##### Table of Contents



---

---

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549




---

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 SEPTEMBER 30, 2003                                               

|     |  |                                                                                         
|---- |  | ----------------------------------------------------------------------------------------
|[  ] |  | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
|     |  | (No Fee Required)                                                                       

For the transition period from          to          .

Commission file number 0-27116



---

PYRAMID BREWERIES INC.

(Exact name of registrant as specified in its charter)


|                                                               |  |                                     
|-------------------------------------------------------------- |  | ------------------------------------
|Washington                                                     |  | 91-1258355                          
|(State or other jurisdiction of
incorporation or organization) |  | (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 [  ].

Indicate by check mark whether the registrant is an accelerated filer (as
defined in Exchange Act Rule 12b-2). Yes [  ] No [X]

Common stock, par value of $.01 per share: 8,558,073 shares of Common
Stock outstanding as of September 30, 2003

1



---

TABLE OF CONTENTS



|                            |                                                                                                |                               |  |  |  |  |  | 
|--------------------------- | ---------------------------------------------------------------------------------------------- | ----------------------------- |  |  |  |  |  | 
|PART I                     
|                            | Item 1  FINANCIAL STATEMENTS                                                                 
|                            |                                                                                                | BALANCE SHEETS               
|                            |                                                                                                | STATEMENTS OF OPERATIONS     
|                            |                                                                                                | STATEMENTS OF CASH FLOWS     
|                            |                                                                                                | NOTES TO FINANCIAL STATEMENTS
|                            | Item 2  Managements Discussion and Analysis of Financial Condition and Results of Operations
|                            | ITEM 3. Quantitative and Qualitative Disclosures about Market Risk                            
|                            | ITEM 4. Controls and Procedures                                                               
|PART II  OTHER INFORMATION
|                            | ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K                                                      
|SIGNATURE                  
|EXHIBIT 31.1               
|EXHIBIT 31.2               
|EXHIBIT 31.3               
|EXHIBIT 32.1               
|EXHIBIT 32.2               
|EXHIBIT 32.3               



---



##### Table of Contents



PYRAMID BREWERIES INC.
FORM 10-Q
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2003

TABLE OF CONTENTS

|        |  |                                                                                                    |  |     
|------- |  | -------------------------------------------------------------------------------------------------- |  | ----
|        |  |                                                                                                    |  | Page
|        |  |                                                                                                    |  |     
|PART I  |  | FINANCIAL INFORMATION                                                                              |  |     
|Item 1. |  | Financial Statements (Unaudited)                                                                   |  |     
|        |  | Balance Sheets
     September 30, 2003 and December 31, 2002                                       |  | 3   
|        |  | Statements of Operations
     Three Month and Nine Month Periods Ended September 30,
2003 and 2002 |  | 4   
|        |  | Statements of Cash Flows
     Nine Month Periods Ended September 30, 2003 and 2002                 |  | 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                                         |  | 15  
|Item 4. |  | Controls and Procedures                                                                            |  | 15  
|PART II |  | OTHER INFORMATION                                                                                  |  |     
|Item 6. |  | Exhibits and Reports on Form 8-K                                                                   |  | 16  
|        |  | SIGNATURE                                                                                          |  | 17  

2



---



##### Table of Contents












PART I

Item 1  FINANCIAL STATEMENTS

PYRAMID BREWERIES INC.

BALANCE SHEETS
(Unaudited)

|                                                                                                                  |                               |                                            |             |               |            |              |             |           |            | 
|----------------------------------------------------------------------------------------------------------------- | ----------------------------- | ------------------------------------------ | ----------- | ------------- | ---------- | ------------ | ----------- | --------- | ---------- | 
|                                                                                                                  |                               |                                            |             | September 30, |            | December 31,
|                                                                                                                  |                               |                                            |             | 2003          |            | 2002        
|                                                                                                                  |                               |                                            |             |               |            |             
|CURRENT ASSETS:                                                                                                   |                               |                                            |             |               |            |              |             |          
|                                                                                                                  | Cash and cash equivalents     |                                            | $           | 1,353,000     |            |              | $           | 596,000   |           
|                                                                                                                  | Short term investments        |                                            |             | 1,042,000     |            |              |             | 2,750,000 |           
|                                                                                                                  | Accounts receivable, net      |                                            |             | 1,927,000     |            |              |             | 1,944,000 |           
|                                                                                                                  | Inventories                   |                                            |             | 1,810,000     |            |              |             | 1,590,000 |           
|                                                                                                                  | Prepaid expenses and other    |                                            |             | 777,000       |            |              |             | 626,000   |           
|                                                                                                                  |                               |                                            |             |               |            |              |             |           |           
|                                                                                                                  |                               | Total current assets                       |             |               | 6,909,000  |              |             |           | 7,506,000  | 
|                                                                                                                  |                               |                                            |             |               |            |              |             |           |           
|Long term investments                                                                                             |                               |                                            | 300,000     |               |            |              | 492,000     |          
|Note receivable related party                                                                                     |                               |                                            | 84,000      |               |            |              | 94,000      |          
|Fixed assets, net                                                                                                 |                               |                                            | 22,003,000  |               |            |              | 20,682,000  |          
|Goodwill                                                                                                          |                               |                                            | 415,000     |               |            |              | 415,000     |          
|Other assets                                                                                                      |                               |                                            | 86,000      |               |            |              | 106,000     |          
|                                                                                                                  |                               |                                            |             |               |            |              |             |           |           
|                                                                                                                  |                               | Total assets                               |             | $             | 29,797,000 |              |             | $         | 29,295,000 | 
|                                                                                                                  |                               |                                            |             |               |            |              |             |           |           
|CURRENT LIABILITIES:                                                                                              |                               |                                            |             |               |            |              |             |          
|                                                                                                                  | Accounts payable              |                                            | $           | 1,604,000     |            |              | $           | 952,000   |           
|                                                                                                                  | Accrued expenses              |                                            |             | 2,093,000     |            |              |             | 1,747,000 |           
|                                                                                                                  | Refundable deposits           |                                            |             | 511,000       |            |              |             | 506,000   |           
|                                                                                                                  | Note payable-current          |                                            |             | 20,000        |            |              |             | 20,000    |           
|                                                                                                                  | Deferred rent - current       |                                            |             | 199,000       |            |              |             | 124,000   |           
|                                                                                                                  | Dividends payable             |                                            |             | 376,000       |            |              |             | 374,000   |           
|                                                                                                                  |                               |                                            |             |               |            |              |             |           |           
|                                                                                                                  |                               | Total current liabilities                  |             |               | 4,803,000  |              |             |           | 3,723,000  | 
|                                                                                                                  | Note payable, net of current  |                                            |             | 34,000        |            |              |             | 31,000    |           
|                                                                                                                  | Deferred rent, net of current |                                            |             | 1,619,000     |            |              |             | 1,005,000 |           
|                                                                                                                  |                               |                                            |             |               |            |              |             |           |           
|                                                                                                                  |                               | Total liabilities                          |             |               | 6,456,000  |              |             |           | 4,759,000  | 
|                                                                                                                  |                               |                                            |             |               |            |              |             |           |           
|COMMITMENTS AND CONTINGENCIES                                                                                     |                               |                                            |             |               |            |              |             |          
|STOCKHOLDERS EQUITY:                                                                                             |                               |                                            |             |               |            |              |             |          
|Preferred stock, 10,000,000 shares authorized, none issued                                                        |                               |                                            |            |               |            |              |            |          
|Common stock, $.01 par value; 40,000,000 shares authorized,
8,558,000 and 8,504,000 shares issued and outstanding |                               |                                            | 86,000      |               |            |              | 85,000      |          
|Additional paid-in capital                                                                                        |                               |                                            | 36,182,000  |               |            |              | 36,041,000  |          
|Note receivable - related party                                                                                   |                               |                                            | (770,000    | )             |            |              | (782,000    | )        
|Deferred stock-based compensation                                                                                 |                               |                                            | (32,000     | )             |            |              | (47,000     | )        
|Accumulated deficit                                                                                               |                               |                                            | (12,125,000 | )             |            |              | (10,761,000 | )        
|                                                                                                                  |                               |                                            |             |               |            |              |             |           |           
|                                                                                                                  |                               | Total stockholders equity                 |             |               | 23,341,000 |              |             |           | 24,536,000 | 
|                                                                                                                  |                               |                                            |             |               |            |              |             |           |           
|                                                                                                                  |                               | Total liabilities and stockholders equity |             | $             | 29,797,000 |              |             | $         | 29,295,000 | 
|                                                                                                                  |                               |                                            |             |               |            |              |             |           |           

The accompanying notes are an integral part of these statements.

3



---



##### Table of Contents






PYRAMID BREWERIES INC.

