U.S. Securities and Exchange Commission
                         Washington, D.C.  20549

                              Form 10-QSB

[X]   QUARTERLY REPORT PURSUANT SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE 
ACT OF 1934 For the quarterly period ended September 30, 1997

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

Commission file number 0-21087

                      Tollycraft Yacht Corporation
      Exact name of small business issuer as specified in its charter)

                 Nevada                          86-0849925
        (State or other jurisdiction of        (I.R.S. Employer
        incorporation or organization)         Identification No.)

              17 Horton Plaza, Suite 251, San Diego, CA 92101
            (Address of principal executive offices)  (Zip Code)

                             (360) 414-5910
            (Registrant's telephone number, including area code)

Check whether the issuer (1) filed all the reports required to be filed by 
Section 13 or 15(d) of the Exchange Act during the past twelve 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 ...

The number of shares of common stock outstanding as of September 30, 1997 is 
2,270,368.

Transitional Small Business Disclosure Format (check one): Yes ... No .X.

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

Effective for the year ending December 31, 1996, the Company changed its 
method of accounting for the recognition of revenue.  In previous years, 
revenue was recognized using the percentage-of-completion method which 
recognizes income based on the percentage of costs completed to the total 
estimated cost of each yacht as production progresses.

The Company now records production costs of each yacht in a work-in-process 
inventory account and records deposits and billings on each yacht in a 
liability account.  Income and direct production costs are recognized on the 
Statement of Operations when a yacht is completed, shipped and title 
transferred.

The accompanying comparative financial statements for 1996 have been restated 
to give effect for this change and are comparable to the 1997 statements.

Tollycraft Yacht Corporation
Third Quarter - 1997

Balance Sheet
                                   December 31,  September 30,
                                       1996          1997
Current Assets
   Cash                                    677        10,928
   Accounts receivable                  32,000        37,000
   Inventory - Raw materials           288,313       292,008
   Inventory - Work-in-process       1,867,999     1,501,348
   Other current assets                  7,749       385,917
                                     2,196,738     2,227,201

Property and Equipment, net          2,731,394     2,636,338


Other Assets                           274,594       362,554

   Total Assets                      5,202,726     5,226,093


Current Liabilities
   Accounts payable                  1,426,644     1,306,292
   Accrued payroll & taxes           2,077,250     2,235,589
   Notes payable                     7,195,747     7,962,208
   Other current liabilities         1,652,186       412,362
   Customer deposits                   678,000       600,800
   Long-term debt - due within one     940,601     1,046,701
                                    13,970,428    13,563,952

Net Deferred Tax Liabilities           124,184       132,112

Long-term Debt                         534,289     1,132,893


Stockholders Equity (Deficit)
   Common Stock                      2,829,703     4,594,171
   Retained earnings (deficit)     (12,255,878)  (14,197,035)
                                    (9,426,175)   (9,602,864)

   Total Liabilities and 
   Stockholders' Equity              5,202,726     5,226,093

<TABLE>
<CAPTION>
Statement of Operations

                                   Three Months                Nine Months
                                   Ended September 30,     Ended September 30,
                                       1996          1997        1996            1997
<S>                                   <C>           <C>         <C>             <C>
Net sales                              155,919       144,013     3,924,963       900,783

Cost of sales                          148,896       194,118     5,354,045       868,907

Gross Margin                             7,023       (50,105)   (1,429,082)       31,876

Excess plant capacity                  166,182       192,895       378,181       726,633

Selling expenses                        69,479         3,469       338,069        81,189

General and administrative expenses    250,957       132,678       880,768       400,917

Income (loss) from operations         (479,595)     (379,147)   (3,026,100)   (1,176,863)

Other income (expenses):
   Interest, net                      (248,012)     (262,351)     (689,508)     (764,294)
   Gain on sale of assets                    0             0             0             0
   Other                                12,305             0         9,290             0
        Total other income (expense   (235,707)     (262,351)     (680,218)     (764,294)

