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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

FORM 10-Q

(mark one)

[X]	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTER ENDED JUNE 30, 2002

[   ]

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE TRANSITION PERIOD FROM _______________ TO______________.

COMMISSION FILE NUMBER 0-27116

PYRAMID BREWERIES INC.
(Exact name of registrant as specified in its charter)

Washington (State or other jurisdiction of incorporation or organization)		91-1258355 (I.R.S. Employer Identification No.)

91 South Royal Brougham Way
Seattle, WA 98134
(Address of principal executive offices) (Zip Code)

Registrant’s telephone number, including area code: (206) 682-8322

     Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [   ].

     Common stock, par value of $.01 per share: 8,379,825 shares of common stock outstanding as of June 30, 2002

Pages 1 of 16 sequentially numbered pages.

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PYRAMID BREWERIES INC.
FORM 10-Q
FOR THE QUARTERLY AND SIX MONTH PERIODS ENDED JUNE 30, 2002

TABLE OF CONTENTS

						Page
PART I				FINANCIAL INFORMATION
Item 1.				Financial Statements (Unaudited)
				Balance Sheets June 30, 2002 and December 31, 2001			3
				Statements of Operations Three Month and Six Month Periods Ended June 30, 2002 and 2001			4
				Statements of Cash Flows Six Month Periods Ended June 30, 2002 and 2001			5
				Notes to Financial Statements			6
Item 2.				Management’s Discussion and Analysis of Financial Condition and Results of Operations			11
Item 3.				Quantitative and Qualitative Disclosures about Market Risk			14
PART II				OTHER INFORMATION
Item 4.				Submission of Matters to a vote of Security Holders			14
Item 6.				Exhibits and Reports on Form 8-K			14
				SIGNATURE			15
				EXHIBIT INDEX			16

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PART I

Item 1 — FINANCIAL STATEMENTS

PYRAMID BREWERIES INC.

BALANCE SHEETS
(Unaudited)

				June 30,				December 31,
				2002				2001
CURRENT ASSETS:
	Cash and cash equivalents			$	4,116,036			$	5,075,454
	Accounts receivable, net				2,317,598				1,425,592
	Inventories				1,145,501				1,178,148
	Prepaid expenses and other				216,013				382,826
		Total current assets			7,795,148				8,062,020
Long term investments					491,742				491,742
Note receivable related party					100,562				106,965
Fixed assets, net					20,821,843				20,222,560
Other assets					541,142				547,466
		Total assets		$	29,750,437			$	29,430,753
CURRENT LIABILITIES:
	Accounts payable			$	894,117			$	662,527
	Accrued expenses				2,235,678				1,312,641
	Refundable deposits				470,267				550,259
	Note payable-current				20,000				20,000
	Dividends payable				368,714				365,178
		Total current liabilities			3,988,776				2,910,605
	Note payable				46,919				43,397
	Deferred rent				1,190,814				1,252,650
		Total liabilities			5,226,509				4,206,652
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS’ EQUITY:
Preferred stock, 10,000,000 shares authorized, none issued					—				—
Common stock, $.01 par value; 40,000,000 shares authorized, 8,379,825 and 8,299,493 shares issued and outstanding					83,799				82,995
Additional paid-in capital					35,812,624				35,649,120
Note receivable					(786,818	)			(786,818	)
Accumulated compensation					(142,239	)			(185,486	)
Accumulated deficit					(10,443,438	)			(9,535,710	)
		Total stockholders’ equity			24,523,928				25,224,101
		Total liabilities and stockholders’ equity		$	29,750,437			$	29,430,753

The accompanying notes are an integral part of these statements.

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PYRAMID BREWERIES INC.

STATEMENTS OF OPERATIONS
(Unaudited)

			Three Months Ended June 30,								Six Months Ended June 30,
							2001								2001
			2002				Restated				2002				Restated
Gross sales			$	10,177,068			$	9,366,493			$	17,010,947			$	15,944,313
Less excise taxes				472,109				446,788				814,282				724,594
Net sales				9,704,959				8,919,705				16,196,665				15,219,719
Cost of sales				7,021,217				6,219,562				12,157,228				11,112,028
Gross margin				2,683,742				2,700,143				4,039,437				4,107,691
Selling, general and administrative expenses				2,219,452				2,517,303				4,394,707				4,792,070
Operating income (loss)				464,290				182,840				(355,270	)			(684,379	)
Other income, net				129,591				161,874				181,753				263,100
Income (loss) before income taxes				593,881				344,714				(173,517	)			(421,279	)
Provision for income taxes				—				—				—				—
Net income (loss)			$	593,881			$	344,714			$	(173,517	)		$	(421,279	)
Basic and diluted net income (loss) per share			$	0.07			$	0.04			$	(0.02	)		$	(0.05	)
Weighted average basic shares outstanding				8,173,219				7,920,376				8,142,677				7,894,132
Weighted average diluted shares outstanding				8,241,812				8,077,134				8,142,677				7,894,132
	Cash dividend declared per share		$	0.044			$	0.044			$	0.088			$	0.088
	Beer barrels shipped			31,900				31,600				55,100				53,900
	Soda barrels shipped			15,000				15,100				24,300				24,900
	Total barrels shipped			46,900				46,700				79,400				78,800

The accompanying notes are an integral part of these statements.

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PYRAMID BREWERIES INC.

