UNITED STATES                                
                 SECURITIES AND EXCHANGE COMMISSION 
                       Washington, D.C. 20549 
 
                 ----------------------------------- 
                             FORM 10-QSB 
                            Amendment #2 
                 ----------------------------------- 
 
    Quarterly Report Pursuant to Section 13 or 15 (d) of the 
                             Securities 
                        Exchange Act of 1934 
 
             For the Quarter Ended March 31, 1997 
 
                 Commission File Number  0-27458 
 
                 NOR'WESTER BREWING COMPANY, INC. 
 
        (Exact name of registrant as specified in charter) 
 
             Oregon                         93-1099661 
(State or other jurisdiction of          (I.R.S. Employer) 
 incorporation or organization        Identification Number) 
 
 
 
                      66 SE Morrison Street 
                      Portland, Oregon 97214 
                          (503) 232-9771 
 
        (Address, including Zip code, and telephone number, 
    including area code, of registrant's principal executive 
                              offices) 
 
 
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.    
                          [X] YES       [ ] NO 
 
Transitional Small Business Disclosure Format        
                          [ ] YES       [X] NO 
 
Number of shares of common stock outstanding as of March  
31, 1997: 3,711,097 shares, no par value. 
 
 
 
                       NOR'WESTER BREWING COMPANY, INC. 
 
                             INDEX TO FORM 10-QSB 
 
 
PART I - FINANCIAL INFORMATION 
 
The information included herein is unaudited.  However, such information 
reflects all adjustments (consisting solely of normal, recurring 
adjustments)which are, in the opinion of the Company's management, 
necessary for a fair presentation of the results of operations for the 
interim periods.  The interim financial information and notes thereto 
should be read in conjunction with the Company's latest annual report on 
Form 10-KSB/A. The results of operations for the three months ended 
March 31, 1997 are not necessarily indicative of results to be expected 
for the entire year. 
 
   Item 1 - Consolidated Financial Statements 
 
      Consolidated Balance Sheet March 31, 1997 and December 31, 1996 
 
      Consolidated Statement of Operations -  Three Months Ended 
       March 31, 1997 and 1996 
 
      Consolidated Statement of Cash Flows -  Three Months Ended 
       March 31, 1997 and 1996 
 
      Notes to Consolidated Financial Statements 
 
   Item 2  Management's Discussion and Analysis of 
      Financial Condition and Results of Operations 
 
Part II - Other Information 
 
   Item 3 -- Defaults Upon Senior Securities 
   Item 6 -- Exhibits and Reports on Form 8-K 
 
 
Signatures 
 
 
Item 1 - Consolidated Financial Statements 
 
 
                     NOR'WESTER BREWING COMPANY, INC. 
                        Consolidated Balance Sheet 
 
                                            March 31, 
                                              1997       December 31, 
ASSETS                                     (unaudited)       1996 
Current assets:                           -----------    ----------- 
   Cash and cash equivalents                 $80,543       $252,049  
   Accounts receivable                       592,813        606,642  
   Income tax receivable                     103,761        103,761  
   Receivable from affiliated companies    1,928,984      1,798,350 
   Inventories                               830,902        720,507  
   Marketing supplies                         77,982         77,530  
   Other current assets, net                 336,912        221,223  
                                           ---------      --------- 
   Total current assets                    3,951,897      3,780,062  
 
Property and equipment, net               11,787,919     11,968,471  
Other non-current assets, net                 65,000         40,000  
                                          ----------     ---------- 
Total assets                             $15,804,816    $15,788,533  
                                          ==========     ========== 
LIABILITIES AND SHAREHOLDERS' EQUITY 
 
Current liabilities: 
   Line of credit                         $1,041,000     $1,041,000  
   Current portion of long-term debt 
     and capital lease                     1,939,289      1,938,709  
   Notes payable                           1,750,000      1,150,000   
   Accounts payable                        2,356,868      2,427,073  
   Container deposits                        127,396        130,921  
   Accrued payroll and other 
     liabilities                             223,266        309,256  
                                           ---------      --------- 
   Total current liabilities               7,437,819      5,343,568  
 
Long-term debt and capital lease              10,825      1,664,796  
                                           ---------      --------- 
   Total liabilities                       7,448,644      7,008,364  
 
Shareholders' equity: 
   Preferred stock, 15,000,000 shares 
    authorized in 1996, no shares 
    issued and outstanding                         -              - 
   Common stock, no par value - 10,000,000 
    shares authorized, 3,711,097 shares  
    outstanding                           11,064,480     11,064,480  
 
Accumulated deficit                       (2,708,308)    (2,284,311) 
                                           ---------      --------- 
Total shareholders' equity                 8,356,172      8,780,169  
                                           ---------      --------- 
Total liabilities and  
   shareholders' equity                  $15,804,816    $15,788,533  
                                          ==========     ========== 
 
 
 
 
                       NOR'WESTER BREWING COMPANY, INC. 
 