Income (loss) before provision for    (715,302)     (641,498)   (3,706,318)   (1,941,157)

Provision for income taxes - deferred      4,663             0        69,120           0

Net income (loss)                     (719,965)     (641,498)   (3,775,438)   (1,941,157)

</TABLE>

Statement of Cash Flows
                                   Nine Months
                                   Ended September 30,
                                       1996          1997

Cash, January 1,                        19,878           677

Cash flows from operating activities:
   Net loss                         (3,775,438)   (1,941,157)
   Adjustments to reconcile net loss
   to net cash used by operations
       Depreciation                    280,887       290,861
   Change in assets and liabilities
       Accounts receivable              23,038        (5,000)
       Material inventory               (1,687)       (3,695)
       Work-in-process inventory       155,814       366,651
       Other current assets            (31,867)     (378,168)
       Accounts payable                469,879      (120,352)
       Accrued payroll & taxes         811,439       158,339
       Customer deposits               573,000       (77,200)
       Other current liabilities       640,695    (1,239,824)
       Deferred tax liability           63,265         7,928
                                      (790,975)   (2,941,617)

Cash flows from investing activities:
   Purchase of other assets              5,855       (87,960)
   Purchases of equipment             (235,646)     (195,805)
                                      (229,791)     (283,765)

Cash flows from financing activities:
   Proceeds from notes payable       1,811,817       766,462
   Repayment of notes payable       (1,199,893)            0
   Proceeds from long-term debt        413,000       704,703
   Repayment of long-term debt         (23,000)            0
   Issuance of common stock                  0     1,764,468
                                     1,001,924     3,235,633

Net increase (decrease) in cash        (18,842)       10,251

Cash, September 30,                      1,036        10,928

TOLLYCRAFT YACHT CORPORATION
Notes to Financial Statements
For the Three Months Ended September 30, 1997

Note 1 - Basis of Presentation

The accompanying financial statements have been prepared by Tollycraft Yacht 
Corporation without audit, pursuant to the rules and regulations of the 
Securities and Exchange Commission.  Certain information and footnote 
disclosures normally included in financial statements prepared using generally 
accepted accounting principles have been condensed or omitted pursuant to such 
rules and regulations.

The financial information presented herein reflects all normal recurring 
adjustments which are, in the opinion of management, necessary for fair 
presentation of the results for the interim periods presented.  The results 
for the interim period are not necessarily indicative of the results to be 
expected for the full year.

The presentation of financial statements in conformity with generally accepted 
accounting principles requires management to make estimates and assumptions 
that affect reported amounts of assets, liabilities, income and expenses and 
disclosure of accounting information.  Future events could alter such 
estimates.

Note 2 - Summary of Significant Accounting Policies

The Company and Acquisitions
Tollycraft Yacht Corporation (the Company) was incorporated under the 
laws of the State of Minnesota on December 7, 1992.  In January of 1996, 
the Company acquired all of the outstanding stock of Tollycraft 
Acquisition Corporation (TAC), a Washington corporation incorporated on 
February 4, 1994.  The Company also changed its name from Child Guard 
Corporation to Tollycraft Yacht Corporation in connection with the 
acquisition.

The acquisition by the Company of TAC has been accounted for as a 
purchase.  Except where otherwise indicated, all references to the 
Company in these financial statements and notes thereto include the 
activities of TAC.

Nature of Business
The Company is engaged in the manufacture and distribution of luxury 
motor yachts.

Cash
The Company periodically throughout the period maintained cash balances 
in its bank accounts in excess of federally insured limits.

Inventories
Raw material inventories are valued at the lower of average cost or 
market.  Work-in-process inventories are valued at actual costs incurred 
including an allocation for manufacturing overhead.

