1994) to December 31, 1994, the
Company paid no income taxes and paid interest of $2,250. During 1994, the
Company acquired land by issuing long-term debt of $50,000; this non-cash
transaction has been excluded from the accompanying statement of cash
flows. For the year ended December 31, 1995, the Company paid no income
taxes and paid interest of $4,500. For the three months ended March 31,
1996, the Company paid no income taxes and paid interest of $1,125.

FAIR MARKET VALUE OF FINANCIAL INSTRUMENTS
Except as discussed in Note 8 under advances from affiliates, the fair
market value of the Company's recorded financial instruments materially
approximate 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.

F-8

AVIATOR ALES, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------

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

STATEMENT OF FINANCIAL ACCOUNTING STANDARDS NO. 123
The Company plans to adopt Statement of Financial Accounting Standards No.
123 (SFAS 123) "Accounting for Stock-Based Compensation," for its year
ending 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 method as prescribed
in Accounting Principles Board Opinion Number 25 (APB 25) or use the fair
value method prescribed in SFAS 123. The Company continues to follow the
provisions of APB 25. Therefore, management believes that the impact of
adoption will not have a significant effect on the Company's financial
position or results of operations.

RECLASSIFICATIONS
Certain reclassifications have been made to the 1994 financial statements
to conform with 1995 presentation. These reclassifications have no impact
on previously reported results of operations or common shareholders'
equity.

2. INVENTORIES

Inventories consisted of:

DECEMBER 31, MARCH 31,
1994 1995 1996
---------- ---------- -----------
(Unaudited)

Raw materials $ - $ 48,589 $ 39,240
Work-in-process - 30,100 58,625
Finished goods - 147,992 131,405
Retail inventory 10,485 17,592 23,588
---------- ---------- -----------

$ 10,485 $ 244,273 $ 252,858
---------- ---------- -----------
---------- ---------- -----------

F-9

AVIATOR ALES, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------

3. PROPERTY AND EQUIPMENT

Property and equipment consist of:

DECEMBER 31, MARCH 31,
1994 1995 1996
--------- ----------- -----------
(Unaudited)

Land and improvements $ 83,633 $ 642,275 $ 668,714
Brewery equipment 2,700 1,527,269 1,612,379
Office furniture and equipment - 10,162 12,586
Vehicles - 19,490 19,490
Construction in progress 16,304 - -
--------- ----------- -----------
102,637 2,199,196 2,313,169

Less accumulated depreciation - (45,345) (83,911)
--------- ----------- -----------

$ 102,637 $ 2,153,851 $ 2,229,258
--------- ----------- -----------
--------- ----------- -----------

4. LONG-TERM DEBT

Long-term debt consists of a note payable to an individual, issued in
connection with the purchase of land. The note bears interest at 9.0% and
requires quarterly interest payments. The note is secured by the land and
is payable in a lump sum in June 1999.

5. INCOME TAXES

Pre-tax loss was attributable to operations entirely within the United
States. For the periods ended December 31, 1994 and 1995 and March 31,
1996, there was no current or deferred provision for income taxes.

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

PERIOD FROM
INCEPTION THREE
(FEBRUARY 14, MONTHS
1994) TO YEAR ENDED ENDED
DECEMBER 31, DECEMBER 31, MARCH 31,
1994 1995 1996
------------ ----------- ------------
(Unaudited)

Statutory graduated federal rate 15.0% 34.0% 34.0%
Reserve of net operating loss
carryforward assets (15.0) (34.0) (34.0)
------------ ----------- ------------

-% -% -%
------------ ----------- ------------

F-10

AVIATOR ALES, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------

5. INCOME TAXES (CONTINUED)

Deferred tax assets (liabilities) consist of:

DECEMBER 31, MARCH 31,
1994 1995 1996
--------- ---------- -----------
(Unaudited)

Federal net operating loss carryforwards $ 15,000 $ 175,000 $ 240,000
Expenses not currently deductible - 15,000 17,000
Fixed assets - (60,000) (55,000)
Deferred tax asset valuation allowance (15,000) (130,000) (202,000)
--------- ---------- -----------

$ - $ - $ -
--------- ---------- -----------
--------- ---------- -----------

As of March 31, 1996, the Company had a net operating loss carryforward
aggregating approximately $800,000 for federal purposes, which may be used
to offset future taxable income, if any. The annual utilization of this
carryforward may be limited if the Company undergoes an ownership change or
fails to meet the continuity of business requirements defined by the
Internal Revenue Code. If the planned stock offering discussed in Note 6
is successful, the Company will be deemed to have undergone an ownership
change and the Company's utilization of its net operating losses would be
limited to approximately $500,000 on an annual basis. The Company's net
operating loss carryforward expires in 2011.