STATEMENTS OF OPERATIONS
(Unaudited)

|                                              |  |                                  |            |                                 |  |      |           |      |  |   |            |   |  |   |            |  
|--------------------------------------------- |  | -------------------------------- | ---------- | ------------------------------- |  | ---- | --------- | ---- |  | - | ---------- | - |  | - | ---------- | -
|                                              |  | Three Months Ended September 30, |            | Nine Months Ended September 30,
|                                              |  | 2003                             |            | 2002                            |  | 2003 |           | 2002
|                                              |  |                                  |            |                                 |  |      |           |     
|Gross sales                                   |  | $                                | 10,765,000 |                                 |  | $    | 9,871,000 |      |  | $ | 27,624,000 |   |  | $ | 26,882,000 |  
|Less excise taxes                             |  |                                  | 493,000    |                                 |  |      | 463,000   |      |  |   | 1,327,000  |   |  |   | 1,277,000  |  
|                                              |  |                                  |            |                                 |  |      |           |      |  |   |            |   |  |   |            |  
|Net sales                                     |  |                                  | 10,272,000 |                                 |  |      | 9,408,000 |      |  |   | 26,297,000 |   |  |   | 25,605,000 |  
|Cost of sales                                 |  |                                  | 8,082,000  |                                 |  |      | 6,947,000 |      |  |   | 20,451,000 |   |  |   | 19,105,000 |  
|                                              |  |                                  |            |                                 |  |      |           |      |  |   |            |   |  |   |            |  
|Gross margin                                  |  |                                  | 2,190,000  |                                 |  |      | 2,461,000 |      |  |   | 5,846,000  |   |  |   | 6,500,000  |  
|Selling, general and administrative expenses  |  |                                  | 2,264,000  |                                 |  |      | 2,135,000 |      |  |   | 6,348,000  |   |  |   | 6,529,000  |  
|                                              |  |                                  |            |                                 |  |      |           |      |  |   |            |   |  |   |            |  
|Operating income (loss)                       |  |                                  | (74,000    | )                               |  |      | 326,000   |      |  |   | (502,000   | ) |  |   | (29,000    | )
|Other income, net                             |  |                                  | 118,000    |                                 |  |      | 137,000   |      |  |   | 268,000    |   |  |   | 318,000    |  
|                                              |  |                                  |            |                                 |  |      |           |      |  |   |            |   |  |   |            |  
|Income (loss) before income taxes             |  |                                  | 44,000     |                                 |  |      | 463,000   |      |  |   | (234,000   | ) |  |   | 289,000    |  
|Provision for income taxes                    |  |                                  |           |                                 |  |      |          |      |  |   | (2,000     | ) |  |   |           |  
|                                              |  |                                  |            |                                 |  |      |           |      |  |   |            |   |  |   |            |  
|Net income (loss)                             |  | $                                | 44,000     |                                 |  | $    | 463,000   |      |  | $ | (236,000   | ) |  | $ | 289,000    |  
|                                              |  |                                  |            |                                 |  |      |           |      |  |   |            |   |  |   |            |  
|Basic and diluted net income (loss) per share |  | $                                | 0.01       |                                 |  | $    | 0.06      |      |  | $ | (0.03      | ) |  | $ | 0.04       |  
|Weighted average basic shares outstanding     |  |                                  | 8,456,000  |                                 |  |      | 8,235,000 |      |  |   | 8,439,000  |   |  |   | 8,173,000  |  
|Weighted average diluted shares outstanding   |  |                                  | 8,655,000  |                                 |  |      | 8,294,000 |      |  |   | 8,439,000  |   |  |   | 8,234,000  |  
|Cash dividend declared per share              |  | $                                | 0.044      |                                 |  | $    | 0.044     |      |  | $ | 0.132      |   |  | $ | 0.132      |  

The accompanying notes are an integral part of these statements.

4



---



##### Table of Contents






PYRAMID BREWERIES INC.

STATEMENTS OF CASH FLOWS
(Unaudited)

|                                                                                          |                                                                 |                                           |           |                                 |            |      |           |            |           |  
|----------------------------------------------------------------------------------------- | --------------------------------------------------------------- | ----------------------------------------- | --------- | ------------------------------- | ---------- | ---- | --------- | ---------- | --------- | -
|                                                                                          |                                                                 |                                           |           | Nine Months Ended September 30,
|                                                                                          |                                                                 |                                           |           | 2003                            |            | 2002
|                                                                                          |                                                                 |                                           |           |                                 |            |     
|OPERATING ACTIVITIES:                                                                     |                                                                 |                                           |           |                                 |            |      |           |           
|Net income (loss)                                                                         |                                                                 | $                                         | (236,000  | )                               |            | $    | 289,000   |           
|Adjustments to reconcile net loss to net cash provided by
(used in) operating activities: |                                                                 |                                           |           |                                 |            |      |           |           
|                                                                                          | Depreciation and amortization                                   |                                           |           | 1,767,000                       |            |      |           | 1,650,000  |          
|                                                                                          | Stock-based compensation expense                                |                                           |           | 40,000                          |            |      |           | 50,000     |          
|                                                                                          | Interest expense                                                |                                           |           | 3,000                           |            |      |           | 6,000      |          
|                                                                                          | Loss on sales of fixed assets                                   |                                           |           | 1,000                           |            |      |           |           |          
|                                                                                          | Deferred rent                                                   |                                           |           | 689,000                         |            |      |           | (93,000    | )        
|Changes in operating assets and liabilities:                                              |                                                                 |                                           |           |                                 |            |      |           |           
|                                                                                          | Accounts receivable                                             |                                           |           | 17,000                          |            |      |           | (197,000   | )        
|                                                                                          | Inventories                                                     |                                           |           | (220,000                        | )          |      |           | (377,000   | )        
|                                                                                          | Prepaid expenses and other                                      |                                           |           | (148,000                        | )          |      |           | (191,000   | )        
|                                                                                          | Accounts payable and accrued expenses                           |                                           |           | 998,000                         |            |      |           | 972,000    |          
|                                                                                          | Refundable deposits                                             |                                           |           | 15,000                          |            |      |           | (18,000    | )        
|                                                                                          |                                                                 |                                           |           |                                 |            |      |           |           
|                                                                                          |                                                                 | Net cash provided by operating activities |           |                                 | 2,926,000  |      |           |            | 2,091,000 |  
|INVESTING ACTIVITIES:                                                                     |                                                                 |                                           |           |                                 |            |      |           |           
|                                                                                          | Purchases of short-term investments                             |                                           |           | (2,455,000                      | )          |      |           | (2,573,000 | )        
|                                                                                          | Proceeds from the sale and maturities of short-term
investments |                                           |           | 4,355,000                       |            |      |           | 3,823,000  |          
|                                                                                          | Acquisitions of fixed assets                                    |                                           |           | (3,082,000                      | )          |      |           | (1,694,000 | )        
|                                                                                          | Proceeds from sales of fixed assets                             |                                           |           |                                |            |      |           | 11,000     |          
|                                                                                          |                                                                 |                                           |           |                                 |            |      |           |           
|                                                                                          |                                                                 | Net cash used in investing activities     |           |                                 | (1,182,000 | )    |           |            | (433,000  | )
|FINANCING ACTIVITIES:                                                                     |                                                                 |                                           |           |                                 |            |      |           |           
|                                                                                          | Proceeds from the sale of common stock and option exercises     |                                           |           | 117,000                         |            |      |           | 177,000    |          
|                                                                                          | Note receivable                                                 |                                           |           | 22,000                          |            |      |           | 11,000     |          
|                                                                                          | Cash dividends paid                                             |                                           |           | (1,126,000                      | )          |      |           | (1,099,000 | )        
|                                                                                          |                                                                 |                                           |           |                                 |            |      |           |           
|                                                                                          |                                                                 | Net cash used in financing activities     |           |                                 | (987,000   | )    |           |            | (911,000  | )
|                                                                                          |                                                                 |                                           |           |                                 |            |      |           |           
|Increase in cash and cash equivalents                                                     |                                                                 |                                           | 757,000   |                                 |            |      | 747,000   |           
|Cash and cash equivalents at beginning of period                                          |                                                                 |                                           | 596,000   |                                 |            |      | 425,000   |           
|                                                                                          |                                                                 |                                           |           |                                 |            |      |           |           
|Cash and cash equivalents at end of period                                                |                                                                 | $                                         | 1,353,000 |                                 |            | $    | 1,172,000 |           
|                                                                                          |                                                                 |                                           |           |                                 |            |      |           |           

The accompanying notes are an integral part of these statements.

5



---



##### Table of Contents






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, Walnut Creek, California and recently
constructed a fourth alehouse and brewery in Sacramento, California which
opened July 3, 2003. The Company sells its beer through a network of selected
independent distributors and alehouse locations primarily in Washington, Oregon
and California under the Pyramid brand and, to a lesser extent, the Thomas
Kemper brand. Pyramid also manufactures a line of gourmet sodas under the
Thomas Kemper Soda Company label. As of September 30, 2003, the Companys
products were distributed in 32 states and Canada. The Company also operates
four restaurants adjacent to its breweries under the Pyramid Alehouse brand
name.

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. 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. For a
presentation including all disclosures required by generally accepted
accounting principles, these financial statements should be read in conjunction
with the audited financial statements for the year ended December 31, 2002,
included in the Annual Report on Form 10-K.