Equipment
Equipment is valued at cost.  Depreciation of equipment is provided 
using the straight line method over the estimated useful life of the 
assets.  Additions and improvements, including patterns and molds for 
yacht production which have been produced internally, are capitalized at 
cost.

Accrued Warranty Reserve
The Company records an accrual on the sale of each yacht for estimated 
warranty claims.  There is a general one year warranty for parts and 
labor to the original owner for defects in material and workmanship.  
There is also a transferable 15 year warranty for structural defects in 
all Tollycraft built hulls, deck bridges, stringers, and bulkheads.

Revenue Recognition
The Company records production costs of each yacht in a work-in-process 
inventory account and records deposits and billings on each yacht in a 
liability account.  Income and direct production costs are recognized on 
the Statement of Operations when a yacht is completed, shipped and title 
transferred.

Pension and Profit Sharing Plans
Union and non-union employees participate in a pension plan which 
qualifies under Section 401(k) of the Internal Revenue Code.

Note 3 - Equipment
Equipment consists of the following

Manufacturing equipment		     	$    391,020
Office furniture and fixtures		     486,126
Yacht molds and patterns		        2,888,444
Vehicles					                        39,958
						                            3,805,548
Less accumulated depreciation	 -  1,169,210
                          					$  2,636,338

Note 4 - Work-in-process Financing
The Company has a $3,000,000 line-of-credit with Caterpillar Financial 
Services Corporation (CFSC).  Under the terms of the agreement, 
borrowings are available to 75% of the dealer net price of each yacht.  
Advances are made at 1/3 upon commencement of the hull lamination, 1/3 
upon commencement of the assembly process, and 1/3 upon installation of 
the engines.  Interest on borrowings is payable monthly at a variable 
rate.  Borrowings are collateralized by specific vessels with assigned 
hull numbers upon which CFSC has advanced funds and filed specific UCC-
1's.  Outstanding borrowings at September 30, 1997 were $3,000,000.

The Company is also required to maintain a minimum level of stockholders 
equity and a ratio of total liabilities to stockholders equity.  At 
September 30, 1997, the Company was in violation of these minimum 
requirements.

Note 5 - Notes Payable
The Company has other lines-of-credit with Vera Corporation, Commercial 
Factors, and California Factors and Finance for working capital 
purposes.  Interest on borrowings is payable monthly at a rate of 12%.  
Borrowings are collateralized by substantially all assets.

Note 6 - Long-term Debt
Long-term debt consists of various obligations assumed in 1994 by 
Tollycraft Acquisition Corporation in connection with the purchase of 
the yacht manufacturing business, tooling, molds, patterns and all 
rights and privileges to the name "Tollycraft".
Note 7 - Leases
The Company leases its manufacturing facilities in Kelso, Washington.  
Effective October 1, 1995, the Company entered into a twenty year lease 
at $29,500 per month.  The agreement calls for 7% increases at the end 
of each five year period of the lease.

Note 8 - Provision for Income Taxes
Deferred income taxes are recognized for all significant temporary 
differences between the tax and financial statement basis of assets and 
liabilities.  The classification of the resulting deferred tax assets 
and liabilities is based upon the classification of the related balance 
sheet asset or liability.  Deferred tax assets and liabilities result 
principally from the Company's net operating loss carryforwards, 
differences in depreciation methods for tax purposes and other temporary 
differences.

Item 2. Management's Discussion and Analysis or Plan of Operation

During the third quarter, Tollycraft Yacht Corporation was operating at 
limited capacity as a result of insufficient working capital and ongoing 
financial difficulties.  The management group has identified specific goals 
for the next 12 to 24 month period including:

1. Obtain additional debt or equity financing to continue operations
2. Maintain customer and dealer relationships
3. Shape maximum customer confidence
4. Invest in updating and redesigning the current product line
5. Complete development of a new series of yachts
6. Expand the dealer network
 
Significant expenses have been incurred to date to implement these goals.  In 
order for the Company to meet its cash requirements and continue operating, 
the Company must achieve profitable operations and/or obtain additional debt 
or equity financing.