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. In February
1994, the Company received $100,000 cash from WVI in exchange for 4,845,455
shares of unregistered common stock.

In connection with the Company's initial stock offering under Oregon
securities laws, WVI agreed to place in escrow its 4,845,455 shares of the
Company's common stock. These shares will be released from escrow to WVI
when the Company satisfies one or more certain earnings requirements or
establishes a bona fide over-the-counter trading market for its common
stock and maintains a bid price equal to or greater than a stipulated
benchmark price for 26 or more consecutive weeks. Unless released pursuant
to these conditions, the 4,845,455 shares shall remain in escrow until
unconditionally released in 25% increments on April 5, 2001, 2002, 2003 and
2004. The shares, while in escrow, entitle WVI to the same rights and
privileges as all other shareholders of common stock, except for certain
rights relating to transferability and liquidation.

During 1994, the Company sold 2,609,091 shares of its common stock at $1.10
per share pursuant to a Form SB-2 public offering filed with the S.E.C.
Cash proceeds from this offering, net of offering expenses of $395,760,
aggregated $2,474,240.

F-11

AVIATOR ALES, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------

6. SHAREHOLDERS' EQUITY (CONTINUED)

During 1995, the Company granted a total of 5,680 shares to third-party
distributors of the Company's products. The Company recorded $10,870 of
expense related to these grants which is included in selling, general and
administrative expenses in the accompanying financial statements.

On March 4, 1996, the board of directors of WVI authorized WVI to
contribute 2,129,871 of its 4,845,455 shares in the Company to the Company
for no consideration in contemplation of the stock offering discussed in
the following paragraph; the Company has retired these shares. This
transaction reduced WVI's ownership in the Company from approximately 65%
to approximately 51%.

The Company plans to file a registration statement with the S.E.C. in May
1996 in an effort to sell an additional 820,000 shares of its common stock
at a proposed offering price of $1.85 per share.

7. STOCK INCENTIVE PLAN

The Company adopted a 1994 Stock Incentive Plan (the "Plan") and has
reserved 250,000 shares of the Company's common stock thereunder. The Plan
provides for the grant of incentive stock options to employees of the
Company and non-qualified stock options, stock sales and stock grants to
employees, directors and consultants of the Company. In January 1995, the
Company granted 55,000 options to employees under the Plan. The options
are exercisable over a ten-year period at an exercise price of $1.10 per
share, which approximated fair market value at the date of grant. The
options vest ratably over the ten-year term beginning one year from the
date of grant.

In January 1996, the Company granted 89,000 options to employees under the
Plan. Of these, 81,000 options vest over a ten-year term and 9,000 vest
over a five-year term. These options have an exercise price of $1.85 per
share, which approximated the fair market value at the date of grant.

No options have been exercised to date.

8. RELATED PARTIES

NATURE OF RELATED PARTIES
The Company's president partially owns and controls Willamette Valley
Vineyards (WVV), a winery in Oregon, and Nor'Wester Brewing Company Inc.
(Nor'Wester) a microbrewery in Oregon, as well as WVI. Additionally, WVI
is the majority owner of Mile High Brewing Company (MHBC) and Bayhawk Ales,
Inc. (BAI), and fully owns North Country Brewing Company, Inc. (NCBCI),
development stage companies located in 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. To mitigate
the inherent conflicts between affiliated companies, the board of directors
of each company have appointed (or will appoint) two board members from
each respective board, and who do not own stock in any of the other
affiliated companies, to serve on an affiliated transactions committee for
their respective company. The affiliated transaction committees review all
material arrangements between companies to approve related costs.

F-12

AVIATOR ALES, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------

8. RELATED PARTIES (CONTINUED)

RELATED PARTY TRANSACTIONS
For the period from inception through December 31, 1994, WVI and WVV
provided secretarial, accounting, marketing and administrative services
related to the Company's initial stock offering and for general and
administrative purposes. The cost of these services aggregated
approximately $185,000, of which approximately $48,000 is included in
selling, general and administrative expenses in the accompanying financial
statements and of which approximately $137,000 was charged directly to
additional paid-in capital as a component of stock offering costs. During
1995 and for the three months ended March 31, 1996, the Company purchased
these services from WVI at an approximate cost of $169,000 and $20,000,
respectively, which is included in selling, general and administrative
expenses in the accompanying financial statements. Additionally, WVI has
allowed the Company to utilize certain proprietary concepts for no cash
consideration. As a result of these and certain other transactions, the
Company owed approximately $42,000, $28,000 and $270,000, at December 31,
1994 and 1995 and March 31, 1996, respectively to affiliated companies.

