Golden West Brewing Company, Inc. (Form: 10KSB, Received: 04/24/2007 14:00:32)

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

FORM 10-KSB

[ X ] ANNUAL REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2006

[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ____________ to ____________

Commission file number 000-51808

GOLDEN WEST BREWING COMPANY, INC .
(Name of Small Business Issuer in its Charter)


Delaware (State or other jurisdiction of incorporation or organization)	90-0158978 I.R.S. Employer Identification number

945 West 2 ^nd Street, Chico, CA 95928
(Address of principal executive offices) (Zip Code)

Issuer's telephone number: (530) 894-7906

Securities registered under Section 12(b) of the Exchange Act: None

Securities registered under Section 12(g) of the Exchange Act: Common Stock, $.0001 par value

Check whether the issuer is not required to file reports pursuant to Section 13 or 15(d) of the Exchange Act. [ ]

Note – Checking the box above will not relieve any registrant required to file reports pursuant to Section 13 or 15(d) of the Exchange Act from their obligations under those Sections.

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

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

The Issuer's revenues for the fiscal year ended December 31, 2006 were $1,032,381. As of April 24, 2007, the aggregate market value of the Common Stock of the Issuer based upon the average bid and asked prices of such Common Stock, held by non-affiliates of the Issuer was $1,247,000. As of April 24, 2007, there were 2,818,000 shares of Common Stock outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

The Registrant incorporates by this reference the following:

PART IV - EXHIBITS


ITEM 13.			EXHIBITS AND REPORTS ON FORM 8-K
	*	2.1		Asset Purchase and Sale Agreement dated October 8, 2004
	*	2.2		Amendment No. 1 to Asset Purchase and Sale Agreement
	*	2.3		Amendment No. 2 to Asset Purchase and Sale Agreement dated July 31, 2005
	*	2.4		Amendment No. 3 to Asset Purchase and Sale Agreement dated August 31, 2005
	*	3.1		Amended and Restated Certificate of Incorporation
	*	3.2		By-Laws
	*	4.1		2004 Equity Incentive Plan
	*	4.2		Form of Subscription Agreement
	*	4.3		Specimen common stock certificate
	*	10.1		Lease Agreement
	*	10.2		Form of Escrow Agreement
	*	10.3		Amended Trademark Assignment
	*	10.3.2		Initial Assignment of Trademark
	*	10.4		Lock-up Letter for Brian Power
	*	10.5		Lock-up Letter for John C. Power
	*	10.6		Lock-up Letter for J. Andrew Moorer
	*	10.7		Amended Fund Escrow Agreement
	*	10.8		Lease Agreement with Golden West Brewing Company
	*	10.9		Security Agreement in favor of Power Curve, Inc., Lone Oak Vineyards, Inc. and Tiffany Grace.
	*	10.10		Promissory Note dated September 9, 2005, Tiffany Grace, Holder
	*	10.11		Promissory Note dated September 9, 2005, Lone Oak Vineyards, Inc., Holder
	*	10.12		Promissory Note dated September 9, 2005, Power Curve, Inc., Holder
	*	10.13		Assignment and Assumption dated August 31, 2005 between Butte Creek Brewing Company, LLC, Golden West Brewing Company and Golden West Brewing Company, Inc.
	*	10.14		Amended and Restated Assignment and Assumption
	*	10.15		August 7, 1998 Distribution Agreement
	*	10.16		Territorial Agreement
	*	10.17		November 4, 2002 Distribution Agreement
	*	10.18		June 1, 2001 Authorization
	*	10.19		July 22, 2004 Authorization
	*	10.20		September 1, 2005 Authorization
	*	10.22		Second Amended Fund Escrow Agreement
	*	10.23		Contract with New Zealand Hops, Ltd., 2006
	*	10.24		Contract with New Zealand Hops, Ltd., 2007
	*	10.25		Second Amended and Restated Assignment and Assumption
	*	10.26		Third Amended Fund Escrow Agreement
	*	10.27		Collateralized Promissory Note with John C. Power
	*	10.28		Collateralized Promissory Note with Power Curve, Inc.
	*	10.29		General Security Agreement with John C. Power and Power Curve, Inc.


**	10.30	Production Agreement with Bison Brewing Co.
**	10.31	Employment Agreement with David DelGrande
*	21.0	List of Subsidiaries


*	Incorporated by reference from the Company's Registration Statement on Form SB-2, SEC File No. 121351 as declared effective by the Commission on February 14, 2006.

**	Incorporated by reference from the Company’s Current Report on Form 8-K dated March 1, 2007 and filed with the Commission on March 8, 2007.

Transitional Small Business Disclosure Format (Check One): Yes _____; No ___X___

Safe Harbor for Forward-looking Statements

In General

This report contains statements that plan for or anticipate the future. In this report, forward-looking statements are generally identified by the words "anticipate," "plan," "believe," "expect," "estimate," and the like. These forward-looking statements include, but are not limited to, statements regarding the following:


	*	our product and marketing plans

	*	consulting and strategic business relationships;

	*	statements about our future business plans and strategies;

	*	anticipated operating results and sources of future revenue;

	*	our organization's growth;

	*	adequacy of our financial resources;

	*	development of new products and markets;

	*	competitive pressures;

	*	changing economic conditions;

	*	expectations regarding competition from other companies; and

	*	our ability to manufacture and distribute our products.

Although we believe that any forward-looking statements we make in this report are reasonable, because forward-looking statements involve future risks and uncertainties, there are factors that could cause actual results to differ materially from those expressed or implied. For example, a few of the uncertainties that could affect the accuracy of forward-looking statements, include:


	*	changes in general economic and business conditions affecting the craft/microbrew industries;

	*	developments that make our beers less competitive;

	*	changes in our business strategies;

	*	the level of demand for our products; and

In light of the significant uncertainties inherent in the forward-looking statements made in this report, particularly in view of our early stage of operations, the inclusion of this information should not be regarded as a representation by us or any other person that our objectives and plans will be achieved.

The safe harbor provisions of the Private Securities Litigation Reform Act of 1995 with respect to forward looking statements contained in this prospectus are not available and do not apply to us.

PART I

ITEM 1. DESCRIPTION OF BUSINESS

Overview

We were formed to acquire substantially all of the business assets of Butte Creek Brewing Company, LLC, a California limited liability company. We completed the acquisition of Butte Creek on August 31, 2005. We currently are a holding company for our wholly-owned subsidiary Golden West Brewing Company, a California corporation, which was formed to complete the acquisition and since the acquisition has been operating as Butte Creek Brewing Company.

Butte Creek has been operating as a premier regional craft brewery in Chico, California since 1996. It specializes in brewing certified organic craft beers. Our flagship brews consist of Organic Ale, Organic Porter, Organic India Pale Ale, Organic Pilsner, Mount Shasta Pale Ale and Mount Shasta Strong Ale. In addition, we craft seasonal brews consisting of Winter Ale, Organic Spring Run™ Ale and Christmas Cranberry Ale. In 2006, we also produced three premium specialty organic ales --- Revolution X™, Trainwreck and Mateveza.

In addition to brewing our own brand of products, we contract brew for third parties.

We currently distribute our products in a total of 24 states, including our core market of California which is serviced through both direct sales and distributors. The majority of our distribution outside of Northern California occurs through a network of independent alcoholic beverage distributors who are licensed in their respective jurisdictions.

Butte Creek's principal offices and brewery are located at 945 West 2 ^nd Street, Chico, California 95928. Its telephone number at that address is (530) 894-7906. In addition, our internet website is located at www.organicale.com .

Description of Operations

Effective October 8, 2004, we executed a definitive Asset Purchase and Sale Agreement to acquire Butte Creek. Under the terms of the Acquisition Agreement, on August 31, 2005, having obtained all necessary regulatory approvals, we completed the purchase of substantially all of the business assets of Butte Creek. In consideration of the Butte Creek assets, we paid:


	*	the sum of $350,000 in cash all of which has already been advanced;

	*	an additional $217,400 in advances through August 31, 2005 were capitalized as part of the purchase price;

	*	the assumption of designated in trade and accounts payable in the approximate amount of $366,000; and


	*	200,000 shares of our common stock. Those shares were issued pursuant to a Subscription Agreement executed by Butte Creek in which it makes representations to the effect that it acquired the shares for investment purposes and not with the view to subsequent resale or redistribution. The shares are restricted as to resale and issued in reliance upon the exemption from registration contained in Section 4(2) of the Securities Act. The shares may not be distributed to the members of Butte Creek unless pursuant to a registration statement filed under the Securities Act or pursuant to an exemption from the registration requirements of the Securities Act, the existence of which must be demonstrated to the satisfaction of the Company.

The U.S. Beer Industry

According to publications of the Association of Brewers ( Beertown , December, 2005), in 2004 the total beer sales in the United States consisted of approximately 206 million barrels (each barrel consisting of 31 U.S. gallons). Of those total sales approximately 24 million barrels, or 11.6%, consisted of sales of imports in the United States. Of the remaining 180 million barrels, more than 85% of sales were dominated by the four largest brewing companies:


	Anheuser Busch	51%
	Coors	11%
	Miller Brewing Company	19%
	Pabst	4%

Craft brewers represented the remaining approximate 3.2% of total U.S. sales, or 6.59 million barrels of craft beer.

Beer Styles

While the beers from the major American brewers are brewed to high quality standards, they are relatively neutral in flavor. They are brewed with less hops and malt than traditional European or craft-brewed beers, creating a less bitter, lighter bodied flavor. In addition, these beers are usually brewed with a high percentage of rice, corn or corn syrup, which further dilutes the flavor and body of the beers. Traditional lager beers use 100% malted barley in the mash (with the exception of specialty wheat beers), which ensures a robust, full-bodied character. The major U.S. brewers have been successful in creating products that appeal to a wide consumer base and have spent heavily to advertise and promote their products. As a result, they have achieved a dominant position in the market for their mass-produced beers. The older regional brewers traditionally produced beers similar in style to the products of major breweries, but several have benefited from the recent boom in specialty, craft-brewed beers as both contract producers and marketers of their own products. Imported beers have long been viewed by the beer-drinking public as being more flavorful and "authentic" than the standard American beers. Although this has not always been the case, the high price and foreign origin of the imported beers created a niche category of "specialty" beers. In recent years, craft-brewed beers have further expanded the "specialty" beer market, and have increased in sales and visibility.

The vast majority of existing craft/microbrewed products in the U.S. are ales. According to a survey published in THE NEW BREWER published by the Brewers Association at www.beertown.org , the five most popular beer styles produced in brewpubs are all ales, and among

the 130 responding craft/microbrewers, only the fourth most popular style (European Pilsner) is a lager. The cost of building and operating a lager brewery is substantially greater than that for an ale brewery.

The following terms are helpful in understanding our business and industry:

Craft Brewing : Beers produced by microbreweries, regional specialty breweries, brewpubs and contract brewers. The common appeal of these beers is a more robust flavor than the standard domestic beers, and an image based on traditional, European beer styles.

Microbrewery : Originally used to refer to a small brewery producing less than 10,000 barrels a year, which packages and distributes its beers for sale off site. The cut-off volume has since been increased to 15,000 barrels a year. The new breweries that were founded in the late 1970s and early 1980s were the first to be called microbreweries.

Regional Specialty Brewery : A term used to describe those breweries which were founded as microbreweries, but have since outgrown the category, having a capacity to brew between 15,000 and 2,000,000 barrels per year. A new category was needed to distinguish these breweries from the older, established regional breweries. Examples of regional specialty breweries are: Sierra Nevada (Chico, California), Anchor Brewing (San Francisco, California), Rockies Brewing (Boulder, Colorado) and Abita Brewing (Abita Springs, Louisiana).

Brewpub : A brewery that sells its beers exclusively or primarily at its own bar or restaurant. Since the market is restricted to one outlet, brewpubs tend to be quite small (typically in the 500 to 2,000 barrel range). Examples of brewpubs are Zip City (New York, New York), Crescent City Brewhouse (New Orleans, Louisiana), Wynkoop (Denver, Colorado) and Commonwealth (Boston, Massachusetts).

Contract Brewer : A company that does not have its own brewery but rather markets beer produced "under contract" by an existing (usually regional) brewery. Examples of contract brewers are Pete's Brewing Company and Neuweiler.

Hard Cider : A fermented apple cider with an alcohol content between 7 and 14 percent.

Draft Cider : A fermented apple cider with an alcohol content of less than 7 percent.

Development of Craft-Brewing Industry

Fritz Maytag bought and revived the failing Anchor Brewery in San Francisco in 1965 and is considered the grandfather of the microbrewing movement. However, it wasn't until the late 1970s and early 1980s that the first new microbreweries opened in the U.S., such as New Albion, Redhook, Yakima Brewing & Malting and Sierra Nevada on the West Coast and Newman Brewing Co. (Albany, New York) on the East Coast. By 1983, there were 11 operating microbreweries in the U.S., which were defined as breweries producing less than 10,000 barrels per year (although all were much smaller in 1983). At least one of these (Buffalo Bill's Brewery, Hayward, California) was a brewpub. In the early to mid 1980s, the first contract brewers appeared.

What all of the craft-brewed beers have in common is an appeal based on traditional, highly flavored European beer styles. They have benefited from their contrast with the products of the major

brewers, which are much lighter in body and flavor. We believe they also were helped by an increasing concern by consumers about how alcoholic beverages fit into a healthy, active, contemporary lifestyle. Like fine wines, we believe that consumers view craft-brewed beers as beverages of moderation.

Craft Beer Industry Segment

Craft beers are characterized by their full-flavor and are usually produced along traditional European brewing styles. The majority of craft beers are ales, although some are malt lagers. Wheat beers and fruit flavoured ales and lagers have enjoyed recent popularity among craft beer consumers.

The craft beer category consists of:


	*	Contract brews - any style brew produced by one brewer for sale under the label of someone else who does not have a brewery or whose brewery does not have sufficient capacity.

	*	Regional craft brews - "hand-crafted" brews, primarily ales, sold under the label of the brewery that produced it.

	*	Microbrews - "hand-crafted" brews, primarily ales, sold under the label of the brewery that produced it, if the capacity of the brewery does not exceed 15,000 bbl. per year.

	*	Large brewer craft-style brews - a brand brewed by a national brewer which may only imitate the style of a craft beer. These craft-style brews are often sold under the label of a brewery that does not exist or the label of a brewpub with no bottling capacity. The term "phantom brewery" is sometimes used to describe such brands.

	*	Brewpub brews - "hand-crafted" brews produced for sale and consumption at the brewery, which is normally connected with a restaurant/saloon. Brewpub brews are not normally sold for off-site consumption in significant quantities.

In 2006, U.S. craft beer industry annual retail sales reached 6,653,703 million barrels, having a total retail value of $4.2 billion. That 2006 production volume was divided into the following categories:


	Volume (barrels)	Percent
Regional specialty breweries	4,287,708	64.46%
Contract breweries	849,002	12.76%
Microbreweries	812,790	12.20%
Brewpubs	704,203	10.58%

See Beertown , www.beertown.org

According to Beertown , a trade publication, as of December 2006, there were a total of 1,444 craft breweries operating in the United States, consisting of:


	50 Regional specialty breweries
	365 Microbreweries
	981 Brewpubs
	20 Large breweries
	24 Regional breweries

Business Strategy

Our business objective is to become recognized as the premier organic craft brewer in the United States. It is our objective to produce the finest quality organic craft beers and to market them strategically in niche markets to capitalize on our dedication to the use of organic ingredients, which we consider to be our principal differentiator and competitive advantage.

Our business strategy includes the following key objectives:


	*	Further develop our existing facility and position as a leading organic ale producer;
	*	Develop new brands utilizing the existing facility;
	*	Produce on a contract basis for other craft brewers, where capacity permits; and
		Update our packaging for our core line of organic ales.
	*	Develop Key Performance Indicators to better monitor and manage our business

Products

Butte Creek produces a variety of distinctive craft beers ranging in color from light to dark. Eight of our beers are certified organic: Organic Ale, Organic Pilsner, Organic Porter and Organic India Pale Ale, Revolution X™, Trainwreck Organic Barley Wine, Spring Run™ Organic Pale Ale and Mateveza. In making these three products, we adhere strictly to the National Organic Program of the United States Department of Agriculture pursuant to which our beers are certified as organic by independent accredited certifiers. All of our beer is made from four traditional ingredients: water, hops, yeast and malted barley. Each beer exhibits unique properties of color, richness, bitterness and aroma, creating a special signature for each beer. In order to maintain full flavor, our beer is not pasteurized or homogenized. We never use adjuncts in substitute for all grain.

We currently produce the following principal brands, each with its own distinctive combination of flavor, color and clarity:


*	Organic Ale	An amber ale made with certified organic hops and barley, brewers yeast and water.
*	Organic Porter	A porter with a full bodied malty flavor balanced with a crisp hop bitterness.
*	Organic India Pale Ale	A full-flavored traditional India Pale Ale.
*	Organic Pilsner	A European-style pilsner that is brewed with German malt and Czech hops to make it a light bodied, clean, straw-colored beer with a refreshing crisp finish.
*	Mount Shasta Pale Ale	A full-flavored pale ale.


*	Mount Shasta Strong Ale	This full bodied Strong Ale boasts a sweet malty flavour with a warming alcohol finish. 8.1% ABV. Sold only in California.
*	Winter Ale (seasonal)	Our Winter Ale is a full-bodied, chestnut brown ale.
*	Christmas Cranberry Ale (seasonal)	A pleasant Christmas Ale with a hint of cranberry fruitiness. This ale is available in December and January.
*	Organic Spring Run Pale Ale (seasonal)	A malty pale ale that is lighter in color.
*	Revolution X™	An Organic Imperial IPA or commonly referred to as a double IPA.
*	Trainwreck	An Organic Barley Wine
*	Mateveza	An Organic Pale Ale brewed with Yerba Mate

For the years ended December 31, 2005 and 2006, sales of Organic Ale, Porter, India Pale Ale and Pilsner represented 72.6% and 75.6% of our total sales, respectively, excluding contract brewed organic beer. During 2005, 81.5% of sales were cases, 12.1% were kegs and 7.6% contract brewed, compared to sales during 2006 being comprised of 81.0% cases, 9.2% kegs and 9.8% contract brewed.

In addition to our current craft brews, we are constantly developing new products in order to be responsive to changing customer tastes. We believe that our continued success will be affected by our ability to be innovative and attentive to consumer desires while maintaining consistently high product quality.

Brewing Operations

The Brewing Process

Beer is produced from four main ingredients: malt, hops, yeast and water. Malt, the main ingredient of beer, is produced when barley is moistened, allowed to germinate and then dried. The malted barley is then crushed and mixed with hot water and strained, producing a clear amber liquid called "wort". Wort is boiled in the brew kettle and hops are added which add bitterness and variety to the brew. The mixture is then strained and placed in a fermentation vessel where yeast is added and the beer is allowed to ferment. During fermentation, yeast metabolizes the sugars in the wort and produces alcohol and carbon dioxide.

Upon completion of fermentation, the beer is then transferred to aging tanks where the flavor is developed and matured. The brewing process, from the conversion of raw materials to the serving of beer, is typically completed in 14 to 28 days, depending on the type of beer being brewed. The production schedule for all of our ale products requires a fourteen (14) day cycle. Our lager products requires a twenty-eight (28) day cycle, from brewing through filtration and packaging. The production cycle includes the following steps:

* Day 1. Mashing. Weighed amounts of milled, malted barley, a cereal grain that provides the body and color to the beer, are mixed and steeped with hot water in a Mash Tun. This serves to extract fermentable and non-fermentable sugars, thus creating a mash. At the end of the mashing process, the sweet, fermentable liquid from the mash, called wort, is run off through screened plates and then transferred into the brew kettle. While the wort is running off, the grain is sprayed with hot water again, a process called "sparing". (This is a process similar to making coffee.)

Once the wort run off is completed, the spent grains are given to local farmers for cattle feed or to local mushroom growers.

* Day 1. Brewing. When the sweet liquid wort transfer is completed, we start the boil, then add fresh hops that provide bitterness and aroma, thus creating the balance and flavor of our beer.

* Day 1. Clarification. After approximately an hour and one half of boiling, the wort and the spent hops are transferred into a whirlpool. A centrifugal force is created inside the vessel during whirlpooling. This force separates the malt proteins and the spent hops from the wort.

* Day 1. Cooling. The wort is pumped from the whirlpool through a heat exchanger which rapidly cools the wort. The cool wort is transferred into a fermenter.

* Day 1. Inoculation. Pure culture lager yeast or ale yeast is added to the wort in the fermenter and the tank is closed up.

* Days 2-7. Fermentation. Within three to five days, the yeast has metabolized and utilized the sugars from the wort, creating alcohol and carbon dioxide. Our ales are made with a top fermenting ale strain that actually floats to the top of the fermenter. Our lagers are made with a bottom fermenting lager strain that settles during fermentation.

When the yeast completely settles it is collected from the tank and used in the next lager or ale brew cycle.

* Days 5-27. Cooling and Conditioning. At the end of the fermentation cycle, our beer is cooled from its fermentation temperature (between 65-70-F for ales and 58-55-F for lagers) to 32- Fahrenheit. Beer flavors mature during this stage. Our beer is then stored for seven to fourteen days. Isinglass finings are added to aid in the clarification process.

* Day 14. Filtration for Ales. While under pressure, the beer is transferred through cellulose sheets in a Filter Press in order to remove protein haze and yeast while stabilizing and clarifying the beer. The beer is transferred from the Filter Press into a Serving Tank which is counter pressured, for service directly to draft taps at each bar.

* Day 28. Filtration for Pilsners. Our pilsner beer remains in the Cellar Tank for an additional fourteen days of fermentation. It is then processed in the same manner as our ale.

Our Brewing Facility

Our Chico, California brewery produced approximately 7,000 barrels of craft beer in 2006. Our current capacity is 8,100 gross barrels a year.

Bottled products utilize the latest technology in bottle crowns that prevent oxygen from causing deterioration of the beer's fresh taste. Our beer is naturally carbonated and pasteurized to ensure the customers enjoy the full fresh flavour. The shelf life of our bottled beer is 120 days and the shelf life of our keg beer is 90 days.

Ingredients and Raw Materials

In order to be certified as organic under the National Organic Program of the USDA, our craft beers must have no more than 5% non-organic ingredients in the finished product. We use only the finest, all natural and certified organic ingredients available to brew our products whenever possible.

There are many different varieties of hops which are used in the production of beers. The selection of particular varieties of hops influences the bitterness and aroma of the finished product. The selection of hops in any particular recipe contributes to the final signature of the microbrew.

Not all hops are available organically-grown. In fact, in the United States, only one type of hop is organically grown; and all other organically-grown hops must be purchased from international sources, primarily New Zealand.

For microbrews whose recipes call for hops that are not available organically, those products can still be manufactured and marketed as "organic," since hops comprise less than 5% of the finished product. Nevertheless, there is intense competition for organically-grown hops, and quantities are limited.

Our Organic Ale is the only product that is 100% organic, including organic hops. Our other Organic ales and lagers use some non-organic hops but are nevertheless marketed as organic microbrews. Our principal competitors in the organic microbrew market: Wolavers and Eel River Brewing Company, also use non-organic hops. Anheuser-Busch (“A-B”) introduced two certified organic beers in 2006 and has substantially more resources and distribution channels than any of our historical competitors. We don't believe that A-B uses any organic hops. Miller Brewing Company released Henry Weinhard’s Organic Amber Premium Ale in 2007. We estimate that there are at least 25 breweries selling beer as “certified organic.” Our principal hops suppliers are Hopunion, Fresh Hops and Certified Foods. We have recently secured an agreement to purchase fixed quantities of organic hops from New Zealand Hops Ltd. The agreements commit us to purchase and New Zealand Hops, Ltd. to sell to us defined quantities of organic hops during 2006 (726 pounds) and 2007 (3,135 pounds). We believe that this arrangement will satisfy all of our organic hops requirements for the next two years. However, we do not have any other contracts or agreements with any of our hops suppliers for ongoing or future deliveries.

We currently obtain our malted barley (grain) from three sources: Gambrinus and Breiss supply our organic barley and Great Western Malting our non-organic barley. We do not have any supply contracts with any of our vendors to meet our grain or hop requirements. As a result, any interruption in our supply of grain or hops could result in a curtailment of our production and loss sales.

We have multiple competitive sources for packing materials, such as bottles, labels, six-pack carriers, crowns and shipping cases, as well as kegs. However, California Glass Company of Oakland, CA is currently the only company offering reasonable bottle pricing for Butte Creek's current production level. Purchases of bottles, six-pack carriers and case boxes from California Glass Company amount to over 40% of the total purchases from all unaffiliated vendors. We have no affiliated vendors.

Sales and Distribution

We market and sell our craft beers through a combination of company marketing personnel and wholesale distributors. We currently distribute our products in a total of 24 states including our core market of California which is serviced through both direct sales and distributors. During 2005 and 2006, our direct sales in Northern California accounted for 30.8% and 18.3% of total sales, respectively. In 2006, we began transferring some of our self-distribution capacity to a local distributor. We expect to transfer the balance of our self-distribution capacity to the same distributor in 2007.

In each state where our beer is distributed, we must satisfy the state's regulatory requirements for beer sales. Those requirements generally consist of completing an application and paying a distribution fee. Some states also impose product quality standards which must be met as a condition to distribution. We have not experienced any difficulties in obtaining approvals to distribute in states where we have sought that approval.

Wholesale distributors sell our products to supermarkets, warehouse stores, liquor stores, taverns and bars, restaurants and convenience stores. Most of our brands are also available on draft' and these are delivered directly to retail outlets. Our independent distributors also distribute a variety of other alcoholic beverages, including other craft beers, import beers and national beer brands. We rely on our distributors not only to provide product sales and deliveries but also to maintain retail shelf space and to oversee timely rotation of inventory. Favorable consumer demand for microbrewed products and higher profit margins are the two primary factors that contribute to strong interest from distributors in handling our regional microbrewed products. Our success is dependent upon our ability to maintain and develop our third party distributor, bar and restaurant accounts.

We have written distribution agreements with all of our wholesale distributors; however, the agreements are all terminable upon 30 days' written notice and provide no reliable assurance of future performance.

Sales are distributed widely over our customer base with only two large customers comprising a significant portion of sales. For the years ending December 31, 2005 and 2006, Mountain People's Warehouse (MPW) was responsible for 19.9% and 20.2% of Butte Creek's sales, respectively. For the same periods, Ray's is the Place, Inc. was responsible for 5.7% and 2.2% of sales, respectively.