Stock Based Compensation

At September 30, 2003, the Company has stock-based compensation plans
which are described more fully in Note 15 of the 2002 Annual report. The
Company accounts for those plans under the recognition and measurement
principles of Accounting Principles Board (APB) Opinion No. 25, Accounting
for Stock Issued to Employees, and related interpretations. The Company has
adopted the disclosure-only provisions of Statement of Financial Accounting
Standards (SFAS) No. 123, Accounting for Stock-Based Compensation.
Accordingly, no compensation cost has been recognized for the fair value of
options issued under the Employee and Director Plans (the Plans) except as
described in Note 4. Had compensation cost been recognized based on the fair
value at the date of grant for options awarded under the Plans, the pro forma
amounts of the Companys net income (loss) and net income (loss) per share for
the periods ended September 30, 2003 and 2002, would have been as follows:

|                                                                                 |  |                                  |         |                                 |  |      |         |      |  |   |          |   |  |   |          |  
|-------------------------------------------------------------------------------- |  | -------------------------------- | ------- | ------------------------------- |  | ---- | ------- | ---- |  | - | -------- | - |  | - | -------- | -
|                                                                                 |  | Three Months Ended September 30, |         | Nine Months Ended September 30,
|                                                                                 |  |                                  |         |                                
|                                                                                 |  | 2003                             |         | 2002                            |  | 2003 |         | 2002
|                                                                                 |  |                                  |         |                                 |  |      |         |     
|Net income (loss) as reported                                                    |  | $                                | 44,000  |                                 |  | $    | 463,000 |      |  | $ | (236,000 | ) |  | $ | 289,000  |  
|Add: Stock-based compensation cost as reported                                   |  |                                  | (24,000 | )                               |  |      | 4,000   |      |  |   | 40,000   |   |  |   | 50,000   |  
|Less: Stock-based compensation cost determined under the
fair value based method |  |                                  | (41,000 | )                               |  |      | (86,000 | )    |  |   | (167,000 | ) |  |   | (234,000 | )
|                                                                                 |  |                                  |         |                                 |  |      |         |      |  |   |          |   |  |   |          |  
|Net income (loss) pro forma                                                      |  | $                                | (21,000 | )                               |  | $    | 381,000 |      |  | $ | (363,000 | ) |  | $ | 105,000  |  
|Basic and diluted net income (loss) per share as reported                        |  | $                                | 0.01    |                                 |  | $    | 0.06    |      |  | $ | (0.03    | ) |  | $ | 0.04     |  
|Basic and diluted net income (loss) per share pro forma                          |  | $                                | (0.00   | )                               |  | $    | 0.05    |      |  | $ | (0.04    | ) |  | $ | 0.01     |  

The fair value of options granted in the third quarter ended September 30,
2003 was estimated using the Black-Scholes option-pricing model with the
following weighted average assumptions: risk-free interest rate of 3.18%;
expected option lives of seven years; expected volatility of 51%; and expected
future dividends of 5.95%. The fair value of options granted in the third
quarter ended September 30, 2002 was estimated using the Black-Scholes
option-pricing model with the following weighted average assumptions: risk-free
interest rate of 3.34%; expected option lives of seven years; expected
volatility of 51%; and expected future dividends of 7.5%.

The fair value of options granted in the nine month period ended September
30, 2003 was estimated using the Black-Scholes option-pricing model with the
following weighted average assumptions: risk-free interest rates ranging from
3.18% to 5.13%; expected option lives of seven years; expected volatility of
51% to 52%; and expected future dividends.

6



---



##### Table of Contents



Revenue Recognition

The Company recognizes revenue from the sale of wholesale beer and soda
products at the time of shipment, when the title of the Companys products
passes to the customer, in accordance with distributor sales agreements and
collectibility is probable. The Companys revenue from its alehouses are
comprised of food, beverage and merchandise, recognized at the time of sale.

2. INVENTORIES:

|                |  |               |           |              |  |   |           | 
|--------------- |  | ------------- | --------- | ------------ |  | - | --------- | 
|                |  | September 30, |           | December 31,
|                |  | 2003          |           | 2002        
|                |  |               |           |             
|Raw materials   |  | $             | 797,000   |              |  | $ | 821,000   | 
|Work in process |  |               | 178,000   |              |  |   | 162,000   | 
|Finished goods  |  |               | 835,000   |              |  |   | 607,000   | 
|                |  |               |           |              |  |   |           | 
|                |  | $             | 1,810,000 |              |  | $ | 1,590,000 | 
|                |  |               |           |              |  |   |           | 

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. Inventory levels
experience fluctuations in carrying levels based on seasonality.

3. FIXED ASSETS:

|                               |  |               |             |              |  |   |             |  
|------------------------------ |  | ------------- | ----------- | ------------ |  | - | ----------- | -
|                               |  | September 30, |             | December 31,
|                               |  | 2003          |             | 2002        
|                               |  |               |             |             
|Brewery and retail equipment   |  | $             | 16,410,000  |              |  | $ | 15,120,000  |  
|Furniture and fixtures         |  |               | 997,000     |              |  |   | 916,000     |  
|Leasehold improvements         |  |               | 17,576,000  |              |  |   | 15,525,000  |  
|Construction in progress       |  |               | 101,000     |              |  |   | 609,000     |  
|                               |  |               |             |              |  |   |             |  
|                               |  |               | 35,084,000  |              |  |   | 32,170,000  |  
|Less: accumulated depreciation |  |               | (13,081,000 | )            |  |   | (11,488,000 | )
|                               |  |               |             |              |  |   |             |  
|                               |  | $             | 22,003,000  |              |  | $ | 20,682,000  |  
|                               |  |               |             |              |  |   |             |  

4. NOTE RECEIVABLE RELATED PARTY

In June 2001, the Company issued a $787,000 full recourse note to the
Companys Chief Executive Officer (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 were unrestricted, except for being pledged as
collateral for the loans, and the remaining 252,300 shares become unrestricted
by December 2004. Compensation expense on the shares are accounted for under
the variable accounting method until the shares become unrestricted. During the
quarter and nine month periods ended September 30, 2003, the Company recorded a
$25,000 expense reversal and $35,000 in compensation expense, respectively, in
connection with this equity arrangement, which is included in selling, general
and administrative expenses.

5. ACCRUED EXPENSES

Accrued expenses consist of the following:

|                                     |  |               |           |              |  |   |           | 
|------------------------------------ |  | ------------- | --------- | ------------ |  | - | --------- | 
|                                     |  | September 30, |           | December 31,
|                                     |  | 2003          |           | 2002        
|                                     |  |               |           |             
|Salaries, wages and related accruals |  | $             | 948,000   |              |  | $ | 963,000   | 
|Barrel taxes                         |  |               | 246,000   |              |  |   | 118,000   | 
|Other accruals                       |  |               | 899,000   |              |  |   | 666,000   | 
|                                     |  |               |           |              |  |   |           | 
|                                     |  | $             | 2,093,000 |              |  | $ | 1,747,000 | 
|                                     |  |               |           |              |  |   |           | 

7



---



##### Table of Contents



6. OTHER INCOME, NET

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

|                       |  |                                  |         |                                 |  |      |         |      |  |   |         |   |  |   |         |  
|---------------------- |  | -------------------------------- | ------- | ------------------------------- |  | ---- | ------- | ---- |  | - | ------- | - |  | - | ------- | -
|                       |  | Three Months Ended September 30, |         | Nine Months Ended September 30,
|                       |  |                                  |         |                                
|                       |  | 2003                             |         | 2002                            |  | 2003 |         | 2002
|                       |  |                                  |         |                                 |  |      |         |     
|Interest income        |  | $                                | 16,000  |                                 |  | $    | 26,000  |      |  | $ | 54,000  |   |  | $ | 81,000  |  
|Interest expense       |  |                                  | (1,000  | )                               |  |      | (2,000  | )    |  |   | (4,000  | ) |  |   | (6,000  | )
|Parking income         |  |                                  | 91,000  |                                 |  |      | 101,000 |      |  |   | 183,000 |   |  |   | 208,000 |  
|Loss on sale of assets |  |                                  |        |                                 |  |      |        |      |  |   | (1,000  | ) |  |   |        |  
|Other income           |  |                                  | 12,000  |                                 |  |      | 12,000  |      |  |   | 36,000  |   |  |   | 35,000  |  
|                       |  |                                  |         |                                 |  |      |         |      |  |   |         |   |  |   |         |  
|Other income, net      |  | $                                | 118,000 |                                 |  | $    | 137,000 |      |  | $ | 268,000 |   |  | $ | 318,000 |  
|                       |  |                                  |         |                                 |  |      |         |      |  |   |         |   |  |   |         |  

7. EARNINGS PER SHARE

Basic earnings (loss) per share was computed by dividing net income or
loss by the weighted average number of shares of common stock outstanding
during the period, excluding shares subject to repurchase. Diluted earnings per
share was computed by dividing net income by the weighted average number of
shares of common stock outstanding plus additional common shares that would be
outstanding from in-the-money stock options upon application of the treasury
stock method. The effect of stock options has not been included in the
calculation of diluted net loss per share as the effect is antidilutive.
Options to purchase approximately 188,000 shares of common stock were
outstanding as of September 30, 2003, but were not included in the nine month
computation of EPS because their effects are antidilutive.

|          |                                             |                            |   |                                  |      |                                 |   |           |      |      |   |           |       |   |   |           |      | 
|--------- | ------------------------------------------- | -------------------------- | - | -------------------------------- | ---- | ------------------------------- | - | --------- | ---- | ---- | - | --------- | ----- | - | - | --------- | ---- | 
|          |                                             |                            |   | Three Months Ended September 30, |      | Nine Months Ended September 30,
|          |                                             |                            |   |                                  |      |                                
|          |                                             |                            |   | 2003                             |      | 2002                            |   | 2003      |      | 2002
|          |                                             |                            |   |                                  |      |                                 |   |           |      |     
|Earnings: |                                             |                            |   |                                  |      |                                 |   |           |      |      |   |           |       |   |   |          
|          | Net income (loss)                           |                            | $ | 44,000                           |      |                                 | $ | 463,000   |      |      | $ | (236,000  | )     |   | $ | 289,000   |     
|Shares:   |                                             |                            |   |                                  |      |                                 |   |           |      |      |   |           |       |   |   |          
|          | Weighted average shares outstanding         |                            |   | 8,556,000                        |      |                                 |   | 8,386,000 |      |      |   | 8,539,000 |       |   |   | 8,345,000 |     
|          | Shares subject to repurchase                |                            |   | (100,000                         | )    |                                 |   | (151,000  | )    |      |   | (100,000  | )     |   |   | (172,000  | )   
|          | Weighted average basic shares outstanding   |                            |   | 8,456,000                        |      |                                 |   | 8,235,000 |      |      |   | 8,439,000 |       |   |   | 8,173,000 |     
|          |                                             |                            |   |                                  |      |                                 |   |           |      |      |   |           |       |   |   |           |     
|          |                                             | Basic earnings per share   |   | $                                | 0.01 |                                 |   | $         | 0.06 |      |   | $         | (0.03 | ) |   | $         | 0.04 | 
|          |                                             |                            |   |                                  |      |                                 |   |           |      |      |   |           |       |   |   |           |     
|          | Stock option dilution                       |                            |   | 199,000                          |      |                                 |   | 59,000    |      |      |   |          |       |   |   | 61,000    |     
|          |                                             |                            |   |                                  |      |                                 |   |           |      |      |   |           |       |   |   |           |     
|          | Weighted average diluted shares outstanding |                            |   | 8,655,000                        |      |                                 |   | 8,294,000 |      |      |   | 8,439,000 |       |   |   | 8,234,000 |     
|          |                                             |                            |   |                                  |      |                                 |   |           |      |      |   |           |       |   |   |           |     
|          |                                             | Diluted earnings per share |   | $                                | 0.01 |                                 |   | $         | 0.06 |      |   | $         | (0.03 | ) |   | $         | 0.04 | 
|          |                                             |                            |   |                                  |      |                                 |   |           |      |      |   |           |       |   |   |           |     

8. STOCKHOLDERS EQUITY

|                              |                                                                 |  |              |        |            |  |         |       |            |   |              |         |               |   |          |        |  |   |         |        |  |   |             |            |   |   |            |            |  
|----------------------------- | --------------------------------------------------------------- |  | ------------ | ------ | ---------- |  | ------- | ----- | ---------- | - | ------------ | ------- | ------------- | - | -------- | ------ |  | - | ------- | ------ |  | - | ----------- | ---------- | - | - | ---------- | ---------- | -
|                              |                                                                 |  |              |        |            |  |         |       |            |   |              |         |               |   |          |        |  |   |         |        |  |   |             |            |  
|                              |                                                                 |  | Common Stock |        | Additional |  |         |       |            |   |              |         | Total        
|                              |                                                                 |  |              |        | Paid-In    |  | Note    |       | Deferred   |   | Accumulated  |         | Stockholders
|                              |                                                                 |  | Shares       |        | Amount     |  | Capital |       | Receivable |   | Compensation |         | Deficit       |   | Equity  
|                              |                                                                 |  |              |        |            |  |         |       |            |   |              |         |               |   |         
|Balance at December 31, 2002  |                                                                 |  | 8,504,000    |        |            |  | 85,000  |       |            | $ | 36,041,000   |         |               | $ | (782,000 | )      |  | $ | (47,000 | )      |  | $ | (10,761,000 | )          |   | $ | 24,536,000 |           
|                              | Net loss                                                        |  |              |       |            |  |         |      |            |   |              |        |               |   |          |       |  |   |         |       |  |   |             | (236,000   | ) |   |            | (236,000   | )
|                              | Shares issued                                                   |  |              | 54,000 |            |  |         | 1,000 |            |   |              | 120,000 |               |   |          |       |  |   |         |       |  |   |             |           |   |   |            | 121,000    |  
|                              | Stock compensation including
amortization of stock compensation |  |              |       |            |  |         |      |            |   |              | 21,000  |               |   |          |       |  |   |         | 15,000 |  |   |             |           |   |   |            | 36,000     |  
|                              | Note repayment                                                  |  |              |       |            |  |         |      |            |   |              |        |               |   |          | 12,000 |  |   |         |       |  |   |             |           |   |   |            | 12,000     |  
|                              | Dividends declared                                              |  |              |       |            |  |         |      |            |   |              |        |               |   |          |       |  |   |         |       |  |   |             | (1,128,000 | ) |   |            | (1,128,000 | )
|                              |                                                                 |  |              |        |            |  |         |       |            |   |              |         |               |   |          |        |  |   |         |        |  |   |             |            |   |   |            |           
|Balance at September 30, 2003 |                                                                 |  | 8,558,000    |        |            |  | 86,000  |       |            | $ | 36,182,000   |         |               | $ | (770,000 | )      |  | $ | (32,000 | )      |  | $ | (12,125,000 | )          |   | $ | 23,341,000 |           
|                              |                                                                 |  |              |        |            |  |         |       |            |   |              |         |               |   |          |        |  |   |         |        |  |   |             |            |   |   |            |           

9. COMMITMENTS AND CONTINGENCIES:

The Company is involved from time to time in claims, proceedings and
litigation arising in the ordinary course of business. The Company does not
believe that any such claim, proceeding or litigation, either alone or in the
aggregate, will have a material adverse effect on the Companys financial
position or results of operations.

8



---



##### Table of Contents



10. CASH DIVIDEND:

The Board of Directors announced on August 11, 2003, the declaration of a
$0.044 per common share dividend payable on October 10, 2003 to shareholders of
record on September 30, 2003. The Board of Directors also announced, on
October 28, 2003, the declaration of a $0.044 per common share dividend payable
on January 16, 2004 to shareholders of record on December 31, 2003. The cash
dividends declared totaled approximately $377,000 for all common stock
outstanding as of each record date.

Cash dividends declared per common share:

|     |  |                    |       |                   |  |   |       | 
|---- |  | ------------------ | ----- | ----------------- |  | - | ----- | 
|     |  | Three Months Ended |       | Nine Months Ended
|     |  | September 30,      |       | September 30,    
|     |  |                    |       |                  
|2003 |  | $                  | 0.044 |                   |  | $ | 0.132 | 
|2002 |  | $                  | 0.044 |                   |  | $ | 0.132 | 

Although the Company has declared and paid a dividend every quarter since
the fourth quarter of 1999, continued future declaration of dividends will
depend, among other things, on the Companys results of operations, capital
requirements and financial condition, and on such other factors as the
Companys Board of Directors may in its discretion consider relevant and in the
best long term interest of the shareholders.

11. SEGMENT INFORMATION:

The Company follows the provisions of SFAS No. 131, Disclosures about
Segments of an Enterprise and Related Information, and reports segment
information in the same format as reviewed by the Companys management (the
Management Approach), which is organized around differences in products and
services.

Products and Services

The Companys reportable segments include beverage operations and
alehouses. Beverage operations include the production and sale of Pyramid ales
and lagers, Thomas Kemper beers and Thomas Kemper Soda Company products. The
alehouse segment consists of full-service alehouses, which market and sell the
full line of the Companys beer and soda products as well as food and certain
merchandise.

Factors used to identify reportable segments

The Companys reportable segments are strategic business units that offer
different products and services. These segments are managed separately because
each business requires different production, management and marketing
strategies.

Measurement of segment profit and segment assets

The accounting policies of the segments are the same as those described in
the summary of critical accounting policies included in the notes to the
financial statements included in the Companys current Form 10-K. The Company
evaluates performance based on profit or loss from operations before income
taxes not including nonrecurring gains and losses. The Company records
intersegment sales at cost.