The Company continues to purchase management and administrative services
from WVI. In 1996, WVI began to contract for certain of these services
under a general services agreement between WVI and Nor'Wester.
Additionally, in 1996, WVI advanced the Company $240,000 to be used for
short-term financing purposes. This advance bears no interest and is
payable upon demand.

STRATEGIC ALLIANCE AND COOPERATIVE BREWING AGREEMENTS
The Company has entered into a Strategic Alliance (the "Alliance") with
Nor'Wester, MHBC, BAI, NCBI, and WVI. The Company, Nor'Wester, MHBC, BAI,
NCBCI, and WVI are collectively referred to as "Alliance members," and the
Company, 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 each of the Company, 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, the Company will
produce Nor'Wester beer, in the amounts and packaging as specified in firm
orders submitted by Nor'Wester on a periodic basis. The Company'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.

F-13

AVIATOR ALES, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------

8. RELATED PARTIES (CONTINUED)

STRATEGIC ALLIANCE AND COOPERATIVE BREWING AGREEMENTS (CONTINUED)
Nor'Wester has acquired certain specified brewing equipment for Aviator's
use in producing Nor'Wester's beer. To the extent that this equipment is
not needed for the production of Nor'Wester beers, Aviator may, upon
notice to Nor'Wester, use this equipment to produce its 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.

ADVANCE FROM AFFILIATE
In connection with the Cooperative Brewing Agreement with Nor'Wester
described above, Nor'Wester advanced $250,000 to the Company in December
1995 for the purchase of ingredients and packaging materials for the
Company's initial production of Nor'Wester's products. This advance is
unsecured, does not bear interest and is not due as long as the terms of
the Cooperative Brewing Agreement with Nor'Wester are in effect. The
estimated fair value of this advance, calculated using estimated current
borrowing rates and a repayment term of four years, is approximately
$170,000.

9. SIGNIFICANT CUSTOMERS

Approximately 58% and 99% of the Company's sales were to wholesale
distributors located in the Pacific Northwest for the year ended December
31, 1995 and for the three months ended March 31, 1996, respectively.
Sales to the Company's largest customer represented approximately 30% and
57% of gross sales for the year ended December 31, 1995 and for the three
months ended March 31, 1996, respectively.

10. COMMITMENTS AND CONTINGENCIES

COMMITMENTS
The Company has entered into agreements with several independent
distributors for the distribution of the Company's products in Washington.
These agreements contain normal distribution provisions and are cancelable
by either the Company or the distributors.

F-14

AVIATOR ALES, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------

10. COMMITMENTS AND CONTINGENCIES (CONTINUED)

COMMITMENTS (CONTINUED)
During 1995, the Company entered into a twenty-year operating lease
arrangement with optional renewal terms for its production facility in
Woodinville, Washington. Approximate minimum lease payments are as
follows:

YEAR ENDING
DECEMBER 31,
------------

1996 (nine months) $ 87,750
1997 117,000
1998 117,000
1999 117,000
2000 119,000
Thereafter 2,195,000
-----------

$ 2,752,750
-----------
-----------

The terms of this lease allowed for no lease payments to be made during
the initial five months of the lease term, and contain escalating payments
beginning in 2000. The Company is recording lease expense on the
straight-line method over the lease term; accordingly, deferred rent has
been recorded in the accompanying balance sheet. Rent expense during 1995
and for the three months ended March 31, 1996 related to this lease
aggregated approximately $67,000 and $38,000, respectively, and is
allocated between cost of sales and selling, general and administrative
expenses in the accompanying statement of operations.

CONTINGENCIES
In connection with maintaining an informal trading market for the
Company's shares following completion of the Company's first public common
stock offering qualified for sale under the Securities Act of 1933, the
prospectus for such offering included the following statement: "The
Company intends to facilitate trading (of its shares) by making available
to existing and potential shareholders the names and addresses of persons
interested in buying and selling the shares" (the "Prospectus Statement").
The Company is unable to conclude with certainty that the Prospectus
Statement is not a solicitation of an offer to sell a security requiring
registration under Section 5 of the Securities Act of 1933. If the
Prospectus Statement constitutes a solicitation of a nonregistered offer
to sell the Company's shares, the Company could be liable to purchasers
who bought shares in the informal trading market as a result of the
Prospectus Statement. Management does not believe that the liability, if
any, resulting from this matter will have a material adverse affect on the
Company's financial position or results of operations.

