________________________________________________________________________________
________________________________________________________________________________

                                  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 JUNE 30, 2001

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

          FOR THE TRANSITION PERIOD FROM ____________ TO____________.

                         COMMISSION FILE NUMBER 0-27116


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


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

                          91 SOUTH ROYAL BROUGHAM WAY
                               SEATTLE, WA 98134
              (address of principal executive offices) (Zip Code)

       REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (206) 682-8322

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

Common  stock,  par  value  of  $.01 per share: 8,298,564 shares of common stock
outstanding  as  of  June  30,  2001

                   Pages 1 of 14 sequentially numbered pages.


                                        1
<PAGE>
                             PYRAMID BREWERIES INC.
                                    FORM 10-Q
          FOR THE QUARTERLY AND SIX MONTH PERIODS ENDED JUNE 30, 2001

                                TABLE OF CONTENTS

                                                                            PAGE
                                                                           -----
PART I    FINANCIAL  INFORMATION
Item 1.   Financial Statements (Unaudited)
          Balance Sheets
            June 30, 2001 and December 31, 2000. . . . . . . . . . . . . . .  3
          Statements of Operations
            Three Month and Six Month Periods Ended June 30, 2001 and 2000 .  4
          Statements of Cash Flows
            Six Month Periods Ended June 30, 2001 and 2000 . . . . . . . . .  5
          Notes to Financial Statements. . . . . . . . . . . . . . . . . . .  6
Item 2.   Management's Discussion and Analysis of Financial Condition
            and Results of Operations. . . . . . . . . . . . . . . . . . . .  9

PART II   OTHER  INFORMATION
Item 4.   Submission of Matters to a vote of Security Holders. . . . . . . . 12
Item 6.   Exhibits and Reports on Form 8-K . . . . . . . . . . . . . . . . . 12

          SIGNATURE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13

          EXHIBIT INDEX. . . . . . . . . . . . . . . . . . . . . . . . . . . 14


                                        2
<PAGE>
PART  I

<TABLE>
<CAPTION>
                            ITEM 1 -- FINANCIAL STATEMENTS

                                PYRAMID BREWERIES INC.

                                    BALANCE SHEETS
                                     (UNAUDITED)


                                                               June 30,     December 31,
                                                                 2001           2000
                                                             ----------------------------
<S>                                                          <C>           <C>
CURRENT ASSETS:
  Cash and cash equivalents . . . . . . . . . . . . . . . .  $ 6,416,145   $   6,444,145
  Accounts receivable, net. . . . . . . . . . . . . . . . .    2,140,017       1,664,466
  Inventories . . . . . . . . . . . . . . . . . . . . . . .    1,469,798       1,164,388
  Prepaid expenses and other. . . . . . . . . . . . . . . .      418,619         710,559
  Deferred income taxes . . . . . . . . . . . . . . . . . .      332,635         332,635
                                                             ----------------------------
    Total current assets. . . . . . . . . . . . . . . . . .   10,777,214      10,316,193
                                                             ----------------------------
Fixed assets, net . . . . . . . . . . . . . . . . . . . . .   20,550,931      21,125,892
Note receivable from officer for exercise of stock options.      114,587               -
Deferred income taxes . . . . . . . . . . . . . . . . . . .      148,674         148,674
Other assets. . . . . . . . . . . . . . . . . . . . . . . .      488,317         518,944
                                                             ----------------------------
    Total assets. . . . . . . . . . . . . . . . . . . . . .  $32,079,723   $  32,109,703
                                                             ============================

CURRENT LIABILITIES:
  Accounts payable. . . . . . . . . . . . . . . . . . . . .  $   973,765   $     739,284
  Accrued expenses. . . . . . . . . . . . . . . . . . . . .    1,778,634       1,297,370
  Refundable deposits . . . . . . . . . . . . . . . . . . .      512,257         534,295
  Dividends payable . . . . . . . . . . . . . . . . . . . .      365,137         314,530
                                                             ----------------------------
    Total current liabilities . . . . . . . . . . . . . . .    3,629,793       2,885,479
Deferred rent . . . . . . . . . . . . . . . . . . . . . . .    1,312,836       1,247,639
                                                             ----------------------------
    Total liabilities . . . . . . . . . . . . . . . . . . .    4,942,629       4,133,118
                                                             ----------------------------