Strategic Brewing Relationships

Mateveza USA, LLC

In November, 2006, we entered into a License, Production and Distribution Agreement with Mateveza USA, LLC, a California limited liability company (“Mateveza”). Under the terms of the Mateveza Agreement, we have been granted an exclusive license to manufacture, sell and distribute Mateveza’s proprietary yerba mate ales within an exclusive territory consisting of the states of California, Oregon, and Washington. Under the terms of the arrangement, we have agreed to advance production costs and sell under a jointly-developed marketing plan. We have further agreed to pay Mateveza a royalty equal to fifty percent of the net profits generated from the sale of the Mateveza yerba mate ales. We have agreed to maintain a minimum manufacturing capacity of 1,000 barrels per year, and have a right of first refusal with respect to any required capacity in excess of that amount.

As this arrangement is relatively new, we cannot predict the financial impact of this license and production arrangement on our overall results of operations.

Bison Brewing Company

In February, 2007, we entered into a Production Agreement with Bison Brewing Company, LLC (“Bison Brewing”). Under this Agreement, we have agreed to be a contract brewer for Bison Brewing’s craft beers. In consideration of our contract brewing, Bison has agreed to pay all direct production costs, including materials, bottling and labor and to share general and administrative expenses of the brewery. While we have contract brewed for Bison Brewing in the past, this arrangement will increase the volume of product that will be generated under the arrangement. However, due to our lack of history under this new production arrangement, we cannot predict what financial impact this strategic relationship will have on our overall results of operations.

As part of our arrangement with Bison Brewing, its President Daniel Del Grande entered into an employment agreement with our subsidiary to serve as Chief Financial Officer. He will devote 50% of his time to our business and will be paid a salary of $30,000 per year for two years ending February 2009.

Marketing

Our marketing efforts are focused on bars, restaurants, grocery stores and retailers of premium beer products in order to obtain shelf and tap space. This is accomplished by intensive one-on-one contact to familiarize our customers thoroughly with our products and our commitment to service. The microbrewers' market is not for the masses but rather it is focused on customers searching for a flavor that is superior and in some cases unique.

We have designed slogans, logos and trade names for use in print advertising. To create additional name recognition and customer identification, we plan to sell T-shirts, sweatshirts and other merchandise featuring our name and logo. Distributors and package store locations are provided with point-of-purchase cards, banners, static stickers and shelf channels as funds permit.

Sales of beer in general are seasonal in nature and are at their highest level in the second and third calendar quarters and at their lowest in the first and fourth calendar quarters. This seasonality has historically had a significant impact on our operations on a quarter-to-quarter basis.

Dependence on Major Customers

During 2005 and 2006, wholesale distributors were responsible for 56.7% and 68.9% of our sales, respectively. Two distributors (Mountain People's Warehouse and Bay Area Distributing) accounted for 27.5% of our sales for 2006. We have no long-term commitments or agreements from any of our distributors or customers. Our distributors can terminate their agreements with us on 30 days' notice. The loss of a major distributor or customer could severely impair our sales for a significant period of time.

Competition

As of December 1, 2006, there were a total of 1,444 craft breweries that included 981 brew pubs, 365 microbreweries, 24 regional breweries and 20 large breweries. During 2006, 35 brew pubs and 13 microbreweries closed, but 60 brew pubs and 33 microbreweries opened.

We compete with other craft brewers on the basis of product quality and freshness, packaging design, distribution, marketing support and regional identification. The beer industry in general and the craft brewing segment in particular is highly competitive and we experience stiff competition and expect that competition to increase in the future. Our products compete with products from large and small domestic and foreign breweries and from and increasing number of regional specialty breweries, microbreweries, brew pubs and contract brewers. Many of these competing breweries, including some existing microbreweries, have significantly greater financial, production, distribution and marketing resources than ours.

Our principal competitors in the organic microbrew market are Wolavers and Eel River Brewing Company. As both are privately held, there is little information available concerning their relative financial strength and resources. Anheuser-Busch (“A-B”) introduced two certified organic beers in 2006 and has substantially more resources and distribution channels than any of our historical competitors. Miller Brewing Company released Henry Weinhard’s Organic Amber Premium Ale in 2007. We estimate that there are at least 25 breweries nationwide selling beer as “certified organic.”

In addition, we contract microbrew for Bison Brewing Company, of Berkeley, California. The beers that we make for Bison are certified organic, although it too uses some non-organic hops. Bison Brewing has a California Department of Alcohol Beverage Control license at our facility as part of this contract brewing arrangement. Bison represented approximately 7.2% of gross revenues in 2005, and 8% of revenues in 2006. We cannot predict the extent to which Bison production will contribute to our overall revenues in the future.

Governmental Regulation

The Company's United States operations are subject to licensing by both state and federal governments, as well as to regulation by a variety of state and local governments and agencies. The Company is licensed to manufacture and sell beer by the Department of Alcoholic Beverage Control in California. Our license issued by California does not permit us to engage in retail sales to consumers on the premises. A federal permit from the United States Bureau of Alcohol, Tobacco Tax and Trade (“TTB”) allows the Company to manufacture fermented malt beverages. To keep these licenses and permits in force, the Company must pay annual fees and submit timely production reports and excise tax returns. Prompt notice of any changes in the operations, ownership, management or company structure must also be made to these regulatory agencies. BATF must also approve all product labels, which must include and alcohol use warning. These agencies require that individuals owning equity securities in the aggregate of 10% or more in the Company be investigated as to their suitability. The Company's production operations must also comply with the Occupational Safety and Health Administrations' workplace safety and worker health regulations and comparable state laws. Management believes that the Company is presently in compliance with the aforementioned laws and regulations.

In the United States, taxation of alcohol has increased significantly in recent years. Currently, the federal tax rate is $7.00 per bbl. for up to 60,000 bbl. per year and $18.00 per bbl. for over 60,000 bbl.

The California tax rate is $6.20 per bbl. Federal and state excise taxes on alcoholic beverages are subject to change. It is possible that excise taxes will be increased in the future by both the federal government and State of California. In addition, increased excise taxes on alcoholic beverages have in the past been considered in connection with various governmental budget balancing or funding proposals. Any such increased in excise taxes, if enacted, could adversely affect our business. We believe that we currently have all licenses, permits and approvals necessary for our current operations. However, existing permits or licenses could be revoked if we 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 our existing or expanded operations. If licenses, permits or approvals necessary for our brewery were unavailable or unduly delayed, or if any such permits or licenses were revoked, our ability to conduct our business could be substantially and adversely affected.

Various federal and state labor laws govern our relationship with our employees, including minimum wage requirements, overtime, working conditions and immigration requirements. Significant additional government-imposed increased in minimum wages, paid leaves of absence and mandated health benefits, or increased tax reporting and tax payment requirements for employees could have an adverse effect on our results of operations.

On March 15, 2006, we were notified that the California Department of Alcoholic Beverage Control had filed an Accusation alleging that we had violated California regulations by participating in a beer tasting at the Mt. Shasta Board & Ski Park, not sponsored by a non-profit. As a result, we entered into a consent sanction consisting of a temporary suspension of ten days of our manufacturing license which was automatically stayed.

Research and Development

During the last two fiscal years we have not expended any working capital on product research and development.

Compliance with Environmental Laws

We are subject to various federal, state and local environmental laws which regulate the use, storage, handling and disposal of various substances.

Our waste products consist of water, spent grains, hops, glass and cardboard. We have instituted a recycling program for our office paper, newspapers, magazines, glass and cardboard at minimal cost to us. We sell or give away our spent grain to local cattle ranchers. We have not purchased any special equipment and do not incur any identifiable fees in connection with our environmental compliance.

The Chico facility is subject to various federal, state and local environmental laws which regulate use, storage and disposal of various materials. The Company pays approximately $190 per month towards sewer fees for liquid waste. The sewer discharge from the brewery is monitored and is within the standards set by the Butte County Sewer Department.

Various states in which the Company sells its products in the U.S., including California, have adopted certain restrictive packaging laws and regulations for beverages that require deposits on packages. The Company continues to do business in these states, and such laws have not had a significant effect on the Company's sales. The adoption of similar legislation by Congress or a

substantial number of states or additional local jurisdictions might require the Company to incur significant capital expenditures to comply.

Employees

As of April 1, 2007, we had a total of ten employees, seven of whom were full time and three of whom were part-time. The full time employees include Larry Berlin, master brewer, Scott Burchell, National Sales Director and two sales/delivery persons and four brewing support. Our part time employees are involved in brewing and administration. Our former General Manager, Tom Atmore, tendered his resignation as general manager effective March 31, 2006; and continued as a consultant until June 30, 2006. Atmore continues to receive $1,000 under the terms of his separation and consulting agreement.

In addition, we utilize the services of one independent contractor who performs accounting services.

Given adequate capital, we would like to hire additional marketing and sales personnel.

Trademarks and Intellectual Property

We consider all of our beer recipes to be trade secrets which we protect by confidentiality and non-disclosure agreements.

We claim common law trademark protection to all of our trademarks, words and design. However, we have applied for federal registrations of certain brand names that are in the development stage but have not sought any protection for our existing tradenames except for Revolution X™ and Spring Run™ which are both registered trademarks. Spring Run is used under license.

In addition to the domain name www.ales.com , we have registered the domain name www.organicale.com and www.buttecreek.com . Both domain addresses link to the same website. We believe that our domain name plays an important role in expanding the awareness of our products on the Internet.

Notwithstanding our efforts to develop and protect our intellectual property rights, trademark protection and the uncertainty surrounding the legal protections of domain names may be unenforceable or limited. As a result, we may not be able to maintain our current trademarks or domain name if they are subject to challenge. We believe that any successful challenge to our use of a trademark or our domain name could have a material adverse impact upon our business, financial condition and future operations.

Employment and Consultation Agreements

Effective February 21, 2007, our wholly-owned subsidiary entered into an Employment Agreement with Daniel Del Grande, the Manager of Bison Brewing, to serve as Chief Financial Officer of the subsidiary for the period beginning February 21, 2007 and ending the earlier of (i) February 20, 2009 or (ii) the termination of the Production Agreement with Bison Brewing Company, LLC.

We do not have any written employment agreements with any of our executive officers of key employees, nor do we have or maintain key man life insurance on any of our employees.

We have one consulting agreement with a person who performs services as an independent contractor.

Accounting services are performed by Ben Kirby in consideration of a monthly fee. This arrangement is terminable at will.

ITEM 2. DESCRIPTION OF PROPERTY

Corporate Offices

Our executive offices and main brewery are located at 945 West 2 ^nd Street, Chico, California. The entire building consists of approximately 8,280 square feet, of which 1,000 square feet is used for executive offices, 4,600 square feet for our brewery and 3,000 square feet for bottling and shipping. The property is an industrial building which we lease from a Butte Creek member with less than a one percent membership interest in Butte Creek. The lease has a term of five years, expiring in 2010, and provides for monthly rental for the first year of $3,312 per month. In July 2006, the rent increased to $3,726 and is subject to an annual adjustment based upon the increase in the Consumer Price Index. We believe that our ability to occupy the present facility under the existing lease is secure and that the facilities are adequate for the foreseeable future.

ITEM 3. LEGAL PROCEEDINGS

There are no material legal proceedings in which either we or any of our affiliates are involved which could have a material adverse effect on our business, financial condition or future operations.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

None

PART II


ITEM 5.	MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

Our outstanding shares of Common Stock have traded over-the-counter and quoted on the OTC Bulletin Board (“OTCBB”) under the symbol “GWBC” since November, 2006. The reported high and low bid and ask prices for the common stock are shown below for the period from November, 2006 through March, 2007.


	Bid		Ask
	High	Low	High	Low
2006 Fiscal Year
Nov – Dec 2006	$0.70	$0.70	$0.75	$0.75
2007 Fiscal Year
Jan – March 2007	$0.70	$0.51	$0.75	$0.64

The bid and ask prices of the Company’s common stock as of April 10, 2007 were $0.63 and $0.65, respectively, as reported on the OTCBB. The OTCBB prices are bid and ask prices which represent prices between broker-dealers and do not include retail mark-ups and mark-downs or any commissions to the broker-dealer. The prices do not reflect prices in actual transactions. As of March 31, 2007, there were approximately 65 record owners of the Company’s common stock.

The OTC Bulletin Board is a registered quotation service that displays real-time quotes, last sale prices and volume information in over-the counter (OTC) securities. An OTC equity security generally is any equity that is not listed or traded on NASDAQ or a national securities exchange. The OTCBB is not an issuer listing service, market or exchange. Although the OTCBB does not have any listing requirements, per se, to be eligible for quotation on the OTCBB issuers must remain current in their filings with the SEC or applicable regulatory authority.

The Company’s Board of Directors may declare and pay dividends on outstanding shares of common stock out of funds legally available therefore in its sole discretion; however, to date, no dividends have been paid on common stock and the Company does not anticipate the payment of dividends in the foreseeable future.

Trading in our common stock is subject to rules adopted by the Commission regulating broker dealer practices in connection with transactions in "penny stocks." Those disclosure rules applicable to penny stocks 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 Commission. That disclosure document advises an investor that investment in penny stocks can be very risky and that the investor's salesperson or broker is not an impartial advisor but rather paid to sell the shares. The disclosure contains further warnings for the investor to exercise caution in connection with an investment in penny stocks, to independently investigate the security, as well as the salesperson with whom the investor is working and to understand the risky nature of an investment in this security. The broker dealer must also provide the customer with certain other information and must make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser's written agreement to the transaction. Further, the rules require that, following the

proposed transaction, the broker provide the customer with monthly account statements containing market information about the prices of the securities.

Recent Sales of Unregistered Securities

1. In December 2003, we sold to seven non-affiliated investors and one affiliated investor an aggregate of 700,000 shares of common stock in consideration of $135,000, consisting of $75,000 in cash and property valued at $60,000. The investors were John Power, Paul Selice, Allan Williams, Donald Fruh, Triumph Capital, Inc., Webquest, Inc., Hangar Development Group, LLC and Rockies Fund, Inc. Each investor executed a subscription agreement attesting that he/she/it qualified as an "accredited investor" within the meaning of Rule 501(a) of Regulation D under the Securities Act, or had such knowledge and experience in financial and business matters that their were capable of evaluating the merits and risks of the investment. The securities, which were taken for investment purposes and were subject to appropriate transfer restrictions and restrictive legend, were issued without registration under the Securities Act in reliance upon the exemption set forth in Section 4(2) of the Securities Act.

2. In June 2004, we issued to four investors an aggregate of 487,000 shares for total consideration of $121,750. The investors were Patrick Radford, John Power, Clifford Neuman and J. Andrew Moorer. Each investor executed a subscription agreement attesting that he/she/it qualified as an "accredited investor" within the meaning of Rule 501(a) of Regulation D under the Securities Act, or had such knowledge and experience in financial and business matters that their were capable of evaluating the merits and risks of the investment. The securities, which were taken for investment purposes and were subject to appropriate transfer restrictions and restrictive legend, were issued without registration under the Securities Act in reliance upon the exemption set forth in Section 4(2) of the Securities Act.

3. In September 2004, we issued to three investors an aggregate of 225,000 shares of common stock in consideration of $46,250. The investors were John Power, Kevin Houtz and Westmoreland, LLC. Each investor executed a subscription agreement attesting that he/she/it qualified as an "accredited investor" within the meaning of Rule 501(a) of Regulation D under the Securities Act, or had such knowledge and experience in financial and business matters that their were capable of evaluating the merits and risks of the investment. The securities, which were taken for investment purposes and were subject to appropriate transfer restrictions and restrictive legend, were issued without registration under the Securities Act in reliance upon the exemption set forth in Section 4(2) of the Securities Act.

4. In December 2004, we issued to two investors an aggregate of 88,000 shares of common stock in consideration of $22,000. The investors were John Power and Michael Stafford. Each investor executed a subscription agreement attesting that he/she/it qualified as an "accredited investor" within the meaning of Rule 501(a) of Regulation D under the Securities Act, or had such knowledge and experience in financial and business matters that their were capable of evaluating the merits and risks of the investment. The securities, which were taken for investment purposes and were subject to appropriate transfer restrictions and restrictive legend, were issued without registration under the Securities Act in reliance upon the exemption set forth in Section 4(2) of the Securities Act.

5. In January 2005, we issued to two investors an aggregate of 120,000 shares of common stock in consideration of $22,500 in cash and services valued at $7,500. The investors were John Power and Clifford Neuman, who accepted shares for legal services rendered to the Company. Each

investor executed a subscription agreement attesting that he/she/it qualified as an "accredited investor" within the meaning of Rule 501(a) of Regulation D under the Securities Act, or had such knowledge and experience in financial and business matters that their were capable of evaluating the merits and risks of the investment. The securities, which were taken for investment purposes and were subject to appropriate transfer restrictions and restrictive legend, were issued without registration under the Securities Act in reliance upon the exemption set forth in Section 4(2) of the Securities Act.

6. Effective August 31, 2005, we issued to Butte Creek Brewing Company, LLC an aggregate of 200,000 shares of common stock in partial consideration of the assets of Butte Creek. Butte Creek executed a subscription agreement acknowledging that it was capable of evaluating the merits and risks of accepting the shares as partial consideration under the Asset Purchase and Sale Agreement. The securities, which were taken for investment purposes and were subject to appropriate transfer restrictions and restrictive legend, were issued without registration under the Securities Act in reliance upon the exemption set forth in Section 4(2) of the Securities Act.

7. In December 2005, we issued to three investors an aggregate of 180,000 shares of common stock in consideration of $20,000 in conversion of advances and services valued at $25,000. Each investor executed a subscription agreement attesting that he/she/it qualified as an "accredited investor" within the meaning of Rule 501(a) of Regulation D under the Securities Act, or had such knowledge and experience in financial and business matters that their were capable of evaluating the merits and risks of the investment. The securities, which were taken for investment purposes and were subject to appropriate transfer restrictions and restrictive legend, were issued without registration under the Securities Act in reliance upon the exemption set forth in Section 4(2) of the Securities Act.

Based upon the above transaction, it is possible that it could be determined that we violated Section 5 of the Securities Act of 1933. Section 5(a) of the Securities Act prohibits the use of any means or instruments of transportation or communication in interstate commerce or of the mails, to sell a security unless a registration statement is in effect as to such security. Section 5(c) of the Securities Act prohibits the use of any means or instruments of transportation or communication in interstate commerce or of the mails to offer to sell or offer to buy a security unless a registration statement has been filed as to such security. While we relied upon the exemption from the registration requirements of the Securities Act contained in Section 4(2), which exempts transactions not involving a public offering, those transactions occurred after this registration statement had been filed with the Securities and Exchange Commission. If that transaction is deemed integrated with the offering covered by this registration statement, which we would dispute, then a Section 5 violation could be found. We are not aware of any pending claims for sanctions against us based upon Section 5 of the Securities Act, and we would vigorously defend any such claims if they arise. However, in our financial statements we have classified the advance payable at September 30, 2005 in the amount of $10,000 as being subject to rescission.

8. Effective August 21, 2006, in consideration of their services to the Company, certain consultants, employees, officers and directors were granted non-qualified stock options exercisable to purchase, in the aggregate 400,000 shares of common stock at an exercise price of $0.50 per share. The foregoing options are exercisable until December 31, 2012, their “Expiration Date”. The foregoing options are subject to vesting and become exercisable 50% on the date of grant; 16.67% on July 31, 2007; 16.67% on July 31, 2008; and 16.67% on July 31, 2009, subject to the holder continuing to serve in their positions with the Company, or in some other capacity as shall be approved by the Company and the holder, on each vesting date. The options were granted to five persons who serve as directors, employees or consultants to the Company. The shares issuable upon

exercise of the options will be “restricted securities” within the meaning of Rule 144 under the Securities Act of 1933, as amended. The Company paid no fees or commissions in connection with the issuance of the options.

9. On March 15, 2007, we completed the private placement of units, each unit consisting of one share of the Company’s Common Stock (“Common Stock”) and one Warrant exercisable to purchase one additional share of Common Stock at an exercise price of $0.40 per share for a period of two years from the date of issue (“Warrants”). Collectively, the Common Stock and Warrants are, hereinafter, referred to as “Units”. The private offering price was $0.35 per Unit. In total, we have sold 400,000 units. Gross proceeds of the offering were $140,000 which proceeds were used for working capital. The units were sold to a total of three (3) investors, each of whom qualify as an "accredited investor" within the meaning of Rule 501(a) of Regulation D under the Securities Act of 1933, as amended (the “Securities Act”). The units, which were acquired for investment purposes and subject to restrictions on transfer, were sold without registration under the Securities Act in reliance upon Section 4(2) of the Securities Act and Regulation D, Rule 506 thereunder. In the offering, the Company paid no fees or commissions to persons who served as placement agents.

EQUITY COMPENSATION PLAN INFORMATION


	Number of securities to be issued upon exercise of outstanding options, warrants and rights (a)	Weighted average exercise price of outstanding options, warrants and rights (b)	Number of securities remaining available for future issuances under equity compensation plans (excluding securities reflected in column (a) (c))
Equity compensation plans approved by security holders	400,000	NA	100,000
Equity compensation plans not approved by security holders ⁽¹⁾	-0-	NA	-0-
Total	400,000	NA	100,000


ITEM 6.	MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Plan of Operations

Golden West Brewing Company, Inc. (the "Company" or "Golden West") was formed in December 2003 to acquire substantially all of the business assets of Butte Creek Brewing Company, LLC ("Butte Creek" or "Butte"). We are currently a holding company for our wholly-owned subsidiary Golden West Brewing Company, a California corporation, which acquired the assets and certain liabilities of Butte Creek on August 31, 2005. Butte Creek has been operating as a craft brewery in Chico, California since 1996. It specializes in brewing certified organic craft beers. We face operational challenges as our sales and production levels increase. The following are the key issues and challenges facing the Company:


	*	Sales . We believe that our minimum level of sales for our operating subsidiary, Butte Creek, to break-even is an average of at least $130,000 per month. Butte Creek has never achieved this level of sales during a month in its history. It is critical for us to improve our sales so that we can achieve at least a break-even operating level. There is no assurance that we will be able to achieve this level of sales, or if we achieve it, that we will be able to maintain it. Our sales enhancement plan is to (a) introduce new products (b) add new sales territories and (c) increase our penetration in existing territories.

	*	Increase Gross Profit Margin. In addition, our gross profit margin must be increased to at least 30% of sales. Our plan is to take advantage of our increased production capacity and increase our production which should lower our average cost per barrel of beer produced. Also, we are trying to improve our product mix with higher margin products including more draft beer sales. We also are raising our prices for contract brewing. Finally, we raised our prices to certain customers in January 2007 and plan increases to other customers later in 2007. There is no assurance that we will be successful in implementing our plan to increase our gross profit margin. Many of these strategies have contributed to an improvement in our gross profit margin but have been outweighed by negative contributing factors including rising raw material costs, contract brewing increasing as a percentage of total sales, inventory adjustments and shortages and packaging inefficiencies caused by an equipment problem. We have recently purchased a new labeler to help improve our packaging problem.

	*	Control Selling, General & Administrative Expenses . In addition to raising sales, we must control our expenditures to achieve a break-even operating level. We have taken steps to reduce our monthly operating expenses by reducing our employee head-count. These savings have been off-set by wage increases for other remaining employees. In addition, we have reduced our direct sales effort in California during 2006 and during the first quarter of 2007. Our direct sales effort consisted of three delivery vans selling directly from our brewery in Chico. As of March 31, 2007, all three of these vans have been transferred to a distributor. We hope to maintain our former direct sales through this distributor. Our gross margin will be reduced but our sales and marketing expenses have been reduced and will more than make up for the loss of gross margin.

	*	Working Capital Shortage . Our history of working capital deficiencies make it difficult to build finished inventory. We owe delinquent taxes to the IRS and several State agencies. In addition, we have increased our production capacity and launched new products that will require increased levels of inventory. Finally, our ability to maintain our equipment has been challenging with our shortage of working capital.


	*	Lack of Marketing Materials . We have very limited marketing budgets and are not competitive with other breweries of our size in the amount and quality of marketing materials needed to support our distribution network.

	*	Continued Operating Losses . Our history of operating losses makes it difficult to raise capital for our working capital needs. We are developing key performance indicators to better manage and monitor our business in an attempt to reduce our operating losses.

	*	Lack of Inventory Controls . We need to improve our control and management of our finished inventory to reduce the amount of shrinkage we have experienced due, we believe, to unsupervised employees. We do not believe our lack of inventory control has materially impacted our business. We conduct physical inventories on a monthly basis and recently upgraded our accounting software to improve our inventory control. If these measures do not provide improved inventory controls, we would expect our margins to erode and our sales to decline. We are considering outsourcing the location of our physical inventory or hiring a full-time warehouse person. Either solution would be intended to reduce inventory shortages and provide stronger inventory controls.

Both Golden West and Butte Creek have sustained losses from operations. Golden West has a working capital deficit which raise substantial doubts about their ability to continue as a going concern. Our audited financial statements have received going concern qualifications from our Independent Registered Public Accounting Firm.

The following discussion and analysis is for the twelve-month period ended December 31, 2006 and should be read in conjunction with the Notes thereto of Golden West Brewing Company, Inc. We were a development stage entity prior to our acquisition of Butte Creek on August 31, 2005.

Possible Section 5 Violation

It is possible that it may be determined that we violated Section 5 of the Securities Act. Section 5 of the Securities Act prohibits the use of any means or instruments of transportation or communication in interstate commerce or of the mails to sell a security unless a registration statement is in effect as to such security. Section 5(c) of the Securities Act prohibits the use of any means or instruments of transportation or communication in interstate commerce or of the mails to offer to sell or offer to buy a security unless a registration statement has been filed as to such security.

The transaction that may have caused such a violation of Section 5 is as follows: In December, 2004, we made the initial filing of our registration statement. In June 2005, an unaffiliated third-party, Bob Vogt, loaned us the sum of $10,000. The loan was uncollateralized and undocumented. It was our intention to repay the loan in a short period of time; however, we were unable to do so due to our lack of working capital. In December 2005, in an effort to improve our balance sheet, we offered Mr. Vogt an opportunity to convert his $10,000 loan into shares of our common stock. In December 2005,

we effected the conversion of Mr. Vogt's loan into shares of our common stock in a transaction in which we relied upon an exemption from the registration requirements of the Securities Act contained in Section 4(2), which exempts transactions not involving a public offering.