F-15

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

Item 24. Indemnification of Directors and Officers.

Section 145 of the General Corporation law of the State of Delaware (the
"GCL") provides that a corporation may indemnify its officers and directors (or
persons who have served, at the corporation's request, as officers and directors
of another corporation) against the expenses, including attorney's fees,
actually and reasonably incurred by them in connection with the defense of any
action by reason of being or having been directors or officers, if such person
shall have acted in good faith and in a manner he reasonably believed to be in
or not opposed to the best interests of the corporation, and, with respect to
any criminal action or proceedings, had no reason to believe his conduct was
unlawful, except that if such action shall be in the right of the corporation,
no such indemnification shall be provided as to any claim, issue or matter as to
which such person shall have been adjudged to have been liable to the
corporation unless and to the extent that the Court of Chancery of the State of
Delaware, or any other court in which the suit was brought, shall determine
that, in view of all the circumstances of the case, such person is fairly and
reasonably entitled to indemnity for such expenses which the Court of Chancery
or such other court shall deem proper. The Certificate of Incorporation and
Bylaws of the Company provide that it shall indemnify all officers and directors
of the Company to the fullest extent permitted by applicable law.

The Certificate of Incorporation of the Company provides for the
elimination of the personal liability of a director to the Company or its
stockholders for monetary damages for breach of a fiduciary duty as a director,
except for liability for:

1. any breach of the director's duty of loyalty to such corporation or
its respective stockholders;

2. any acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law;

3. any action under Section 174 of the GCL, including paying a dividend
or approving an illegal dividend; and

4. any transaction from which the director derived an improper personal
benefit.

II-1

The Company has also entered into an agreement with its director providing
for his indemnification by the Company to the maximum extent permitted under
applicable law, including the advancement of expenses incurred by a director in
any suit in which the director is involved.

Item 25. Other Expenses of Issuance and Distribution.

The following table sets forth the costs and expenses expected to be
incurred by the Registrant in connection with the offering described in this
Registration Statement and assuming all Shares are sold. All amounts, except
the SEC registration fee, are estimates.

SEC Registration Fees. . . . . . . . . . . . . . $ 546
Printing and Engraving . . . . . . . . . . . . . 41,437
Accounting Fees and Expenses . . . . . . . . . . 6,000
Legal Fees and Expenses. . . . . . . . . . . . . 50,000
Marketing Expenses . . . . . . . . . . . . . . . 114,591
Miscellaneous. . . . . . . . . . . . . . . . . . 14,976
--------
Total. . . . . . . . . . . . . . . . . . . . . . $227,550
--------
--------

Item 26. Recent Sales of Unregistered Securities.

Within the last three years, the Company sold securities without
registration under the Securities Act of 1933, as amended (the "Act") in the
transaction described below in reliance on Section 4(2) of the Act as not
involving any public offering.

On July 27, 1994, the Company issued to WVI 4,845,455 shares of Common
Stock for aggregate consideration of $100,000 as part of the initial
capitalization of the Company.

Item 27. Exhibits.

3.1 Certificate of Incorporation of the Company and all amendments
thereto.*

3.2 Bylaws of the Company.*

II-2

5.0 Opinion of Ater Wynne Hewitt Dodson & Skerritt as to legality of
securities being registered.*

10.1 Lease Agreement between the Company and Intrawest Properties
Partnership, dated May 10, 1995.*

10.2 Form of Management Agreement between the Company and Willamette
Valley, Inc. Microbreweries across America dated June 25, 1994.*

10.3 Form of Licensing Agreement between the Company and Willamette Valley,
Inc. Microbreweries across America dated June 25, 1994.*

10.4 Form of Director Indemnity Agreement between the Company and its
Directors.*

10.5 Copy of the Company's 1994 Stock Incentive Plan.*

10.6 Revised Employment Agreement between the Company and Dustin Wyant
dated July 5, 1995.

10.7 Form of Distribution Agreement between the Company and various
distributors.*

10.8 Form of Distribution Agreement between the Company and various
distributors.*

10.9 Strategic Alliance Agreement dated January 1, 1996, between the
Company, Nor'Wester Brewing Company, Willamette Valley, Inc.
Microbreweries across America, Mile High Brewing Company, Bayhawk Ales
and North Country Brewery, Inc.*

10.10 Cooperative Brewing Agreement dated January 1, 1996, between the
Company and Nor'Wester Brewing Company.*

10.11 Loan Agreement between the Company and Willamette Valley, Inc.
Microbreweries across America dated February 28, 1996.