COMMITMENTS AND CONTINGENCIES

STOCKHOLDERSEQUITY:
Preferred stock, 10,000,000 shares authorized, none issued.            -               -
Common stock, $.01 par value; 40,000,000 shares authorized,
  8,298,564 and 7,863,251 shares issued and outstanding . .       82,986          78,632
Additional paid-in capital. . . . . . . . . . . . . . . . .   35,648,245      34,337,887
Note receivable . . . . . . . . . . . . . . . . . . . . . .     (786,818)              -
Deferred compensation . . . . . . . . . . . . . . . . . . .     (246,224)              -
Retained deficit. . . . . . . . . . . . . . . . . . . . . .   (7,561,095)     (6,439,934)
                                                             ------------  --------------
    Total stockholders' equity. . . . . . . . . . . . . . .   27,137,094      27,976,585
                                                             ------------  --------------
    Total liabilities and stockholders' equity. . . . . . .  $32,079,723   $  32,109,703
                                                             ============  ==============
</TABLE>

        The accompanying notes are an integral part of these statements.


                                        3
<PAGE>
<TABLE>
<CAPTION>
                                    PYRAMID BREWERIES INC.

                                   STATEMENTS OF OPERATIONS
                                          (UNAUDITED)


                                               Three Months Ended June 30,  Six Months Ended June 30,
                                                    2001        2000          2001           2000
                                                -----------  -----------  -------------   -------------
<S>                                             <C>          <C>          <C>             <C>
Gross sales. . . . . . . . . . . . . . . . . .  $ 9,366,493  $ 8,424,897  $ 15,944,313     $14,947,829
Less excise taxes. . . . . . . . . . . . . . .      446,788      506,298       724,594         861,743
                                                -----------  -----------  -------------   -------------
Net sales. . . . . . . . . . . . . . . . . . .    8,919,705    7,918,599    15,219,719      14,086,086
Cost of sales. . . . . . . . . . . . . . . . .    6,289,352    5,713,906    11,246,909      10,422,639
                                                -----------  -----------  -------------   -------------
Gross margin . . . . . . . . . . . . . . . . .    2,630,353    2,204,693     3,972,810       3,663,447
Selling, general and administrative expenses .    2,475,558    1,981,127     4,645,679       3,742,153
                                                -----------  -----------  -------------   -------------
Operating income (loss). . . . . . . . . . . .      154,795      223,566      (672,869)        (78,706)
Other income, net. . . . . . . . . . . . . . .      161,874      219,431       263,100         311,852
                                                -----------  -----------  -------------   -------------
Income (loss) before income taxes. . . . . . .      316,669      442,997      (409,769)        233,146
Provision for income taxes . . . . . . . . . .            -            -             -               -
                                                -----------  -----------  -------------   -------------
Net income (loss). . . . . . . . . . . . . . .  $   316,669  $   442,997  $   (409,769)   $    233,146
                                                ===========  ===========  =============   =============

Basic and diluted net income (loss) per share.  $      0.04  $      0.06  $      (0.05)   $       0.03
Weighted average basic shares outstanding. . .    7,920,376    7,924,514     7,894,132       8,036,612
Weighted average diluted shares outstanding. .    8,077,134    7,926,029     7,894,132       8,042,377

  Beer barrels shipped . . . . . . . . . . . .       31,600       30,000        53,900          53,500
  Soda barrels shipped . . . . . . . . . . . .       15,100       11,000        24,900          19,500
                                                -----------  -----------  -------------   -------------
  Total barrels shipped. . . . . . . . . . . .       46,700       41,000        78,800          73,000
                                                ===========  ===========  =============   =============
</TABLE>

        The accompanying notes are an integral part of these statements.


                                        4
<PAGE>
<TABLE>
<CAPTION>
                                    PYRAMID BREWERIES INC.

                                   STATEMENTS OF CASH FLOWS
                                          (UNAUDITED)


                                                                      Six Months Ended June 30,
OPERATING ACTIVITIES:                                                    2001          2000
                                                                      -----------  ------------
<S>                                                                   <C>          <C>
  Net (loss) income. . . . . . . . . . . . . . . . . . . . . . . . .  $ (409,769)  $   233,146
  Adjustments to reconcile net (loss) income to net cash provided by
  operating activities:
  Depreciation and amortization. . . . . . . . . . . . . . . . . . .   1,177,682     1,263,656
  Stock compensation . . . . . . . . . . . . . . . . . . . . . . . .     183,599             -
  Loss (gain) on sales of fixed assets . . . . . . . . . . . . . . .         436        (5,518)
  Deferred income taxes. . . . . . . . . . . . . . . . . . . . . . .           -       170,879
  Deferred rent. . . . . . . . . . . . . . . . . . . . . . . . . . .      65,197       111,890
Changes in operating assets and liabilities:
  Accounts receivable. . . . . . . . . . . . . . . . . . . . . . . .    (475,551)     (830,511)
  Inventories. . . . . . . . . . . . . . . . . . . . . . . . . . . .    (305,410)      225,539
  Prepaid expenses and other . . . . . . . . . . . . . . . . . . . .     147,558        83,844
  Accounts payable and accrued expenses. . . . . . . . . . . . . . .     715,745       117,393
  Refundable deposits. . . . . . . . . . . . . . . . . . . . . . . .     (22,038)          858
                                                                      -----------  ------------
    Net cash provided by operating activities. . . . . . . . . . . .   1,077,449     1,371,176
INVESTING ACTIVITIES:
  Acquisitions of fixed assets . . . . . . . . . . . . . . . . . . .    (429,725)     (396,623)
  Proceeds from sales of fixed assets. . . . . . . . . . . . . . . .       1,577       118,730
  Proceeds from long-term receivable . . . . . . . . . . . . . . . .           -       185,820
                                                                      -----------  ------------
    Net cash used in investing activities. . . . . . . . . . . . . .    (428,148)      (92,073)
FINANCING ACTIVITIES:
  Proceeds from the sale of common stock . . . . . . . . . . . . . .      98,071        38,031
  Notes receivable . . . . . . . . . . . . . . . . . . . . . . . . .    (114,587)            -
  Cash dividends paid. . . . . . . . . . . . . . . . . . . . . . . .    (660,785)     (648,005)
  Repurchase and retirement of common stock. . . . . . . . . . . . .           -      (773,560)
                                                                      -----------  ------------
    Net cash used in financing activities. . . . . . . . . . . . . .    (677,301)   (1,383,534)
                                                                      -----------  ------------
Decrease in cash and cash equivalents. . . . . . . . . . . . . . . .     (28,000)     (104,431)
Cash and cash equivalents at beginning of period . . . . . . . . . .   6,444,145     6,303,540
                                                                      -----------  ------------
Cash and cash equivalents at end of period . . . . . . . . . . . . .  $6,416,145   $ 6,199,109
                                                                      ===========  ============
</TABLE>

        The accompanying notes are an integral part of these statements.


                                        5
<PAGE>
                             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 and Berkeley, California.  The Company sells its beer through a
network of selected independent distributors primarily in Washington, Oregon and
California under the Pyramid and Thomas Kemper brands. Pyramid also manufactures
a line of gourmet sodas under the Thomas Kemper Soda Company label.  As of June
30, 2001, the Company's products were distributed in 32 states and Canada. The
Company operates two 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. With the
exception of the historical information contained herein, the matters described
may contain forward-looking statements that involve risks and uncertainties,
including those described under the caption entitled "Risk Factors and
Forward-Looking Statements" in the Company's Annual Report on Form 10-K for the
year ended December 31, 2000, filed with the Securities and Exchange Commission,
and elsewhere in the Company's periodic reports.  In the opinion of management,
the accompanying unaudited financial statements contain all material
adjustments, consisting only of those of a normal recurring nature, considered
necessary for a fair presentation of the Company's financial position, results
of operations and cash flows at the dates and for the periods presented.  The
operating results for the interim periods presented are not necessarily
indicative of the results expected for the full year.


2.   INVENTORIES:

                                   JUNE 30,   DECEMBER 31,
                                     2001         2000
                                  ----------  -------------
          Raw materials. . . . .  $  665,046  $     481,601
          Work in process. . . .     204,816        109,510
          Finished goods . . . .     599,936        573,277
                                  ----------  -------------
                                  $1,469,798  $   1,164,388
                                  ==========  =============

     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


3.   FIXED  ASSETS:

                                             JUNE 30,     DECEMBER 31,
                                               2001           2000
                                           ------------  --------------
          Brewery and retail equipment. .  $14,354,829   $  14,246,061
          Furniture and fixtures. . . . .      902,042         772,562
          Leasehold improvements. . . . .   13,742,561      13,563,615
          Construction in progress. . . .      165,888         165,555
          Assets held for sale. . . . . .        3,832           3,832
                                           ------------  --------------
                                            29,169,152      28,751,625
          Less: accumulated depreciation.   (8,618,221)     (7,625,733)
                                           ------------  --------------
                                           $20,550,931   $  21,125,892
                                           ============  ==============


                                        6
<PAGE>
4.   EARNINGS  PER  SHARE

     Basic earnings per share was computed by dividing net income available to
common shareholders by weighted average shares outstanding. Options to purchase
approximately 341,000 and 447,000 for the quarter and six months ended June 30,
2001, respectively, and approximately  849,000 shares of common stock were
outstanding during the quarter and six months ended June 30, 2000 but were not
included in the calculation of diluted earning per share because the exercise
price of the options were greater than the average market price of the common
shares. Dilutive earnings per share was calculated as follows:

<TABLE>
<CAPTION>
                                                  THREE MONTHS ENDED       SIX MONTHS ENDED
                                                       JUNE 30,                JUNE 30,
                                                   2001        2000        2001         2000
                                                ----------  ----------  -----------  ----------
<S>                                             <C>         <C>         <C>          <C>
Earnings:
  Net income (loss). . . . . . . . . . . . . .  $  316,669  $  442,997  $ (409,769)  $  233,146

Shares:
  Weighted average basic shares outstanding. .   7,920,376   7,924,514   7,894,132    8,036,612
  Stock option dilution. . . . . . . . . . . .     156,758       1,515           -        5,765
                                                ----------  ----------  -----------  ----------
  Weighted average diluted shares outstanding.   8,077,134   7,926,029   7,894,132    8,042,377
                                                ----------  ----------  -----------  ----------
    Diluted earnings per share . . . . . . . .  $     0.04  $     0.06  $    (0.05)  $     0.03
                                                ==========  ==========  ===========  ==========
</TABLE>


5.   STOCKHOLDERS'  EQUITY

<TABLE>
<CAPTION>
                                 COMMON STOCK      ADDITIONAL                 DEFERRED                    TOTAL
                              ------------------    PAID-IN        NOTE       COMPEN-     RETAINED     STOCKHOLDERS'
                               SHARES    AMOUNT     CAPITAL     RECEIVABLE     SATION      DEFICIT        EQUITY
                              -------------------------------------------------------------------------------------
<S>                           <C>        <C>      <C>          <C>           <C>         <C>           <C>
Balance at December 31, 2000  7,863,251  $78,632  $34,337,887            -           -   $(6,439,934)  $27,976,585
  Net loss . . . . . . . . .          -        -            -            -           -      (409,769)     (409,769)
  Shares issued. . . . . . .     19,613      196       39,377            -           -        39,573
  Exercised stock options . .   415,700    4,158      841,158     (786,818)          -             -        58,498
  Stock compensation . . . .          -        -      183,599            -           -             -       183,599
  Deferred compensation. . .          -        -      246,224            -    (246,224)            -             -
  Dividends declared . . . .          -        -            -            -           -      (711,392)     (711,392)
                              -------------------------------------------------------------------------------------
Balance at June 30, 2001 . .  8,298,564  $82,986  $35,648,245  $  (786,818)  $(246,224)  $(7,561,095)  $27,137,094
                              =====================================================================================
</TABLE>

     In June 2001, the Company issued a $787,000 full recourse note to the CEO
in exchange for the exercise of options for 387,400 shares of the Company's
common stock. In addition, the Company issued a $115,000 full recourse note to
the CEO to fund his payment of taxes on the exercise of the options. The notes
are due on the earlier of June 30, 2011 or upon the sale of the stock and bear
an annual interest rate of 5.6%. A total of 135,100 of those shares are
unrestricted, except for being pledged as collateral for the loans, and the
remaining 252,300 shares become unrestricted over the next three and one-half
years. During the quarter ended June 30, 2001, the Company recorded $180,000 in
compensation expense in connection with this equity arrangement.

6.   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.

7.   CASH  DIVIDEND:

     The  Board  of  Directors  announced  on  May 4, 2001, the declaration of a
$0.044  per  common  share  dividend payable on July 16, 2001 to shareholders of
record  on  June  29,  2001.  The  cash  dividend declared totaled approximately
$365,000  for  all  common  stock  outstanding  as  of  the  date  of  record.

8.   SEGMENT  INFORMATION:

     The Company adopted Statement of Financial Accounting Standards (SFAS) No.
131 "Disclosures about Segments of an Enterprise and Related Information,"
during 1998. Following the provisions of SFAS No. 131, the Company is reporting
segment information in the same format as reviewed by the Company's management,
which is organized around differences in products and services.

     Products and Services


                                        7
<PAGE>
     The Company's reportable segments include beverage operations and
alehouses. Beverage operations include the production and sale of Pyramid Ales,
Thomas Kemper beers and Thomas Kemper Soda Company products. The alehouse
segment consists of two 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
distinct and 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 significant accounting policies.  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.