Under the principals of integration, two or more offerings of securities may be integrated and deemed to be one offering under certain circumstances. Factors considered in determining whether offers and sales of securities should be integrated are:


*	Whether the sales are part of a single plan of financing;
*	Whether the sales involve the issuance of the same class of securities;
*	Whether the sales have been made at or about the same time;
*	Whether the same type of consideration is being received; and,
*	Whether the sales were made for the same general purpose.

If it were to be determined that the conversion of Mr. Vogt's note payable into shares of common stock is integrated with the offering covered by the registration statement and this prospectus, then we could not rely upon the exemption contained in Section 4(2) of the Securities Act for the Vogt conversion, and as a result, it may be determined that the conversion of the Vogt loan into shares of common stock constituted a violation of Section 5 of the Securities Act. If this were to occur, we would become subject to remedial actions, which would include the payment of disgorgement, pre-judgment interest and civil or criminal penalties pursuant to Sections 12(a)(1), 8A and 24 of the Securities Act. We are not aware of any pending claims for sanctions against us based upon a Section 5 violation and we intend to vigorously defend any such claim should it arise. However, in our financial statements, we have classified the advance payable to Mr. Vogt as subject to rescission. A rescission offer would require that we file a registration statement covering the offer and, once the registration statement has been declared effective by the Securities and Exchange Commission, redeeming the shares of common stock and repaying the loan to Mr. Vogt. In addition, we could face possible civil penalties in an undetermined amount. This could have a significant impact on our working capital and impair our ability to continue as a going concern.

Furthermore, any claim for rescission would make it difficult for us to raise additional debt or equity financing needed to run our business, and would not be viewed favorably by analysts or investors.

Critical Accounting Policies And Estimates

In the ordinary course of business, we have made a number of estimates and assumptions relating to the reporting of results of operations and financial condition in the preparation of our financial statements in conformity with accounting principles generally accepted in the United States of America. Actual results could differ significantly from those estimates under different assumptions and conditions. We believe that the following discussion addresses our most critical accounting policies, which are those that are most important to the portrayal of our financial condition and results. We constantly re-evaluate these significant factors and make adjustments where facts and circumstances dictate.

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and the accompanying notes. The actual results could differ from those estimates. Our financial statements are based upon a number of significant estimates, the allowance for doubtful accounts, obsolescence of inventories and the estimated useful lives selected for property

and equipment. Due to the uncertainties inherent in the estimation process, it is at least reasonably possible that the estimates for these items could be further revised in the near term and such revisions could be material.

Overview - Factors Affecting Results of Operations

Sales in the craft beer industry generally reflect a degree of seasonality, with the first and fourth quarters historically being the slowest and the rest of the year typically demonstrating stronger sales. We have historically operated with little or no backlog and, therefore, our ability to predict sales for future periods is limited.

Our sales are affected by several factors, including consumer demand, price discounting and competitive considerations. We compete in the craft brewing market as well as in the much larger specialty beer market, which encompasses producers of import beers, major national brewers that produce fuller-flavored products, and large spirit companies and national brewers that produce flavored alcohol beverages. Beyond the beer market, craft brewers also face competition from producers of wines and spirits. The craft beer segment is highly competitive due to the proliferation of small craft brewers, including contract brewers, and the large number of products offered by such brewers. Imported products from foreign brewers have enjoyed resurgence in demand since the mid-1990s. Certain national domestic brewers have also sought to appeal to this growing demand for craft beers by producing their own fuller-flavored products.. The wine and spirits market has experienced a surge in the past several years, attributable to competitive pricing, increased merchandising, and increased consumer interest in spirits. Because the number of participants and number of different products offered in this segment have increased significantly in the past ten years, the competition for bottled product placements and especially for draft beer placements has intensified.

Operating and Financial Review and Prospects

Operating Results

For the year ended December 31, 2006 compared to the twelve months ended December 31, 2005:

REVENUES. Gross Revenues were $1,032,381 for the year ended December 31, 2006. Revenues net of excise taxes (“Net Revenues”) for the fiscal year ended December 31, 2006 were $983,975 compared to $305,387 in the fiscal year ended December 31, 2005. The increase was due to our acquisition of Butte Creek which occurred on August 31, 2005.

COST OF GOODS SOLD Cost of goods sold for fiscal 2006 was $724,746 or 73.7% of net sales compared to $205,565 or 67% of net sales in fiscal 2005.

GROSS PROFIT Gross profit for the year ended December 31, 2006 was $259,229 or 26.3% of net sales compared to $99,822 or 33% of net sales for the year ended December 31, 2005.

OPERATING EXPENSES Total operating expenses increased $555,010 or 259% to $769,340 for the fiscal year ended December 31, 2006 compared to an increase of $153,324 or 245% to $214,330 for of the fiscal year ended December 31, 2005. Components of operating expenses were:


*		Depreciation & Amortization expense was $33,454 for fiscal year 2006 compared to $10,464 for fiscal 2005. The increase was the result of tangible and intangible assets acquired from Butte Creek on August 31, 2005 and additional brewing equipment acquired in 2005 and 2006.
*		Management compensation was $84,307 for the year ended December 31, 2006 compared to $26,744 for the year ended December 31, 2005. The increase was solely related to our acquisition of Butte Creek on August 31, 2005.
*		Rent expense was $41,256 for the year ended December 31, 2006 compared to $12,600 for the year ended December 31, 2005. The increase was the rent paid for our Chico, California facility subsequent to our acquisition of Butte Creek on August 31, 2005 and a rent increase in July 2006.
*		Selling expense was $72,477 for the fiscal year ended December 31, 2006 compared to $23,237 for the fiscal year ended December 31, 2005. The increase was due to our acquisition of Butte Creek on August 31, 2005.
*		Outside Sales Compensation was $51,062 for the fiscal year ended December 31, 2006 compared to $28,909 for the fiscal year ended December 31, 2005. The increase was the result of purchase of Butte Creek on August 31, 2005.
*		Stock Based Compensation was $91,086 for the year ended December 31, 2006 compared to $0 in the prior fiscal year. The increase was the result of the granting of 400,000 options and 10,000 shares, to various directors, officers and employees resulting in stock based compensation expense of $86,086 for options and $5,000 in stock bonuses.
*		Other General & Administrative Operating Expenses increased $283,322 to $395,698 or 252% for the year ended December 31, 2006 compared to an increase of $51,370 to $112,376 or 82% for year ended December 31, 2005.

		The components in this category are detailed below:
			2006	2005
	Legal and Accounting		$ 120,340	$ 38,979
	Research and Organizational Expense		$ -	$ 722
	Other		$ 275,358	$ 72,675

OPERATING LOSS. The operating loss for the fiscal year ended December 31, 2006 increased $395,603 or 345% to $(510,111) compared to an increase of $53,502 or 86% to $(114,508) for the fiscal year ended December 31, 2005 as a result of the increase in total operating expenses resulting from the Butte Creek acquisition and the granting of stock options. In addition, we have incurred substantial legal and accounting expense in 2006 related to our public offering.

OTHER INCOME & EXPENSE Total other expense was $519,500 for the fiscal year ended December 31, 2006 compared to $13,277 for the fiscal year ended December 31, 2005. The primary component was a write off of the impairment to Goodwill of $472,503 related to the Butte Creek acquisition on August 31, 2005. Our annual analysis of the potential goodwill impairment determined

that several factors have developed that have impaired the value of the assets of Butte Creek Brewing Company that we acquired in August 2005.

#1 – Substantial increase in competition from breweries marketing certified organic ales. The new competition includes Anheuser Busch (2006) and Miller Brewing Company’s Henry Weinhard (2007). These two new competitors have far greater distribution channels and capital and could develop substantial market share of the organic beer market. We had previously thought that the organic beer market was too small to attract larger breweries.

#2 - Continued substantial operating losses and diminishing sources of capital to fund these losses. We have determined the fair value of our operating unit to be that of its tangible assets and the other intangible assets acquired and have elected to impair 100% of the goodwill from the Butte Creek Acquisition. We have recorded $472,503 Impairment to Goodwill in the fourth quarter of 2006.We believe the carrying value of our other intangibles is fair. We believe the Butte Creek brand could be sold for the value of the intangibles acquired less any accumulated depreciation. Furthermore, there is currently a very strong market for used brewery equipment and we believe that our furniture, fixtures and equipment could be sold for their carrying costs less any accumulated depreciation.

NET LOSS Net loss increased $901,826 or 706% to $(1,029,611) for the fiscal year ended December 31, 2006 compared to an increase of $65,242 or 104% to $(127,785) for the fiscal year ended December 31, 2005. The increase in our net loss was a result of the operating losses incurred by Butte Creek in the first nine months of 2006 and the granting of stock options. We did not own Butte Creek in eight of the first nine months of 2005. In addition to the impairment to Goodwill of $472,503 discussed above, we incurred over $90,000 in legal and accounting costs during this period related to our public offering that was completed in August 2006.

Liquidity and Capital Resources

We have required capital principally for the purchase of Butte Creek and the funding of operating losses and working capital. To date, we have financed our capital requirements through the sale of equity and short and long-term borrowings primarily from related parties. We expect to meet our future financing needs and working capital and capital expenditure requirements through cash on hand, borrowings and offerings of debt or equity securities, although there can be no assurance that our future financing efforts will be successful. The terms of future financings could be highly dilutive to existing shareholders.

We have no commitments, understandings or arrangements for any additional working capital. If we are unable to secure additional financing to cover our operating losses until break-even operations can be achieved, we may not be able to continue as a going concern.

We had nominal cash and cash equivalents and a working capital deficit of $(233,585) at December 31, 2006. Our long-term debt was $686,636 at December 31, 2006. We do not have sufficient cash on hand or available credit facilities to continue operations and are dependent upon securing loans or the sale of equity to provide adequate working capital to continue operations. We have raised capital through the sales of unregistered securities and advances and/or loans from its officers and directors to acquire Butte Creek, and fund its operations after its acquisition. There are no assurances that we will be able to secure additional capital to maintain the operations.

During the year ended December 31, 2006, the Company's capital expenditures totaled $21,734.

Lines of Credit

The Company assumed a $25,000 balance on a credit card issued by Wells Fargo Bank, with interest at the rate of 17.25%. The card is uncollateralized and guaranteed by Tom Atmore, Butte Creek's former general manager. The outstanding balance as of December 31, 2006 was $24,148. Under our separation agreement with Atmore, we were obligated to pay this indebtedness prior to September 30, 2006 but did not have the resources to pay this obligation.

The Company assumed a $15,400 line of credit on a Butte Creek credit card with Bank of America/MBNA with interest at the rate of 29.98%. The debt on the credit card is uncollateralized but guaranteed by Tom Atmore, Butte Creek's former general manager. The outstanding balance as of December 31, 2006 was $11,178. Under our separation agreement with Atmore, we were obligated to pay this indebtedness prior to September 30, 2006 but did not have the resources to pay this obligation.

Notes Payable

Between March and September 2005, the Company borrowed a total of $125,000 from three lenders: $50,000 in July 2005 from Power Curve, Inc. (a company controlled by John Power); $50,000 in May 2005 from Lone Oak Vineyards, Inc. (a company controlled by Brian Power); and $25,000 in March 2005 from Tiffany Grace, an unaffiliated party. The loans were used to payoff Butte Creek's loans to Tri County Economic Development Corporation, purchase additional equipment and provide working capital. The Tiffany Grace note, which was executed on September 9, 2005 accrues interest at the rate of 9% per annum, is payable in monthly payments of principal and interest based upon a five year amortization, and is due in full March 2008. As of December 31, 2006, the Tiffany Grace note had current maturities of $4,850 and a long-term maturity of $12,642. The Power Curve and Lone Oak notes were executed in September, 2005, accrue interest at the rate of 9% per annum, and are payable in full in 2008. The loans are collateralized by a security interest covering all of our tangible and intangible assets. As of December 31, 2006, the Power Curve and Lone Oak notes had accrued interest of $3,884 and ($2,924) respectively and long-term maturities of $50,000 and $25,000, respectively, after the sale by Lone Oak Vineyards of $25,000 of it’s note to an unrelated third party on September 15, 2006. These related party transactions have not been evaluated for fairness. The terms of these loans are believed to be equal to or better than what could have been obtained from an unrelated party.

On December 30, 2005, John Power and Power Curve, Inc. converted $215,000 and $90,000, respectively, in outstanding advances into collateralized long-term debt. The notes bear interest at 9% and mature December 31, 2008 and are collateralized by a security interest covering all of our tangible and intangible assets but are junior to the security interest granted to Power Curve, Inc. ($50,000), Lone Oak Vineyards, Inc. ($25,000), Dayton Misfeldt Trust ($25,000) and Tiffany Grace ($25,000) in September 2005 described above. As of December 31, 2006, these notes had current maturities of $0 and $0 respectively and long-term maturities of $215,000 and $90,000 respectively and had accrued interest of $19,350 and $8,100 respectively. These related party transactions have not been evaluated for fairness. The terms of these loans are believed to be equal to or better than what could have been obtained from an unrelated party.

As part of the acquisition of Butte Creek, the Company assumed an $8,136 note payable to Bruce Detweiler, a member of Butte Creek, and a $10,098 note payable to Richard Atmore, Jr., a member of Butte Creek and the brother of Tom Atmore, a managing member of Butte Creek. As of December 31, 2006 the note to Richard Atmore, Jr. was paid in full and the note to Bruce Detweiler had accrued interest of $3,667.

The Company has pledged substantially all of its assets to collateralize some of the notes. Should the Company default in the payment of these collateralized notes, the collateral could be subject to forfeiture.

In the twelve months ended December 31, 2006, John Power and Power Curve, Inc. have made advances to the Company of $115,000 and $155,000, respectively. On December 31, 2006 John Power and Power Curve, Inc. converted these advances of $115,000 and $155,000, respectively, into collateralized long-term debt. The notes bear interest at 8% and mature December 31, 2008 and are collateralized by all tangible and intangible assets but junior to all prior perfected liens against those assets. These related party transactions have not been evaluated for fairness. The terms of these loans are believed to be equal to or better than what could have been obtained from an unrelated party.

Delinquent Taxes & Rent

At December 31, 2006, the Company had outstanding payroll tax liabilities of $46,526. Of these amounts $38,009 are considered delinquent.

California Redemption Value (CRV) is a tax collected on all package sales to retailers, processed through the California Department of Conservation and refunded through the State's recycling program. The United States Tax and trade Bureau ("TTB"), and various state agencies collect excise taxes often referred to as "alcohol taxes" with the amount based on the volume of beer sold. At December 31, 2006, the Company had alcohol related taxes payable to federal and state taxing authorities of $8,681. The detail of those taxes payable is as follows:


	December 31, 2006
Tax Agency	Due	Delinquent
Internal Revenue Service	$37,096	$30,900	PAYROLL TAXES
CA Employment Development Department	$ 9,430	$ 7,109	PAYROLL TAXES
Federal Tax and Trade Bureau	$ 7,426	$ 0	EXCISE TAX
CA Board of Equalization	$ 1,255	$ 0	EXCISE TAX
CA Board of Equalization	$ 3,324	$ 1,560	SALES AND USE TAX
CA Department of Conservation	$30,773	$29,379	CRV TAX
CA Franchise Tax Board	$ 6,600	$ 6,600	FRANCHISE TAXES
Butte County Tax Collector	$17,959	$17,959	PROPERTY TAXES

Most of these delinquent taxes payable have been assumed by the Company in connection with our acquisition of Butte Creek as the continuation of regulatory compliance is material to the Company's ability to continue as a going concern. The Company has entered into monthly payment plans with all of the aforementioned agencies. Continued operations could be severely impaired should the Company default on its payment plans with the IRS or any other governmental agency seeking to collect any of the delinquent payables before we are able to pay them.

At December 31, 2006 the Company had outstanding rent obligations assumed from Butte Creek on our operating facility of $17,950. The Landlord made a demand for payment on or before November 1, 2006. The Company was unable to make this payment requested as has had no further discussions with the landlord regarding this matter.

Off Balance Sheet Arrangements

The Company does not have and has never had any off-balance sheet arrangements.

Overview of Product Distribution

Our products are available for sale directly to consumers in draft and bottles at restaurants, bars and liquor stores, as well as in bottles at supermarkets, warehouse clubs and convenience stores. Like substantially all craft brewers, our products are delivered to these retail outlets through a network of local distributors whose principal business is the distribution of beer and, in some cases, other alcoholic beverages, and who traditionally have local distribution relationships with one or more national beer brand.

Certain Considerations: Issues and Uncertainties

We do not provide forecasts of future financial performance or sales volume, although this report contains certain other types of forward-looking statements that involve risks and uncertainties. While we are optimistic about our long-term prospects, the following issues and uncertainties, among others, should be considered in evaluating its business prospects and any forward-looking statements.

In light of uncertain contingencies relating to our acquisition of Butte Creek, we anticipate that a material impairment charge is reasonably likely to occur in the future, resulting in a material impact on our financial statements and results of operations. Since the acquisition has been consummated, we will be required to determine if a valuation allowance with respect to our investment in Butte Creek. Based upon the financial history of Butte Creek, it appears to us that a valuation allowance is reasonably likely.

Recent Accounting Pronouncements

There were various accounting standards and interpretations issued during 2006 and 2005, none of which are expected to have a material impact on the Company's consolidated financial position, operations or cash flows.

ITEM 7. FINANCIAL STATEMENTS

The following consolidated financial statements are filed as part of this report:


	1.	Report of Independent Registered Public Accounting Firm

	2.	Consolidated Balance Sheet

	3.	Consolidated Statements of Operations

	4.	Consolidated Statement of Stockholders' (Deficit)

	5.	Consolidated Statements of Cash Flows

	6.	Notes to Consolidated Financial Statements

Report of Independent Registered Public Accounting Firm

Board of Directors
Golden West Brewing Company, Inc.

We have audited the accompanying balance sheet of Golden West Brewing, Inc. and Consolidated Subsidiaries as of December 31, 2006, and the related statements of operations, stockholders' equity (deficit), and cash flows for the two years ended December 31, 2006 and 2005. 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 audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States of America). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. The company is not required to have, nor were we engaged to perform an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the company's internal control over financial reporting. Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe our audit provides a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Golden West Brewing, Inc. and Consolidated Subsidiaries as of December 31, 2006, and the results of its operations and cash flows for the two years ended December 31, 2006 and 2005, in conformity with accounting principles generally accepted in the United States of America.

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As described in Note 1, the Company has sustained losses from operations, and has net working capital and stockholders’ deficits, which raise substantial doubt about its ability to continue as a going concern. Management's plans in regard to this matter are also discussed in Note 1. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

SCHUMACHER & ASSOCIATES, INC.

Denver, Colorado
April 24, 2007

F-1


*GOLDEN WEST BREWING COMPANY, INC. AND SUBSIDIARY* CONSOLIDATED BALANCE SHEET ASSETS

Current Assets:	December 31, 2006
Cash and cash equivalents	$ 344
Accounts receivable, net of allowance for doubtful accounts of $864	107,859
Inventory (Note 1 )	192,015
Prepaid Expenses	17,634
Total current assets	317,852

Fixed Assets:
Property and Equipment, net of accumulated depreciation of $36,683	276,097

Other Assets:
Deferred Offering Costs (Note 6 )	-
Goodwill (Notes 1 and 9 )	-
Intangibles, net of accumulated amortization of $7,235	20,313
Other assets	8,512
Total other assets	28,825
Total Assets	$ 622,774
LIABILITIES AND STOCKHOLDERS' (DEFICIT)
Current Liabilities:
Accounts payable		$ 279,968
Accrued expenses		205,147
Checks written in excess of funds available		9,260
Lines of credit payable (Note 2)		35,326
Notes payable - other, current portion (Note 2)		4,850
Notes payable, related party, current portion (Note 2)		16,886
Total current liabilities		551,437
Long-term liabilities:
Notes payable, net of current portion (Note 2)		36,636
Notes payable – related party, net of current portion (Note 2)		650,000
Total long-term liabilities		686,636
Common stock issued subject to rescission (Notes 5 and 11)		10,000
Total Liabilities		1,248,073
Commitments and Contingencies (Notes 1,2,3,4, 5, 6,7, 8, 10 and 11)
Stockholders' (Deficit)
Preferred stock, $.0001 par value, 5,000,000 shares authorized, none issued and outstanding		- -
Common Stock, $.0001 par value, 20,000,000 shares authorized, with shares issued and outstanding of 2,418,000		241
Additional paid-in capital		594,845
Accumulated (Deficit)		(1,220,385)
Total Stockholders' (Deficit)		(625,299)
Total Liabilities and Stockholders' (Deficit)		$ 622,774

See accompanying notes to these financial statements

F-2

GOLDEN WEST BREWING COMPANY AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF OPERATIONS


	For the year ended December 31,
	2006	2005
Revenues	$ 1,032,381	$ 321,895
Less: Excise taxes	(48,406)	(16,508)
Net revenues	983,975	305,387

Cost of sales	724,746	205,565

Gross profit	259,229	99,822

Operating expenses:
Depreciation and amortization	33,454	10,464
Legal and accounting	120,340	38,979
Management compensation	84,307	26,744
Outside sales compensation	51,062	28,909
Rent	41,256	12,600
Stock-based Compensation	91,086	-
Selling expenses	72,477	23,237
Other	275,358	73,397
Total operating expenses	769,340	214,330

Operating (Loss)	(510,111)	(114,508)

Other Income (Expense):
Miscellaneous income	3,417	338
Debt Forgiveness	19,773	-
Franchise Taxes	(1,548)	(1,537)
Impairment to Goodwill	(472,503)	-
Interest expense	(68,639)	(12,078)
Total other (expense)	(519,500)	(13,277)

Net (Loss)	$ (1,029,611)	$ (127,785)

Net (Loss) Per Share	$ (.475)	$ (.075)

Weighted Average Shares Outstanding	2,167,671	1,691,666

See accompanying notes to these financial statements

F-3

GOLDEN WEST BREWING COMPANY, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENT OF STOCKHOLDERS' (DEFICIT)

For the Period from January 1, 2005 through December 31, 2006


	Preferred Stock		Common Stock		Additional Paid-In	Accumulated
	Shares	Amount	Shares	Amount	Capital	(Deficit)	Totals
Balance, December 31, 2004	-	-	1,500,000	$ 150	$ 334,850	$ (62,990)	$ 272,010

Stock issued for conversion of liabilities at $0.25	-	-	120,000	12	29,988	-	30,000
Stock issued for acquisition of Butte Creek at $0.25	-	-	200,000	20	49,980	-	50,000
Stock issued for conversion of liabilities at $0.25	-	-	180,000	18	44,982	-	45,000
Stock issued for conversion of liabilities subject to rescission	-	-	-	-	(10,000)	-	(10,000)

Net (Loss)	-	-	-	-	-	(127,785)	(127,785)

Balance, December 31, 2005	-	-	2,000,000	200	449,800	(190,775)	259,225

Stock issued for cash at $0.50	-	-	408,000	41	203,959	-	204,000
Offset Capitalized Stock Issuance Costs					(150,000)	-	(150,000)
Stock-Based Compensation-Shares	-	-	10,000	-	5,000	-	5,000
Stock-Based Compensation-Options					86,086	-	86,086

Net (Loss)	-	-	-	-	-	(1,029,611)	(1,029,611)

Balance, December 31, 2006	-	-	2,418,000	$ 241	$ 594,845	$ (1,220,385)	$ (625,299)

See accompanying notes to these financial statements

F-4

GOLDEN WEST BREWING COMPANY AND SUBSIDARY

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE YEARS ENDED DECEMBER 31


	2006	2005
Cash Flows from Operating Activities:
Net loss	$ (1,029,611)	$ (127,785)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation	27,961	8,722
Amortization of intangibles	5,493	1,742
Stock-Based Compensation	91,086	-
Impairment to Goodwill	472,503	-
Changes in operating assets and liabilities:
(Increase) decrease in:
Accounts Receivable	1,309	9,488
Inventories	(73,242)	(44,458)
Prepaid expenses and other receivables	(8,801)	(7,297)
Increase (decrease) in:
Checks written in excess of funds available	9,260	(2,196)
Accounts payable	57,780	(17,739)
Accrued Expenses and other	8,407	21,615
Net cash (used in) operating activities	(437,855)	(157,908)

Cash Flows from Investing Activities:
Investment in fixed assets	(21,734)	(1,118)
Investment in intangibles and other assets	(8,245)	(2,460)
Acquisition of Butte Creek	-	(218,400)
Net cash (used in) investing activities	(29,979)	(221,978)

Cash Flows from Financing Activities:
Net proceeds from sale of stock	204,000	-
Deferred offering costs	-	(80,153)
Net Increase (Decrease) in Notes Payable	253,341	466,770
Net cash provided by financing activities	457,341	386,617

Increase in Cash and Cash Equivalents	(10,493)	6,731
Cash and Cash Equivalents, beginning of period	10,837	-
Cash acquired from Butte Creek	-	4,106
Cash and Cash Equivalents, end of period	$ 344	$ 10,837
Supplemental Schedule of Cash Flow Information:
Cash paid for interest	$ 55,727	$ -
Issuance of stock for conversion of liabilities	$ -	$ 75,000
Issuance of stock for conversion of liabilities, subject to rescission	$ -	$ 10,000
Issuance of stock for acquisition of Butte Creek	$ -	$ 50,000

See accompanying notes to these financial statements

F-5

GOLDEN WEST BREWING COMPANY, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2006

1. Nature of Business and Significant Accounting Policies:

This summary of significant accounting policies of is presented to assist in understanding the Company's financial statements. The financial statements and notes are representations of management who is responsible for their integrity and objectivity. These accounting policies conform to generally accepted accounting principles in the United States of America and have been consistently applied in preparation of the financial statements. The Company has selected December 31 as its year end.

Certain amounts for prior years have been reclassified to conform with the 2006 presentation.

Description of Business - Golden West Brewing Company, Inc., a Delaware Corporation, and its wholly-owned California subsidiary Golden West Brewing Company (hereinafter referred to as “The Company” on a consolidated basis) were formed in 2003 for the purpose of acquiring Butte Creek Brewing Company, LLC ("Butte Creek"). The acquisition of Butte Creek was completed on August 31, 2005.