STATEMENTS OF CASH FLOWS
(Unaudited)

					Six Months Ended June 30,
									2001
					2002				Restated
OPERATING ACTIVITIES:
	Net income (loss)				$	(173,517	)		$	(421,279	)
	Adjustments to reconcile net income (loss) to net cash provided by operating activities:
		Depreciation and amortization				1,107,582				1,060,060
		Stock compensation				46,019				183,599
		Interest expense				3,522				—
		(Gain) loss on sales of fixed assets				(53	)			436
		Deferred rent				(61,836	)			65,197
Changes in operating assets and liabilities:
		Accounts receivable				(892,006	)			(475,551	)
		Inventories				32,647				(305,410	)
		Prepaid expenses and other				4,011				276,690
		Accounts payable and accrued expenses				987,905				715,745
		Refundable deposits				(79,992	)			(22,038	)
			Net cash provided by operating activities			974,282				1,077,449
INVESTING ACTIVITIES:
		Acquisitions of fixed assets				(1,381,499	)			(429,725	)
		Proceeds from sales of fixed assets				10,535				1,577
			Net cash used in investing activities			(1,370,964	)			(428,148	)
FINANCING ACTIVITIES:
		Proceeds from the sale of common stock				161,536				98,071
		Notes receivable				6,403				(114,587	)
		Cash dividends paid				(730,675	)			(660,785	)
			Net cash used in financing activities			(562,736	)			(677,301	)
Decrease in cash and cash equivalents						(959,418	)			(28,000	)
Cash and cash equivalents at beginning of period						5,075,454				6,444,145
Cash and cash equivalents at end of period					$	4,116,036			$	6,416,145

The accompanying notes are an integral part of these statements.

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PYRAMID BREWERIES INC.

NOTES TO FINANCIAL STATEMENTS
(Unaudited)

1. BASIS OF PRESENTATION:

     Pyramid Breweries Inc. (the “Company”), a Washington corporation, is engaged in the brewing, marketing and selling of craft beers and premium sodas and in restaurant operations. The Company operates breweries in Seattle, Washington, Berkeley, California, and Walnut Creek, California. The Company sells its beer through a network of selected independent distributors primarily in Washington, Oregon and California under the Pyramid and Thomas Kemper brands. Pyramid also manufactures a line of gourmet sodas under the Thomas Kemper Soda Company label. As of June 30, 2002, the Company’s products were distributed in 32 states and Canada. The Company operates three restaurants adjacent to its breweries under the Pyramid Alehouse brand name.

Revenue Recognition

     Revenue from the sale of wholesale beer and soda product is recognized at the time of shipment, when the title of the Company product passes to the customer, in accordance with distributor sales agreements.

Restatement

     The Company changed the accounting method for package design costs to reflect the expensing of these costs as incurred rather than capitalizing and amortizing over twelve months. This change has been accounted for as a prior period adjustment in accordance with Accounting Principals Board Opinion No. 20 “Accounting Changes.” The financial statements for the period presented have been restated to reflect this change.

Impact of Restatement on Prior Period — Increase (Decrease) in Amounts
(Dollars in thousands, except per share data)

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Other Income, net

     Other Income, net consists of interest income and parking fee income, and other insignificant non-operating income and expenses.

     The accompanying condensed financial statements have been prepared by the Company, without audit, in accordance with accounting principles generally accepted in the United States for interim financial information and pursuant to the rules and regulations of the Securities and Exchange Commission. With the exception of the historical information contained herein, the matters described may contain forward-looking statements that involve risks and uncertainties, including those described under the caption entitled “Risk Factors and Forward-Looking Statements” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2001, filed with the Securities and Exchange Commission, and elsewhere in the Company’s periodic reports. In the opinion of management, the accompanying unaudited financial statements contain all material adjustments, consisting only of those of a normal recurring nature, considered necessary for a fair presentation of the Company’s financial position, results of operations and cash flows at the dates and for the periods presented. The operating results for the interim periods presented are not necessarily indicative of the results expected for the full year.

2. INVENTORIES:

     Raw materials primarily include ingredients, flavorings and packaging. Work in process includes beer held in fermentation prior to the filtration and packaging process. Finished goods primarily include product ready for shipment, as well as promotional merchandise held for sale

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3. FIXED ASSETS:

4. NOTE RECEIVABLE RELATED PARTY

     In June 2001, the Company issued a $787,000 full recourse note to the CEO in exchange for the exercise of options for 387,400 shares of the Company’s common stock. In addition, the Company issued a $115,000 full recourse note to the CEO to fund his payment of taxes on the exercise of the options. The notes are due on the earlier of June 30, 2011 or upon the sale of the stock and bear an annual interest rate of 5.6%. A total of 135,100 of those shares are unrestricted, except for being pledged as collateral for the loans, and the remaining 252,300 shares become unrestricted over the next three and one-half years. During the quarter and six months ended June 31, 2002, the Company recorded $11,000 and $43,000, respectively, in compensation expense in connection with this equity arrangement which is included in selling, general and administrative expenses.

5. EARNINGS PER SHARE

     Basic earnings per share was computed by dividing net income available to common shareholders by weighted average shares outstanding. Options to purchase approximately 263,000 and 341,000 shares of common stock were outstanding as of June 30, 2002 and 2001, respectively, but were not included in the calculation of diluted earnings per share for the quarter ended June 30, 2002 and 2001 because the exercise price of the options were greater than the average market price of the common shares. Dilutive earnings per share was calculated as follows: