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.   [     ]

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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.

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DOCUMENTS INCORPORATED BY REFERENCE

The Registrant incorporates by this reference the following:

PART IV - EXHIBITS

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

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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:

       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:

       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.

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       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.  

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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:

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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:

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

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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

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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:

       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:

See Beertown, www.beertown.org

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       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:

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:

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:

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       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.)

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                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.

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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.  

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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.  

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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.

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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.  

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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

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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.

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       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

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.

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

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PART II

      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.

     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

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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

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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

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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

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:

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          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,

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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:  

         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

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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:

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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

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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.

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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.

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     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:

          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.

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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.

        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.

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.

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ITEM 7.       FINANCIAL STATEMENTS

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

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

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See accompanying notes to these financial statements

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GOLDEN WEST BREWING COMPANY AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF OPERATIONS

See accompanying notes to these financial statements

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GOLDEN WEST BREWING COMPANY, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENT OF STOCKHOLDERS' (DEFICIT)

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

See accompanying notes to these financial statements

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GOLDEN WEST BREWING COMPANY AND SUBSIDARY

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE YEARS ENDED DECEMBER 31

See accompanying notes to these financial statements

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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.

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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.

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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,  

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,

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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.

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 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.

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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

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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,

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

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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.

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:

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.

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.

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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:

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

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

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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

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:

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

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

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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.

F-18

       None

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.

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       None.

PART III

Directors and Executive Officers

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

________________________________

⁽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

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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:

       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

37

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.

       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.

       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.

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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:

       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

39

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

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

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

DIRECTOR COMPENSATION TABLE

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

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

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.

____________________________

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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.   

43

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.

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.

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.

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.   

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

44

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.

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.

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PART IV

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