9



---



##### Table of Contents



Segment profit and segment assets are as follows:

|                                     |                                        |  |                        |        |          |  |       |       |       |  |   |        |   |  |   |        |  
|------------------------------------ | -------------------------------------- |  | ---------------------- | ------ | -------- |  | ----- | ----- | ----- |  | - | ------ | - |  | - | ------ | -
|                                     |                                        |  | Beverage               |        |          |  |       |       |       |  |   |        |   |  |  
|                                     |                                        |  | Operations             |        | Alehouse |  | Other |       | Total
|                                     |                                        |  |                        |        |          |  |       |       |      
|                                     |                                        |  | (Dollars in thousands)
|Quarter ended September 30, 2003     |                                        |  |                        |        |          |  |       |       |       |  |   |        |   |  |   |       
|                                     | Gross revenues from external customers |  | $                      | 6,777  |          |  | $     | 3,988 |       |  | $ |       |   |  | $ | 10,765 |  
|                                     | Net revenues from external customers   |  |                        | 6,284  |          |  |       | 3,988 |       |  |   |       |   |  |   | 10,272 |  
|                                     | Intersegment revenues                  |  |                        | 143    |          |  |       |      |       |  |   | (143   | ) |  |   |       |  
|                                     | Interest income                        |  |                        |       |          |  |       |      |       |  |   | 16     |   |  |   | 16     |  
|                                     | Depreciation and amortization          |  |                        | 393    |          |  |       | 210   |       |  |   | 53     |   |  |   | 656    |  
|                                     | Operating (loss) income                |  |                        | 703    |          |  |       | 297   |       |  |   | (1,074 | ) |  |   | (74    | )
|                                     | Capital expenditures                   |  |                        | 75     |          |  |       | 564   |       |  |   | 36     |   |  |   | 675    |  
|                                     | Total assets                           |  |                        | 18,659 |          |  |       | 6,929 |       |  |   | 4,209  |   |  |   | 29,797 |  
|Quarter ended September 30, 2002     |                                        |  |                        |        |          |  |       |       |       |  |   |        |   |  |   |       
|                                     | Gross revenues from external customers |  | $                      | 6,748  |          |  | $     | 3,123 |       |  | $ |       |   |  | $ | 9,871  |  
|                                     | Net revenues from external customers   |  |                        | 6,285  |          |  |       | 3,123 |       |  |   |       |   |  |   | 9,408  |  
|                                     | Intersegment revenues                  |  |                        | 110    |          |  |       |      |       |  |   | (110   | ) |  |   |       |  
|                                     | Interest income                        |  |                        |       |          |  |       |      |       |  |   | 26     |   |  |   | 26     |  
|                                     | Depreciation and amortization          |  |                        | 387    |          |  |       | 117   |       |  |   | 38     |   |  |   | 542    |  
|                                     | Operating (loss) income                |  |                        | 668    |          |  |       | 422   |       |  |   | (764   | ) |  |   | 326    |  
|                                     | Capital expenditures                   |  |                        | 200    |          |  |       | 147   |       |  |   | 58     |   |  |   | 405    |  
|                                     | Total assets                           |  |                        | 15,506 |          |  |       | 4,449 |       |  |   | 10,020 |   |  |   | 29,975 |  
|Nine months ended September 30, 2003 |                                        |  |                        |        |          |  |       |       |       |  |   |        |   |  |   |       
|                                     | Gross revenues from external customers |  | $                      | 18,382 |          |  | $     | 9,242 |       |  | $ |       |   |  | $ | 27,624 |  
|                                     | Net revenues from external customers   |  |                        | 17,055 |          |  |       | 9,242 |       |  |   |       |   |  |   | 26,297 |  
|                                     | Intersegment revenues                  |  |                        | 323    |          |  |       |      |       |  |   | (323   | ) |  |   |       |  
|                                     | Interest income                        |  |                        |       |          |  |       |      |       |  |   | 54     |   |  |   | 54     |  
|                                     | Depreciation and amortization          |  |                        | 1,166  |          |  |       | 446   |       |  |   | 155    |   |  |   | 1,767  |  
|                                     | Operating (loss) income                |  |                        | 1,816  |          |  |       | 704   |       |  |   | (3,022 | ) |  |   | (502   | )
|                                     | Capital expenditures                   |  |                        | 464    |          |  |       | 2,493 |       |  |   | 125    |   |  |   | 3,082  |  
|                                     | Total assets                           |  |                        | 18,659 |          |  |       | 6,929 |       |  |   | 4,209  |   |  |   | 29,797 |  
|Nine months ended September 30, 2002 |                                        |  |                        |        |          |  |       |       |       |  |   |        |   |  |   |       
|                                     | Gross revenues from external customers |  | $                      | 18,986 |          |  | $     | 7,896 |       |  | $ |       |   |  | $ | 26,882 |  
|                                     | Net revenues from external customers   |  |                        | 17,709 |          |  |       | 7,896 |       |  |   |       |   |  |   | 25,605 |  
|                                     | Intersegment revenues                  |  |                        | 281    |          |  |       |      |       |  |   | (281   | ) |  |   |       |  
|                                     | Interest income                        |  |                        |       |          |  |       |      |       |  |   | 81     |   |  |   | 81     |  
|                                     | Depreciation and amortization          |  |                        | 1,205  |          |  |       | 324   |       |  |   | 121    |   |  |   | 1,650  |  
|                                     | Operating (loss) income                |  |                        | 1,341  |          |  |       | 840   |       |  |   | (2,210 | ) |  |   | (29    | )
|                                     | Capital expenditures                   |  |                        | 351    |          |  |       | 1,138 |       |  |   | 205    |   |  |   | 1,694  |  
|                                     | Total assets                           |  |                        | 15,506 |          |  |       | 4,449 |       |  |   | 10,020 |   |  |   | 29,975 |  

Other

Other consists of interest income, general, administrative and marketing
expense, corporate office assets and other reconciling items that are not
allocated to segments for internal management reporting purposes. Total assets
include all assets except for accounts receivable, inventory, goodwill and
fixed assets, which are presented by segment.

Certain 2002 operating income balances have been reclassified to conform
to the 2003 presentation.

12. NEW ACCOUNTING PRONOUNCEMENTS:

In August 2001, the FASB issued SFAS No. 143, Accounting for Asset
Retirement Obligations. SFAS No. 143 requires entities to record the fair
value of a liability for an asset retirement obligation in the period in which
it is incurred. The associated asset retirement costs are capitalized as part
of the carrying amount of the long-lived asset. The statement is now effective.
The adoption of SFAS No. 143 did not have a material impact on the Companys
financial position or results of operations.

10



---



##### Table of Contents






Item 2  Managements Discussion and Analysis of Financial Condition and
Results of Operations

RESULTS OF OPERATIONS

The following table sets forth, for the periods indicated, certain
selected unaudited operating data, expressed as a percentage of net sales.

SELECTED UNAUDITED OPERATING DATA

|                                             |                            |   |                                  |         |           |  |       |   |           |   |           |         |      |  |       |  | 
|-------------------------------------------- | -------------------------- | - | -------------------------------- | ------- | --------- |  | ----- | - | --------- | - | --------- | ------- | ---- |  | ----- |  | 
|                                             |                            |   | Three Months Ended September 30,
|                                             |                            |   |                                 
|                                             |                            |   |                                  |         |           |  | % of  |   |           |   |           |         | % of
|                                             |                            |   | 2003                             |         | Net Sales |  | 2002  |   | Net Sales
|                                             |                            |   |                                  |         |           |  |       |   |          
|Gross sales                                  |                            | $ | 10,765,000                       |         |           |  |       |   |           | $ | 9,871,000 |         |      |  |       | 
|Less excise taxes                            |                            |   | 493,000                          |         |           |  |       |   |           |   | 463,000   |         |      |  |       | 
|                                             |                            |   |                                  |         |           |  |       |   |           |   |           |         |      |  |       | 
|Net sales                                    |                            |   | 10,272,000                       |         |           |  | 100.0 |   |           |   | 9,408,000 |         |      |  | 100.0 | 
|Cost of sales                                |                            |   | 8,082,000                        |         |           |  | 78.7  |   |           |   | 6,947,000 |         |      |  | 73.8  | 
|                                             |                            |   |                                  |         |           |  |       |   |           |   |           |         |      |  |       | 
|Gross margin                                 |                            |   | 2,190,000                        |         |           |  | 21.3  |   |           |   | 2,461,000 |         |      |  | 26.2  | 
|Selling, general and administrative expenses |                            |   | 2,264,000                        |         |           |  | 22.0  |   |           |   | 2,135,000 |         |      |  | 22.7  | 
|                                             |                            |   |                                  |         |           |  |       |   |           |   |           |         |      |  |       | 
|Operating loss                               |                            |   | (74,000                          | )       |           |  | (0.7  | ) |           |   | 326,000   |         |      |  | 3.5   | 
|Other income, net                            |                            |   | 118,000                          |         |           |  | 1.1   |   |           |   | 137,000   |         |      |  | 1.4   | 
|                                             |                            |   |                                  |         |           |  |       |   |           |   |           |         |      |  |       | 
|Income before income taxes                   |                            |   | 44,000                           |         |           |  | 0.4   |   |           |   | 463,000   |         |      |  | 4.9   | 
|Benefit for income taxes                     |                            |   |                                 |         |           |  |      |   |           |   |          |         |      |  |      | 
|                                             |                            |   |                                  |         |           |  |       |   |           |   |           |         |      |  |       | 
|Net income                                   |                            | $ | 44,000                           |         |           |  | 0.4   |   |           | $ | 463,000   |         |      |  | 4.9   | 
|                                             |                            |   |                                  |         |           |  |       |   |           |   |           |         |      |  |       | 
|Basic and diluted net income per share       |                            | $ | 0.01                             |         |           |  |       |   |           | $ | 0.06      |         |      |  |       | 
|                                             |                            |   |                                  |         |           |  |       |   |           |   |           |         |      |  |       | 
|Weighted average shares outstanding          |                            |   | 8,456,000                        |         |           |  |       |   |           |   | 8,235,000 |         |      |  |       | 
|                                             |                            |   |                                  |         |           |  |       |   |           |   |           |         |      |  |       | 
|Operating data (in barrels):                 |                            |   |                                  |         |           |  |       |   |           |   |           |         |      |  |       | 
|                                             | Beer barrels shipped       |   |                                  | 32,000  |           |  |       |   |           |   |           | 32,000  |      |  |       |  | 
|                                             | Soda barrels shipped       |   |                                  | 14,000  |           |  |       |   |           |   |           | 13,000  |      |  |       |  | 
|                                             |                            |   |                                  |         |           |  |       |   |           |   |           |         |      |  |       | 
|                                             | Total barrels shipped      |   |                                  | 46,000  |           |  |       |   |           |   |           | 45,000  |      |  |       |  | 
|                                             |                            |   |                                  |         |           |  |       |   |           |   |           |         |      |  |       | 
|                                             | Annual production capacity |   |                                  | 204,000 |           |  |       |   |           |   |           | 200,000 |      |  |       |  | 
|                                             |                            |   |                                  |         |           |  |       |   |           |   |           |         |      |  |       | 