Third quarter operations included some construction activity on a contract 
basis on an incomplete yacht sold in June 1997.  A short period of production 
proceeded during July through September in order to finish the vessel to 
Tollycraft standards.  Production of the yacht was financed through 
progressive payments from the owner.

Results of Operations

Current results reflect the difficulty the Company has had in raising the 
necessary working capital   A net loss of $(641,498) was incurred on net sales 
of $144,013.  The revenue resulted from a construction contract to complete a 
partially constructed yacht sold in June.

The majority of the manufacturing expenses incurred during the third quarter 
were fixed costs relating to plant overhead expenses and some wages for 
essential personnel.  These costs have been identified as "Excess plant 
capacity" on the Statement of Operations.

Financial Condition

The cumulative losses of the Company continue to be financed with current 
liabilities.  Current liabilities of $13,563,952 exceed current assets of 
$2,227,201 resulting in a current ratio of .16.
Current assets include prepaid consulting fees $360,000 financed by the 
issuance of common stock pursuant to an employee benefit plan.

The Company is unable to make timely payments to its landlord, trade 
suppliers, material vendors, and various taxing authorities.  Deferred payment 
terms have been or are being negotiated with various taxing authorities.  
State and local taxing authorities have agreed to payment terms while 
negotiations continue with federal authorities.

The Company is considering numerous alternatives to improve its financial 
position, meet trade obligations, pay delinquent tax balances, and fund 
capital expenditure requirements.  These include converting current debt to 
equity through the issuance of common shares and the sale of common shares to 
raise working capital.  The Company has engaged the services of professional 
advisors to perform the financing activities.  

Other Information

During the third quarter the Company has experienced an attempt by its 
landlord to take over the Company through a forced liquidation.  The property 
owner, who had been a member of the Company's "Capital Formation Committee", 
had agreed to accept stock in Tollycraft for his lease payments.  On July 2, 
1997 the Company was served with a "Writ To Vacate" for failure to make 
payments under the terms of the lease.  Prior to serving the Company with the 
"Writ", the landlord notified certain key vendors, customers, and debtors of 
his intentions for the takeover.

On the day of the court hearing for the Writ to Vacate, the landlord produced 
a document whereby Tollycraft Yacht Corporation and its officers would agree 
not to sue him for tortuous interference as a direct result of his actions.  
The document also required that Tollycraft not file a class action shareholder 
lawsuit against him, again as a result of his actions.  Tollycraft Yacht 
Corporation and its officers opted to not sign any such agreement indicating 
it would not be in the best interest for the Company or its shareholders.  In 
August, 1997 the Company vacated the manufacturing plant and surrendered the 
property to the landlord.  A reduced level of operations were relocated to a 
local warehouse to complete the current active construction contract

As a result of the Writ being served, Cowlitz County filed a notice of 
distraint on August 22, 1997 for the non payment of personal property tax.  
This prompted the IRS to also begin proceeding against the Company for unpaid 
taxes and withholdings.  Vera Corporation, the senior secured debt holder for 
Tollycraft, has filed a notice to the taxing authorities informing them of 
their right to any of the assets of Tollycraft based on their UCC filing.  The 
assets of the Company are being held in storage pending a resolution of the 
financial rights of the creditors involved.  Cowlitz County subsequently filed 
a release of distraint on the assets on October 17, 1997.  Negotiations 
continue with the Internal Revenue Service.