23.1 Consent of Price Waterhouse LLP.

23.2 Consent of Ater Wynne Hewitt Dodson & Skerritt (included in Exhibit
5.0).

99.1 Copy of Impound Escrow Agreement between the Company and First
Interstate Bank of California.

II-3

99.2 Form of Subscription Agreement.

99.3 Founder's Escrow Agreement among the Company, Willamette Valley, Inc.
Microbreweries across America and First Interstate Bank of Oregon,
N.A. dated June 25, 1994.*

* Previously filed
** To be filed by amendment

Item 28. Undertakings.

1. The undersigned, Company, hereby undertakes:

(a) To file, during any period in which the Company offers or sells
securities, a post-effective amendment(s) to this registration
statement:

(1) To include any prospectus required by Section 10(a)(3) of
the Securities Act;

(2) To reflect in the prospectus any facts or events which,
individually or together, represent a fundamental change in
the information in the registration statement; and

(3) To include any additional or changed material information
with respect to the plan of distribution not previously
disclosed in the registration statement or any material
change to such information in the registration statement;

(b) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall
be deemed to be a new registration statement relating to the
securities offering therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering
thereof; and

(c) To file a post-effective amendment to remove from registration
any of the securities being registered which remain unsold at the
termination of the offering.

2. Insofar as indemnification for liabilities arising under the
Securities Act of 1933 (the "Act") may be permitted to directors, officers and
controlling persons of the Company pursuant

II-4

to the foregoing provisions, or otherwise, the Company has been advised that in
the opinion of the Securities and Exchange Commission (the "Commission") such
indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Company of expenses incurred or
paid by a director, officer or controlling person of the Company in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Company will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question of whether such indemnification by it is against
public policy as expressed in the Act and will be governed by the final
adjudication of such issue.

3. If the Company relies on Rule 430A under the Act, the Company will:

(a) For determining any liability under the Act, treat the
information omitted from the form of prospectus filed as part of
this registration statement in reliance upon Rule 430A and
contained in a form of prospectus filed by the Company under Rule
424(b)(1), or (4), or 497(h) under the Act as part of this
registration statement as of the time the Commission declared it
effective; and

(b) For determining any liability under the Act, treat each post
effective amendment that contains a form of prospectus as a new
registration statement for the securities offered in the
registration statement, and that offering of the securities at
that time as the initial bona fide offering of those securities.

II-5

SIGNATURES

In accordance with the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing Form SB-2 and has authorized this Amendment No. 2
to the Registration Statement to be signed on its behalf by the undersigned,
thereunder duly authorized, in the City of Portland, State of Oregon on the
day of May, 1996.

AVIATOR ALES, INC.

/s/ James W. Bernau
-----------------------------------
James W. Bernau, President

In accordance with the requirements of the Securities Act of 1933, this
Amendment No. 1 to the Registration Statement was signed by the following
persons in the capacities and on the dates indicated:

Signature Title Date

/s/ James W. Bernau May __, 1996
- ------------------------------
James W. Bernau President, Secretary, Director
(Principal Executive, Financial

/s/ Dustin Wyant General Manager May __, 1996
- ------------------------------
Dustin Wyant and Accounting Officer)

* Director May __, 1996
- ------------------------------
William Gates

* Director May __, 1996
- ------------------------------
Jim Gregory

* Director May __, 1996
- ------------------------------
Howard Lovering

* Director May __, 1996
- ------------------------------
David McCray

Director May __, 1996
- ------------------------------
Bonnie Pladson

*By: /s/ James W. Bernau
- -------------------------------------------
James W. Bernau, Attorney-in-Fact

II-6

EXHIBIT INDEX

NUMBER DESCRIPTION PAGE
- ------ ----------- ----

10.6 Revised Employment Agreement between the Company
and Dustin Wyant dated July 5, 1995.

10.11 Loan Agreement between the Company and Willamette
Valley, Inc. Microbreweries across America dated
February 28, 1996.

99.1 Copy of Impound Escrow Agreement between the
Company and First Interstate Bank of California.

99.2 Form of Subscription Agreement.