|                                             |                            |   |                                 |         |           |  |       |   |           |   |            |         |      |  |       |   | 
|-------------------------------------------- | -------------------------- | - | ------------------------------- | ------- | --------- |  | ----- | - | --------- | - | ---------- | ------- | ---- |  | ----- | - | 
|                                             |                            |   | Nine Months Ended September 30,
|                                             |                            |   |                                
|                                             |                            |   |                                 |         |           |  | % of  |   |           |   |            |         | % of
|                                             |                            |   | 2003                            |         | Net Sales |  | 2002  |   | Net Sales
|                                             |                            |   |                                 |         |           |  |       |   |          
|Gross sales                                  |                            | $ | 27,624,000                      |         |           |  |       |   |           | $ | 26,882,000 |         |      |  |       |  
|Less excise taxes                            |                            |   | 1,327,000                       |         |           |  |       |   |           |   | 1,277,000  |         |      |  |       |  
|                                             |                            |   |                                 |         |           |  |       |   |           |   |            |         |      |  |       |  
|Net sales                                    |                            |   | 26,297,000                      |         |           |  | 100.0 |   |           |   | 25,605,000 |         |      |  | 100.0 |  
|Cost of sales                                |                            |   | 20,451,000                      |         |           |  | 77.8  |   |           |   | 19,105,000 |         |      |  | 74.6  |  
|                                             |                            |   |                                 |         |           |  |       |   |           |   |            |         |      |  |       |  
|Gross margin                                 |                            |   | 5,846,000                       |         |           |  | 22.2  |   |           |   | 6,500,000  |         |      |  | 25.4  |  
|Selling, general and administrative expenses |                            |   | 6,348,000                       |         |           |  | 24.1  |   |           |   | 6,529,000  |         |      |  | 25.5  |  
|                                             |                            |   |                                 |         |           |  |       |   |           |   |            |         |      |  |       |  
|Operating loss                               |                            |   | (502,000                        | )       |           |  | (1.9  | ) |           |   | (29,000    | )       |      |  | (0.1  | )
|Other income, net                            |                            |   | 268,000                         |         |           |  | 1.0   |   |           |   | 318,000    |         |      |  | 1.2   |  
|                                             |                            |   |                                 |         |           |  |       |   |           |   |            |         |      |  |       |  
|Loss before income taxes                     |                            |   | (234,000                        | )       |           |  | (0.9  | ) |           |   | 289,000    |         |      |  | 1.1   |  
|Benefit for income taxes                     |                            |   | (2,000                          | )       |           |  | (0.0  | ) |           |   |           |         |      |  |      |  
|                                             |                            |   |                                 |         |           |  |       |   |           |   |            |         |      |  |       |  
|Net (loss) income                            |                            | $ | (236,000                        | )       |           |  | (0.9  | ) |           | $ | 289,000    |         |      |  | 1.1   |  
|                                             |                            |   |                                 |         |           |  |       |   |           |   |            |         |      |  |       |  
|Basic and diluted net loss per share         |                            | $ | (0.03                           | )       |           |  |       |   |           | $ | 0.04       |         |      |  |       |  
|                                             |                            |   |                                 |         |           |  |       |   |           |   |            |         |      |  |       |  
|Weighted average shares outstanding          |                            |   | 8,439,000                       |         |           |  |       |   |           |   | 8,173,000  |         |      |  |       |  
|                                             |                            |   |                                 |         |           |  |       |   |           |   |            |         |      |  |       |  
|Operating data (in barrels):                 |                            |   |                                 |         |           |  |       |   |           |   |            |         |      |  |       |  
|                                             | Beer barrels shipped       |   |                                 | 87,000  |           |  |       |   |           |   |            | 87,000  |      |  |       |   | 
|                                             | Soda barrels shipped       |   |                                 | 35,000  |           |  |       |   |           |   |            | 37,000  |      |  |       |   | 
|                                             |                            |   |                                 |         |           |  |       |   |           |   |            |         |      |  |       |  
|                                             | Total barrels shipped      |   |                                 | 122,000 |           |  |       |   |           |   |            | 124,000 |      |  |       |   | 
|                                             |                            |   |                                 |         |           |  |       |   |           |   |            |         |      |  |       |  
|                                             | Annual production capacity |   |                                 | 204,000 |           |  |       |   |           |   |            | 200,000 |      |  |       |   | 
|                                             |                            |   |                                 |         |           |  |       |   |           |   |            |         |      |  |       |  

11



---



##### Table of Contents



QUARTER ENDED SEPTEMBER 30, 2003 COMPARED TO QUARTER ENDED SEPTEMBER 30, 2002

Gross Sales.Gross sales increased 9.1% to $10,765,000 in the third
quarter ended September 30, 2003 from $9,871,000 in the same quarter of 2002.
Wholesale beverage sales increased 0.4% to $6,777,000 in the third quarter from
$6,748,000 in the same quarter of 2002. Total beverage barrel shipments
increased 2.6% compared to prior year. Pyramid beer brand shipments increased
1.1% to 31,000 barrels, while Thomas Kemper beer continued its planned decline.
Total beer shipments, including Thomas Kemper beer, increased by 1.0% to 32,000
barrels. Shipments of Thomas Kemper Soda increased by 6.7% to 14,000 barrels
from 13,000 barrels in the same quarter of the prior year. Alehouse sales
increased 27.7%, to $3,988,000 in the third quarter ended September 30, 2003,
from $3,123,000 in the same quarter of 2002 due to the addition of the
Sacramento, CA Alehouse, which opened July of this year, contributing $974,000
in revenues for the quarter. On a same store basis, alehouse sales increased
slightly to $2,300,000 from $2,291,000. Seattle, WA and Berkeley, CA are
included in the same store location comparisons.

Excise Taxes.Excise taxes totaled 4.6% and 4.7% of gross sales for the
quarters ended September 30, 2003 and 2002, respectively. The decrease in
excise taxes as a percentage of gross sales was due mainly to a greater portion
of soda and alehouse sales, which do not bear excise tax.

Gross Margin. Gross margin decreased $271,000 to $2,190,000, down 11.1%
in the third quarter ended September 30, 2003. This decrease was due in part to
(1) lower net selling prices and higher material costs on the beverage side of
the business, (2) increased insurance and benefit costs of approximately
$120,000 and (3) $100,000 of pre-opening costs for the Sacramento Alehouse.

|                  |  |                                  |           |           |  |           |      |           |  |          |           |           |  |  |      |   |  |   |          |   |  |  |       |  
|----------------- |  | -------------------------------- | --------- | --------- |  | --------- | ---- | --------- |  | -------- | --------- | --------- |  |  | ---- | - |  | - | -------- | - |  |  | ----- | -
|                  |  | Three Months Ended September 30,
|                  |  |                                 
|                  |  |                                  |           |           |  | % of Div. |      |           |  |          |           | % of Div. |  |  |      |   |  |   |          |  
|Gross Margin      |  | 2003                             |           | Net Sales |  | 2002      |      | Net Sales |  | $ Change |           | % Change 
|                  |  |                                  |           |           |  |           |      |           |  |          |           |          
|Beverage Division |  | $                                | 1,808,000 |           |  |           | 28.8 | %         |  | $        | 2,033,000 |           |  |  | 32.3 | % |  | $ | (225,000 | ) |  |  | -11.1 | %
|Alehouse Division |  |                                  | 382,000   |           |  |           | 9.6  | %         |  |          | 428,000   |           |  |  | 13.7 | % |  |   | (46,000  | ) |  |  | -10.7 | %
|                  |  |                                  |           |           |  |           |      |           |  |          |           |           |  |  |      |   |  |   |          |   |  |  |       |  
|Total             |  | $                                | 2,190,000 |           |  |           | 21.3 | %         |  | $        | 2,461,000 |           |  |  | 26.2 | % |  | $ | (271,000 | ) |  |  | -11.0 | %
|                  |  |                                  |           |           |  |           |      |           |  |          |           |           |  |  |      |   |  |   |          |   |  |  |       |  

Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased 6.0% to $2,264,000 or 22.0% of net sales for
the third quarter ended September 30, 2003 from $2,135,000 or 22.7% of net
sales for the same quarter of 2002.

Other Income, net. Other income, net was approximately $118,000 and 1.1%
of net sales for the third quarter ended September 30, 2003 compared to
$137,000 and 1.4% of net sales in the same quarter of 2002. See Note 6  Other
Income, Net for greater detail.

Income Taxes. The Company recorded no income tax expense for the quarters
ended September 30, 2003 and 2002.

Net Income. The Company reported net income of $44,000 for the third
quarter ended September 30, 2003 compared to net income of $463,000 in the same
quarter of 2002.

Other.The Sacramento Alehouse opened its doors to the public on July 3,
2003. The 295 seat restaurant and brewery occupies approximately 9,500 square
feet on the first floor of a historical building. As of September 30, 2003
approximately $2,302,000 has been spent on the build-out of the new alehouse
location.

NINE MONTHS ENDED SEPTEMBER 30, 2003 COMPARED TO NINE MONTHS ENDED SEPTEMBER
30, 2002

Gross Sales.Gross sales increased 2.8% to $27,624,000 for the nine month
period ended September 30, 2003 from $26,882,000 in the same period of 2002.
Wholesale beverage sales decreased 3.2% to $18,382,000 for the nine month
period ended September 30, 2003 from $18,986,000 in the same period of 2002.
Total beverage barrel shipments decreased 1.8% compared to prior year. Pyramid
beer brand shipments increased 1.0% to 84,000 barrels, while Thomas Kemper beer
declined 14.8% to 3,000 barrels. Shipments of Thomas Kemper Soda decreased by
7.1% to 35,000 barrels from 37,000 barrels in the same nine month period of the
prior year. The year-to-date performance of the Northwest market continues to
lag prior year while the West and Southwest regions are showing increases over
prior. Alehouse sales increased 17.1%, to $9,242,000 in the nine month period
ended September 30, 2003, from $7,896,000 in the same period of 2002. The
additional revenue is from the recently opened Sacramento, CA alehouse
contributing $974,000 and the Walnut Creek, CA alehouse contributing $2,049,000
for the nine month period compared to prior year sales of $1,439,000 from the
two new alehouses. The same store alehouse sales decreased $237,000 or 3.7%
largely due to lower traffic at the Berkeley, California and Seattle,
Washington alehouse locations.

Excise Taxes.Excise taxes as a percentage of gross sales remained flat
over prior year, totaling 4.8% of gross sales for the nine month periods ended
September 30, 2003 and 2002.

12



---



##### Table of Contents



Gross Margin. Gross margin decreased $654,000 to $5,846,000, down 10.1%
for the nine month period ended September 30, 2003.

|                    |  |                                 |           |           |  |           |      |           |  |          |           |           |  |  |      |   |  |   |          |   |  |  |       |  
|------------------- |  | ------------------------------- | --------- | --------- |  | --------- | ---- | --------- |  | -------- | --------- | --------- |  |  | ---- | - |  | - | -------- | - |  |  | ----- | -
|                    |  | Nine Months Ended September 30,
|                    |  |                                
|                    |  |                                 |           |           |  | % of Div. |      |           |  |          |           | % of Div. |  |  |      |   |  |   |          |  
|Gross Margin        |  | 2003                            |           | Net Sales |  | 2002      |      | Net Sales |  | $ Change |           | % Change 
|                    |  |                                 |           |           |  |           |      |           |  |          |           |          
|Beverage Operations |  | $                               | 4,962,000 |           |  |           | 29.1 | %         |  | $        | 5,552,000 |           |  |  | 31.4 | % |  | $ | (590,000 | ) |  |  | -10.6 | %
|Alehouse Operations |  |                                 | 884,000   |           |  |           | 9.6  | %         |  |          | 948,000   |           |  |  | 12.0 | % |  |   | (64,000  | ) |  |  | -6.8  | %
|                    |  |                                 |           |           |  |           |      |           |  |          |           |           |  |  |      |   |  |   |          |   |  |  |       |  
|Total Operations    |  | $                               | 5,846,000 |           |  |           | 22.2 | %         |  | $        | 6,500,000 |           |  |  | 25.4 | % |  | $ | (654,000 | ) |  |  | -10.1 | %
|                    |  |                                 |           |           |  |           |      |           |  |          |           |           |  |  |      |   |  |   |          |   |  |  |       |  

Selling, General and Administrative Expenses. Selling, general and
administrative expenses decreased 2.8% to $6,348,000 or 24.1% of net sales for
the nine month period ended September 30, 2003 from $6,529,000 or 25.5% of net
sales for the same period of 2002.

Other Income, net. Other income, net was approximately $268,000 and 1.0%
of net sales for the nine month period ended September 30, 2003 compared to
$318,000 and 1.2% of net sales in the same period of 2002. See Note 6  Other
Income, Net for greater detail.

Income Taxes. The Company recorded approximately $2,000 of income tax
expense in the nine month period ended September 30, 2003 related to certain
state tax expense. For the most part, however, the Company recorded no income
tax for the periods ended September 30, 2003 and 2002. As of December 31, 2002,
the Company had approximately $6.8 million in deferred tax assets arising from
deductible temporary differences and tax loss carryforwards. A valuation
allowance was recorded against the deferred tax asset for the benefits of tax
losses which may not be realized. Realization of the deferred tax assets is
dependent on the Companys ability to generate future U.S. taxable income. The
Company does not believe that its net deferred assets meet the more likely
than not realization criteria of SFAS No. 109, Accounting for Income Taxes.
Accordingly, a full valuation allowance has been established. The Company will
continue to evaluate the realizability of the deferred tax assets quarterly by
assessing the need for and amount of a valuation allowance.

Net Loss. The Company reported net loss of $237,000 for the nine month
period ended September 30, 2003 compared to net income of $289,000 in the same
period of 2002.

LIQUIDITY AND CAPITAL RESOURCES

The Company had approximately $2,203,000 of cash, cash equivalents and
short-term investments at September 30, 2003 compared to $3,346,000 at December
2002. At September 30, 2003, the Company had working capital of $1,914,000
compared to $3,783,000 at December 31, 2002. The $1,869,000 decrease in working
capital is a result of the capital expenditures related to the build-out costs
of the Sacramento Alehouse, reflected in an approximate $1,143,000 decrease in
cash and short-term investments, and an increase in accounts payable, offset by
other various current asset and liability changes.

Net cash provided by operating activities during the nine month period
ended September 30, 2003 was approximately $2,926,000 compared to $2,091,000
for the same period of the prior year. The increase in net cash provided by
operating activities was due primarily to a tenant improvement credit of
$800,000 paid to Pyramid Breweries Inc. by the landlord of the Sacramento
Alehouse. The $800,000 cash receipt was recorded as a deferred rent liability
and will be amortized over the life of the lease.

Net cash used in investing activities for the nine month period ended
September 30, 2003 was $1,182,000 compared to $433,000 for the same period of
the prior year. The cash used in investing activities in 2003 included
approximately $2,302,000 used to build-out the new Sacramento Alehouse which
opened in July 2003. The capital expenditures were offset by the sale of
$1,900,000 of short-term investments. Short-term investment sales of $1,250,000
were made during the same nine month period of 2002.

At September 30, 2003, the Companys commitment to make future payments
under contractual obligations was as follows:

|                 |  |       |           |             |  |             |         |             |  |         |           |  |  |   |           |  |  |           |           | 
|---------------- |  | ----- | --------- | ----------- |  | ----------- | ------- | ----------- |  | ------- | --------- |  |  | - | --------- |  |  | --------- | --------- | 
|                 |  |       |           |             |  |             |         |             |  |         |           |  |  |   |           |  |  | More Than
|                 |  | Total |           | Within Year |  | 1 - 3 years |         | 3 - 5 years |  | 5 years
|                 |  |       |           |             |  |             |         |             |  |        
|Operating leases |  | $     | 9,223,000 |             |  | $           | 344,000 |             |  | $       | 2,271,000 |  |  | $ | 2,217,000 |  |  | $         | 4,391,000 | 
|Note payable (1) |  |       | 60,000    |             |  |             | 20,000  |             |  |         | 40,000    |  |  |   |          |  |  |           |          | 



| | (1) - |  | The amounts are payments as stated in the non-interest bearing note. The note payable was
recorded using a 10% discount rate on the balance sheet.
| | ----- |  | --------------------------------------------------------------------------------------------------------------------------------------------------

On December 15, 1999, the Company announced its first regular quarterly
cash dividend and has declared and paid a quarterly cash dividend each
consecutive quarter since the initial declaration. During the quarter ended
September 30, 2003 the Company declared per share dividends of $0.044 and paid
out $376,000 in cash dividends. Although the Company has declared and paid a
dividend every quarter

13



---



##### Table of Contents



since the fourth quarter of 1999, continued future
declaration of dividends will depend, among other things, on the Companys
results of operations, capital requirements and financial condition, and on
such other factors as the Companys Board of Directors may in its discretion
consider relevant and in the best long term interest of the shareholders.