Tollycraft's Future

The following narration outlines a program for Tollycraft Yacht Corporation to 
continue as a builder of luxury motor yachts, and also to be an attractive 
investment for the capital markets. It contains certain forward-looking 
statements within the meaning of the Private Litigation Reform Act of 1995 
with respect to the financial condition, results of operations and business of 
the company. these forward-looking statements involve certain risks and 
uncertainties, and as such may involve known and unknown risks, uncertainties 
and other factors which may cause the actual results, performance or 
achievements of the company to be materially different from any future 
results, performance or achievements express or implied by such 
forward-looking statements. Such forward-looking statements speak only as of 
the date of this document.  The company expressly disclaims any obligation or 
undertaking to release publicly any updates or revisions to any 
forward-looking statements contained herein to reflect any change in the 
company's expectations with regard thereto or any change in events, conditions 
or circumstances on which any such statement is based. 
  
Tollycraft has been in business for 63 years and has produced some of the 
finest motor yachts available.  However, the Company has operated as a Union 
Shop and typically had the highest labor rates in the industry.  Even with the 
concessions in the current labor contract recent research has determined that 
other manufacturers labor rates are much less.  Thousands of man-hours go into 
the production of each vessel.  These circumstances have contributed to 
Tollycraft Yachts becoming some of the most expensive yachts in their class.  
While these retail prices have not diminished demand for the finished product 
it is only evident that at some point in the future, Tollycraft would price 
itself out of existence.

In order to move into the 21st century and beyond Tollycraft is making some 
massive changes in its organization, manufacturing, marketing, and sales.  The 
boating industry itself is maturing with many companies being purchase or 
merging with other entities.  This consolidation process is being recognized 
as a healthy improvement in the yacht building industry.  Just as important is 
the perceived favorable climate for the yacht consumer.

Tollycraft's future plans are to outsource the manufacturing of all yachts.  
While this process is not new, it will allow Tollycraft to concentrate on its 
financial posture during 1995.

The Company plans to build the smaller 18' to 57' yachts in Mexico.  With the 
yachts being built to the same standards of quality control as Tollycraft 
requires the cost savings are projected to be as much as 30%.  Materials used 
in construction would remain the same, with inventory being shipped from the 
Unites States.  Major savings would result from lower direct labor costs as 
well as cost reductions in general and administrative expenses.  In addition, 
this will allow the Company to broaden its product line and again offer 
smaller Tollycraft vessels that had previously been discontinued because 
domestic manufacturing costs became prohibitive.  The Company is also looking 
toward one of the largest producers of 100' and over powerboats to manufacture 
its 65' and larger sized vessels.  This builder is located in Florida, where 
90% of the 65' Tollycraft yachts have been sold.

The Company also plans to relocate its corporate offices to south Florida.  
Administrative functions, new designs and engineering and all promotional and 
marketing support for the sale of Tollycraft yachts would be headquartered in 
a location considered to be the yacht capital of the world.

For marketing, the Company is considering a strategic alliance with a major 
franchised yacht broker.  This broker anticipates 50 major yacht dealerships 
across the United States and the rest of the world.  Each franchisee would be 
required to carry an inventory of Tollycraft vessels.  This would propel 
Tollycrafts' gross sales to over $100MM in a very fast time frame.  In this 
business, the size of production facilities limit sales.  By outsourcing yacht 
production to reputable manufacturers expansion may be realized without the 
enormous capital outlays necessary for plant expansion and improvements.

With the Mexican connection, Tollycraft Yacht Corporation interest on being 
listed on the Mexican stock exchange.  This would be the first U.S. Company to 
go in this direction. It is anticipated that funds may be generated from an 
offering in Mexico that would be solely used for production of vessels in 
Mexico.

Additionally, four new models are in various stages of design and testing.  
The new models will have significantly higher profit margins when fully 
developed.  This would allow the Company to become extremely competitive.  
Being able to offer $30,000,000 in wholesale production has generated 
inquiries from experienced, interested parties and discussions continue.  The 
yachts would be built to the same quality standards that Tollycraft customers 
demand.

Lastly, the Company has signed an Investment Banking Agreement with Lloyd Wade 
Securities of Dallas, Texas, for a Private Placement of $3,000,000 to provide 
the necessary capital for Tollycraft to go forward with its plans.  The 
Company also plans on doing a registration of its stock to convert all of its 
debt to equity and to repay all vendors and noteholders at 100%.  This will 
leave the Company debt free with a positive equity section and funding for 
operations.

In general Tollycraft management feels that the Company is in its best 
position in recent history.  The months ahead will set the course for the next 
decade of Tollycraft Yachts.  It is the goal of management to have a company 
that is debt free and for the first time have a surplus of cash in the bank.

PART II - OTHER INFORMATION

Item 1. Legal Proceedings

Kenneth N. Findley and Island Dreamer, Inc. v. Tollycraft Yacht Corporation
125th Judicial District, Harris County, Texas
Original File Date: 1995
Claim for breach of express and implied warranties resulting from water damage 
caused by plugged drains and associated loss of market value.  Default 
judgment set aside.  Amended petition relief sought in the amount of $100,000 
plus three times actual damages and legal costs.  Set for trial on May 25, 
1998.

Larry and Vicki Castello v. Searock, Inc., d/b/a The Allied Marine Group, 
Tollycraft Yachts, and D.R. Cooley, individually.
17th Judicial Circuit Court, Broward County, Florida
Original File Date : October 11, 1996
Claim for treble damages in excess of $2,700,000 plus attorney fees and costs 
for failure to deliver a 57 foot yacht as scheduled.  Answers by all 
Defendants have been filed and motions to dismiss have been filed and heard.  
No decision has been rendered on the Defendants Motion to Dismiss.

Estate of Nora Folkenflik v. Tollycraft Yacht Corporation
King County, Washington Superior Court,
Original File Date: January 13, 1997
Alleged wrongful death suit relating to liquor liability as a result of an 
individual's auto accident after attending open house co-sponsored by 
Tollycraft.  Relief sought to be determined by the court.

D & C Lemmons Enterprises, L.L.C. v. Tollycraft Acquisition Corporation
Superior Court of Washington for Cowlitz County
Original File Date: July 14, 1997
Object of action is to terminate lease of manufacturing plant leased by 
Tollycraft, payment of delinquent rent and property taxes of $250,768, plus 
interest on all unpaid sums.  Scheduled for trial on October 29, 1997

Judith A. Southard v. Tollycraft Acquisition Corporation
United States District Court for the Western District of Washington, No. C97-
5400-FDB
Original File Date: July 9, 1997
Plaintiff alleges employment discrimination on the basis of age and sex.  
Seeks sustained wage loss of $39,250 plus compensatory and punitive damages in 
the amount of $1,300,000

Item 2. Changes in Securities

None.

Item 3. Defaults Upon Senior Securities

Caterpillar Financial Services Corporation
The Company has not made timely payments as required by the debt 
agreement.  Total debt is $3,422,921 including accrued interest in 
arrears of $422,921.

Vera Corporation
The Company has not made timely payments as required by the debt 
agreement.  Total debt is $3,342,930, including accrued interest in 
arrears of $768,293.

Commercial Factors of Portland
The Company has not made timely payments as required by the debt 
agreement.  Total debt is $146,493 including accrued interest in arrears 
of $26,493.

California Factors & Finance
The Company has not made timely payments as required by the debt 
agreement.  Total debt is $304,561 including accrued interest in arrears 
of $54,461.

Item 4. Submission of Matters to a Vote of Security Holders

None

Item 5. Other Information

None

Item 6. Exhibits and Reports on Form 8-K

     (a) Exhibit Table:

27 Financial Data Schedule

     (b) No reports on Form 8-K were filed during the quarter.

                                  [Signatures]

In accordance with the requirements of the Exchange Act, the registrant caused 
this report to be signed on its behalf by the undersigned, thereunto duly 
authorized.

Tollycraft Yacht Corporation
    (Registrant)


Date: 11-18-97


By:/s/_______________________________
   D.R. Cooley, President
   Chief Operating Officer
   Chief Financial Officer