The consolidated financial statements include the assets of the companies listed above for the years ended December 31, 2006 and 2005. All intercompany account balances and transactions are eliminated in consolidation.

Accounts Receivable - Accounts receivable are reported at net realizable value. The Company has established an allowance for doubtful accounts based on factors pertaining to the credit risk of specific customers, historical trends and other information. Delinquent accounts are written-off when it is determined that the amounts are uncollectible.

Inventory - Inventory is stated at the lower-of-average cost or market computed on a first-in first-out basis.

Revenue Recognition - The Company recognizes revenues in accordance with SEC Staff Accounting Bulletin (SAB) No. 104, “Revenue Recognition.” Under SAB 104, revenues are recognized when persuasive evidence of an arrangement exists, delivery has occurred, the sales price is fixed and determinable and collectibility is reasonably assured.

Accounting Estimates - The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and the accompanying notes. The actual results could differ from those estimates. The Company's financial statements are based upon a number of significant estimates including the allowance for doubtful accounts.

Financial Instruments - The Company discloses fair value information about financial instruments when it is practicable to estimate that value. The carrying value of the Company's cash, cash equivalents, and accounts payable approximate their estimated fair values due to their short-term maturities.

F-6

Concentrations of Credit Risk - Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of cash and cash equivalents and advances. At December 31, 2005 and December 31, 2006, the Company had no amounts of cash or cash equivalents in financial institutions in excess of amounts insured by agencies of the U.S. Government. In the year ended December 31, 2006, one customer, Mountain People’s Warehouse, accounted for over 10% of our sales in 2006. A loss of this account or any other large account, or a significant reduction in sales to any of the Company’s principal customers, could have an adverse impact on the Company.

Valuation of Long-Lived Assets - The Company evaluates the carrying value of long-lived assets to be held and used whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. The carrying value of a long-lived asset is considered impaired when the projected undiscounted future cash flows are less than its carrying value. The Company measures impairment based on the amount by which the carrying value exceeds the fair market value. Fair market value is determined primarily using the projected cash flows discounted at a rate commensurate with the risk involved. Losses on long-lived assets to be disposed of are determined in a similar manner, except that fair market values are reduced for the cost to dispose.

Income Taxes - The Company recognizes deferred tax assets and liabilities for temporary differences between the tax bases of assets and liabilities and the amounts at which they are carried in the financial statements, the effect of net operating losses, based upon the enacted tax rates in effect for the year in which the differences are expected to reverse. A valuation allowance is established when necessary to reduce deferred tax assets to the amount expected to be realized.

Intangibles - Intangibles consists of goodwill, trade names and trademarks. Intangibles other than goodwill are amortized using the straight-line method over the estimated useful life of the intangibles. The $25,000 of acquired intangible assets relate to trade names and trademarks that had an expected remaining useful life of approximately five years at the time of their purchase and are being amortized over a 5-year period. Assets determined to have indefinite lives are no longer amortized in accordance with SFAS No. 142, "Goodwill and Other Intangibles," but are tested for impairment on an annual basis.

Goodwill, which relates entirely to our acquisition of the assets of Butte Creek is not amortized but is tested annually for impairment. At December 31, 2006 the Company performed a test of impairment on goodwill that resulted in a write down of 100% of the value as of December 31, 2006, and is included in Impairment to Goodwill on the Statement of Operations for the year ended December 31, 2006.

Recent Accounting Pronouncements - There were various accounting standards and interpretations issued during 2006 and 2005, none of which are expected to have a material impact on the Company's consolidated financial position, operations or cash flows.

Development Stage Enterprise - Until August 31, 2005, the Company was a development stage enterprise since planned principal operations had not yet commenced. As a result of the acquisition of Butte Creek on August 31, 2005, the Company is no longer considered a development stage enterprise (Note 9).

Per Share Information - Earnings per share ("EPS") are calculated in accordance with the provisions of SFAS No. 128, Earnings Per Share . SFAS No. 128 requires the Company to report both basic earnings per share, which is based on the weighted-average number of common shares outstanding, and diluted earnings per share, which is based on the weighted-average number of common shares outstanding plus all dilutive potential common shares outstanding, except where the effect of their inclusion would be anti-dilutive.

F-7

Cash and Cash Equivalents - The Company considers cash and cash equivalents to consist of cash on hand and demand deposits in banks with an initial maturity of 90 days or less.

Risks and Uncertainties - The Company is subject to substantial business risks and uncertainties inherent in starting a new business. There is no assurance that the Company will be able to generate sufficient revenues or obtain sufficient funds necessary for launching a new business venture.

Stock Based Compensation - Effective January 1, 2006, the Company adopted FAS No. 123(R), Share-Based Payments , and the related SEC rules included in Staff Accounting Bulletin No. 107. Under this method, compensation cost is recognized for costs related to 1) all share-based payments (stock options and restricted stock awards) granted before but not yet vested as of January 1, 2006 based on the grant-date fair value estimated under the original provisions of FAS No. 123, Accounting for Stock-Based Compensation , and 2) all share-based payments (stock options and restricted stock units) granted after December 31, 2005 based on the grant-date fair value estimated under the provisions of FAS No. 123(R). During the year ended December 31, 2006 400,000 options were granted and were outstanding at December 31, 2006.

Basis of Presentation - Going Concern - Generally accepted accounting principles in the United States of America contemplates the continuation of the Company as a going concern. However, the Company has sustained losses from operations, and has net working capital deficit, which raise substantial doubt about the Company's ability to continue as a going concern. Management of the Company believes that the additional capital from the proposed public offering and improved results from operations will be sufficient for the continued viability of the company, however there can be no assurance that either will occur.

In view of these matters, realization of certain of the assets in the accompanying balance sheet is dependent upon continued operations of the Company, which in turn is dependent upon the Company's ability to meet its financial requirements, raise additional capital, and the success of its future operations.

2. Advances and Notes Payable:

On November 1, 2004, J. Andrew Moorer, a former Director of the Company, made an uncollateralized advance of $8,750. The advance continues to be uncollateralized and due on demand. This advance started to accrue interest at 8% on January 1, 2006 and had accrued interest as of December 31, 2006 of $700,

F-8

respectively, after the sale by of the Lone Oak Vineyards of $25,000 of it’s note to an unrelated third party on September 15, 2006.

On December 30, 2005, John Power and Power Curve, Inc. converted $215,000 and $90,000, respectively, in outstanding advances into collateralized long-term debt. The notes bear interest at 9% and mature December 31, 2008 and are collateralized by a security interest covering all of our tangible and intangible assets but are junior to the security interest granted to Power Curve, Inc. ($50,000), Lone Oak Vineyards, Inc. ($25,000), Dayton Misfeldt Trust ($25,000) and Tiffany Grace ($25,000) in September 2005 described above. As of December 31, 2006, these notes had no current maturities and long-term maturities of $215,000 and $90,000 respectively and had accrued interest of $19,350 and $8,100 respectively.

The Company has pledged substantially all of its assets to collateralize certain of the notes. Should the Company default in the payment of these collateralized notes, the collateral could be subject to forfeiture.

In the twelve months ended December 31, 2006, John Power and Power Curve, Inc. have made advances to the Company of $115,000 and $155,000, respectively. The advances are uncollateralized and due on demand. On December 31, 2006, John Power and Power Curve, Inc. converted these advances of $115,000 and $155,000, respectively, into collateralized long-term debt. The notes bear interest at 8% and mature December 31, 2008 and are collateralized by all tangible and intangible assets but junior to all prior perfected liens against those assets

Lines of Credit - The Company assumed a $25,000 balance on a credit card issued by Wells Fargo Bank, with interest at the rate of 17.25%. The card is uncollateralized and guaranteed by Tom Atmore, Butte Creek's Managing Member and former general manager. The outstanding balance as of December 31, 2006 was $24,148.

The Company assumed a $15,400 line of credit on a Butte Creek credit card with Bank of America (formerly MBNA) with interest at the rate of 29.98%. The debt on the credit card is uncollateralized but guaranteed by Tom Atmore, Butte Creek's managing member and our former general manager. The outstanding balance on December 31, 2006 was $11,178.

F-9

Notes Payable

December 31, 2006

Current

Long Term

Interest

Maturity

Portion

Rate

Date

Collateralized

Lines of Credit

Atmore - MBNA

$ 11,178

29.98%

Demand

Atmore - Wells Fargo

24,188

17.25%

Demand

TOTAL

$ 35,326

Notes Payable - Related Parties

Power Curve, Inc.

$ 50,000

Sep-08

Yes

Power Curve, Inc.

90,000

Dec-08

Yes

Power Curve, Inc.

155,000

Dec-08

Yes

John C. Power

215,000

Dec-08

Yes

John C. Power

115,000

Dec-08

Yes

Lone Oak Vineyards, Inc.

25,000

Sep-08

Yes

J. Andrew Moorer

8,750

Demand

B. Detweiler

8,136

Demand

TOTAL

$16,886

$650,000

Notes Payable - Unaffiliated

Tiffany Grace

$4,850

$12,642

Mar-08

Yes

Dayton Misfeldt Trust

23,994

Sep-08

Yes

TOTALS

$21,736

$686,636

The unused portions of the lines of credit total approximately $5,000 at December 31, 2006.

3. Related Party Transactions

(a) On December 1, 2003, an officer and director of the Company purchased a delivery vehicle (2003 Ford Van) for the purposes of assisting Butte Creek Brewing Company, LLC ("Butte Creek") maintain and expand its self-distribution capabilities. The vehicle is 100% utilized by Butte Creek as a delivery vehicle. The purchase price of the vehicle was $22,921 and was financed for 60 months with Ford Credit at an annual percentage rate of 5.99%. The payments on the vehicle are paid and expensed by the Company. The liability to Ford Credit is in the name of the officer and director of Golden West Brewing company, Inc. and is not recorded as a liability on these financial statements. There are no written agreements between the Company and the officer and director memorializing this transaction. The balance owing as of December 31, 2006 was $10,111. Effective October 31, 2006, this vehicle was transferred to one of our distributors and the Company is no longer making payments on this vehicle.

(b) In July 2004, an officer and director of the Company purchased a delivery vehicle (2004 Ford Van) for the purpose of assisting Butte Creek maintain and expand its self-distribution capabilities. The vehicle is 100% utilized by Butte Creek as a delivery vehicle. The purchase price was $26,156 and was financed for 60 months with Ford Credit at an annual percentage rate of 0.90%. The payments on the vehicle are paid and expensed by the Company. The liability to Ford Credit is the name of the officer and director of the Company and is not recorded as a liability on these financial statements. There are no written agreements between the Company and the officer and director

F-10

memorializing this transaction. The balance owing as of December 31, 2006 was $13,675. Effective December 31, 2006, this vehicle was transferred to one of our distributors and the Company is no longer making payments on this vehicle

(c) In 2003, an officer and director of the Company guaranteed a $25,000 line of credit for Butte Creek with one of its key suppliers. No compensation has been paid by either the Company or Butte Creek for the guarantee.

(d) On November 1, 2004, J. Andrew Moorer, a former Director of the Company, made an uncollateralized advance of $8,750. The advance continues to be uncollateralized and due on demand. This advance started to accrue interest at 8% on January 1, 2006.

(e) In January 2005, John Power converted $22,500 in outstanding advances to the Company into 90,000 shares of common stock.

(f) Between March and September 2005, the Company borrowed a total of $125,000 from three lenders: $50,000 in July 2005 from Power Curve, Inc. (a company controlled by John Power); $50,000 in May 2005 from Lone Oak Vineyards, Inc. (a company controlled by Brian Power); and $25,000 in March 2005 from Tiffany Grace, an unaffiliated party. The loans were used to pay off Butte Creek's loans to Tri County Economic Development Corporation, purchase additional equipment and provide working capital. The Tiffany Grace note, which was executed on September 9, 2005 accrues interest at the rate of 9% per annum, is payable in monthly payments of principal and interest based upon a five year amortization, and is due in full March 2008. As of December 31, 2006, the Tiffany Grace note had current maturities of $4,850 and a long-term maturity of $12,642. The Power Curve and Lone Oak notes were executed in September, 2005, accrue interest at the rate of 9% per annum, and are payable in full in 2008. The loans are collateralized by a security interest covering all of our tangible and intangible assets. As of December 31, 2006, the Power Curve and Lone Oak notes had accrued interest of $3,884 and ($2,924) respectively and long-term maturities of $50,000 and $25,000 respectively after the sale by Lone Oak of $25,000 of its note to an unrelated third party on September 15, 2006.

(g) On December 30, 2005, John Power converted $10,000 in outstanding advances to the Company into 40,000 shares of common stock

(h) On December 30, 2005, John Power and Power Curve, Inc. converted $215,000 and $90,000, respectively, in outstanding advances into collateralized long-term debt. The notes bear interest at 9% and mature December 31, 2008 and are collateralized by a security interest covering all of our tangible and intangible assets but are junior to the security interest granted to Power Curve, Inc. ($50,000), Lone Oak Vineyards, Inc. ($25,000) , Dayton Misfeldt Trust ($25,000) and Tiffany Grace ($25,000) in September 2005 described above. As of December 31, 2006, these notes had accrued interest of $19,350 and $8,100 with no current maturities and long-term maturities of $215,000 and $90,000 respectively.

(i) Effective December 30, 2005, our attorney Clifford Neuman converted $25,000 in accrued fees payable into 100,000 shares of common stock at a conversion price of $.25 per share. The accrued fees were incurred in connection with this offering. Mr. Neuman immediately gifted the shares to his two children equally.

(j) In the twelve months ended December 31, 2006, John Power and Power Curve, Inc. have made advances to the Company of $115,000 and $ 155,000 respectively. On December 31, 2006, John Power and Power Curve, Inc. converted these advances of $115,000 and $155,000, respectively, into

F-11

collateralized long-term debt. The notes bear interest at 8%, mature December 31, 2008, and are collateralized by all tangible and intangible assets but junior to all prior perfected liens on those assets.

(k) John Power and Power Curve, Inc. have made advances to one of our distributor/customers, Craft Brewers. This distributor accounted for 6.6 % of our gross sales in 2006. In March 2007, the Company made a collateralized loan to the same distributor in the amount of $40,000. The loan was collateralized by all of the assets (receivables, inventory and equipment) of the distributor. This Distributor owed us $21,716 for products and $6,009 for other costs as of December 31, 2006

4. Operating Leases

Effective July 1, 2005, the Company entered into a five year lease for office and warehouse space in Chico, California for Butte Creek. The lease provided for initial monthly rent of $3,150, which increased to $3,726 in July 2006 and is subject to annual increases every year starting in July 2007 based on the Consumer Price Index, and expires in 2010.

Future minimum lease payments under this lease are as follows:

Year Ending December 31,


	2007	$44,712
	2008	$44,712
	2009	$44,712
	2010	$44,712
		$178,848

5. Commitments & Contingencies

A. On December 30, 2005, an uncollateralized outstanding advance to the Company by an unaffiliated party at that time in the amount of $10,000 was converted into 40,000 shares of common stock. In February 2006, the Company was notified by the SEC that this conversion of $10,000 into 40,000 shares of common stock to an unaffiliated third party might have been a violation of Section 5 of the Securities Act of 1933 (the "33 Act"). While Management disagrees with this view, if it is determined that this transaction constituted a primary offering by or on behalf of the Company in violation of Section 5 of the 33 Act, then the Company may be subject to remedial sanctions. Such sanctions may include the payment of disgorgement, prejudgment interest and civil or criminal penalties. Management of the Company is not aware of any pending claims for sanctions against it based on Section 5 of the 33 Act, and intends to vigorously defend against any such claims if they arise. However, due to the notification by the SEC, the Company has classified the advance, amounting to $10,000 as of December 31, 2006, as a liability under amounts subject to rescission in the accompanying December 31, 2006 balance sheet. The shares issued are included in our total number of shares outstanding as of December 31, 2006. A contingency exists with respect this matter, the ultimate resolution of which cannot be determined at this time.

Mateveza USA, LLC

In November, 2006, the Company entered into a License, Production and Distribution Agreement with Mateveza USA, LLC, a California limited liability company (“Mateveza”) to manufacture, sell and distribute Mateveza’s proprietary yerba mate ales within an exclusive territory consisting of the states of California, Oregon, and Washington. Under the terms of the arrangement, the Company has agreed to advance production costs and sell under a jointly-developed marketing plan and pay Mateveza a royalty equal to fifty percent of the net profits generated from the sale of the Mateveza

F-12

yerba mate ales. In addition, the Company has agreed to maintain a minimum manufacturing capacity of 1,000 barrels per year, and have a right of first refusal with respect to any required capacity in excess of that amount.

Bison Brewing Company

In February, 2007, the Company entered into a Production Agreement with Bison Brewing Company, LLC (“Bison Brewing”) be a contract brewer for Bison Brewing’s craft beers. In consideration of the contract brewing, Bison has agreed to pay all direct production costs, including materials, bottling and labor and to share general and administrative expenses of the brewery. While the Company has contract brewed for Bison Brewing in the past, this arrangement will increase the volume of product that will be generated under the arrangement. As part of the agreement with Bison Brewing, our subsidiary hired Daniel Del Grande, President of Bison, as its Chief Financial Officer. As CFO, Mr. Del Grande will devote 50% of his time to the Company and receive a salary of $30,000 per year for a term of two years, expiring February 2009.

B. Delinquent Taxes & Rent

At December 31, 2006, the Company had outstanding payroll tax liabilities of $46,526. Of these amounts $38,009 are considered delinquent.


	December 31, 2006
Tax Agency	Due	Delinquent
Internal Revenue Service	$37,096	$30,900	PAYROLL TAXES
CA Employment Development Department	$ 9,430	$ 7,109	PAYROLL TAXES
Federal Tax and Trade Bureau	$ 7,426	$ 0	EXCISE TAX
CA Board of Equalization	$ 1,255	$ 0	EXCISE TAX
CA Board of Equalization	$ 3,324	$ 1,560	SALES AND USE TAX
CA Department of Conservation	$30,773	$29,379	CRV TAX
CA Franchise Tax Board	$ 6,600	$ 6,600	FRANCHISE TAXES
Butte County Tax Collector	$17,959	$17,959	PROPERTY TAXES

Most of these delinquent taxes payable have been assumed by the Company in connection with our acquisition of Butte Creek as the continuation of regulatory compliance is material to the Company's ability to continue as a going concern. The Company has entered into monthly payment plans with all of the aforementioned agencies. Continued operations could be severely impaired should the Company default on its payment plans with the IRS or any other governmental agency seek to collect any of the delinquent payables before we are able to pay them.

At December 31, 2006 the Company had outstanding rent obligations assumed from Butte Creek on our operating facility of $17,950. The Landlord made a demand for payment on or before November 1, 2006. The Company was unable to make this payment requested and has no further discussions with the landlord regarding this matter.

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6. Deferred Offering Costs:

As of June 30, 2006, the Company had incurred $232,089 related to the pending public offering of its securities. The Company has carried $150,000 of the costs as deferred offering costs and has expensed $11,295 in fiscal 2005 and $70,794 in the 6 months ended June 30, 2006. The deferred offering costs were charged against the proceeds of the offering. All offering costs incurred in excess of $150,000 were expensed in the period incurred.

The Company's SB-2 registration statement and a post-effective amendment were declared effective by the Securities and Exchange Commission on February 14, 2006 and June 30, 2006, respectively. The offering consisted of a minimum of 400,000 shares at $0.50 per share and a maximum of 1,000,000 shares at $0.50 per share. The Company completed this offering on August 3, 2006 having sold 408,000 shares and received gross proceeds of $204,000.

7. Common Stock:

In January, 2005, the Company issued 90,000 shares of its common stock at $0.25 per share for conversion of advances payable of $22,500, and 30,000 shares of common stock in conversion of outstanding indebtedness in the amount of $7,500.

In connection with the acquisition of Butte Creek on August 31, 2005, the Company issued 200,000 shares of common stock to Butte Creek.

Effective December 30, 2005, John Power converted $10,000 in accrued advances payable into 40,000 shares of common stock, at a conversion price of $.25 per share.

Effective December 30, 2005, our attorney Clifford Neuman converted $25,000 in accrued fees payable into 100,000 shares of common stock at a conversion price of $.25 per share. The accrued fees were incurred in connection with this offering. Mr. Neuman immediately gifted the shares to his two children equally.

On December 30, 2005, an uncollateralized outstanding advance to the Company by an unaffiliated party in the amount of $10,000 was converted into 40,000 shares of common stock. In February 2006, the Company was notified by the SEC that this conversion of $10,000 into 40,000 shares of common stock to an unaffiliated third party might have been a violation of Section 5 of the Securities Act of 1933 (the "33 Act"). While Management disagrees with this view, if it is determined that this transaction constituted a primary offering by or on behalf of the Company in violation of Section 5 of the 33 Act, then the Company may be subject to remedial sanctions. Such sanctions may include the payment of disgorgement, prejudgment interest and civil or criminal penalties. Management of the Company is not aware of any pending claims for sanctions against it based on Section 5 of the 33 Act, and intends to vigorously defend against any such claims if they arise. However, due to the notification by the SEC, the Company has classified the advance, amounting to $10,000 as of December 31, 2006, as a liability under amounts subject to rescission in the accompanying December 31, 2006 balance sheet. The 40,000 shares issued are included in our total number of shares outstanding as of December 31, 2006. A contingency exists with respect this matter, the ultimate resolution of which cannot be determined at this time.

F-14

The Company granted a one-time bonus of 1,000 common shares to each full-time employee in December 2006 for a total of 10,000 common shares at $.50 per share, for a total value of $5,000. The shares were expensed as stock compensation expense in 2006 and the shares were issued in January 2007.

On March 15, 2007, we completed the private placement of units, each unit consisting of one share of the Company’s Common Stock (“Common Stock”) and one Warrant exercisable to purchase one additional share of Common Stock at an exercise price of $0.40 per share for a period of two years from the date of issue (“Warrants”). Collectively, the Common Stock and Warrants are, hereinafter, referred to as “Units”. The private offering price is $0.35 per Unit.

In total, we have sold 400,000 units. Gross proceeds of the offering were $140,000 which proceeds will be used for working capital. The units were sold to a total of three (3) investors, each of whom qualify as an "accredited investor" within the meaning of Rule 501(a) of Regulation D under the Securities Act of 1933, as amended (the “Securities Act”). One of the three investors was John Power, the Company’s President and Director.

8. Income Taxes

Deferred income taxes arise from temporary timing differences in the recognition of income and expenses for financial reporting and tax purposes. The Company’s deferred tax assets consist of the benefit from net operating loss (NOL) carryforwards. The net operating loss carry forwards expire in various years through 2026. The Company’s deferred tax assets are offset by a valuation allowance due to the uncertainty of the realization of the net operating loss carryforwards. Net operating loss carryforwards may be further limited by a change in company ownership and other provisions of the tax laws.

The Company’s deferred tax assets, valuation allowance, and change in valuation allowance are as follows:


Year Ending December 31,	Estimated NOL Carry-forward	NOL Expires	Estimated Tax Benefit from NOL	Valuation Allowance	Change in Valuation Allowance	Net Tax Benefit
2005	191,000	2025	35,335	(35,335)	(23,635)	—
2006	1,220,000	2026	225,700	(225,700)	(190,365)

Income taxes at the statutory rate are reconciled to the Company’s actual income taxes as follows:


Tax (benefit) at Federal statutory rate		(15.00)%
State tax (benefit) net of Federal benefit		(3.50)
Valuation allowance		18.50
Tax provision (benefit)		-

9. Acquisition

On August 31, 2005, the Company acquired all the assets and certain liabilities of Butte Creek Brewing Company, LLC (Butte Creek). The results of Butte Creek's operations have been included in the consolidated financial statements since that date. Butte Creek was a manufacturer of craft beers, specializing in organic beers. The Company made the acquisition to become an organic craft brewer

F-15

and expects to continue to produce organic craft beers and to market them strategically in niche markets to capitalize on dedication to the use of organic ingredients.

This business combination was accounted for as a purchase of Butte Creek by the Company under the purchase method of accounting in accordance with Statement of Financial Accounting Standards No. 141, Business Combinations. Under the purchase method of accounting, the total purchase price, including transaction costs, is allocated to the net tangible and intangible assets acquired by the Company in connection with the transaction, based on their fair values as of the completion of the transaction. The aggregate purchase price was $983,084, including $567,400 cash, $365,684 assumed liabilities, and common stock valued at $50,000. The $567,400 cash consisted of advances to Butte Creek of $215,035 and $134,965 during the years ended December 31, 2004 and 2003, respectively, and advances of $217,400 during the eight months ended August 31, 2005. These advances were prepayments on the purchase of assets and were uncollateralized. The value of the 200,000 common shares issued was determined based on the offering price of the Company's common shares in its prospectus, which management believes to be the fair value.

The following table summarizes the fair values of the assets acquired and liabilities assumed at the date of acquisition.

At August 31, 2005


	Current assets	$197,612
	Property, plant and equipment	287,969
	Intangible assets	25,000
	Goodwill	472,503
	Total assets acquired	983,084
	Current liabilities	365,684
	Total liabilities assumed	365,684
	Net assets acquired	$617,400

The $25,000 of acquired intangible assets relate to trade names and trademarks that had an expected remaining useful life of approximately five years at the time of their acquisition and are being amortized on a 5-year schedule.

Goodwill, which relates entirely to our acquisition of the assets of Butte Creek, is not amortized but is tested annually for impairment. At December 31, 2006 the Company performed a test of impairment on goodwill that resulted in a write down of 100% of the value as of December 31, 2006, and is included in Impairment to Goodwill on the Statement of Operations for the year ended December 31, 2006.

10. Equity Incentive Plan:

On December 10, 2004, we adopted our 2004 Equity Incentive Plan for our officers, directors and other employees, plus outside consultants and advisors. In consideration of their services to the Company, on August 21, 2006, certain consultants, employees, officers and directors were granted non-qualified stock options exercisable to purchase, in the aggregate 400,000 shares of common stock at an exercise price of $0.50 per share. The foregoing options are exercisable until December 31, 2012, their “Expiration Date”. The foregoing options are subject to vesting and become exercisable 50% on the date of grant; 16.67% on July 31, 2007; 16.67% on July 31, 2008; and 16.67% on July 31, 2009, subject to the holder continuing to serve in their positions with the Company, or in some other capacity as shall be approved by the Company and the holder, on each vesting date.

F-16

The options were granted to five persons who serve as directors, employees or consultants to the Company. The shares issuable upon exercise of the options will be “restricted securities” within the meaning of Rule 144 under the Securities Act of 1933, as amended.

Under the Equity Incentive Plan, our employees, outside consultants and advisors may receive awards of non-qualified options and incentive options, stock appreciation rights or shares of stock. A maximum of 500,000 shares of our common stock are subject to the Equity Incentive Plan. No stock appreciation rights, options or bonus stock have been granted under the Equity Incentive Plan.

The Equity Incentive Plan may be administered by the Board or in the Board's sole discretion by the Compensation Committee of the Board or such other committee as may be specified by the Board to perform the functions and duties of the Committee under the Equity Incentive Plan. Subject to the provisions of the Equity Incentive Plan, the Committee and the Board shall determine, from those eligible to be participants in the Equity Incentive Plan, the persons to be granted stock options, stock appreciation rights and restricted stock, the amount of stock or rights to be optioned or granted to each such person, and the terms and conditions of any stock option, stock appreciation rights and restricted stock.

A summary of stock option activity is as follows:


		Number of Shares	Weighted Average Exercise Price
Balance December 31, 2005		-0-	$ -
	Granted	400,000	$ 0.50
	Exercised	-0-	-
Balance December 31, 2006		400,000	$ 0.50

The following table presents summarized information about fixed price stock options at December 31, 2006:


				Exercisable
Exercise Prices	Weighted Average Number Outstanding	Weighted Average Contracted Life	Weighted Average Price	Number Exercisable	Exercise Price
$0.50	400,000	5.4 years	$0.50	200,000	$0.50

The fair value of the options granted in fiscal year 2006 was estimated using the Black-Scholes option pricing model with the following assumptions:


Expected volatility			75%
Risk-free interest rate			4.85%

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Expected dividends			None
Expected life of options			6 years

11. Subsequent Events:

A. Subsequent to December 31, 2006, John Power, Power Curve, Inc. and Sea Ranch Lodge & Village, LLC, a company controlled by John Power, have made short-term advances to the Company in the amount of $16,250, $17,750 and $50,000, respectively. The advances are uncollateralized and due on demand.

B. On March 1, 2007, the Registrant’s wholly-owned subsidiary, Golden West Brewing Company, a California corporation doing business as Butte Creek Brewing Company (the “Company”) entered into a Production Agreement with Bison Brewing Company, LLC (“Bison”) pursuant to which the Company will contract brew Bison’s products for a term of two years. Bison Brewing shall pay the costs of material and labor and a share of general and administrative expense.

C. Additionally, effective March 1, 2007, the Company entered into an Employment Agreement wherein Mr. Daniel Del Grande, as the Manager of Bison shall be employed by the Company as the Chief Financial Officer of its wholly-owned subsidiary during the term of the Production Agreement referenced above. Mr. Del Grande will devote 50% of his time to the Company and will receive a salary of $30,000 per year for two years ending February 2009.

D. On March 15, 2007, we completed the private placement of units, each unit consisting of one share of the Company’s Common Stock (“Common Stock”) and one Warrant exercisable to purchase one additional share of Common Stock at an exercise price of $0.40 per share for a period of two years from the date of issue (“Warrants”). Collectively, the Common Stock and Warrants are, hereinafter, referred to as “Units”. The private offering price was $0.35 per Unit. In total, we sold 400,000 units. Gross proceeds of the offering were $140,000 which proceeds were used for working capital. The units were sold to a total of three (3) investors, each of whom qualify as an "accredited investor" within the meaning of Rule 501(a) of Regulation D under the Securities Act of 1933, as amended (the “Securities Act”). One of the three investors was John Power, The Company’s President and Director.

E. J. Andrew Moorer resigned as an officer & director on December 31, 2006.

F. In March 2007, the Company made a loan to one of our distributors in the amount of $40,000. The loan was collateralized by all of the assets (receivables, inventory and equipment) of the distributor. The Distributor accounted for 6.6 % of our sales in 2006. This Distributor owed us $21,716 for products and $6,009 for other costs as of December 31, 2006.

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ITEM 8.	CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None


ITEM 8A.	CONTROLS AND PROCEDURES

The Company's Principal Executive Officer and Principal Financial Officer, John C. Power, has established and is currently maintaining disclosure controls and procedures for the Company. The disclosure controls and procedures have been designed to provide reasonable assurance that the information required to be disclosed by the Company in reports that it files under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC and to ensure that information required to be disclosed by the Company is accumulated and communicated to the Company's management as appropriate to allow timely decisions regarding required disclosure.

The Principal Executive Officer and Principal Financial Officer conducted an update review and evaluation of the effectiveness of the Company's disclosure controls and procedures and have concluded, based on his evaluation as of the end of the period covered by this Report, that our disclosure controls and procedures are not effective to provide reasonable assurance that information required to be disclosed in the reports that you file or submit under the Exchange Act is accumulated and communicated to management, including our principal executive officer and our principal financial officer, to allow timely decisions regarding required disclosure and we refer you to Exchange Act Rule 13a-15(e). We initially became subject to the reporting requirements of Section 13a of the Exchange Act on February 16, 2006. The principal deficiency in our disclosure controls and procedures is our lack of a dedicated Chief Financial Officer who is primarily responsible for our public disclosures and financial reporting. We intend to retain a qualified Chief Financial Officer during the present fiscal year. There have been no material changes in our internal controls or in other factors that could materially affect these controls subsequent to the date of the previously mentioned evaluation.

Our principal executive and financial officer does not expect that our disclosure controls or internal controls will prevent all error and all fraud. Although our disclosure controls and procedures were designed to provide reasonable assurance of achieving their objectives and our principal executive and financial officer has determined that our disclosure controls and procedures are effective at doing so, a control system, no matter how well conceived and operated, can provide only reasonable, not absolute assurance that the objectives of the system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented if there exists in an individual a desire to do so. There can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.


ITEM 8B.	OTHER INFORMATION

None.

PART III


ITEM 9.	DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT

Directors and Executive Officers

Our executive officers, key employees and directors and their respective ages and positions are set forth below:


Name	Age	Position

John C. Power ⁽¹⁾	44	Chief Executive Officer, President, Chief Financial Officer, Principal Accounting Officer, Secretary and Director

Brian Power ⁽¹⁾	41	Director

________________________________

⁽¹⁾ John C. Power and Brian Power are brothers.

John C. Power , age 44, has been a director of Golden West since its inception in December 2003 and Chief Financial Officer since March 2005. He has served as President since December 2005 and as Secretary since January, 2007. He was President (since September 1992) and Director (since September 1989) of Redwood MicroCap Fund, Inc., a registered closed-end investment company regulated under the Investment Company Act of 1940, until March 2005. In addition, until March 2005, he served as Vice President of TriPower Resources, Inc., an oil and gas exploration company, (since December 1993), President and Director of Alta California Broadcasting, Inc. which operates local market radio stations, (since May 1994), President and Director of Four Rivers Broadcasting, Inc., also a radio broadcaster, (since May 1997),and Managing Member of Nova Redwood, LLC, which held undeveloped real property which has now been sold, (since November 1999). He is Managing Member of Wyoming Resorts, LLC, which owns and operates an historic hotel in Thermopolis, Wyoming, (since June 1997), Managing Member of Montana Resorts, LLC, which is a holding company for Yellowstone Gateway Resorts, LLC, (from May 2002), Managing Member of Yellowstone Gateway Resorts, LLC, which owns and operates the Gallatin Gateway Inn, (from May 2002) and co-Managing Member of Napa Canyon, LLC, which owns undeveloped real estate in Napa, California, (since September 2001). On November 16, 2004, Yellowstone Gateway Resorts, LLC filed a voluntary petition in bankruptcy under Chapter 11 of the U.S. Bankruptcy Code in response to an adverse arbitration award in favor of a former employee. Yellowstone Gateway Resorts, LLC was successfully reorganized under Chapter 11. He served as Director of Redwood Energy, Ltd. from 1994 to 2004, President and Director of Redwood Broadcasting, Inc. from December 1994 to June 1998, President and Director of Power Surge, Inc., which was involved in radio broadcasting from December 1996 to June 1998. He also serves as President of Power Curve, Inc., a private investment company, (since 1986), Managing Member of Sea Ranch Lodge and Village, LLC, which owns and operates the Sea Ranch Lodge in Sonoma County, California, (since December 1997), Managing Member of Best of Sea Ranch, LLC, which owns a 50% interest in Sea Ranch Escapes which is involved in home rentals at the Sea Ranch (since December 2004) and co-Managing Member of Napa

Partners, LLC, which is a real estate holding company (since November 1999). He also served as Managing Member of Sea Ranch California, LLC from December 1997 to June 2004. Mr. Power attended Occidental College and University of California at Davis.

On June 1, 1998, the Securities and Exchange Commission issued an Order instituting proceedings alleging, among other things, that John C. Power, one of our directors, violated Section 10(b) of the Securities Exchange Act of 1934 and Rule 10(b)(5) promulgated thereunder by participating in a manipulation through his personal account of the public trading market for the stock of Premier Concepts, Inc., from approximately June 1994 through December 1994. On November 15, 2005, the US Court of Appeals for the District of Columbia Circuit issued an Opinion and Order dismissing the matter.

Brian Power, age 41, was CEO, President and Director of Golden West since its inception in December 2003. He resigned as President and CEO in December 2005. He has been President and Director from February 1997 to the present of Lone Oak Vineyards, Inc., a California real estate investment company. From October 1998 to December 2005, he was the co-founder and managing member of Spirit of Adventure, LLC, formed to develop deep ocean exploration technologies and design and build high technology-based manned submersibles. From February 2002 to present, he has been founder and managing member of West Indies Investments, LLC, a company that sponsors tourist excursions in Providenciales, Turks and Caicos Islands, and the British West Indies. He has been Director of Snuba, Inc. from 1996 to present, a licensor of and manufacturer of patented dive apparatus. From September 1996 to April 2002, he was a Director of Combined Penny Stock Fund, Inc., a registered closed-end investment management company regulated under the Investment Company Act of 1940; and from May 2000 to December 2001, served as managing member of Binghampton Meadows, LLC, a single purpose real estate development entity located in Solano County, California. Mr. Power attended Solano Community College and the University of California at Davis.

During the last five years none of our directors or officers has:


	a.	had any bankruptcy petition filed by or against any business of which such person was a general partner or executive officer either at the time of the bankruptcy or within two years prior to that time;

	b.	been convicted in a criminal proceeding or subject to a pending criminal proceeding;

	c.	been subject to any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining, barring, suspending or otherwise limiting his involvement in any type of business, securities or banking activities; or

	d.	been found by a court of competent jurisdiction in a civil action, the Commission or the Commodity Futures Trading Commission to have violated a federal or state securities or commodities law, and the judgment has not been reversed, suspended, or vacated.

Our executive officers are elected annually at the annual meeting of our Board of Directors held after each annual meeting of shareholders. Our directors are elected annually at the annual meeting of

our shareholders. Each director and executive officer will hold office until his successor is duly elected and qualified, until his resignation or until he shall be removed in the manner provided by our by-laws.

We currently do not have standing audit, compensation or nominating committees of the Board of Directors. We plan to form audit, compensation and nominating committees when it is necessary to do so to comply with federal securities laws or to meet listing requirements of a stock exchange or the Nasdaq Stock Market.

Except for the filial relationship between John C. Power and Brian Power, no other family relationship exists among our directors. No arrangements or understandings exist between any director and any other person pursuant to which any director was elected as such.

2004 Equity Incentive Plan

On December 10, 2004, we adopted our 2004 Equity Incentive Plan for our officers, directors and other employees, plus outside consultants and advisors. Under the Equity Incentive Plan, our employees, outside consultants and advisors may receive awards of non-qualified options and incentive options, stock appreciation rights or shares of stock. As required by Section 422 of the Internal Revenue Code of 1986, as amended, the aggregate fair market value of our common stock underlying incentive stock options granted to an employee exercisable for the first time in any calendar year may not exceed $100,000. The foregoing limitation does not apply to non-qualified options. The exercise price of an incentive option may not be less than 100% of the fair market value of the shares of our common stock on the date of grant. The same limitation does not apply to non-qualified options. An option is not transferable, except by will or the laws of descent and distribution. If the employment of an optionee terminates for any reason, (other than for cause, or by reason of death, disability or retirement), the optionee may exercise his options within a 90-day period following such termination to the extent he was entitled to exercise such options at the date of termination. A maximum of 500,000 shares of our common stock are subject to the Equity Incentive Plan. As of the date of this prospectus, no options, stock appreciation rights or bonus stock have been granted under the Equity Incentive Plan. The purpose of the Equity Incentive Plan is to provide employees, including our officers and employee directors, and non-employee consultants and advisors, with an increased incentive to make significant and extraordinary contributions to our long-term performance and growth, to join their interests with the interests of our shareholders, and to facilitate attracting and retaining employees of exceptional ability.

As of the date of this Report, we have granted options exercisable to purchase an aggregate of 400,000 shares under the Plan. A portion of those outstanding options are subject to future vesting.

Director Compensation

Under our Equity Incentive Plan, each of our directors and officers is eligible to receive options to purchase shares of our common stock. To date, we have granted Brian Power and J. Andrew Moorer each options to purchase 50,000 shares of common stock at an exercise price of $.50 per share. Mr. Moorer resigned from the board of directors in December 2006, and his options have since expired without exercise. We plan to make annual grants to directors in the future, but the basis of such grants has not yet been established.

Indemnification and Limitation on Liability of Directors

Our certificate of incorporation limits the liability of a director for monetary damages for his conduct as a director, except for:


	*	Any breach of the duty of loyalty to us or our stockholders,

	*	Acts or omissions not in good faith or that involved intentional misconduct or a knowing violation of law,

	*	Dividends or other distributions of corporate assets from which the director derives an improper personal benefit.

	*	Liability under federal securities law

The effect of these provisions is to eliminate our right and the right of our stockholders (through stockholder's derivative suits on our behalf) to recover monetary damages against a director for breach of his fiduciary duty of care as a director, except for the acts described above. These provisions do not limit or eliminate our right or the right of a stockholder to seek non-monetary relief, such as an injunction or rescission, in the event of a breach of a director's duty of care.

Our certificate of incorporation also provides that we shall indemnify, to the full extent permitted by Delaware law, any of our directors, officers, employees or agents who are made, or threatened to be made, a party to a proceeding by reason of the fact that he or she is or was one of our directors, officers, employees or agents. The indemnification is against judgments, penalties, fines, settlements, and reasonable expenses incurred by the person in connection with the proceeding if certain standards are met. Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to our directors, officers and controlling persons in accordance with these provisions, or otherwise, we have been advised that, in the opinion of the SEC, indemnification for liabilities arising under the Securities Act of 1933 is against public policy as expressed in the Securities Act and is, therefore, unenforceable.

Compliance with Section 16(a) of the Exchange Act

Under the Securities Laws of the United States, the Company's Directors, its Executive (and certain other) Officers, and any persons holding more than ten percent (10%) of the Company's common stock are required to report their ownership of the Company's common stock and any changes in that ownership to the Securities and Exchange Commission. Specific due dates for these reports have been established and the Company is required to report in this report any failure to file by these dates. All of these filing requirements were satisfied by its Officers, Directors, and ten- percent

holders except Butte Creek Brewing Company, LLC failed to file one report covering one transaction in a timely fashion, and Brian Power failed to file one report covering one transaction in a timely fashion. In making these statements, the Company has relied on the written representation of its Directors and Officers or copies of the reports that they have filed with the Commission.

ITEM 10. EXECUTIVE COMPENSATION

The following table and discussions summarize all plan and non-plan compensation earned by or paid to our chief executive officer for our last three completed fiscal years. No other executive officer received total annual salary and bonus of at least $100,000 during those periods.

SUMMARY COMPENSATION TABLE

Name

and

Principal

Position

Year

Salary

($)

Bonus

Stock

Awards

Options

Awards

Non equity

Incentive Plan

Compensation

Nonqualified

Deferred

Compensation

Earnings

All Other

Compensation

Total

John C. Power, CEO

2006

- 0 -

John C. Power, CEO

2005

- 0 -

Thomas Atmore, Managing Member,

Butte Creek

2005

43,500

$800

- 0 -

$44,300

Thomas Atmore, Managing Member,

Butte Creek

2004

42,000

- 0 -

$42,000

The following table sets forth information concerning unexercised options, stock that has not vested and equity incentive plan awards for each named executive officer outstanding as of the end of the most recently completed fiscal year:

OUTSTANDING EQUITY AWARDS AT FISCAL YEAR END TABLE

Option Awards

Stock Awards

Name

Number of

Securities

Underlying

Unexercised

Options

Exercisable

Number of

Securities

Underlying

Unexercised

Options

Unexercisable

Equity

Incentive

Plan

Awards;

Number of

Securities

Underlying

Unexercised

Unearned

Options

Option

Exercise

Price

Option

Exercise

Date

Number of

Shares or

Units of

Stock That

Have Not

Vested

Market

Value of

Shares of

Units That

Have Not

Vested

Equity

Incentive

Plan

Awards;

Number of

Unearned

Shares,

Units or

Other

Rights

That Have

Not

Vested

Equity

Incentive

Plan

Awards;

Market or

Payout

Value of

Unearned

Shares,

Units or

Other

Rights

That Have

Not

Vested

John Power

-0-

The following table sets forth information concerning compensation paid to the Company’s directors during the most recently completed fiscal year:

DIRECTOR COMPENSATION TABLE


Name	Fees Earned or Paid in Cash	Stock Awards	Option Awards	Non-Equity Incentive Plan Compensation	Nonqualified Deferred Compensation Earnings	All Other Compensation	Total
John Power	0	0	0	0	0	0	0
Brian Power	0	0	50,000	0	0	0	$32,500
J. Andrew Moorer ⁽¹⁾	0	0	50,000	0	0	0	$32,500

⁽¹⁾ Mr. Moorer resigned from the Board in December, 2006, and his options have since expired without extension.


ITEM 11.	SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

The following table sets forth information with respect to beneficial ownership of our common stock by:


	*	each person who beneficially owns more than 5% of the common stock;
	*	each of our executive officers named in the Management section;
	*	each of our Directors; and
	*	all executive officers and Directors as a group.

The table shows the number of shares owned as of March 31, 2007 and the percentage of outstanding common stock owned as of March 31, 2007. Each person has sole voting and investment power with respect to the shares shown, except as noted.


Name and Address of Beneficial Owner ⁽¹⁾	Amount and Nature of Beneficial Ownership ⁽²⁾		Before Offering ⁽³⁾

Allan W. Williams 21071 43A Avenue Langley, British Columbia CANADA V3A 8K4	160,000		5.7%
John Gibbs 807 Wood N Creek Ardmore, OK 73041	820,000	⁽⁴⁾	22.9%
John C. Power Post Office Box 114 Sea Ranch, CA 95497	708,000	⁽⁵⁾	22.0%
Brian Power	0		0

Butte Creek Brewing Company, LLC 945 West 2 ^nd Street Chico, California ⁽⁶⁾	200,000		7.1%

All officers and directors as a group (three persons)	668,000		33.4%

____________________________


(1)	Unless otherwise stated, address is 945 West 2 ^nd Street, Chico, California 95928.



(2)	Under SEC Rules, we include in the number of shares owned by each person the number of shares issuable under outstanding options or warrants if those options or warrants are exercisable within 60 days of the date of this prospectus. In calculating percentage ownership, we calculate the ownership of each person who owns exercisable options by adding (i) the number of exercisable options for that person only to (ii) the number of total shares outstanding and dividing that result into (iii) the total number of shares and exercisable options owned by that person.

(3)	Shares and percentages beneficially owned are based upon 2,818,000 shares outstanding on March 31, 2007.

(4)	Includes (i) 300,000 shares of common stock and warrants exercisable to purchase an additional 300,000 shares of common stock owned by Mr. Gibbs, individually; and, (ii) an aggregate of 220,000 shares of common stock owned of record by Wyoming Resorts, LLC, of which Mr. Gibbs is a control person.

(5)	Includes warrants exercisable to purchase 85,000 shares of common stock.

(6)	Voting and investment power is exercised by the sole manager of Butte Creek, who is Thomas Atmore.


ITEM 12.	CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

On December 1, 2003, an officer and director of the Company purchased a delivery vehicle (2003 Ford Van) for the purposes of assisting Butte Creek Brewing Company, LLC ("Butte Creek") maintain and expand its self-distribution capabilities. The vehicle is 100% utilized by Butte Creek as a delivery vehicle. The purchase price of the vehicle was $22,921 and was financed for 60 months with Ford Credit at an annual percentage rate of 5.99%. The payments on the vehicle are paid and expensed by the Company. The liability to Ford Credit is in the name of the officer and director of Golden West Brewing company, Inc. and is not recorded as a liability on these financial statements. There are no written agreements between the Company and the officer and director memorializing this transaction. The balance owing as of December 31, 2006 was $10,111. Effective October 31, 2006, this vehicle was transferred to one of our distributors and the Company is no longer making payments on this vehicle.

In July 2004, an officer and director of the Company purchased a delivery vehicle (2004 Ford Van) for the purpose of assisting Butte Creek maintain and expand its self-distribution capabilities. The vehicle is 100% utilized by Butte Creek as a delivery vehicle. The purchase price was $26,156 and was financed for 60 months with Ford Credit at an annual percentage rate of 0.90%. The payments on the vehicle are paid and expensed by the Company. The liability to Ford Credit is the name of the officer and director of the Company and is not recorded as a liability on these financial statements. There are no written agreements between the Company and the officer and director memorializing this transaction. The balance owing as of December 31, 2006 was $13,675. Effective December 31, 2006, this vehicle was transferred to one of our distributors and the Company is no longer making payments on this vehicle.

In 2003, an officer and director of the Company guaranteed a $25,000 line of credit for Butte Creek with one of its key suppliers. No compensation has been paid by either the Company or Butte Creek for the guarantee.

In January 2005, John Power converted $22,500 in outstanding advances to the Company into 90,000 shares of common stock.

Between March and September 2005, the Company borrowed a total of $125,000 from three lenders: $50,000 in July 2005 from Power Curve, Inc. (a company controlled by John Power); $50,000 in May 2005 from Lone Oak Vineyards, Inc. (a company controlled by Brian Power); and $25,000 in March 2005 from Tiffany Grace, an unaffiliated party. The loans were used to pay off Butte Creek's loans to Tri County Economic Development Corporation, purchase additional equipment and provide working capital. The Tiffany Grace note, which was executed on September 9, 2005 accrues interest at the rate of 9% per annum, is payable in monthly payments of principal and interest based upon a five year amortization, and is due in full March 2008. As of December 31, 2006, the Tiffany Grace note had current maturities of $4,850 and a long-term maturity of $12,642. The Power Curve and Lone Oak notes were executed in September, 2005, accrue interest at the rate of 9% per annum, and are payable in full in 2008. The loans are collateralized by a security interest covering all of our tangible and intangible assets. As of December 31, 2006, the Power Curve and Lone Oak notes had accrued interest of $3,884 and ($2,924) respectively and long-term maturities of $50,000 and $25,000 respectively after the sale by Lone Oak of $25,000 of its note to an unrelated third party on September 15, 2006.

On December 30, 2005, John Power converted $10,000 in outstanding advances to the Company into 40,000 shares of common stock

On December 30, 2005, John Power and Power Curve, Inc. converted $215,000 and $90,000, respectively, in outstanding advances into collateralized long-term debt. The notes bear interest at 9% and mature December 31, 2008 and are collateralized by a security interest covering all of our tangible and intangible assets but are junior to the security interest granted to Power Curve, Inc. ($50,000), Lone Oak Vineyards, Inc. ($25,000), Dayton Misfeldt Trust ($25,000) and Tiffany Grace ($25,000) in September 2005 described above. As of December 31, 2006, these notes had accrued interest of $19,350 and $8,100 with no current maturities and long-term maturities of $215,000 and $90,000 respectively.

In the twelve months ended December 31, 2006, John Power and Power Curve, Inc. have made advances to the Company of $115,000 and $ 155,000 respectively. On December 31, 2006, John Power and Power Curve, Inc. converted these advances of $115,000 and $155,000, respectively, into

John Power and Power Curve, Inc. have made advances to one of our distributor/customers, Craft Brewers. This distributor accounted for 6.6 % of our gross sales in 2006. In March 2007, the Company made a collateralized loan to the same distributor in the amount of $40,000. The loan was collateralized by all of the assets (receivables, inventory and equipment) of the distributor. This Distributor owed us $21,716 for products and $6,009 for other costs as of December 31, 2006

In the three months ended March 31, 2007, John Power, Power Curve, Inc., and Sea Ranch Lodge & Village, LLC, a company controlled by John Power, have made additional working capital advances to the Company in the amounts of $10,750, $17,750 and $50,000, respectively. The advances are uncollateralized and are due on demand.