                    Consolidated Statement of Operations 
                                 (unaudited) 
 
 
 
                                          Three Months Ended March 31, 
                                             1997              1996 
                                          ----------        ---------- 
Gross sales                               $1,317,212        $1,554,845  
Less: excise taxes                           (63,365)          (75,059) 
                                           ---------         --------- 
Net sales                                  1,253,847         1,479,786  
 
Cost of sales                                980,409           968,267  
                                           ---------         --------- 
Gross profit                                 273,438           511,519  
 
Selling, general and administrative  
  expenses                                   578,838           475,471 
                                           ---------         --------- 
Income (loss) from operations               (305,400)           36,048 
 
Interest and other income, net              (118,597)           38,321  
                                           ---------         --------- 
Income (loss) before income taxes and  
   minority interest                        (423,997)           74,369  
 
Provision for income taxes	                        -        (29,004) 
                                           ---------         ---------     
Income (loss) before minority interest      (423,997)           45,365  
 
Minority interest                                  -            17,692  
                                           ---------         --------- 
Net income (loss)                          $(423,997)          $63,057  
                                           =========         ========= 
Net income (loss) per common share            $(0.11)            $0.02  
                                           =========         ========= 
Weighted average number of 
common shares outstanding                  3,696,041         3,651,554 
                                           ----------        --------- 
 
 
 
 
                      NOR'WESTER BREWING COMPANY, INC. 
 
                   Consolidated Statement of Cash Flows 
                               (unaudited) 
 
                                          Three Months Ended March 31, 
                                               1997           1996 
Cash flows from operating                  ----------      ---------- 
activities: 
   Net income (loss)                       $(423,997)        $63,057 
   Minority interest in loss from 
     joint venture                                 -         (17,692) 
   Reconciliation of net income to net 
     cash provided by operating activities: 
     Depreciation and amortization           209,707          67,742 
     Changes in assets and liabilities: 
       Accounts receivable                    13,829        (126,284) 
      Inventories                           (110,395)         14,732  
      Other current assets                  (116,141)        239,957  
      Other non-current assets               (25,000)        102,521  
      Accounts payable                       (70,205)       (391,715) 
      Accrued liabilities and container 
        deposits                             (89,515)       (259,992) 
                                           ---------        -------- 
   Net cash used for operating activities   (611,717)       (307,674) 
 
Cash flows from investing activities 
Purchases of property and equipment          (29,155)       (928,938) 
                                           ---------       --------- 
   Net cash used for investing activities    (29,155)       (928,938) 
 
Cash flows from financing activities: 
   Advances to affiliated companies         (130,634)       (218,966) 
   Payments on line of credit                      -        (500,000) 
   Increase in borrowings                    600,000         231,282  
   Net proceeds from stock offering                -       7,689,840  
                                           ---------       --------- 
Net cash provided by financing activities    469,366       7,202,156  
                                           ---------       --------- 
Net increase (decrease) in cash and 
  cash equivalents                          (171,506)      5,965,544  
 
Cash and cash equivalents: 
   Beginning of period                       252,049         276,807  
                                           ---------       --------- 
   End of period                             $80,543      $6,242,351  
                                           =========       ========= 
 
 
 
                       NOR'WESTER BREWING COMPANY, INC. 
 
                 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
                                (Unaudited) 
 
BASIS OF PRESENTATION 
 
The Company's consolidated financial statements enclosed herein are  
unaudited and, because of the seasonal nature of the business and the  
varying schedule of its special sales efforts, these results are not 
necessarily indicative of the results to be expected for the entire  
year.  In the opinion of management, the interim financial statements 
reflect all adjustments, consisting of only normal recurring items which 
are necessary for a fair presentation of the results for the periods 
presented.  The accompanying financial statements have been prepared in 
accordance with GAAP and SEC guidelines applicable to interim financial 
information which require management to make certain estimates and 
assumptions.  These estimates and assumptions affect the reported 
amounts of assets and liabilities, the disclosure of contingent assets 
and liabilities as of the date of the financial statements, and the 
reported amounts of revenues and expenses during the period.  Actual 
results could differ from those estimates.  The accompanying financial 
statements and related notes should be read in conjunction with the 
financial statements and notes thereto included in the Company's Annual 
Report on Form 10-KSB/A for the year ended December 31, 1996. 
 
The accompanying consolidated financial statements have been prepared 
assuming the Company continue as a going concern.  The Company has 
recorded significant losses in the current year, has negative working 
capital of $3,485,922, is not in compliance with its debt covenants, and 
has limited access to capital with which to fund future operations.  
There can be no assurance that the Company will produce and sell its 
products on a profitable basis to sustain operations.  Such factors, 
among other, raise substantial doubt as to its ability to continue as a 
going concern. 
 
In light of significant losses and negative working capital the Company 
has developed and is implementing plans for the continuation of the 
business.  In particular, the Company has taken steps to:  (i) reduce or 
eliminate cooperative brewing arrangements which proved to be 
inefficient and costly;  (ii) eliminate national roll-out programs in 
favor of stepped-up regional sales and marketing efforts; (iii) 
negotiate with past due creditors which could involve extended terms and 
payment plans; (iv) hire and retain high-quality employees familiar with 
the brewing industry, (v) use available bridge loans from a proposed 
investor (see Proposed Merger note) to fund operations until new 
strategies result in positive cash flows and improved profitability, 
and; (vi) use proceeds from the disposition of duplicative and/or 
unutilized assets created by the proposed merger.  Management believes 
these plans will result in the Company sustaining operations as a going 
concern for the next 12 months. 
 
As part of the plans, the Company entered into an investment agreement 
to be merged with other affiliated companies and convert its stock into 
shares of a new publicly traded entity as discussed in the Proposed 
Merger note. 
 
 
Statement of Cash Flows 
 
The Company considers short-term investments which are highly liquid, 
have maturities of fewer than three months and are readily convertible 
into cash to be cash equivalents. 
 
During the quarter ended March 31, 1996 the North Country Brewing 
Company, Inc. ("NCBCI") entered into a joint venture agreement with the 
Company relating to the ownership and operation of a brewery in Saratoga 
Springs New York.  NCBCI financed its minority interest in the joint 
venture with a short-term note payable, in the amount of $2,550,000, to 
the joint venture.  NCBCI has failed to make payment on the note and its 
interest in the joint venture has been terminated.  This non-cash 
transaction has been excluded from the accompanying statement of cash 
flows.  
 
Inventories 
 
Inventories consist of the following: 
                                        March 31,      December 31, 
                                          1997             1996     
                                    -------------      ------------ 
Beer-making and packaging materials  $    520,806       $   460,423 
Work-in-process                            74,933            75,553 
Finished goods                            235,163           184,531 
                                    -------------      ------------ 
                                     $    830,902       $   720,507 
 
 
                      NOR'WESTER BREWING COMPANY, INC. 
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 
                               (Unaudited) 
 
 
Property and Equipment 
 
Property and Equipment consists of the following: 
 
                                          March 31,      December 31, 
                                            1997              1996    
                                       --------------    ------------- 
Land and improvements                   $     243,072     $    243,071 
Leasehold improvements                      2,359,098        2,338,391 
Equipment                                  10,004,764        9,612,828 
Construction in progress                      164,303          547,792 
                                       --------------    ------------- 
                                           12,771,237       12,742,082 
Less accumulated depreciation                (983,318)        (773,611) 
                                       --------------   --------------  
                                        $  11,787,919   $   11,968,471 
                                       ==============  =============== 
 
 
Shareholders' Equity 
 
The Company is authorized to issue 10 million shares of its common 
stock.  Each share of common stock entitles the holder to one vote.  At 
its discretion, the Board of Directors may declare dividends on shares 
of common stock, although the Board does not anticipate paying dividends 
in the foreseeable future.  During 1996, the Company completed a public 
offering of 1,115,000 shares of common stock at $7.00 per share.  The 
underwriters for the offering exercised an over-allotment option for an 
additional 172,500 shares of common stock at $7.00 per share.  Net 
proceeds to the Company totaled approximately $7,963,000, net of selling 
commissions and offering expenses of approximately $1,320,000.  In 
January 1996, the shareholders of the Company authorized 15 million 
shares of preferred stock to be available for issuance, the terms of 
which the Board of Directors have the authority to establish.  There are 
no current agreements or understandings for the issuance of any shares 
of preferred stock. 
 
 
Net Loss Per Share 
 
Net loss per common share is calculated based on the weighted average 
number of common shares and common share equivalents outstanding during 
the three month periods ended March 31, 1997 and 1996. Outstanding 
options to purchase shares of the Company's common shares have not been 
included in the calculation for the quarter ended March 31, 1997 as 
their effect would be anti-dilutive. 
 
 
Line of Credit and Notes Payable 
 
The Company had a $1,000,000 revolving bank line of credit bearing 
interest at the bank's reference rate plus 0.5% (8.75% at March 31, 
1997) which expired on December 31, 1996.  The line is secured by the 
Company's assets, and contains certain covenants and restrictions (see 
Proposed Merger note).  At March 31, 1997 $1,000,000 was outstanding 
under this line of credit.  In addition, the Company's North Country 
subsidiary had $41,000 outstanding on a separate line of credit bearing 
interest at 9.75% at March 31, 1997.  The Company has a $250,000 loan 
payable to its president, bearing interest at 10.5%.  Repayment of the 
loan is required upon completion of the proposed merger with UBA (see 
Proposed Merger note).  The Company has a $1.5 million bridge loan 
payable to UBA, bearing interest at 11.25%, related to an investment 
agreement the Company entered into during the three months ended March 
31, 1997 (see Proposed Merger note).  The Company has a $1,842,351 bank 
term loan which bears interest at the bank's reference rate plus 0.5% 
(8.63% at March 31, 1997) and is payable in equal monthly installments 
over seven years.  At March 31, 1997, $1,842,351 was borrowed under this 
facility.  This non-revolving credit facility and the revolving credit 
facility discussed above are secured by the Company's assets and contain 
covenants which require the Company to maintain financial ratios and 
prohibit the Company from making any dividend payments without the bank 
approval.  At March 31, 1997, the Company was not in compliance with 
certain loan covenants relating to both the non-revolving credit 
facility and the revolving credit facility.  The Company is involved in 
discussions with the lender in order to (i) renew the $1 million 
revolving line of credit facility to mature on the earlier of September 
30, 1997, or 10 days following closing of the investment by UBA (see 
Proposed Merger note). and (ii) waive the loan covenants associated with 
theses loans so long as the Company remains in compliance with all terms 
of the investment agreement and achieves reasonable progress toward 
closing the investment with UBA.  Subsequent to March 31, 1997, the bank 
notified the Company that the non-revolving credit facility would also 
be due on September 30, 1997.  However, final approval of amendment to 
the lender's loan agreements has not yet been received.  If final 
approval is not received or if received but the Company subsequently 
violates the terms of the amendment, then the Company would be in 
default of its loans which could lead to foreclosure and sale of all or 
an important part of the Company's assets.  Such an event would have a 
material adverse impact on the Company's business, financial condition 
and results of operations.  The Company is obligated under the 
provisions of a capital lease to make monthly payments of $248 through 
the year 2002. 
 
 
Stock Incentive and Stock Grant Plans 
 
In 1993, the Board of Directors established a pool of 128,482 shares of 
the Company's common stock for a stock incentive plan for issuance to 
employees, consultants, distributors and their employees, and directors 
of the Company pursuant to the exercise of stock options granted under 
the plan or stock grants or stock sales.  Administration of the plan, 
including determination of the number of shares to be issued, the term 
of exercise of any option, the option exercise price, and type of 
options to be granted, lies with the Board of Directors or a duly 
authorized committee of the Board of Directors.  In January 1996, the 
shareholders of the Company approved an increase to the number of shares 
available under the Company's stock incentive plan to 360,000 shares.  
In January 1996, the shareholders also approved the adoption of a non-
employee director's stock option plan and the reservation of 40,000 
shares thereunder.  As of March 31, 1997, options for a total of 266,539 
shares have been awarded, net of cancellations.  Options have vesting 
periods ranging from two years to ten years.  Exercise prices range from 
$1.99 per share to $3.25 per share with a weighted average exercise 
price per share of $3.09.  No options have been exercised through March 
31, 1997.  During the quarter ended March 31, 1997, options for 140,000 
shares of the Company's common stock were issued with an exercise price 
of $3.25 per share.  In addition, during the quarter ended March 31, 
1997, the Company adjusted the exercise price to $3.25 for all 
previously issued and outstanding options with an exercise price in 
excess of $3.25.  Subsequent to March 31, 1997 the company repriced all 
outstanding options to $1.75.  A total of 126,539 options were re-
priced.  No compensation expense has been recorded as a result of 
granting any of the options as all such options were granted with an 
exercise price equal to the market price on the date of grant.  Options 
granted by the Company are expected to be converted to options of the 
new company expected to be formed in the consolidation of the Company 
and its affiliates.  See Proposed Merger note.  The options will be 
converted at the same conversion rate as the conversion of common stock 
discussed in the Pending Consolidation note. 
 
 
Income Taxes 
 
No benefit for income taxes was recognized for the quarters ended March 
31, 1997 and 1996 in the accompanying statement of operations as there 
can be no assurance that the Company will generate taxable income in the 
future against which such benefits could be realized.  At March 31, 
1997, the Company had a net operating loss carryforward aggregating 
approximately $4.6 million for federal income tax purposes, which may be 
used to offset future taxable income, if any.  The annual utilization of 
this carryforward may be limited if the Company undergoes the ownership 
change anticipated by management (see Proposed Merger note ) or fails to 
meet continuity of business requirements defined by the Internal Revenue 
Code.  The Company's net operating loss carryforwards begin expiring in 
2013. 
 
 
Related Parties 
 
Nature of related parties 
The Company's president partially owns and controls Willamette Valley  
Vineyards (WVV), a winery in Oregon, and Willamette Valley Inc.  
Microbreweries across America (WVI), a company organized to establish  
microbreweries throughout the United States.  Additionally, the 
Company's president , Jim Bernau, is the president of each of the 
following subsidiaries of WVI:  Aviator Ales, Inc. (AAI); Mile High 
Brewing Company (MHBC); Bayhawk Ales, Inc. (BAI); and North Country 
Brewing Company, Inc. (NCBCI); development stage companies located in 
Washington, Colorado and California, respectively.  As a result of 
certain arrangements between the Company and its affiliates, as well as 
the Company president's positions with and/or ownership interests in 
each of these companies, inherent conflicts of interest exist with 
respect to the pricing of services, the sharing of resources and 
allocation of the Company president's time. 
 
Related party transactions 
For the three months ended March 31,1996, the Company purchased human  
resources and other administrative services from affiliated companies,  
under a general services agreement at a total cost of $12,150.  For the 
three months ended March 31, 1997, the Company performed these services 
internally.  For the three months ended March 31, 1996, the Company 
purchased stock and sales support services from an affiliated company, 
Willamette Valley Vineyards, Inc., for $3,600. For the three months 
ended March 31, 1997, the Company performed these services internally.  
Under the general services agreement, the Company provided services such 
as accounting, sales management and executive oversight to WVI and it's  
subsidiaries and WVV.  The Company charged affiliates $48,567 for such  
services for the three months ended March 31, 1997 and $60,075 for the 
three months ended March 31, 1996. 
 
Strategic Alliance and Cooperative Brewing Agreements  
The Company has entered into a Strategic Alliance (the "Alliance") with 
AAI, MHBC, BAI, NCBCI, and WVI.  The Company, AAI, MHBC, and BAI are 
individually referred to as a "Cooperative Brewer."  The purpose of the 
Alliance is to promote and support the growth of all of the Alliance 
members by increasing production at each Cooperative Brewer's facility 
and supporting the entry of Nor'Wester products into new markets.  To 
achieve this goal, each Cooperative Brewer agreed to cooperatively brew 
Nor'Wester's products, and to support the entry of these products into 
new markets by facilitating Nor'Wester's access to the Cooperative 
Brewer's network of distributors.  However, due to the fact that 
Nor'Wester's Portland Brewery is not currently operating at capacity, as 
well as the fact that attempting to develop other regional markets for 
its products, the Cooperative Brewing Agreements are not being utilized.  
Should the consolidation occur as planned (see Proposed Merger note), 
the Strategic Alliance and agreements thereunder will terminate. 
In connection with the Cooperative Brewing Agreement with AAI and MHBC  
described above, Nor'Wester advanced $250,000 to each AAI and MHBC 
during 1995 for the purchase of ingredients and packaging materials for 
the cooperative brewer's initial production of Nor'Wester's products.  
In 1996, the Company advanced $100,000 and $350,000 to AAI and MHBC, 
respectively, for the cooperative brewing purchases and operating 
expenses.  In addition, the Company provided a loan of $35,000 to 
Bayhawk Ales, Inc. ("BAI") for the purchase of a grain silo and milling 
system to reduce cooperative brewing costs.  At March 31, 1997 these 
advances remain outstanding.  Because management expects these advances 
will eventually be eliminated when the proposed merger occurs, as 
discussed in the Pending Consolidation note, these advances have been 
classified as current receivables from affiliates at March 31, 1997. 
 
Joint Venture Agreement and Principles of Consolidation  
In 1996, the Company entered into a joint venture agreement with  
NCBI for the purpose of constructing, owning and operating a brewery in  
Saratoga Springs, New York (the "Saratoga Springs Brewery").  Under the  
terms of this agreement, the Company contributed $4,000,000 in cash and  
equipment which was used to construct and operate the brewery, as well 
as certain intangible assets for a 61% interest in the joint venture 
known as North Country Joint Venture, LLC (NCJV).  The Company also 
advanced $2,550,000 to the joint venture.  NCBCI was to repay the 
Company $2,550,000 in cash by October 1996 for its 39% of the joint 
venture in accordance with the agreement.  NCBI did not repay the 
Company.  Accordingly, NCBCI's rights to NCJV terminated and Nor'Wester 
became the 100% owner of NCJV.  Because Nor'Wester owned 100% of NCJV at 
March 31, 1997, no minority interest is recorded in the accompanying 
balance sheet or statement of operations.  The Saratoga Springs brewery 
makes up approximately 57% of the Company's net fixed assets. 
 
Receivables from affiliates 
The Company has not been repaid for a significant portion of the 
services provided and cash advanced to the affiliated companies.  
Accordingly, the Company has recorded on the accompanying balance sheet 
receivables from affiliates aggregating $1.9 million.  Because these 
receivables are expected to be eliminated or received in cash after the 
proposed merger with UBA occurs (see Proposed Merger note), these 
receivables have been classified as current at March 31, 1997.  
Receivables from each of the affiliated companies are as follows: 
 
     WVV  $   21,093 
     WVI     379,275 
     AAI     629,857 
     MHB     735,134 
     BAI      67,497 
     NCBI     96,128 
          ---------- 
          $1,928,984 
 
 
These balances are not expected by management to be fully collected in 
cash.  Instead, a portion is expected to be collected when the assets of 
MHBC are sold subsequent to March 31, 1997, and the remainder are 
expected to be eliminated when the companies are merged into the new 
company expected to be formed (see Proposed Merger note). 
 
 
Commitments and Contingencies 
 
Commitments 
The Company has entered into five-year operating lease arrangements for  
brewery and pub facilities in Oregon and New York which expire on 
January 31, 2000 and February 15, 2002, respectively.  The term of the 
lease in Oregon is renewable for an additional 10 years.  The New York 
lease has three five-year renewal options.  Annual payments under the 
leases total $178,740 (totaling approximately $2,078,717, including 
payments under renewal terms, over the terms of the leases) plus net 
charges for property taxes, fire insurance, and utilities.  Rent 
payments are adjusted annually based on increases in the consumer price 
index, limited to no more than a four percent annual increase.  The 
Company paid lease consideration of $50,000 in 1995 to hold the New York  
facility until construction began.  This payment was capitalized and is 
being amortized over a period of five years.   
 
Significant Customers 
A significant portion of the Company's sales are to distributors located 
in Oregon. 
 
 
Proposed Merger, Bridge Loan, and Subsequent Investment By UBA 
 
During the quarter ended March 31, 1997, the Company, along with its 
affiliates (WVI, AAI, MHBC and BAI) entered into an Investment Agreement 
with United Breweries of America, Inc. ("UBA"), an entity controlled by 
the UB Group of Bangalore, India.  The agreement provides for 
Nor'Wester, WVI, AAI, MHBC and BAI to merge into a company to be known 
as United Craft Brewers (UCB).  This proposed merger will result in the 
issuance of newly registered shares of UCB common stock in exchange for 
shares of Nor'Wester, WVI and its subsidiaries.  The merger and share 
exchange will require approval by the Boards of Directors and 
shareholders of each of the entities.  Following the merger, all 
shareholders in the Nor'Wester/WVI alliance will hold shares in UCB, a 
company which is intended to be listed for trading on the Nasdaq 
National Market system under the symbol ALES.  Proposed exchange ratios 
for each of the entities are as follows, based on an average closing 
price of $2.63 for Nor'Wester's common stock for the 20 trading days 
immediately preceding execution of the merger: 
 
   Company             Exchange 
                         Ratio 
   Nor'Wester          1.00000:1 
   WVI                 1.99159:1 
   AAI                 2.98739:1 
   BAI                 1.99159:1 
   MHBC                2.98739:1 
 
 
Following the proposed merger, UBA has proposed to invest $8.63 million 
in exchange for a 45% equity interest in the new entity, UCB.  Of the 
$8.63 million proposed investment by UBA, $2.75 million is in the form 
of bridge loans conditionally available to Nor'Wester during the 
consolidation phase.  As of March 31, 1997, $1.5 million has already 
been loaned to Nor'Wester, the majority of which has been advanced to 
North Country.  At closing, it is anticipated that the bridge loans will 
be converted into shares of UCB and the remaining $5.88 million cash 
investment will be made directly in shares of UCB.  All principal and 
interest related to the bridge loans is secured by the assets of North 
Country Joint Venture, the Company's wholly-owned subsidiary, and by the 
Company's ownership interest in North Country Joint Venture.  Repayment 
of all principal and interest is guaranteed personally by the Company's 
president.  The closing of the proposed investment remains subject to 
(i) approval by the shareholders of each of the companies, (ii) 
achievement of certain operating results at each of the breweries, (iii) 
maintenance of certain operating conditions and covenants, including 
that there shall be no material adverse change in the businesses of the 
affiliated breweries taken as a whole, (iv) approval by federal and 
state liquor control agencies, (v) registration with the U.S. Securities  
and Exchange Commission of UCB shares to be exchanged in the merger, 
(vi) extension of Nor'Wester's $1 million revolving line of credit 
through September 30, 1997 and the lender shall have waived any defaults 
under the line of credit agreement and the line of credit shall have 
been converted to a term loan and (vii) such other customary conditions 
for transactions of this type.  Immediately following the proposed 
investment by UBA, UBA would own 45% and the Company's president would 
own 10% of UCB.  The public shareholders of Nor'Wester, WVI, and 
subsidiaries would own the remaining 45% of UCB. 
 
 
Impact of Recent Accounting Pronouncements 
 
In February 1997, the Financial Accounting Standards Board 
("FASB") issued Statement of Financial Accounting Standards 
No. 128 "Earnings Per Share" ("SFAS 128") and Statement of 
Financial Accounting Standards No. 129, "Disclosure of 
Information about Capital Structure" ("SFAS 129")which are  
effective for fiscal years ending after December 15, 1997.  
The Company believes the implementation of these statements 
will not have a material effect on its results of operations 
or financial statement disclosures. 
 
 
Renegotiation of Proposed Merger and Investment by UBA 
 
In light of lower than anticipated 1996 operating results, lower than 
anticipated first quarter 1997 sales and other operating results and  
adverse conditions with the craft beer industry in general,  
representatives of UBA and management and the investment  
bankers of the affiliated companies are in the process of  
re-negotiating the terms of the UBA investment discussed in  
the Proposed Merger note.  The re-negotiating will reflect a  
significantly lower valuation for the affiliate companies, a  
reduction in the total amount of cash to be invested by UBA  
to $5.5 million and a reduction of UBA's percentage  
ownership position in UCB to 40% following consolidation.   
It is anticipated that the $2.75 million bridge loan will  
not be reduced.  The existing shareholders in the affiliated  
companies would retain a 60% interest in UCB.  The exact  
distribution of ownership interests among shareholders of  
the affiliated companies has not yet been determined.   
Management will soon seek Board approval by each of the  
affiliated companies of any re-negotiated terms.  Failure of  
the parties to reach a mutually agreeable re-negotiated  
investment agreement could lead to a loss of the bridge  
loans and the remainder of the UBA investment which would  
materially and adversely affect the Company's financial  
condition and results of operations.  There can be no  
assurance that the proposed merger will be completed or that  
the Company will obtain the capital needed to sustain  
operations. 
 
 
Item 2 -- MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION 
AND  
          RESULTS OF OPERATIONS 
 
 
 
            NOR'WESTER MANAGEMENT'S DISCUSSION AND ANALYSIS OF 
               FINANCIAL CONDITION AND RESULTS OF OPERATIONS 
 
 
Forward-Looking Information 
 
This Management's Discussion and Analysis of Financial Condition and 
Results of Operations and other sections of this Form 10-QSB contains 
forward-looking information within the meaning of the Private Securities 
Litigation Reform Act  of 1995.  This forward-looking information 
involves risks and uncertainties  that are based on current 
expectations, estimates and projections about the  Company's business, 
management's beliefs and assumptions made by management.   Words such as 
"expects," "anticipates," "intends," "plans," "believes,"  "seeks," 
"estimates" and variations of such words and similar expressions are 
intended to identify such forward-looking information.  Therefore, 
actual  outcomes and results may differ materially from what is 
expressed or  forecasted in such forward-looking information due to 
numerous factors,  including, but not limited to, availability of 
financing for operations,  successful performance of internal 
operations, impact of competition, changes in distributor relationship 
or performance, successful completion of the  planned consolidation of 
the Affiliated Companies, and other risks detailed  below as well as 
those discussed elsewhere in this Form 10-QSB and from time to time in 
Nor'Wester's Securities and Exchange Commission filings and reports.   
In addition, such statements could be affected by general industry and 
market  conditions and growth rates, and general domestic economic 
conditions.     
 
Consolidated Results of Operations. 
 
Nor'Wester's Saratoga Springs Brewery (North Country Brewing) began 
producingand selling beer in October 1996.  Therefore, the Company's 
consolidated results of operations for the quarter ended March 31, 1997 
include those of North Country Brewing while the results for the quarter 
ended March 31, 1996 do not. 
 
Gross Revenues.   
Gross revenues from beer, pub and retail products totaled $1,317,212 for 
the quarter ended March 31, 1997 and $1,554,845 for the quarter ended 
March 31, 1996.  The decrease in revenues is primarily a result of 
increased competition in its Pacific Northwest market from the continued 
proliferation of new and existing craft brewers and the introduction of 
fuller-flavored products by certain major national brewers.  North 
Country Brewery's gross revenues represented  $497,307 of consolidated 
gross revenues for the quarter ended March 31, 1997. 
 
Nor'Wester's Portland Brewery currently has an annual production 
capacity of 41,000 barrels.  Nor'Wester sold 4,480 barrels and 7,966 
barrels during the quarter ended March 31, 1997 and 1996 respectively. 
 
Nor'Wester's Saratoga Springs Brewery currently has an annual production  
capacity of 30,000 barrels and sold 2,724 and 0 barrels during the 
quarter ended March 31, 1997 and 1996, respectively. 
 
Excise Taxes 
Excise taxes decreased to $63,365 (4.8 % of gross revenues) for the 
quarter ended March 31, 1997 from $75,059 (4.8 % of gross revenues) for 
the quarter ended March 31, 1996.  The decrease in excise taxes is the 
result of the decreased gross sales on which the taxes are assessed. 
 
Cost of Goods Sold. 
Cost of goods sold totaled $980,409 (78 % of net revenues) for the 
quarter ended March 31, 1997 compared to $968,267 (65 % of net revenues) 
for the quarter ended March 31, 1996.  The increase in cost of goods 
sold as a percentage of net revenues is due primarily to the 
commencement of brewing operations at the Saratoga Springs facility 
which is operating below designed capacity and the increased cost 
structure due to additional brewing equipment (tanks and cooperage) 
acquired to meet anticipated sales that never materialized. 
 
Selling, General and Administrative 
Selling, general and administrative ("SG&A") expenses increased to 
$578,838(46 % of net revenues) for the quarter ended March 31, 1997 from 
$475,471 (32 % of net revenues) for the quarter ended March 31, 1996.  
The increase in SG&A expenses is primarily attributable to marketing and 
related costs associated with initial production at the Saratoga Springs 
Brewery and increased shipping costs associated with delivering beer to 
markets located considerable distances from the Portland and Saratoga 
Brewing facilities. 
 
Net Income (Loss).  
As a result of the individual line items discussed above, net loss was  
$423,997 for the quarter ended March 31, 1997 compared to net income of  
$63,057 for the quarter ended March 31, 1996. 
 
Liquidity and Capital Resources 
 
Cash and cash equivalents decreased $171,506 to $80,543 for the quarter 
ended March 31, 1997 primarily due to operating losses incurred during 
the quarter.  Uses of funds included an increase in inventory of 
$110,395, an increase in other current assets (mostly marketing and 
point of sale materials) of $116,141, and increases in receivables to 
affiliates of $130,634.  Bridge loans provided by UBA of $600,000 was 
the primary source of funds. 
 
The Company's working capital deficit was $3,485,922 at March 31, 1997, 
compared to working capital of $10.4 million at March 31, 1996.  The 
decreasein working capital reflects the use of funds generated from the 
Company's initial public offering in January 1996 to support the 
Company's operations, provide capital to build the Saratoga Springs 
facility, and fund efforts to expand its markets nationally.   
 
Accounts payable at March 31, 1997 totaled $2,365,868 compared to 
$2,427,073 at December 31, 1996, and $479,000 at March 31, 1996.  Of the 
$2,365,868 at March 31, 1997 $2,093,991 was past due.   
 
At March 31, 1997 and December 31, 1996, the Company had outstanding 
$2,842,351 million under its bank credit facilities consisting of a $1 
million revolving line of credit and a $1,842,351 non-revolving credit 
facility.  The non-revolving loan bears interest at 8.63% and calls for 
equal monthly installments over a 7-year period.  The revolving line of 
credit expired on December 31, 1996 and remains unpaid.  Under the 
credit facilities, Nor'Wester must (i) maintain certain financial 
ratios, (ii) not incur further debt or create or assume any other lien 
on its property without the bank's prior approval, and (iii) make no 
payment of dividends without the bank's prior approval.  Nor'Wester is 
in violation of items (i) and (ii).  Nor'Wester is involved in 
discussions with the lender in order to (i) renew the $1.0 million 
credit facility to mature on the earlier of September 30, 1997 or 10 
days following closing of the investment by UBA and (ii) waive the loan 
covenants associated with these loans so long as Nor'Wester remains in 
compliance with all terms of the Investment Agreement and achieves 
reasonable progress toward closing the investment with UBA.  Subsequent 
to March 31, 1997, the bank notified the Company that the non-revolving 
credit facility would also be due on September 30, 1997. 
 
In 1996, Nor'Wester utilized capital primarily to finance the 
construction and start-up of the Saratoga Springs Brewery and increases 
in brewing capacity to its existing facilities.  In addition, Nor'Wester 
required capital to finance operations and continues to require capital 
for ongoing operations.  The recently completed construction and start-
up of the Saratoga Springs Brewery and Nor'Wester's attempts to regain 
market share in the Portland area for its Nor'Wester branded products 
has had and is expected to continue to have a material impact on 
Nor'Wester's assets, liabilities, capital expenditure commitments, and 
liquidity.  
 
The Company's management believes that projected income from operations 
is not sufficient to meet the Company's cash needs over the next twelve 
months. The Company's independent accountants expressed substantial 
doubt as to the Company's ability to continue as a going concern in 
their report on the Company's 1996 consolidated financial statements. 
 
DEPENDENCE UPON BRIDGE LOANS AND INVESTMENT FROM UNITED BREWERIES OF 
AMERICA, INC.   
The Company has been and continues to be highly dependent upon the  
receipt of bridge loans and investment funds from UBA to pay creditors 
and sustain the Company's operations during the expected periods of loss 
until profitability is restored.  Since October 1996 through the date of 
this report, UBA has provided $1.9 million in bridge loans under the 
$2.75 million credit facility.  The receipt of additional advances under 
the credit facility and closing of the investment is subject to the 
Affiliated Companies' compliance with certain covenants and conditions 
set forth in the Investment Agreement and credit documents, including 
the condition that no "material adverse effect" occurs in the businesses 
of the Affiliated Companies as a whole.  While the Company is dependent 
upon the receipt of further bridge and closing of the UBA investment, 
the Company does not control the business or operations of the other 
Affiliated Companies and can not assure that it or another Affiliated 
Company will not violate one or more covenants in the Investment 
Agreement or that a closing condition will not be met.  Accordingly, 
there can be no assurance that the Company will receive further bridge 
loan amounts or that the investment will ultimately close or will close 
on the terms set forth in the Investment Agreement. See footnotes to  
consolidated financial statements -- Pending Consolidation.  If for any 
reason, the Company is unable to pay past due creditors and finance 
working capital requirements through an investment by UBA, alternative 
methods of financing would have to be obtained.  No assurance can be 
given that alternative methods of financing would be obtained.  No 
assurance can be given that alternative methods of financing would be 
available on terms acceptable to the Company, or at all.  Having to 
develop alternative means of financing would likely slow development of 
the existing breweries and such alternative financing may be costly.  
The inability of the Company to obtain additional capital would 
adversely affect the Company's business and results of operations. 
 
AMOUNTS PAST DUE TO CONTRACTORS, SUPPLIERS AND EQUIPMENT VENDORS.   
At March 31, 1997 and as of the date of this report, the Company was 
past due on $1.9 million and $2.1, respectively, of its accounts 
payable.  The Company has communicated with these creditors and has 
negotiated acceptable payment terms to be funded primarily through 
bridge loans from UBA.  If the Company does not have the cash needed to 
pay the amounts due and is not able to work out satisfactory alternative 
payment arrangements, these contractors, suppliers and vendors may seek 
to exercise their remedies, including the filing of liens against the 
Company's assets.  As of the date of this report, management is aware of 
three creditors who have filed liens to secure an aggregate of $414,103 
owed.  Resolving the Company's payment obligations to its contractors, 
suppliers and vendors may distract Management from its other duties, 
involve additional expense, and result in production delays which in 
turn could have a material adverse impact on the Company's business, 
financial condition, and results of operations. 
 
 
 
 
PART II.   OTHER INFORMATION 
 
Item 3. Defaults Upon Senior Securities 
 
The Company had a $1,000,000 revolving bank line of credit which expired 
on December 31, 1996.  The line is secured by the Company's assets, and 
containscertain covenants and restrictions.  At March 31, 1997 
$1,000,000 was outstanding under this line of credit. 
 
The Company has a $1,842,351 term loan with the same financial 
institution.  At March 31, 1997, $1,842,351 was borrowed under this 
facility.This and the revolving credit facility discussed above are 
secured by the Company's assets and contain covenants which require the 
Company to maintain financial ratios and prohibit the Company from 
making any dividend payments without the bank approval. 
 
At March 31, 1997, the Company was not in compliance with certain loan  
covenants relating to both the term loan facility and the revolving 
credit facility.  The Company is involved in discussions with the lender 
in order to (I) renew the $1 million revolving line of credit facility 
to mature on the earlier of September 30, 1997, or 10 days following 
closing of the investment by UBA, and (ii) waive the loan covenants 
associated with theses loans so long as the Company remains in 
compliance with all terms of the investment agreement and achieves 
reasonable progress toward closing the investment with UBA.  Subsequent 
to March 31, 1997, the bank notified the Company that the non-revolving 
credit facility would also be due on September30, 1997.  However, final 
approval of amendment to the lender's loan agreements has not yet been 
received.  If final approval is not received or if received but the 
Company subsequently violates the terms of the amendment,then the 
Company would be in default of its loans which could lead to foreclosure 
and sale of all or an important part of the Company's assets. Such an 
event would have a material adverse impact on the Company's business, 
financial condition and results of operations.  Subsequent to March 31, 
1997 the bank notified the Company that the non-revolving credit 
facility would also be due on September 30, 1997. 
 
 
Item 6. Exhibits and Reports on Form 8-K. 
 
 (a) Exhibit 1 - Definitive Investment Agreement press release dated 
January 30, 1997. 
 
 (b) Reports on Form 8-K: 
 
On January 30, 1997, the Company filed a Form 8-K in connection with its  
execution of a definitive investment agreement with United Breweries of  
America, Inc., an affiliate of the UB Group of Bangalore, India.  Under 
termsof the agreement, UBA will invest approximately $9 million in cash 
in exchange for a 45% equity interest in a new entity comprised of the  
consolidated businesses of Nor'Wester, North Country Brewing Company, 
LLC., Willamette Valley, Inc., Microbreweries across America and its 
affiliates - Aviator Ales, Inc., Bayhawk Ales, Inc., Mile High Brewing 
Company, Inc.  The Form 8-K set forth the terms and conditions of the 
proposed investment as outlined in the letter of intent ,and included as 
exhibits copies of the letter of intent dated September 26, 1996, and a 
January 30, 1997 press release relating to the matter. 
 
Exhibit 1 
 
 
SIGNATURES 
 
 
Pursuant to the requirements of the Security Exchange Act of 1934, the  
Registrant has duly caused this report to be signed on its behalf by the  
undersigned thereunto duly authorized. 
 
 
NOR'WESTER BREWING COMPANY, INC. 
 
 
 
 
Date:  May 15, 1997    By _________________________ 
                             James W. Bernau 
                             President 
 
 
 
SIGNATURES 
 
Pursuant to the requirements of the Security Exchange Act of 1934, the  
Registrant has duly caused this report to be signed on its behalf by the  
undersigned thereunto duly authorized. 
 
 
NOR'WESTER BREWING COMPANY, INC. 
 
 
 
 
Date: May 15, 1997 by /s/ James W. Bernau 
                          James W. Bernau 
                          President