On December 15, 1999, the Company also announced a stock buyback plan to
repurchase up to $2,000,000 of the Companys common stock from time to time on
the open market. Stock purchases are at the discretion of management and
depend, among other things, on the Companys results of operations, capital
requirements and financial condition, and on such other factors as the
Companys management may consider relevant. As of September 30, 2003, the
Company has purchased a total of 457,724 shares at an average price of $1.94
per share for a total of $892,000 since the inception of the program. During
the nine month period ended September 30, 2003, the Company did not purchase
any shares.

Future capital requirements may vary depending on such factors as the cost
of acquisition of businesses, brands and real estate costs in the markets
selected for future expansion, whether such real estate is leased or purchased
and the extent of improvements necessary. While there can be no assurance that
current expectations will be realized and plans are subject to change upon
further review, the Company believes that its cash balances, together with cash
from operations, will be sufficient for the Companys working capital needs.

Critical Accounting Policies

The Company believes that its critical accounting policies include the following:



| |  | Long-lived assets impairment      
|- |  | ----------------------------------
| 
| |  | Realization of deferred tax assets
| 
| |  | Stock-based compensation          

Long-Lived Assets Impairment.The Company reviews its long-lived assets
for impairment whenever events or changes in circumstances indicate that the
carrying amount of the assets may not be recoverable. The Companys evaluation
is based on an estimate of the future undiscounted net cash flows of the
related asset or asset grouping over the remaining life in measuring whether
the assets are recoverable. Long-lived assets to be disposed of are evaluated
in relation to the estimated fair value of such assets less the estimated costs
to sell. Long-lived assets are written down to their estimated net fair value
calculated using a discounted future cash flow analysis in the event of an
impairment. Effective in the fiscal year 2002, the Company accounts for
long-lived assets in accordance with Statement of Financial Accounting
Standards No. 144, Accounting for the Impairment or Disposal of Long-Lived
Assets. If circumstances related to the Companys long-lived assets change,
the Companys valuation of the long-lived assets could materially change.

Realization of Deferred Tax Assets.The Company evaluates the
realizability of its deferred tax assets quarterly by assessing the need for
and amount of the valuation allowance. The evaluation of the realizability of
the deferred tax assets is based on an assessment of the Companys ability to
generate future U.S. taxable income. Results of operations in recent years are
considered in the assessment. The Company records a valuation allowance for
the portion of its deferred tax assets that do not meet the recognition
criteria of SFAS No. 109, Accounting for Income Taxes. If circumstances
related to the Companys ability to generate future U.S. taxable income change,
the Companys evaluation of the realizability of its deferred tax assets could
materially change.

Stock-Based Compensation.The Company follows Accounting Principles Board
Opinion No. 25 (APB 25), Accounting for Stock Issued to Employees, in
accounting for its employee stock options using the fair value based method.
Under APB 25, because the exercise price of the Companys employee stock
options equals the market price of the underlying stock on the date of grant,
no compensation expense is recognized in the Companys Statements of
Operations. The Company is required under SFAS No. 123, Accounting for
Stock-Based Compensation, to disclose pro forma information regarding option
grants made to its employees based on specific valuation techniques that
produce estimated compensation charges. The Black-Scholes option pricing model
is used by the Company in estimating the fair value of options. If the Company
changes the accounting for stock-based compensation, the Companys results of
operations could materially change.

RISK FACTORS AND FORWARD LOOKING STATEMENTS

The Company does not provide forecasts of future financial performance.
However, this report contains forward looking statements: discussions of a
number of matters and subject areas that are not historical or current facts
but that address potential future circumstances, operations, and prospects.
These forward-looking statements are subject to the safe harbor created by
Section 21E of the Securities Exchange Act of 1934, are qualified by the
inherent risks and uncertainties surrounding future expectations generally and
may differ materially from the Companys actual future experience as a result
of such factors as: the effects of increased competition from regional craft
brewers and major breweries, the Companys ability to gain and continue access
to the markets through independent distributors and chain stores, the effects
of governmental regulation and the Companys ability to obtain and maintain
necessary permits, licenses and approvals, the Companys ability to maintain or
increase the price of its products without decreasing demand and the Companys
ability to maintain or increase operating margins which may decline as a result
of lower sales volumes or selling prices and increased production,
transportation and promotions costs. Investors are cautioned that all
forward-looking statements involve a high degree of risk and

14



---



##### Table of Contents



uncertainty.
Additional information concerning those and other factors is contained in the
Companys Securities and Exchange Commission filings including its Form 10-K
for the year ended December 31, 2002.




ITEM 3. Quantitative and Qualitative Disclosures about Market Risk

The Company has not and does not currently have any intention to hold any
derivative instruments or engage in hedging activities. Also, the Company does
not have any outstanding variable rate debt and does not enter into significant
transactions denominated in foreign currency. Therefore, the Companys direct
exposure to risks arising from changes in interest rates, foreign currency
exchange rates, commodity prices, equity prices, and other market changes that
affect market risk sensitive instruments is not material.

The Company does maintain an investment portfolio of various holdings,
types and maturities. These securities are generally classified as available
for sale and, consequently, are recorded on the balance sheets at fair value.
At any time, a rise or decrease in interest rates could have a material impact
on interest earnings of the investment portfolio. The Company currently does
not hedge interest rate exposures.




ITEM 4. Controls and Procedures

Procedures

Evaluation of disclosure controls and procedure

The Company maintains a set of disclosure controls and procedures and
internal controls designed to ensure that information required to be disclosed
in its filings under the Securities Exchange Act of 1934 is recorded,
processed, summarized and reported within the time periods specified in the
Securities and Exchange Commissions rules and forms. Based on their evaluation
as of the end of the period covered by this Quarterly Report on Form 10-Q, the
Companys Chief Executive Officer and Chief Financial Officer have concluded
that the Companys disclosure controls and procedures (as defined in Rules
13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (the Exchange
Act) are effective to ensure that information required to be disclosed by the
Company in reports that it files or submits under the Exchange Act is recorded,
processed, summarized and reported within the time periods specified in
Securities and Exchange Commission rules and forms.

Changes in internal controls

There were no changes in the Companys internal control over financial
reporting in connection with this evaluation that has materially affected, or
is reasonably likely to materially affect, our internal control over financial
reporting.

15



---



##### Table of Contents






PART II  OTHER INFORMATION




ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

(A) EXHIBITS

The following exhibits are filed as part of this report.

|     |  |                                                                                                                                                                                    
|---- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|3.1* |  | Amended and Restated Articles of Incorporation                                                                                                                                     
|     |  |                                                                                                                                                                                    
|3.2* |  | Amended and Restated Bylaws                                                                                                                                                        
|     |  |                                                                                                                                                                                    
|31.1 |  | Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant
to Section 302 of the Sarbanes-Oxley Act of 2002: R. Martin Kelly,
President and Chief Executive Officer     
|     |  |                                                                                                                                                                                    
|31.2 |  | Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant
to Section 302 of the Sarbanes-Oxley Act of 2002: James K. Hilger,
Vice-President and Chief Financial Officer
|     |  |                                                                                                                                                                                    
|31.3 |  | Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant
to Section 302 of the Sarbanes-Oxley Act of 2002: Jason W. Rees,
Controller and Chief Accounting Officer     
|     |  |                                                                                                                                                                                    
|32.1 |  | Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002: R. Martin Kelly,
President and Chief Executive Officer     
|     |  |                                                                                                                                                                                    
|32.2 |  | Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002: James K. Hilger,
Vice-President and Chief Financial Officer
|     |  |                                                                                                                                                                                    
|32.3 |  | Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002: Jason W. Rees,
Controller and Chief Accounting Officer     

* Incorporated by reference to the exhibits filed as part of the
Companys Registration Statement on Form S-1 (File No. 33-97834).

(B) REPORTS ON FORM 8-K

A report on Form 8-K was filed during the quarter ended September 30, 2003
on July 30, 2003.

Items 1, 2, 3 and 5 of PART II are not applicable and have been omitted

16



---



##### Table of Contents






SIGNATURE

Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned; thereunto duly authorized, in the City of
Seattle, State of Washington, on November 14, 2003.

| |  |                        |  |                                                            
| |  | ---------------------- |  | -----------------------------------------------------------
| |  | PYRAMID BREWERIES INC.
| |  |                        |  |                                                            
| |  | By:                    |  | /s/ R. MARTIN KELLY                                        
| |  |                        |  |                                                            
| |  |                        |  | R. Martin Kelly, President and Chief Executive Officer     
| |  |                        |  |                                                            
| |  | By:                    |  | /s/ JAMES K. HILGER                                        
| |  |                        |  |                                                            
| |  |                        |  | James K. Hilger, Vice-President and Chief Financial Officer
| |  |                        |  |                                                            
| |  | By:                    |  | /s/ JASON W. REES                                          
| |  |                        |  |                                                            
| |  |                        |  | Jason W. Rees, Controller and Chief Accounting Officer     

DATE: November 14, 2003

17