PART IV


ITEM 13.			EXHIBITS AND REPORTS ON FORM 8-K
	*	2.1		Asset Purchase and Sale Agreement dated October 8, 2004
	*	2.2		Amendment No. 1 to Asset Purchase and Sale Agreement
	*	2.3		Amendment No. 2 to Asset Purchase and Sale Agreement dated July 31, 2005
	*	2.4		Amendment No. 3 to Asset Purchase and Sale Agreement dated August 31, 2005
	*	3.1		Amended and Restated Certificate of Incorporation
	*	3.2		By-Laws
	*	4.1		2004 Equity Incentive Plan
	*	4.2		Form of Subscription Agreement
	*	4.3		Specimen common stock certificate
	*	10.1		Lease Agreement
	*	10.2		Form of Escrow Agreement
	*	10.3		Amended Trademark Assignment
	*	10.3.2		Initial Assignment of Trademark
	*	10.4		Lock-up Letter for Brian Power
	*	10.5		Lock-up Letter for John C. Power
	*	10.6		Lock-up Letter for J. Andrew Moorer
	*	10.7		Amended Fund Escrow Agreement
	*	10.8		Lease Agreement with Golden West Brewing Company
	*	10.9		Security Agreement in favor of Power Curve, Inc., Lone Oak Vineyards, Inc. and Tiffany Grace.
	*	10.10		Promissory Note dated September 9, 2005, Tiffany Grace, Holder
	*	10.11		Promissory Note dated September 9, 2005, Lone Oak Vineyards, Inc., Holder
	*	10.12		Promissory Note dated September 9, 2005, Power Curve, Inc., Holder
	*	10.13		Assignment and Assumption dated August 31, 2005 between Butte Creek Brewing Company, LLC, Golden West Brewing Company and Golden West Brewing Company, Inc.
	*	10.14		Amended and Restated Assignment and Assumption
	*	10.15		August 7, 1998 Distribution Agreement
	*	10.16		Territorial Agreement
	*	10.17		November 4, 2002 Distribution Agreement
	*	10.18		June 1, 2001 Authorization
	*	10.19		July 22, 2004 Authorization
	*	10.20		September 1, 2005 Authorization
	*	10.22		Second Amended Fund Escrow Agreement
	*	10.23		Contract with New Zealand Hops, Ltd., 2006
	*	10.24		Contract with New Zealand Hops, Ltd., 2007
	*	10.25		Second Amended and Restated Assignment and Assumption
	*	10.26		Third Amended Fund Escrow Agreement
	*	10.27		Collateralized Promissory Note with John C. Power
	*	10.28		Collateralized Promissory Note with Power Curve, Inc.
	*	10.29		General Security Agreement with John C. Power and Power Curve, Inc.
	***	10.30		Production Agreement dated February 21, 2007 with Bison Brewing Company
	***	10.31		Employment Agreement with David DelGrande dated February 21, 2007
	**	10.32		License, Production and Distribution Agreement dated November 1, 2006 with Mateveza USA, LLC


**	14	Code of Ethics
*	21.0	List of Subsidiaries
**	31	Certification
**	32	Certification pursuant to 18 U.S.C.. Section 1350

_________________


*	Incorporated by reference from the Company's Registration Statement on Form SB-2, SEC File No. 121351 as declared effective by the Commission on February 14, 2006.

**	Filed herewith.

***	Incorporated by reference from the Company’s Report on Form 8-K dated December 28, 2006 and filed with the Commission on March 8, 2007.
	Reports on Form 8-K

	Current Report on Form 8-K dated December 28, 2006, Item No. Item 5.02, as filed with the Commission on December 28, 2006.

	Current Report on Form 8-K dated March 1, 2007, Item Nos. 1.01 and 9.01, as filed with the Commission on March 8, 2007.

	Current Report on Form 8-K dated March 15, 2007, Item No. 3.02, as filed with the Commission on March 20, 2007.


ITEM 14.	PRINCIPAL ACCOUNTANT FEES AND SERVICES

We understand the need for our principal accountants to maintain objectivity and independence in their audit of our financial statements. To minimize relationships that could appear to impair the objectivity of our principal accountants, our Board of Directors has restricted the non-audit services that our principal accountants may provide to us primarily to tax services and audit related services. We are only to obtain non-audit services from our principal accountants when the services offered by our principal accountants are more effective or economical than services available from other service providers, and, to the extent possible, only after competitive bidding. These determinations are among the key practices adopted by the Board of Directors. The board has adopted policies and procedures for pre-approving work performed by our principal accountants.

The following table details the aggregate fees billed to the Company by Schumacher & Associates, Inc., its principal accountant, for each of the last two fiscal years:


	2006	2005
Audit fees - audit of annual financial statements and review of financial statements included in our quarterly reports, services normally provided by the accountant in connection with statutory and regulatory filings.	$25,000	$23,000
Audit-related fees - related to the performance of audit or review of financial statements not reported under "audit fees" above	7,000	13,000
Tax fees - tax compliance, tax advice and tax planning	-	-
All other fees - services provided by our principal accountants other than those identified above	-	-
Total fees paid or accrued to our principal accountants	$32,000	$36,000

After careful consideration, the Board of Directors has determined that payment of the audit fees is in conformance with the independent status of the Company's principal independent accountants.

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this annual report to be signed on its behalf by the undersigned, thereunto duly authorized.


	GOLDEN WEST BREWING COMPANY, INC.

Date: April 24, 2007	By: /s/ John C. Power____________________ John C. Power, President, Chief Financial Officer, Principal Accounting Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.


SIGNATURE	TITLE	DATE

/s/ John C. Power _ John C. Power	President, Principal Executive Officer, Chief Financial Officer, Principal Accounting Officer, Secretary & Director	April 24, 2007

/s/ Brian Power ___ Brian Power	Director	April 24, 2007

LICENSE, PRODUCTION, AND DISTRIBUTION AGREEMENT

-- MATEVEZA YERBA MATÉ ALE --

This License, Production, and Distribution Agreement (“ Agreement ”) is entered into effective as of the 1st day of November, 2006 (“ Effective Date ”), by and between Golden West Brewing Company, a California corporation d/b/a Butte Creek Brewing Company , (“ Butte Creek ”), and Mateveza USA, LLC, a California limited liability company (“ Mateveza USA ”).

WHEREAS, Mateveza USA controls certain valuable trademarks, trade secrets and other intellectual property associated with the production and marketing of yerba maté ale products in the United States (“ Licensed Property ” as defined herein);

WHEREAS, Butte Creek is engaged in the manufacture, sale, and distribution of beers, ales, and other malt beverages in various channels; and

WHEREAS, Mateveza USA and Butte Creek desire to enter into this Agreement for the purpose of (a) Butte Creek manufacturing, selling, and distributing yerba maté ales products using the Licensed Property (the “ Products ” as defined herein); and (b) Mateveza USA granting Butte Creek the right to use the Licensed Property in connection with such manufacture, sale, and distribution of the Products.

NOW, THEREFORE, for the mutual consideration set forth herein, the parties hereto agree as follows:

Definitions .

For purposes of this Agreement:

“ ABC ” means the California Department of Alcoholic Beverage Control.

“ Acceptable Product ” means a Product that is in compliance with the terms of Sections 3.B(i) through 3.B(ix), and Sections 4.B(vi) and (vii), inclusive.

“ Affiliate ” means, with respect to a specified Person, another Person that Controls, is Controlled by, or is under common Control with, the specified Person.

“ Agreement ” has the meaning set forth in the first paragraph hereof.

“ Auditor ” has the meaning set forth in Section 7.D.

“ Brewing Sheet ” means the recipe for brewing the Products, as set forth in Schedule 1.3 .

“ Business Day ” means any day that is not a Saturday, Sunday, or statutory federal holiday in the United States.

“ Butte Creek Monthly Reports ” has the meaning set forth in Section 7.A.

“ Change of Control ” occurs: (i) where any Person or group of Persons acting in concert who, on the Effective Date, does not possess Control over a party hereto, gains Control over such party, or (ii) in the event of any sale or other transfer of all or substantially all of the assets of Mateveza USA or Butte Creek other than to an Affiliate of such party.

“ Confidential Information ” has the meaning set forth in Section 12.A.

“ Control ” means the power to exercise voting control over a majority of the issued and outstanding voting securities of a Person.

“ Cost of Goods Sold ” means all direct and indirect costs in accordance with U.S. Generally Accepted Accounting Principles (“ U.S. GAAP ”) for calculations of Cost of Goods Sold (“ COGS ”) for the applicable category of Products, plus freight and shipping costs and that portion of the General and Administrative (“ G & A ”) costs reasonably allocated to the Products . On or before January 1, 2007, Butte Creek will prepare in good faith a true and complete listing of the elements of Butte Creek’s COGS (including freight and shipping and G & A costs) and a description of how the cost elements are derived (including indirect cost allocation methodologies) and when they are updated, including the formula to the portion of the G & A costs that will be allocated to the Products, substantially in the format set forth on Schedule 1.1 . To the extent Butte Creek purchases goods or services from an Affiliate of Butte Creek, all cost components shall be based on the fair market value of the component for such item in an arm’s length transaction between unrelated parties. The components and/or allocations as then set forth in Schedule 1.1 must be agreed by Mateveza USA and Butte Creek and, once agreed, will be deemed incorporated into this Agreement, may be changed only upon the mutual agreement of Mateveza USA and Butte Creek, and will be subject to the audit rights provision in Section 7.D of this Agreement.

“ Disclosing Party ” has the meaning set forth in Section 12.A.

“ Distributor ” means any third-party distributor, wholesaler, or other entity authorized to purchase and sell malt beverages at wholesale to licensed accounts in the Territory for the retail sale of such beverages to consumers for on-premise and/or off-premise consumption.

“ Distribution Privileges ” has the meaning set forth in Section 4.

“ Effective Date ” has the meaning set forth in the first paragraph hereof.

“ Expired Product ” means any Product that has not been sold by Butte Creek to a Distributor or other customer within 90 days from the date of its manufacture.

“ FDCA ” has the meaning set forth in Section 3.B(vii).

“ Final Determination ” has the meaning set forth in Section 7.D.

“ First Fiscal Year ” means the period of time beginning on January 1, 2007 and ending on December 31, 2007.

“ Fiscal Year ” means the period of time beginning January 1 and ending on December 31.

“ Force Majeure ” means acts of God (including, but not limited to, fire, storm, flood, frost, disease, pestilence, crop failure, and earthquake), explosion, accident, acts of the public enemy, war, rebellion, insurrection, sabotage, epidemic, quarantine restrictions, or other acts beyond the reasonable control of a party, but expressly excluding strikes or other labor stoppages, slowdowns or disputes.

“ Formulas ” has the meaning set forth in Section 2.F(ii).

“ Gross Sales Proceeds ”means (1) Butte Creek’s collected and cleared gross revenues from sales of Products to Distributors or other customers, net of (a) all federal or state excise taxes applicable to the Products as paid by Butte Creek, and less (b) Management Committee-approved discounts, deductions, allowances, set-offs, refunds, markdowns, or adjustments to Distributors or other customers, plus (2) any amounts received by Butte Creek on account of insurance or other recovery for lost, stolen, destroyed or damaged Products.

“ Intellectual Property ” means any and all domestic and international rights in: (i) trademarks, service marks, trade dress, logos, trade names and Internet domain names, together with all goodwill associated therewith; (ii) patents, patent disclosures, inventions and know-how; (iii) copyrights, copyrightable works and moral rights; (iv) trade secrets and confidential information; (v) other intellectual proprietary property (of every kind and nature and however designated), whether arising by operation of law, contract, license, or otherwise; and (vi) all registrations, applications, renewals, extensions, continuations, continuations-in-part, divisions or reissues of the foregoing now or hereafter in force or hereafter acquired or adopted.

“ IP License ” has the meaning set forth in Section 2.A.

“ Licensed Channels ” means those market segments which may be targeted for distribution of the Products as set forth in the Marketing Plan.

“ Licensed Property ” means: (a) the “MATEVEZA” trademarks and all other current and future trademarks or service marks, slogans, logos, insignias, emblems, symbols, trade dress, label designs, copyrightable material and other proprietary identifying characteristics or content (whether or not registered) owned, used, or licensed by Mateveza USA or its Affiliates with respect to the Products, including, but not limited to, those marks set forth on Schedule 1.2 ; (b) all Formulas, recipes, know-how, and other trade secrets associated with the Products including, but not limited to the Brewing Sheet; and (c) and including the goodwill associated with any and all of the foregoing.

“ Licensed Marks ” means the trademarks and service marks included in the Licensed Property.

“ Loss ” has the meaning set forth in Section 15.B.

“ Management Committee ” has the meaning set forth in Section 8.B(i).

“ Manufacturing Capacity ” means that amount of brewing and bottling capacity which Butte Creek has committed to reserving for the Products, as described in Section 3.C

“ Market Withdrawal ” has the meaning set forth in Section 3.E.

“ Marketing Plan ” means a description of Mateveza USA’s objectives with respect to brand development, key territories, key channels, and brand positioning for sales of the Products, as may be updated by Mateveza USA from time-to-time, upon 30 (thirty) days prior written notice to Butte Creek.

“ Material Breach ” means (i) the breach of any representation, warranty, covenant or obligation in this Agreement by a party that causes or is reasonably likely to cause serious brand equity and/or other reputational injury to the other party, the Licensed Marks, or the Products; (ii) any willful misrepresentation or falsification of a record or report required by this Agreement, or any fraudulent act or omission in connection with this Agreement; (iii) the violation by Butte Creek of the non-favoritism and the non-compete provisions of Sections 2.G or 2.H or the production and distribution limitations of Sections 3.A or 4.A; (iv) the failure or inability of Butte Creek to timely manufacture or distribute the volume of products ordered by customers in the Licensed Channels in the Territory as required by

Sections 3.B(iii), 4.B(iv) and 4.B(v); (v) the failure to timely pay a shortfall determined by audit as required by Section 7.D; (vi) the failure to make Royalty Payments due under Section 5 or to report Royalty Amounts and sales as required under Sections 7.A(ii) and 7.A(iii); ( vii ) the failure of Mateveza USA to pay any sums due Butte Creek under this Agreement within the time frame required ; or (viii) sales by Butte Creek that are in violation of Section 13.

“ Mateveza Website ” means www.mateveza.com and any other current or future domain name and external Internet address containing information about the MATEVEZA brand, the Products, and initiatives and events associated with the brand.

“ Net Profits ” means Gross Sales Proceeds from Butte Creek’s sales of the applicable Products during a given month; minus (i) Butte Creek’s Cost of Goods Sold for the Products recorded in such month (including freight and shipping and G & A costs as described above); minus (ii) Butte Creek’s cost of Management Committee-agreed Product marketing initiatives (advertising, point-of-sale materials, etc.) published, broadcast, or distributed in such month; and minus (iii) the amount of reimbursements or adjustments by Butte Creek for other out-of-pocket expenses incurred by Mateveza USA and/or Butte Creek during such month in association with Management Committee-agreed marketing or sales initiatives for the Products pursuant to Section 6.A(i) or 6.D below (for which such reimbursement or adjustment was agreed by the Management Committee prior to such expense being incurred).

“ Non-saleable Product ” means any Product that is materially defaced, exposed from its retail sales carton, or known or reasonably believed to have been materially damaged in production, or known or reasonably believed to have been materially damaged by handling, storage, or shipment in improper temperature, relative humidity, or environmental conditions.

“ OLCC ” means the Oregon Liquor Control Commission.

“ Person ” means any natural person, corporation, company, partnership, limited partnership, limited liability company, firm, association, trust, government, governmental agency, or any other entity, whether acting in an individual, fiduciary or other capacity.

“ Products ” means the yerba maté ales that will be branded with and utilize the Licensed Property, as set forth on Schedule 1.4 .

“ Records ” has the meaning set forth in Section 7.C.

“ Receiving Party ” has the meaning set forth in Section 12.A.

“ Royalty Amount ” with respect to sales of Products manufactured prior to January 1, 2007 means the applicable Royalty Percentage multiplied times the Gross Sales Proceeds for the applicable category of Products during a given month; and “ Royalty Amount ” with respect to sales of Products on or after January 1, 2007 means 50% of Net Profits during a given month. Under no circumstances may the Royalty Amount be less than $0 or may the calculation of the Royalty Amount trigger any payment obligation from Mateveza USA to Butte Creek.

“ Royalty Payment ” has the meaning set forth in Section 5.A(iii).

“ Royalty Percentage ” with respect to sales of Products prior to January 1, 2007 means 5% for 12 ounce bottled Products, 10% for 22 ounce bottled Products, and 10% for Products sold in kegs.

“ Specifications ” means the written description of the materials and methods used to manufacture a Product, as determined by the Management Committee, including, but not limited to the applicable

Brewing Sheet, Formula, ingredients, manufacturing and bottling processes and procedures, quality control procedures, suppliers, regulatory compliance procedures, and packaging and labeling standards.

“ Subsidiary ” means, with respect to a specified Person, another entity that is majority-owned by the specified Person.

“ Term ” has the meaning set forth in Section 10.A.

“ Territory ” means the states of California, Oregon, and Washington.

“ Trade Spending ” means special allowances, extraordinary volume incentives, extraordinary performance allowances, and surge funds ( i.e. , to support the manpower to shelve Products) and display/advertising allowances to provide incentive to a customer to promote the display or sales of the Products in the customer’s store.

“ TTB ” means the federal Alcohol and Tobacco Tax and Trade Bureau.

“ Wholesale Price ” has the meaning given in Section 6.C.

“ Written Notice ” means written notice as set forth in Section 19.A.

“ WSLCB ” means the Washington State Liquor Control Board.

IP License; Quality Control; Legends; Non-Compete.

IP License; Territory . Mateveza USA hereby grants to Butte Creek a royalty-bearing, non-transferable limited license to use the Licensed Property for the sole purpose of manufacturing, selling, and distributing the Products in the Licensed Channels in the Territory in accordance with this Agreement (the “ IP License ”).

(i)

The foregoing IP License will be exclusive to Butte Creek in the Territory; provided, however, that if Butte Creek does not maintain Distributors or Manufacturing Capacity to satisfy demand for the Products in any material market area or market segment within the Territory, or if Butte Creek is unable or fails for any other reason within its control to fulfill firm purchase orders for Product within the Territory, then Mateveza USA may appoint other brewers to serve market areas or market segments in the Territory where Butte Creek is unable to perform.

(ii)

If Mateveza USA proposes to authorize manufacturing, selling, and distribution of Products outside the Territory, then Butte Creek will have the first right to expand its Territory to include the additional territory proposed by Mateveza USA on the same terms and conditions contained in this Agreement; provided that Butte Creek maintains Distributors and Manufacturing capacity to satisfy demand for the Products in all material market areas and market segments within the additional territory and the original Territory. Absent such amendment of the Territory hereunder, Mateveza USA may, in its sole discretion, engage another brewery to manufacture, sell and distribute Products in the additional territory, provided such licensing agreement, contract brewing agreement, or other arrangement includes quality provisions substantially the same as those required in Section 4 and 5 of this Agreement.

Quality Control . Butte Creek shall not use the Licensed Property in a manner that injures, demeans , or dilutes the reputation of Mateveza USA or the goodwill symbolized by the Licensed

Property. Butte Creek shall conform its use of the Licensed Property to the provisions regarding use of the Licensed Property in Section 13. Products, promotions, and advertising offered by Butte Creek in connection with the Licensed Property shall be offered in accordance with Butte Creek’s obligations to meet Mateveza USA’s quality standards set forth in Sections 3 and 4, and all commercially reasonable style and display policies agreed upon between Mateveza USA a nd Butte Creek from time to time, in accordance with Mateveza USA’s responsibility for the Marketing Plan and matters affecting the brand integrity and branding strategy for the Licensed Property across all market channels and all territories.

Ownership . The Licensed Property is owned by Mateveza, LLC, a California limited liability company. Mateveza USA has the right to use and sublicense the Licensed Property throughout the United States pursuant to an exclusive master license agreement with Mateveza, LLC. Butte Creek acknowledges that, all right, title and interest in and to the Licensed Property and all goodwill of the business associated therewith will be-long exclusively to and inure to the benefit of their owner, and Butte Creek shall do nothing inconsistent with such ownership. Butte Creek agrees that it will not contest the ownership or validity of the Licensed Property, nor assist anyone else to do so, nor attempt to register or use any trademarks or service marks or other content in a manner that would amount to infringement or misappropriation of the Licensed Property. Butte Creek’s use of Licensed Property and any goodwill generated from the use of the Licensed Property by Butte Creek shall inure to the benefit of Mateveza USA.

Markings . Where practical and appropriate or reasonably required by Mateveza USA, Butte Creek shall include the following attribution on all product packaging, advertising and promotional materials for all Products using the Licensed Marks: “MATEVEZA™ is a licensed trademark of Mateveza, LLC” or such other attribution for the Licensed Property as may be reasonably specified by Mateveza USA from time to time.

Retained Rights . Mateveza USA retains the right to use and to grant rights to use the Licensed Property for purposes of marketing and promoting the Products in the Territory in accordance with this Agreement, as well as the right to use and to grant rights to use the Licensed Property for any other purpose not in conflict or inconsistent with the rights granted to Butte Creek herein.

Ownership of Additional Intellectual Property .

(i)

As between Butte Creek and Mateveza USA, Mateveza USA shall own all slogans, branding, Product and packaging trade dress and designs, and marketing, advertising, and promotional materials (including the copyrights and trademark rights therein), developed or acquired by either party during the term of this Agreement that are used in connection with the Products. Any rights in such Intellectual Property shall be deemed Licensed Property owned by Mateveza USA and licensed to Butte Creek in accordance with the terms of this Agreement.

(ii)

As between Butte Creek and Mateveza USA, Mateveza USA shall own all Product recipes and formulas (including but not limited to the Brewing Sheet) currently existing or hereafter developed or acquired by either party during the term of this Agreement that are used in connection with the Products (collectively “ Formulas ”). Any rights in such Intellectual Property shall be deemed Licensed Property owned by Mateveza USA and licensed to Butte Creek in accordance with the terms of this Agreement. Notwithstanding the foregoing, Butte Creek may not modify the Brewing Sheet except with the prior written consent of Mateveza USA.

Other Products . Butte Creek shall not require distributors that purchase Mateveza to purchase other Butte Creek products.

Non-Compete . Butte Creek agrees to not directly or indirectly produce, offer, support or promote any other malt beverage product containing yerba mate during or for a period of 2 years after the end of the Term of this Agreement. Butte Creek agrees to not directly or indirectly produce, offer, support or promote the Licensed Property or any tradename or trade dress similar to the Licensed Property, except with Mateveza USA’s consent or in accordance with the Agreement. Provided Butte Creek is not in default, and subject to the limited exceptions of Section 2.A above, Mateveza USA agrees that it will not directly offer, and will not grant rights to third parties, to produce, distribute and market any malt beverage product containing yerba mate within Butte Creek’s exclusive Territory during the Term of the Agreement.

Butte Creek’s Independence . Butte Creek represents, warrants, and agrees that: (a) Butte Creek is an independent business entity, with sufficient knowledge and experience to conduct and manage its own business affairs and the performance under this Agreement without the assistance of Mateveza USA or others; (b) except to the limited extent otherwise provided in this Agreement, Butte Creek will exercise control over its own operations, business organization, management, marketing plans, and business affairs; (c) Butte Creek will be more dependent upon its own resources than any assistance from Mateveza USA which may be incidental to this Agreement; and (d) the operation of Butte Creek’s business is not substantially associated with the Licensed Marks. Butte Creek acknowledges and agrees that the foregoing warranties are essential and reasonable. Should any of the foregoing representations, warranties, and covenants be incorrect at any time while this Agreement is in effect, Butte Creek shall immediately notify Mateveza USA upon becoming aware of same.

Manufacture and Supply of Products .

Product Standards . Butte Creek agrees to formulate, manufacture, bottle and package Products in accordance with their Specifications and the terms and conditions of this Agreement (the “ Manufacturing Privileges ”). All Products shall meet the quality standards established by Mateveza USA. Butte Creek will not market, sell, or distribute any kind or category of Product until Mateveza USA has provided its prior approval of such Product and a representative sample thereof.

Supply Representations and Warranties . Subject to Force Majeure, Butte Creek represents, warrants, and covenants that:

(i)

it has sufficient capacity to manufacture and distribute, in all material respects, the amount of Products set forth as the Manufacturing Capacity ;

(ii)

it will exercise all commercially reasonable efforts to manufacture and maintain in its custody sufficient quantities of Products for reasonably anticipated volumes of Product purchases by accounts in the Territory;

(iii)

it will exercise all commercially reasonable efforts to timely fulfill its manufacturing requirements in accordance with this Agreement as necessary to promptly supply all approved and accepted orders for Products in the Licensed Channels in the Territory;

(iv)

it will exercise all commercially reasonable efforts to ensure that it does not sell any Expired Products or Non-Saleable Products;

(v)

it will exercise reasonable effort to ensure that all Products under this Agreement shall have been manufactured, stored, and delivered in accordance with their Specifications and all applicable laws and regulations, including but not limited to federal Good Manufacturing Practices for Manufacturing, Packaging, and Holding Food (CFR Title 21, Part 110) and the rules and regulations of the TTB and ABC;

(vi)

it will exercise reasonable effort to ensure that all Products manufactured and distributed under this Agreement (a) shall comply with all applicable labeling laws and regulations, including without limitation Title 7 of the Code of Federal Regulations, Section 205 (which governs products labeled or otherwise designated as organic), and the labeling rules and regulations of the TTB, ABC, OLCC, and WSLCB, and (b) shall be marked with accurate scan codes that are readable throughout the Territory;

(vii)

it will exercise reasonable effort to ensure that shipments of Products under this Agreement shall not be adulterated or misbranded within the meaning of the Federal Food, Drug and Cosmetic Act (the “ FDCA ”), or any similar state or municipal law in the Territory, and shall not be considered articles which may not, under the provision of Section 404 of the FDCA, be introduced into interstate commerce;

(viii)

it will exercise reasonable effort to ensure that the Products manufactured and distributed under this Agreement will be substantially free from material defects (including, but not limited to, manufacturing defects) and will be merchantable and suitable for human consumption in the manner in which such products are normally or reasonably foreseeably consumed; and,

(ix)

it will promptly notify Mateveza USA if Butte Creek is (or if Butte Creek becomes aware that any of Butte Creek’s suppliers are) under a written citation from any regulatory agency (federal, state, or local) for violation of any standards with respect to the Products or those portions of the storage, production, and other facilities of Butte Creek or its suppliers who are involved in, committed to, or have an effect on the production of Products.

Manufacturing Capacity . Butte Creek shall reserve a minimum Manufacturing Capacity of 1,000 31-gallon barrels (bbls) per year available for the production of the Products, on a monthly basis of approximately 84 bbls per month. Butte Creek may increase its stated Manufacturing Capacity for the Products upon 30 days written notice to Mateveza USA. If Mateveza USA reasonably determines that demand for the Products in the Territory exceeds the monthly Manufacturing Capacity, Mateveza USA may elect to have the Products brewed by a third party, provided, however, that Mateveza shall provide Butte Creek with written notice of the need to increase capacity, whereupon Butte Creek shall have 15 days from the date of delivery of such notice to provide Mateveza with written notice of its election to increase its stated Manufacturing Capacity in order to satisfy such demand. If Butte Creek elects to increase its Manufacturing Capacity, it shall have 60 days to implememnt such increased Manufacturing Capacity; absent such election and/or implementation by Butte Creek to increase its Manufacturing Capacity hereunder, Mateveza USA may, in its sole discretion, engage another brewer to manufacture, sell and distribute additional Products in the Territory, provided such licensing agreement, contract brewing agreement, or other arrangement includes quality provisions substantially the same as those required in Sections 4 and 5 of this Agreement.

Consumer Complaints . Butte Creek shall provide, with its Butte Creek Monthly Reports, a log of all material positive and negative incidents or consumer complaints about the Products, and Butte Creek shall notify Mateveza USA as soon as reasonably practicable of any material consumer or product quality issues with respect to the Products that are brought to Butte Creek’s attention.

Notification, Recalls and Withdrawals . Butte Creek will notify Mateveza USA if any contamination, adulteration, or public health issues arise that are likely to have a material impact on Butte Creek’s sales of the Products in the Territory. The parties will cooperate, at Butte Creek’s expense, in the containment, assessment, and any market withdrawal or recall of the Products (“ Market Withdrawal ”) due to contamination, adulteration, or public health risk. Butte Creek will exercise reasonable effort to trace and locate any Products suspected of any such hazard, and will follow its

commercially reasonable procedures for the hold, recovery, transportation, storage, and disposition of affected Products. Butte Creek will ensure that replacement Products are provided as soon as possible and will coordinate the replacement of withdrawn or recalled Products. If such Market Withdrawal is due to a negligent or intentional act or omission of Butte Creek, Butte Creek will bear all costs related to the Market Withdrawal of the Products; and if such Market Withdrawal is due to a reason other than the negligent or intentional act or omission of Butte Creek, then Butte Creek’s costs related to the Market Withdrawal may be netted from Gross Sales Proceeds before accounting for any Royalty Amount hereunder. Any media releases, public announcements, or public disclosures by either party regarding any Market Withdrawal shall be made jointly with a mutually agreed statement. Any statement regarding any Market Withdrawal that is not made jointly shall be provided to the other party for written approval prior to such release, announcement, or disclosure, which approval shall not be unreasonably withheld or delayed.

Distribution .

Distribution Standards . Butte Creek agrees to use commercially reasonable efforts to carry out its obligations related to the sale (as set forth in Section 6) and distribution of the Products in Licensed Channels in the Territory and in accordance with the terms and conditions of this Agreement (the “ Distribution Privileges ”). Butte Creek shall only sell and distribute in Licensed Channels and to Distributors approved by Mateveza USA in writing, which approval will not be unreasonably withheld or delayed. Butte Creek may not enter any agreement for the distribution of the Products by Distributors without the prior approval of Mateveza USA, which approval will not be unreasonably withheld or delayed. Mateveza USA reserves the right to revoke such approval in its reasonable discretion, provided, however, that such revocation does result in the breach of any contractual commitment or obligation on the part of Butte Creek. Butte Creek will not market, sell or distribute any kind or category of Product until Mateveza USA has first provided its prior written approval of such Product in all respects, including without limitation the quality, design, packing and wrapping of such Product. For each proposed Product, Butte Creek will furnish a reasonable number of representative samples to Mateveza USA (at no cost to Mateveza USA), including proposed packaging and packing materials, for the purpose of Mateveza USA determining whether to approve of such Product.

Distribution Representations and Warranties by Butte Creek . Butte Creek represents, warrants, and covenants that (as to the Manufacturing Capacity) it will exercise all commercially reasonable efforts to:

(i)

furnish, operate, and maintain in good working condition and suitable appearance adequate equipment, devices, and facilities for the storage, loading, transporting, unloading, and delivery of the Products;

(ii)

comply in all material respects with the warehouse operating procedures and quality control procedures that Butte Creek has in place for its warehousing network, and all applicable laws, regulations, and ordinances with respect to its handling, storage, use, sale, and distribution of the Products;

(iii)

maintain in its custody sufficient quantities of Products for reasonably anticipated volumes of Product purchases by accounts in the Territory, which shall be based upon projected and actual sales;

(iv)

timely and accurately fulfill sales and merchandising obligations for the Products throughout the Territory to at least the degree of care and skill commensurate with the high standards for performance consistent with, and no less stringent than, the care and skill exercised by Butte Creek in the sale, merchandising, and marketing of its own brands;

(v)

timely fulfill its distribution obligations in accordance with this Agreement as necessary to promptly supply all financially-qualified orders for Products by customers in the Licensed Channels in the Territory;

(vi)

sell Products at not less than the Wholesale Price determined as set forth in Section 6.C and in accordance with the Marketing Plan, except with the prior consent of the Management Committee;

(vii)

(a) not sell or distribute any Non-saleable Product or Expired Products, (b) report quantities of Non-saleable Product and Expired Product to Mateveza USA, and (c) adhere to Mateveza USA’s instructions as to the appropriate disposition of such goods, which disposition will be at Butte Creek’s sole cost and expense (and without credit or other compensation by Mateveza USA);

(viii)

promptly notify Mateveza USA if it becomes aware that any of its accounts are engaged in misrepresentation or misuse of any Licensed Property;

(ix)

comply in all material respects with all laws, rules, and regulations applicable to its performance pursuant to this Agreement and procure and maintain all required governmental licenses, permits, approvals, and consents including but not limited to those of the TTB, ABC, OLCC, and WSLCB;

(x)

not intentionally interfere with or impair in any material respects the relationship between Mateveza USA and Mateveza USA’s vendors, suppliers, or customers; and

(xi)

take no action intended to facilitate the distribution of Products outside the Licensed Channels or outside the Territory.

Distribution Representations and Warranties by Mateveza USA . To the extent that Mateveza USA undertakes any selling activities in the Territory in support of Butte Creek’s distribution of the Products as contemplated hereunder, Mateveza USA represents, warrants and covenants that it will exercise all commercially reasonable efforts to:

(i)

arrange sales of Products at not less than the Wholesale Price determined as set forth in Section 6.C and in accordance with the Marketing Plan, except with the prior consent of the Management Committee;

(ii)

promptly notify Butte Creek if it becomes aware that any of accounts are engaged in misrepresentation or misuse of any Licensed Property;

(iv)

(v)

not intentionally interfere with or impair in any material respects the relationship between Butte Creek and its vendors, suppliers, or customers.

Payment Obligations .

Royalties for Products .

(i)

For each month during the Term of the Agreement, Butte Creek shall pay Mateveza USA monthly royalties (each a “Royalty Payment”) on the sale of Products based upon the Royalty Amounts as defined in Section 1 above. Except as set forth herein, Butte Creek shall not offer any discounts, deductions, allowances, set-offs, refunds, markdowns or adjustments to customers without the prior written consent of Mateveza USA, which consent shall not be unreasonably withheld. In the event that Butte Creek offers any of the aforementioned to a customer without the prior written consent of Mateveza USA, Butte Creek will be responsible for accounting for such unauthorized amount to Mateveza USA as Gross Sales Proceeds.

(ii)

After the First Fiscal Year, Cost of Goods Sold will be adjusted from time to time as necessary if the Cost of Goods Sold increases or decreases for any Product.

(iii)

Butte Creek shall pay the Royalty Payment to Mateveza USA within thirty (30) days after the end of each month, by check or other means acceptable to Butte Creek and Mateveza USA. The receipt and deposit of monies by Mateveza USA shall not prevent or limit Mateveza USA’s right to contest the accuracy and/or correctness of any statement in respect of such payments.

Monetary Defaults . A late charge may be assessed on any Royalty Payment under this Agreement that is not paid when due, at a rate of 1% per month from the date due until paid in full; provided, however , that any late charge will not be assessed at a rate which exceeds the maximum amount permitted by applicable law.

Sales and Marketing Performance Obligations . Mateveza USA will be responsible for the development of the initial Marketing Plan, and revisions, modifications, and updates thereto during the term of this Agreement, in consultation with the Management Committee.

Rights and Obligations of Butte Creek .

(i)

Butte Creek will reasonably assist and cooperate with all advertising, promotions , and media marketing efforts of Mateveza USA under this Agreement; provided that any expenditures made to third parties in connection with advertising promotion, and/or media marketing efforts that are not approved by the Management Committee will be at Mateveza USA’s sole cost and expense.

(ii)

The respective responsibilities of Butte Creek and of Mateveza USA relating to the sale of Products and continuing account maintenance are set forth on Schedule 6A(ii) attached hereto.

(iii)

Butte Creek may not engage account brokers for the Products without the prior approval of Mateveza USA, which approval will not be unreasonably withheld or delayed. Engagements of account brokers shall be in the name of Butte Creek and Butte Creek shall be responsible for all obligations and activities with respect to any such account brokers, including oversight and supervision, as well as the payment of compensation to them. Butte Creek will use commercially reasonable efforts to require that account brokers (if any) for the Products: (a) provide monthly activity reports to Mateveza USA and Butte Creek; (b) present regular promotions to retailers; and (c) provide information and insight on all accounts and potential accounts for the Products.

(iv)

Butte Creek will employ and designate such in-house sales representative FTE as the Management Committee may later agree from time-to-time, in order to support the development of sales of the Products in accordance with this Agreement.

Rights and Obligations of Mateveza USA .

(i)

Mateveza USA shall have ultimate control and approval rights over all sales presentations, promotions, and other sales activities of Butte Creek pursuant to this Agreement.

(ii)

Mateveza USA shall have ultimate control and approval rights over, all advertising, promotions, and media marketing relating to the Products.

(iii)

Mateveza USA will own and manage the Mateveza Website.

(iv)

Mateveza USA may in its discretion arrange sales of Products to selected accounts within the Territory. All such sales shall be for the account of Butte Creek, and Mateveza USA shall not be entitled to any additional compensation for such sales.

Wholesale Pricing . Mateveza USA and Butte Creek will mutually determine the wholesale price to be charged by Butte Creek for the Products sold to distributors and to eligible retail customers (the “Wholesale Price”), subject to the proviso that the Wholesale Price may never be less than the Cost of Goods Sold. The initial Wholesale Prices are set forth on Schedule 1.4 ; but these Wholesale Prices may be revised by the Management Committee .

MATEVEZA Marketing Initiatives in the Territory . Butte Creek will reimburse Mateveza USA (or will pay vendors directly, to the extent applicable) for the cost of agreed MATEVEZA brand marketing and sales initiatives to promote and support the sale of the Products by Butte Creek in the Territory. All such marketing expenses shall be deducted from the Gross Sales Proceeds in determining the Net Profits upon which the Royalty Amount due to Mateveza USA is calculated. To the extent Butte Creek agrees pays such vendors directly, Butte Creek shall make payment in a timely fashion, as and when due in accordance with the invoice. To the extent an expense is to be reimbursed to Mateveza USA, Butte Creek will pay Mateveza USA within thirty (30) days of its documentation and request for reimbursement of the expense. To the extent any particular activity is associated with the development of the MATEVEZA brand in geographic areas both within and outside of the Territory, then the expense item shall be allocated by Mateveza USA in proration to the volume of Product sales in the Territory vis-à-vis the other applicable geographic regions where the Products are sold by Mateveza USA or a licensee or affiliate of Mateveza USA.

Reporting.

Butte Creek Reports . Within thirty (30) days after the end of each month, Butte Creek shall deliver to Mateveza USA a report (“ Butte Creek Monthly Report ”) that contains the following:

(i)

A log of any material consumer complaints, with added detail where material to other terms of this Agreement, received by Butte Creek during the month as specified in Section 3.C;

(ii)

A detailed report of sales, including by named account or Distributor and by specific locale;

(iii)

A calculation (including supporting data) of all Royalty Payments for the month; and,

(iv)

A report that contains a summary of the current Cost of Goods Sold.

Records . Each party shall maintain for a period and in a manner consistent with its normal retention practices, complete and accurate records and accounts covering the transactions related to this Agreement, including, but not limited to, records supporting their respective Monthly Reports (“ Records ”). Each party’s accounts included in such Records shall be kept in accordance with generally accepted accounting procedures and principles. In no event shall Records be maintained for less than two (2) years from the end of the Fiscal Year to which they relate.

Confidentiality of Reports and Records . Any information contained in the Monthly Reports or the Records shall be treated as Confidential Information by the Receiving Parties and their agents as provided in Section 12.

Audit Rights and Procedures .

Mateveza USA may commence an audit, as further described in this Section 7.D, of the books and records relating to statements provided (or to have been provided) by Butte Creek and received by Mateveza USA within twenty four (24) months of the date Mateveza USA gives notice to Butte Creek of its desire to audit, provided that Mateveza USA may only conduct two (2) such audits in any twelve (12) month period. All such annual audits will be conducted either by a mutually-agreed auditing firm that is not presently prohibited from providing such services under the Sarbanes-Oxley Act or, at the auditing party’s option, its own internal auditing department or such other third party it may engage (in either case, the “Auditor”). Such audit(s) shall be preceded by a procedures report which sets out to the audited party what scope and focus the audit is intended to cover . Such audit(s) shall cover the books and records of Butte Creek to confirm the accuracy of Butte Creek calculation of Cost of Goods Sold, Net Profits, and the Royalty Payments for the applicable period. Mateveza USA shall pay for all costs associated with this audit unless the costs shift to Butte Creek because a discrepancy is found as provided later in this paragraph. All records of Mateveza USA and Butte Creek as may be reasonably necessary to verify the audit will be made available to the Auditor upon its request. If the Auditor is from a nationally recognized auditing firm, the Auditor's determination as to the calculations of any of the foregoing shall be in writing and shall be conclusive and binding upon Mateveza USA and Butte Creek (the “Final Determination”), unless contested in writing by the other party within fifteen (15) days following its receipt of the audit report. . If the Final Determination indicates any errors in (X) Butte Creek’s calculation of Cost of Goods Sold, (Y) the sales price payable for Products distributed and sold by Butte Creek, or (Z) Butte Creek’s calculation of the Royalty Payments, then the Auditor shall calculate the net amount of a payment to be made by either Mateveza USA or Butte Creek, as applicable, to correct such errors, which payment shall be made by either Mateveza USA or Butte Creek, as applicable, within fifteen (15) days after such determination. If any such Final Determination reveals that additional Royalty Payments due Mateveza USA that are more than five (5%) of the Royalty Payments paid to Mateveza USA by Butte Creek for the period covered by such audit, then all audit fees, costs, and expenses shall be borne by Butte Creek, in addition to which simple interest shall be added to the amount discovered to be due in the amount of ten percent (10%) per annum. Interest shall be calculated from the dates any payment should have been made.

Management Committee, Primary Contact .

Operations and Marketing Plan . Butte Creek will be responsible for day-to-day operations regarding the supply of Products for the Licensed Channels in the Territory, including, but not limited to, manufacturing, transacting sales, and logistics and distribution matters. Mateveza USA will be responsible for implementation of the Marketing Plan.

Management Committee .

(i)

As of the Effective Date, Butte Creek and Mateveza USA shall form a Management Committee consisting of one senior Butte Creek executive appointed by Butte Creek and a senior Mateveza USA executive appointed by Mateveza USA (the “ Management

Committee ”). The Management Committee will meet monthly or as needed. The initial Management Committee shall be comprised of John Power for Butte Creek and Jim Woods for Mateveza USA. Either party may change the composition of those Management Committee members that such party is entitled to appoint, upon Written Notice to the other party.

(ii)

The Management Committee’s principal roles will consist of: (a) providing guidance on strategic issues and opportunities; (b) providing guidance on key manufacturing decisions; (c) reviewing and approving any proposed adjustments to the Cost of Goods Sold; and (d) providing a forum to resolve issues as required herein or that are not able to be resolved at lower levels as provided in Section 17.A.

(iii)

Mateveza USA and Butte Creek shall each have one vote as to matters requiring approval by the Management Committee. Final decisions of the Management Committee shall be made by unanimous consent. If unanimous consent of the Management Committee cannot be obtained either to affirmatively decide a matter or to table such matter, then such matter shall be escalated as described in Section 17.A.

Representations and Warranties.

Full Power and Authority . Each of Butte Creek and Mateveza USA hereby represents and warrants to the other that: (i) it has full corporate power and authority to enter into this Agreement and to carry out its obligations hereunder; and (ii) this Agreement has been duly authorized by all necessary action on its part.

Sufficiency; No Conflict . Mateveza USA represents and warrants to Butte Creek that: (i) Mateveza USA has all Intellectual Property and other rights sufficient to grant the licenses to Butte Creek described in this Agreement; (ii) Mateveza USA has not, as of the Effective Date, entered into any enforceable agreement with, or granted any rights whatsoever, that would be in conflict in any material respect with the rights and licenses granted to Butte Creek hereunder; (iii) as of the Effective Date, no claims have been made and no proceedings have been brought or threatened, against Mateveza USA or any of its respective Affiliates challenging the ownership, validity or improper use of the Licensed Property; (iv) it possess all necessary legal authority to grant to Butte Creek the right to use the Licensed Property in accordance with the Agreement; and (v) the exercise by Butte Creek of the rights to use the Licensed Property under this Agreement will not violate or infringe upon the rights of any third parties.

Butte Creek Representations and Warranties . Butte Creek represents and warrants that the execution and delivery of this Agreement and the consummation of the transactions contemplated hereby or the compliance by Butte Creek with any on the provisions hereof will not:

(a)

Conflict with or result in a breach of any provision of its Articles of Incorporation or Bylaws or similar documents of any Affiliate;

(b)

Result in a default (or give rise to any right of termination, cancellation, or acceleration) under any of the terms, conditions or provisions of any note, bond, mortgage, indenture, license, agreement or other instrument or obligation to which Butte Creek is a party, or by which any of its properties or assets may be bound except for such default (or right of termination, cancellation, or acceleration) as to which requisite waivers or consents shall either have been obtained by Butte Creek prior to the Effective Date or the obtaining of which shall have been waived by Mateveza USA; or

(c)

Violate any order, writ, injunction, decree or, to the best of Butte Creek’s knowledge, any statute, rule or regulation applicable to Butte Creek or any of its properties or assets. No consent or approval by any Governmental Authority is required in connection with the execution and

delivery by Butte Creek of this Agreement or the consummation and performance by Butte Creek of the transactions and undertakings contemplated hereby, except for consents and approvals of Governmental Authorities that have been obtained prior to the Effective Date.

Mateveza USA Representations and Warranties . Mateveza USA represents and warrants that the execution and delivery of this Agreement and the consummation of the transactions contemplated hereby or the compliance by Mateveza USA with any on the provisions hereof will not:

(a)

Conflict with or result in a breach of any provision of its Articles of Incorporation or Bylaws or similar documents of any Affiliate;

(b)

Result in a default (or give rise to any right of termination, cancellation, or acceleration) under any of the terms, conditions or provisions of any note, bond, mortgage, indenture, license, agreement or other instrument or obligation to which Mateveza USA is a party, or by which any of its properties or assets may be bound except for such default (or right of termination, cancellation, or acceleration) as to which requisite waivers or consents shall either have been obtained by Mateveza USA prior to the Effective Date or the obtaining of which shall have been waived by Butte Creek; or

(c)

Violate any order, writ, injunction, decree or, to the best of Mateveza USA’s knowledge, any statute, rule or regulation applicable to Mateveza USA or any of its properties or assets. No consent or approval by any Governmental Authority is required in connection with the execution and delivery by Mateveza USA of this Agreement or the consummation and performance by Mateveza USA of the transactions and undertakings contemplated hereby, except for consents and approvals of Governmental Authorities that have been obtained prior to the Effective Date.

10.

Term and Termination .

Term . This Agreement shall commence as of the Effective Date and shall continue through December 31, 2011 (“ Term ”), unless sooner terminated in accordance with this Section 10.

Termination for Cause . This Agreement may be terminated:

(i)

By Butte Creek or Mateveza USA, in the event of an assignment of this Agreement by the other party in violation of Section 16.B hereof;

(ii)

By Butte Creek or Mateveza USA, in the event of insolvency or bankruptcy of the other, if such condition is not cured within sixty (60) days;

(iii)

By Mateveza USA, upon a Material Breach by Butte Creek of its obligations pursuant to Section 5 that is not cured within fifteen (15) days after Written Notice to Butte Creek of the circumstances constituting the Material Breach; and

(iv)

By Butte Creek or Mateveza USA, upon a Material Breach of this Agreement (other than a breach by Butte Creek of its obligations pursuant to Section 5, which shall be governed by Section 10.B(iii) above) by the other or the other’s Affiliate that is not cured within thirty (30) days after Written Notice to the breaching party of the circumstances constituting the Material Breach.

Notwithstanding anything to the contrary herein, no party shall be entitled to terminate this Agreement pursuant to this Section 10.B if it shall then be in Material Breach of this Agreement.

Termination Not For Cause . This Agreement may also be terminated:

(i)

By mutual written agreement of Mateveza USA and Butte Creek to terminate their relationship or to convert their business relationship to one of contract brewing by Butte Creek for Mateveza USA’s own sales and distribution.

(ii)

By either party following a review of the business results during the First Fiscal Year, upon two (2) months prior Written Notice to the other party, which Written Notice is delivered between October 1, 2007 and February 28, 2008.

(iii)

By Mateveza USA, for other than cause, at any time following the end of the First Fiscal Year in the event that a third party acquires all or substantially all of the assets of Mateveza USA, upon giving two (2) months prior Written Notice to Butte Creek and payment to Butte Creek of a termination fee equal to 50% of the total Net Profit generated from the sale of Product under this Agreement during the period of time immediately preceding the date of termination that is the lesser of (a) 12 months; or (b) the number of months which have passed since the end of the First Fiscal Year.

11.

Post-Termination Rights and Obligations.

Following Termination for Cause .

(i)

Upon termination of this Agreement for cause by Butte Creek pursuant to Section 10.B, Butte Creek shall discontinue all use of the Licensed Property, and Mateveza USA will purchase or cause to be purchased all remaining inventory of Products Butte Creek has on hand (except Non-saleable Products and Expired Products), at the Cost of Goods Sold, plus costs of shipping from Butte Creek to Mateveza USA or Mateveza USA’s designee; provided, however, that Mateveza USA will not obligated to purchase (or cause to be purchased) more than a reasonable inventory of Products based upon prior and reasonably projected sales volumes prior to termination.

(ii)

Upon termination of this Agreement for cause by Mateveza USA pursuant to Section 10.B:

(a)

Butte Creek, at its own expense, shall reasonably assist and cooperate with Mateveza USA in an orderly transfer of the Manufacturing Privileges, Distribution Privileges, and IP License under this Agreement back to Mateveza USA or to one or more sales and distribution designees selected by Mateveza USA in its sole discretion; and

(b)

Butte Creek shall discontinue all use of the Licensed Property, and Mateveza USA may elect to either (i) purchase (or cause to be purchased) all or a portion of the remaining inventory of Products Butte Creek has on hand (except for Non-saleable Products and Expired Products), at the Cost of Goods Sold, plus costs of shipping from Butte Creek to Mateveza USA or Mateveza USA’s designee; and/or (ii) allow Butte Creek to sell-through all or a portion of the remaining inventory of Products Butte Creek has on hand (except for Non-saleable Products and Expired Products) at the Wholesale Price; provided , however, that in the event Mateveza USA terminates this Agreement due to a breach of Butte Creek’s obligations regarding the quality of the Products, Mateveza USA may elect instead to direct Butte Creek to destroy (and certify the destruction of) any Product that is not demonstrated to be an Acceptable Product.

Following Termination Not for Cause .

(i)

In the event that this Agreement is terminated pursuant to Section 10.C:

(a)

Butte Creek shall reasonably assist and cooperate with Mateveza USA in an orderly transfer of the Manufacturing Privileges, Distribution Privileges, and IP License under this Agreement back to Mateveza USA or to one or more sales and distribution designees selected by Mateveza USA in its sole discretion;

(b)

Butte Creek shall discontinue all use of the Licensed Property, and Mateveza USA may elect to either (i) purchase (or cause to be purchased) all or a portion of the remaining inventory of Products Butte Creek has on hand (except for Non-saleable Products and Expired Products), at the Cost of Goods Sold, plus costs of shipping from Butte Creek to Mateveza USA or Mateveza USA’s designee; and/or (ii) allow Butte Creek to sell-through all or a portion of the remaining inventory of Products Butte Creek has on hand (except for Non-saleable Products and Expired Products) at the Wholesale Price, and Mateveza USA shall be permitted to use or license the Licensed Property on any products without restriction.

Survival . Sections 2.H, 7.D, 11, 12, 15, 17, 18.A, and 18.I shall survive any termination of this Agreement. In addition, Sections 2.A, 2.B, 2.D, 3, 5, 7, 13, and 14 shall remain in full force and effect during any post-termination transition period as they relate to the continuing sale of Product by Butte Creek in the Licensed Channels in the Territory.

Continuing Liabilities . Termination of this Agreement for any reason shall not (i) release any party hereto from any liability or obligation that, at the time of such termination, has already accrued to such party or that is attributable to a period prior to such termination, including, but not limited to, obligations to cooperate in the remittance of payments as described in Section 5.A, Section 11.A, and Section 11.B, and the obligations described in Section 7; or (ii) constitute a waiver of, or preclude any party from pursuing, any rights and remedies it may have hereunder or at law or in equity which accrued or are based upon any event occurring prior to such termination. Upon termination of this Agreement with or without cause, Mateveza USA shall assume all executory obligations of Butte Creek under existing and enforceable distribution or broker agreements which were approved by Mateveza USA for the Products in accordance with this Agreement, and shall indemnify, defend and hold harmless Butte Creek with respect thereto.

12.

Confidentiality.

Confidential Information . Each party (a “ Receiving Party ”) shall regard as confidential and proprietary all of the information communicated to it by another party to this Agreement (a “ Disclosing Party ”) in connection with this Agreement including, but not limited to, information concerning product formulas and processes, technology, data, methods, know-how, techniques, samples, trade secrets and business, finance, marketing, customer, supplier and other information about any other party to this Agreement and their respective Affiliates (the “ Confidential Information ”). Confidential Information shall at all times be the property of the Disclosing Party and the disclosure of Confidential Information to a Receiving Party does not convey any right, title or license in the Confidential Information to such Receiving Party, other than as provided elsewhere in this Agreement. A Receiving Party shall not, without the Disclosing Party’s prior written consent, at any time use such Confidential Information for any purpose other than in connection with the performance of its obligations under this Agreement or disclose any portion of such information to third parties; provided, however , that a Receiving Party may disclose Confidential Information on a “need-to-know” basis to third-party suppliers (e.g., advertising agencies), with a Receiving Party to be responsible for any misuse or disclosure of such

Confidential Information by such third-party suppliers. A Receiving Party shall disseminate Confidential Information to its employees on a “need-to-know” basis only. A Receiving Party shall cause each of its employees who has access to such Confidential Information to comply with the terms and provisions of this Section in the same manner as such Receiving Party is bound hereby, with such Receiving Party remaining responsible for the actions and disclosures of any such employees.

Exceptions . Notwithstanding the provisions of Section 12.A, a Receiving Party’s confidentiality obligations shall not apply to (i) information that, at the time of disclosure is, or after disclosure becomes, part of the public domain other than as a consequence of such Receiving Party’s breach; (ii) information that was known or otherwise available to such Receiving Party prior to the disclosure by the Disclosing Party; (iii) information disclosed by a third party to such Receiving Party after the disclosure by the Disclosing Party, if such third party’s disclosure neither violates any obligation of the third party to Disclosing Party nor is a consequence of Receiving Party’s breach; (iv) information developed independently by such Receiving Party; or (v) information that Disclosing Party authorizes, in writing, for release. The parties understand that a Receiving Party may be legally compelled to disclose certain Confidential Information and acknowledge that such disclosure shall not be considered a breach of this Agreement so long as: to the extent such Receiving Party becomes so legally compelled, it may disclose such information only if it shall first have used reasonable efforts to, and, if practicable, shall have afforded the Disclosing Party or its Affiliates the opportunity to obtain an appropriate protective order, or other satisfactory assurance of confidential treatment, for the information required to be disclosed. Confidential Information that a party is compelled to disclose by operation of law (as described in the preceding sentence) shall not, by virtue of such limited disclosure alone, render the Confidential Information disclosed to become an exception to other requirements of the confidentiality obligations imposed under this Agreement.

Privacy and Data Protection . Each of Butte Creek and Mateveza USA represents and warrants that it and/or its respective agents provide and will provide, data and network security for the protection of data and privacy compliance for, among other things, any and all Confidential Information, data, proprietary materials or assets, and the like, held by or in the possession of such party and/or its agents, in accordance with or exceeding all applicable laws, regulations, directives, ordinances, decrees, and the highest industry standards and best practices.

13.

Use of Licensed Property.

Mateveza USA’s Approval Rights .

(i)

Butte Creek agrees to conform its use of the Licensed Property to the style and display policies set forth in Schedule 13 . Butte Creek will submit to Mateveza USA’s Management Committee representative or his or her designee the initial prototype or specifications for new or alternative packaging or repacking concepts for the Products (including, but not limited to, assortments or gift packs).

(ii)

In order to retain final authority on matters affecting its trademark rights and its brand equity, including the maintenance of appropriate quality controls, Mateveza USA will have the right to reasonably reject any uses of the Licensed Property submitted pursuant to Section 13.A(i). Mateveza USA’s disapproval shall be presumed if Mateveza USA has not otherwise responded in writing within ten (10) Business Days following Butte Creek’s submission of materials, in which event Butte Creek may again resubmit such proposed uses of the Licensed Property for review by Mateveza USA. Mateveza USA will use commercially reasonable efforts to enable timely reviews and approvals (or objections, as the case may be), and to provide a consistent basis for approvals (or objections). Any objection by Mateveza USA shall be accompanied by a written statement setting forth in reasonable detail the nature of Mateveza

USA’s objections and suggestions for removing or replacing the objectionable aspects. Butte Creek will not use any Licensed Property in any corporate designation, trade name, or Internet domain name without the prior written approval of Mateveza USA.

Changes to the Licensed Property . Mateveza USA shall have the right at any time to make additions to, deletions from, and changes to any or all of the Licensed Property at its sole and complete discretion; provided, however , that Mateveza USA shall give Butte Creek reasonable prior Written Notice thereof. Butte Creek shall, after receipt of such Written Notice from Mateveza USA, adopt and begin using any and all such additions, deletions and changes as soon as reasonably practicable after Mateveza USA’s adoption thereof. Mateveza USA shall pay or reimburse Butte Creek for Butte Creek’s reasonable costs associated with adopting and using any such additions, deletions and changes. Notwithstanding the foregoing, if Mateveza USA requires that any such addition, deletion or change be made, Butte Creek shall be entitled to distribute and sell previously approved Products, and to use previously approved display materials, while adopting the additions, deletions and changes prescribed by Mateveza USA, unless Mateveza USA notifies Butte Creek in writing that such uses of Products or Materials allegedly infringe the rights of a third party. If Mateveza USA notifies Butte Creek to cease selling Product due to an alleged infringement, Mateveza USA shall purchase or cause to be purchased any existing inventory of the infringing Product from Butte Creek at the Cost of Goods Sold for each Product.

Covenants . Butte Creek will neither use, nor take action intended to, or the primary foreseeable result of which will be to, facilitate the use of the Licensed Property outside the scope of the license granted in Section 2.A, and should Butte Creek or Mateveza USA identify any unauthorized use of the Licensed Property as a result of Butte Creek’s exercise of the license granted in Section 2.A, Butte Creek will cooperate with Mateveza USA and assist Mateveza USA to prevent such unauthorized use of the Licensed Property by or through Butte Creek.

14.

Protection and Defense of Licensed Property.

Protection Obligation . During the Term of this Agreement Mateveza USA shall use commercially reasonable efforts at its own cost and expense to maintain in full force and effect and to otherwise protect the Licensed Property. Mateveza USA will at all times have the right to take whatever steps it deems necessary or desirable to defend all claims that the use of the Licensed Property infringes the rights of a third party. Mateveza USA will at all times have the right to take whatever steps it deems necessary or desirable, in its sole discretion, to protect the Licensed Property from all harmful or wrongful activities of third parties. Such steps may include, but will not be limited to, the filing and prosecution of: (i) litigation against infringement or unfair competition by third parties, (ii) opposition proceedings against applications by third parties for trademark or service mark registration for trademarks that are confusingly similar to any one or more of the Licensed Property, and (iii) cancellation proceedings against registration by third parties of trademarks that are confusingly similar to any one or more of the Licensed Property.

(i) Butte Creek will cooperate fully with Mateveza USA, at Mateveza USA’s request and at Mateveza USA’s expense , in the defense and protection of the Licensed Property. Mateveza USA will be responsible for all reasonable direct out-of-pocket costs and expenses, including reasonable attorneys’ fees. Butte Creek agrees to execute, at Mateveza USA’s reasonable request, any and all truthful and accurate instruments or documents as may be reasonably necessary or advisable to protect and maintain the interest of Mateveza USA in the Licensed Property; provided , that the expense of preparing or filing such instruments or documents will be borne by Mateveza USA. Except as described in this Section 14.A(i), Butte Creek shall have no obligations to clear, register, protect or maintain Licensed Property, including, without limitation, Licensed Property owned by Mateveza USA pursuant to Section 2.F.

(ii)

In the event of institution of any suit against Butte Creek alleging infringement of any patent of a third party by reason of Butte Creek’s use of the Licensed Products in accordance with this Agreement, Mateveza USA agrees, upon written request of Butte Creek made after institution thereof, to undertake and diligently conduct, at Mateveza USA expense, defense of such suit, and to hold Butte Creek harmless against any judgment or award of damages which result therefrom. Butte Creek shall render all reasonable assistance to Mateveza USA in connection with any suit to be defended by Mateveza USA under this Section 14 and shall have the right to be represented therein by advisory counsel of its own choice and at its own expense. Mateveza USA shall have full control of the defense of any such suit, but shall not be free to settle the same without the consent of Butte Creek if by settlement, Butte Creek would be obligated to make payments, or if the settlement would impair Butte Creek's ability to continue operations.

(iii)

If Butte Creek in good faith believes that Mateveza USA has failed to take any action that, in the exercise of its reasonable business judgment, is necessary to maintain, enforce or protect the Licensed Marks (including, but not limited to, pursuing infringers), then Butte Creek shall give Mateveza USA Written Notice describing such alleged failure, and Mateveza USA will use commercially reasonable efforts to cooperate with Butte Creek to correct such failure in the interest of protecting the value of the IP License granted to Butte Creek hereunder.

(iv)

Notwithstanding anything in this Agreement to the contrary, decisions regarding action involving the protection and defense of the Licensed Property will be solely in the discretion of Mateveza USA at Mateveza USA’s sole cost and expense..

Notice of Infringement . In the event that any party learns of an actual or suspected infringement or misuse of Licensed Property or Confidential Information of another party to this Agreement, or of an opposition or cancellation proceeding brought by any Person against a Licensed Mark or disputing the ownership thereof, it shall promptly provide the other parties with a written statement of the facts of the infringement, misuse, opposition or cancellation to the extent known.

15.

Insurance; Indemnification.

Insurance . Butte Creek shall arrange insurance policies in respect of the goods and services of each hereunder affording coverages commonly referred to by the insurance industry as: (a) commercial general liability, including products/completed operations, contractual liability, personal and advertising liability and premises/operations liability; (b) automobile liability, including coverage for owned, non-owned, hired or borrowed vehicles; and (c) employer’s liability and workers compensation insurance, or qualified self-insurance, for all employees as required by law. Butte Creek’s commercial general liability and auto liability insurance policies shall include Mateveza USA as an additional insured, and shall be primary and non-contributing with any insurance maintained by Mateveza USA as respects claims resulting from Butte Creek’s negligence. All said insurance shall be obtained and maintained in full force and in effect during the entire term of this Agreement, and shall be written on an occurrence basis with a per occurrence limit of not less than $2,000,000 and an annual aggregate limit of not less than $5,000,000. An insurance certificate of all of the foregoing, including all of the required coverages and endorsements, shall be provided to Mateveza USA prior to the commencement of services under this Agreement. Each policy shall require the insurer to give Mateveza USA not less than thirty (30) days prior written notice of any termination or material modification of coverage. To the extent that the parties both maintain insurance, they waive their insurers’ right of subrogation for damage which may be attributable to the other party’s negligence. To the extent of available insurance, any indemnification otherwise payable under this Agreement shall be subject to this mutual waiver of subrogation rights.

Butte Creek’s Indemnity . Butte Creek hereby indemnifies, defends and holds Mateveza USA, its Affiliates and each of their respective officers, directors, agents, representatives, employees, successors and assigns, forever harmless from and against any and all obligations, third party claims, damages, losses, liabilities, obligations, settlements, injunctions, suits, actions, proceedings, liens, demands, charges, fines, penalties, costs and expenses of every kind and nature (whether based on tort, breach of contract, product liability, infringement or otherwise), including without limitation, reasonable expenses of attorneys and other professionals, and disbursements which may be imposed on, incurred by or asserted against the persons hereby required to be indemnified (but not against any of the same to the extent that a negligent or willful act or omission of any of such party was the cause of the same) (collectively, “ Loss ”) arising directly or indirectly from, out of or based upon (i) Butte Creek’s (or any authorized broker’s or sub-distributor’s) failure to comply with applicable laws, regulations, or any obligation in its agreements with other Persons, (ii) Butte Creek’s (or any authorized broker’s or sub-distributor’s) breach of any of its representations or warranties or any failure to perform any covenant or obligation of Butte Creek hereunder; (iii) any product liability or similar claims relating to any Person’s use of the Products.

Mateveza USA Indemnity . Mateveza USA hereby indemnifies, defends and holds Butte Creek, its Affiliates and each of their respective officers, directors, agents, representatives, employees, successors and assigns, forever harmless from and against any and all Loss arising directly or indirectly from, out of or based upon: (i) Mateveza USA’s (or any authorized sub-contractor’s) failure to comply with applicable laws, regulations, or any obligation in its agreements with other Persons regarding the Licensed Property or the Products; (ii) Mateveza USA’s breach of any of its representations or warranties or any failure to perform any covenant or obligation hereunder; or (iii) any claim that Butte Creek’s use of the Licensed Property or distribution or sale of Products in the manner permitted hereunder infringes the trademark or other rights of any Person.

Procedures .

(i)

Upon receipt of notice, whether formal or informal, direct or indirect, of any claim for which indemnification may be available under this Section 15.D, the party receiving notice shall notify the others.

(ii)

Subject to the provisions of this Section 15.D, the indemnifying party/parties shall have the right to control the defense of any claim and to settle such claim in its sole discretion, except that any such settlement shall not (i) impair any license rights of the indemnified party; or (ii) require the indemnified party to take or refrain from any action other than the payment of money damages for which it is fully indemnified without its prior consent (such consent not to be unreasonably withheld or delayed). Notwithstanding the foregoing, if the indemnifying party/parties fails to timely and adequately conduct the defense of any such claim, then the other party shall be entitled to take over control of such defense, including, without limitation, the right to select new counsel.

(iii)

When seeking indemnification, the indemnified party shall have the right and obligation to reasonably cooperate with the indemnifying party/parties, at the indemnifying party’s/parties’ expense, in the defense or settlement of the claim.

No Consequential Damages . None of the parties to this Agreement shall have any liability to another party to this Agreement for any indirect, consequential, punitive or other special damages. Nothing in this Section 15.E shall limit a party’s indemnification obligations with respect to third party or governmental claims.

16 .

Binding Agreement; Assignability.

Binding Agreement . Unless assigned or transferred in violation hereof, this Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their respective successors and permitted assigns.

Assignment . No party to this Agreement may assign this Agreement or any of its rights hereunder, either voluntarily or involuntarily, by operation of law or otherwise, without the prior written approval of the other parties , which shall not be unreasonably withheld or delayed . Notwithstanding the foregoing, either Party may assign this Agreement, and its rights and obligations hereunder (in whole or in part), without the prior written approval of the other parties, to a Subsidiary or other Affiliate, or to a third party which is acquiring all or substantially all of the assets of such Party, provided that such successor agrees in writing to be bound by all of the terms and conditions of this Agreement. In the event of any authorized or permitted assignment of this Agreement, the assignor shall, following such assignment, remain liable for all of its obligations under this Agreement.

17.

Dispute Resolution.

Mediation; Arbitration . The parties hereto will attempt to settle any claim or controversy arising out of or relating to this Agreement through consultation and negotiation in good faith and a spirit of mutual cooperation, including, but not limited to, referring such claim or controversy to the Management Committee, and to the chief executives of each party. However, at any time before or during such negotiations, or following any unsuccessful negotiations, either Butte Creek or Mateveza USA may by Written Notice to the other demand that the dispute be submitted to mediation. When such a demand is made, the parties shall within ten (10) days jointly make arrangements for the mediation of the dispute within the city of San Francisco with JAMS or its successor, whose Mediation Guide in effect on the date of the written demand for mediation shall govern the mediation in all respects, except as modified by agreement of the parties. If the dispute has not been resolved within sixty (60) days after any written demand for mediation, or within a longer time period to which the parties may agree, the dispute shall be submitted to binding arbitration. Such binding arbitration shall be conducted within the city of San Francisco in accordance with the then-current JAMS Arbitration Guidelines and Rules by a single arbitrator selected by mutual agreement of the parties within twenty (20) days after the date of submission of the dispute to binding arbitration, or in the absence of such agreement, such selection to be made by JAMS in accordance with the procedures outlined in JAMS Arbitration Rules. The arbitration shall be governed by the United States Arbitration Act, 9 U.S.C. §§ 1-16 (as may be amended), and judgment upon the award rendered by the arbitrator may be entered by any court having jurisdiction thereof. The arbitrator is empowered to award attorneys’ fees but is not empowered to award damages in excess of compensatory damages, and each party hereby irrevocably waives any right to recover such damages with respect to any dispute arising out of or relating to this Agreement, except as such dispute may concern indemnification for a third party claim, as addressed in Section 15.

Judicial Proceedings . Nothing in this Agreement will prevent either Butte Creek or Mateveza USA from resorting to judicial proceedings in the Superior Court of California for the County of San Francisco or in the United States District Court for the Northern District of California for the limited purpose of seeking a preliminary injunction or to avoid the barring of the claim under the applicable statute of limitations. In addition, resort by either Butte Creek or Mateveza USA to negotiation, mediation or arbitration pursuant to this Agreement shall not be construed under the doctrines of laches, waiver or estoppel to affect adversely the rights of either Butte Creek or Mateveza USA to pursue any such judicial relief; provided, however , that irrespective of the filing of any such request for judicial relief all necessary parties shall continue to participate in the dispute resolution proceedings required by Section 17.A. Any negotiation or mediation which takes place pursuant to this Agreement

shall be confidential and shall be treated as a compromise and settlement negotiation for purposes of the Federal Rules of Evidence and State rules of evidence.

18.

Option to Purchase Interest in Mateveza USA .

If at any time during the First Fiscal Year (provided that this Agreement is not sooner terminated (or subject to Section 10.B or 10.C above) and provided that Butte Creek remains in full compliance with the terms and conditions of this Agreement), substantially all of the ownership or assets of Mateveza USA is sold to a third party that is not an Affiliate of Mateveza USA or of Butte Creek, which third party will not continue this Agreement as an assignee of Mateveza USA, Butte Creek shall be entitled to 12.5% of such sales proceeds, which shall be paid to Butte Creek in cash (or electronic funds transfer) upon the Closing of such transaction.

Provided that this Agreement is not sooner terminated (or subject to an earlier notice of termination pursuant to Section 10.B or 10.C above), and provided that Butte Creek remains in full compliance with the terms and conditions of this Agreement, as of January 1, 2008, Butte Creek shall have the option of purchasing a percentage of the membership interests of Mateveza USA, LLC, which percentage shall vary depending upon the volume of Product sales by Butte Creek in the Territory in the First Fiscal Year, as follows (based on 31-gallon barrel equivalents):


2007 Sales Volume	Percentage
less than 80 barrels	None
80 barrels	Up to 5%
125 barrels	Up to 10%
250 barrels	Up to 15%
375 barrels	Up to 20%
500 barrels	Up to 25%

The election must be made by Butte Creek, if at all, on or before January 1, 2008, and the transaction shall be closed no later than March 30, 2008. Closing of the purchase is subject to the following: (1) mutual agreement to reasonable terms and conditions of an amended and restated Operating Agreement for Mateveza USA, LLC to accommodate Butte Creek’s minority membership interest (without Control), including redemption and buy-sell provisions, as the parties shall negotiate in good faith; (2) fixing the purchase price for such proportionate amount of membership interests, which shall be calculated (on a percentage basis) based upon 50% of the fair market value of the Mateveza USA, LLC business (including goodwill) to a strategic buyer, provided that if the parties are unable to agree upon the applicable fair market value, then the fair market value shall be determined by a mutually-agreed, qualified appraiser with experience valuing micro-brewery brands, with the cost of any such appraisal to be borne equally by the parties; and (3) payment for the membership interests acquired by Butte Creek pursuant to this Section 18 being made in cash (or electronic funds transfer) at closing. If Butte Creek fails to give written notice of its election on or before January 1, 2008, or if the transaction fails to close by March 30, 2008, due to no fault of Mateveza USA, LLC, then unless otherwise agreed, the option described in this Section 18 shall terminate without any additional consideration to Butte Creek.

19.

Miscellaneous.

Notices .

(i)

Any notice, demand, or other communication required or permitted to be given or made hereunder shall be in writing and shall be well and sufficiently given or made if to the address set forth in Section 19.A(iii), and:

(a)

enclosed in a sealed envelope and delivered during normal business hours on a Business Day and left with a receptionist or other responsible employee at the relevant address set forth below in this Agreement;

(b)

sent by certified mail deposited in a post office within the United States;

(c)

sent by facsimile or sent by other means of recorded electronic communication during normal business hours on a Business Day and confirmed by mail as aforesaid; or

(d)

sent by a reputable air courier for overnight delivery.

(ii)

Any notice, demand or other communication so given or made shall be deemed to have been provided and to have been received on:

(a)

the day of delivery, if delivered as pursuant to Section 19.A(i)(a);

(b)

on the third Business Day after the postmark date thereof (excluding each day during which there exists any general interruption of postal service due to strike, lockout, labor disturbance or other cause), if mailed pursuant to Section 19.A(i)(b);

(c)

on the day of sending if sent by facsimile or other means of recorded electronic communication (or on the next Business Day if sent on a day other than a Business Day) pursuant to Section 19.A(i)(c); or

(d)

on the air courier’s scheduled day of delivery if sent by air courier pursuant to Section 19.A(i)(d).

(iii)

All significant notices or other communications to be sent under this Agreement shall be sent to the parties at the following addresses, subject to each party’s right to change its address for notice from time to time by giving notice of such change.

If to Mateveza USA:

Mateveza USA, LLC

Attn: Jim Woods

26A Glover St.

San Francisco, CA 94109-2173

With a copy to:

Davis Wright Tremaine LLP

Attn: Jesse D. Lyon

1300 SW 5 ^th Avenue, Suite 2300

Portland, OR 97201

If to Butte Creek:

Butte Creek Brewing Company

Attn: John Power

945 W. 2 ^nd Street

Chico, CA 95928

With a copy to:

Clifford L. Neuman, PC

Attn: Clifford L. Neuman, Esq.

1507 Pine Street

Boulder, CO 80302

(iv)

“ Written Notice ” means notice delivered in the manner set forth in this Section 19.A.

Further Assurances . The parties shall execute and deliver such further documents and take such further actions as may be necessary or appropriate to carry out the provisions of this Agreement, including, but not limited to, securing rights and executing licenses to assure Butte Creek’s access to Licensed Property as contemplated hereunder.

No Third Party Beneficiaries . The parties hereto do not intend the benefits or rights contained in any provision of this Agreement to inure to any third party. Notwithstanding anything contained in this Agreement to the contrary, the parties hereto agree that this Agreement shall not be construed as creating any rights, claims or causes of action against any party to this Agreement in favor of any third party.

Relationship . Nothing herein shall create, be deemed to create or be construed as creating any partnership, employer-employee, joint venture, franchise or agency relationship between the parties hereto or shall be deemed to render any party to this Agreement liable for any of the debts or obligations of another. No party to this Agreement shall, by virtue of this Agreement, in any way be considered an agent or representative of another party in any dealings with any third party, and none of the parties hereto nor any of their employees or agents shall have the power or authority to bind or obligate another party by virtue of this Agreement.

Sole Agreement . This Agreement and the schedules and exhibits attached hereto constitute and contain the entire agreement of the parties hereto relating to the subject matter hereof, and no oral or written statements, representations, documents, promises or any other prior materials not embodied herein shall be of any force or effect. This Agreement cannot be amended, altered or modified except by a written instrument executed by Butte Creek and Mateveza USA. Once so executed, such amendments shall become an integral part of this Agreement, subject to all the terms and conditions herein and shall have full force and effect. This Agreement supersedes: (i) all prior agreements, discussions and negotiations among the parties; and (ii) any other documents or forms used by the parties in connection with the purchase and sale of goods pursuant to the terms of this Agreement, including, but not limited to, Section 3. To the extent that additional terms contained on Butte Creek’s order forms or required by Butte Creek’s ordering procedures do not conflict with the terms of this Agreement, those additional terms shall have full effect, and shall control over any additional or conflicting terms in any other form related to the purchase or sale of goods under this Agreement, whether or not material.

Modification; Waiver . This Agreement may not be amended except by an instrument in writing signed by a duly authorized officer or representative of Butte Creek and Mateveza USA. The failure or delay of any party to exercise its rights under this Agreement or to complain of any act, omission or default on the part of another party, no matter how long the same may continue, or to insist upon the strict performance of any of the terms or provisions herein, shall not be deemed or construed to be a waiver by such party of its rights under this Agreement or a waiver of any subsequent breach or default of the terms or provisions of this Agreement.

Construction . The captions of the various articles and sections of this Agreement have been inserted for the purpose of convenience of reference only, and such captions are not a part of this Agreement and shall not be deemed in any manner to modify, explain, enlarge or restrict any of the provisions of this Agreement. The recitals set forth prior to Section 1 of this Agreement are statements setting forth the intentions of the parties and shall not be deemed to create, modify, supersede or eliminate any obligation of the parties under this Agreement.

Severability . If any provision or provisions of this Agreement, or any portion of any provision hereof or thereof, shall be deemed invalid or unenforceable pursuant to a final determination of any arbitrator or court of competent jurisdiction, or as a result of future legislative action, such determination or action shall be construed so as not to affect the validity or effect of any other portion hereof or thereof, unless, as a result of such determination or action, the consideration to be received or enjoyed by any party hereto would be materially impaired or reduced.

Choice of Law . This Agreement shall be governed by and construed pursuant to the substantive laws, but not the principles of conflicts of laws, of the state of California as if this agreement were negotiated, executed, and to be fully performed in the state of California.

Compliance with Laws . Each party shall, at its own cost and expense, obtain all licenses, permits and other governmental approvals which may be required in the Territory for performance of its obligations hereunder.

Counterparts . This Agreement may be executed by the parties hereto individually or in any combination, in counterparts, each of which shall be an original and both of which shall together constitute one and the same agreement.

Arms Length Contract . This Agreement has been negotiated “at arms length” by the parties hereto, each represented by counsel of its choice and each having an equal opportunity to participate in the drafting of the provisions hereof. Accordingly, in construing the provisions of this Agreement no party shall be presumed or deemed to be the “drafter” or “preparer” of the same.

Public Announcements and Disclosures . All media releases or public announcements by either party regarding this Agreement or the subject matter of this Agreement, not including announcements intended solely for internal distribution or, upon the advice of legal counsel, necessary to meet legal or regulatory requirements beyond the reasonable control of the disclosing party, shall be provided to the other party for written approval prior to such release, announcement or disclosure.

IN WITNESS WH E REOF , the parties hereto have duly executed this Agreement as of the date first above written.

MATEVEZA USA, LLC

By: /s/ James C. Woods

Name: James C. Woods

Its: Member

Date Executed: _ February 8, 2007 _

BUTTE CREEK BREWING COMPANY

By:_ John C. Power

Name:_ John C. Power

Its: President

Date Executed: _ February 8, 2007 _


1.	I have reviewed this Annual Report on Form 10-KSB of Golden West Brewing Company, Inc.;

2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the small business issuer as of, and for, the periods presented in this report;

4.	The small business issuer's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the small business issuer and have:

	(a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the small business issuer, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
	(b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
	(c)	Evaluated the effectiveness of the small business issuer's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
	(d)	Disclosed in this report any change in the small business issuer's internal control over financial reporting that occurred during the small business issuer's most recent fiscal quarter (the small business issuer's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the small business issuer's internal control over financial reporting; and



	5.	The small business issuer's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the small business issuer's auditors and the audit committee of the small business issuer's board of directors (or persons performing the equivalent functions):
		(a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the small business issuer's ability to record, process, summarize and report financial information; and
		(b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the small business issuer's internal control over financial reporting.

Date: April 24, 2007				/s/ John C. Power John C. Power, President, Secretary, Chief Financial Officer, Chief Executive Officer, Principal Accounting Officer and Principal Executive Officer


	(1)	The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

	(2)	The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.