Segment profit and segment assets are as follows:

<TABLE>
<CAPTION>

                                                                 BEVERAGE
                                                                OPERATIONS    ALEHOUSE    OTHER     TOTAL
                                                                -----------  ----------  --------  --------
                                                                          (DOLLARS IN THOUSANDS)
<S>                                                             <C>          <C>         <C>       <C>
QUARTER ENDED JUNE 30, 2001
    Revenues from external customers . . . . . . . . . . . . .  $     7,044  $   2,322   $     -   $ 9,366
    Intersegment revenues. . . . . . . . . . . . . . . . . . .           86        (86)        -         -
    Interest income. . . . . . . . . . . . . . . . . . . . . .            -          -        66        66
    Depreciation and amortization including stock compensation          454        103       217       774
    Operating income . . . . . . . . . . . . . . . . . . . . .          722        364      (931)      155
    Capital expenditures . . . . . . . . . . . . . . . . . . .           91         14        78       183
    Total assets . . . . . . . . . . . . . . . . . . . . . . .       16,641      3,228    12,211    32,080

QUARTER ENDED JUNE 30, 2000
    Revenues from external customers . . . . . . . . . . . . .  $     6,347  $   2,078   $     -   $ 8,425
    Intersegment revenues. . . . . . . . . . . . . . . . . . .           71        (71)        -         -
    Interest income. . . . . . . . . . . . . . . . . . . . . .            -          -       104       104
    Depreciation and amortization including stock compensation          495         98        37       630
    Operating income . . . . . . . . . . . . . . . . . . . . .          640        176      (592)      224
    Capital expenditures . . . . . . . . . . . . . . . . . . .           41         54        25       120
    Total assets . . . . . . . . . . . . . . . . . . . . . . .       17,810      3,494    11,485    32,789

SIX MONTHS ENDED JUNE 30, 2001
    Revenues from external customers . . . . . . . . . . . . .  $    11,812  $   4,132   $     -   $15,944
    Intersegment revenues. . . . . . . . . . . . . . . . . . .          140       (140)        -         -
    Interest income. . . . . . . . . . . . . . . . . . . . . .            -          -       160       160
    Depreciation and amortization including stock compensation          902        206       253     1,361
    Operating loss . . . . . . . . . . . . . . . . . . . . . .          416        496    (1,585)     (673)
    Capital expenditures . . . . . . . . . . . . . . . . . . .          211         99       120       430
    Total assets . . . . . . . . . . . . . . . . . . . . . . .       16,641      3,228    12,211    32,080

SIX MONTHS ENDED JUNE 30, 2000
    Revenues from external customers . . . . . . . . . . . . .  $    11,183  $   3,765   $     -   $14,948
    Intersegment revenues. . . . . . . . . . . . . . . . . . .          130       (130)        -         -
    Interest income. . . . . . . . . . . . . . . . . . . . . .            -          -       180       180
    Depreciation and amortization including stock compensation          940        205       119     1,264
    Operating loss . . . . . . . . . . . . . . . . . . . . . .          960        219    (1,257)      (78)
    Capital expenditures . . . . . . . . . . . . . . . . . . .          104        228        64       396
    Total assets . . . . . . . . . . . . . . . . . . . . . . .       17,810      3,494    11,485    32,789
</TABLE>

Other

     Other consists of interest income, general and administrative 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 fixed assets, which are presented by segment.


                                        8
<PAGE>
9.   NEW  ACCOUNTING  PRONOUNCEMENTS:

     In June 2001 the Financial Accounting Standards Board approved SFAS No.
141, "Business Combinations," and SFAS No. 142, "Goodwill and Other Intangible
Assets." SFAS No. 141 prospectively prohibits the pooling of interest method of
accounting for business combinations initiated after June 30, 2001. SFAS No. 142
requires companies to cease amortizing goodwill that existed at June 30, 2001.
The amortization of existing goodwill will cease on December 31, 2001. Any
goodwill resulting from acquisitions completed after June 30, 2001 will not be
amortized. SFAS No. 142 also establishes a new method of testing goodwill for
impairment on an annual basis or on an interim basis if an event occurs or
circumstances change that would more likely than not reduce the fair value of a
reporting unit below its carrying value. The adoption of SFAS No. 142 will
result in the Company's discontinuation of amortization of its goodwill;
however, the Company will be required to test its goodwill for impairment under
the new standard beginning in the first quarter of 2002, which could have an
adverse effect on the Company's future results of operations if an impairment
occurs.


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

<TABLE>
<CAPTION>
                                                          QUARTER ENDED JUNE 30,
                                                          ----------------------
                                                 % OF        % OF
                                                 2001     NET SALES      2000     NET SALES
                                              ----------  ----------  ----------  ---------
<S>                                           <C>         <C>         <C>         <C>
Gross sales. . . . . . . . . . . . . . . . .  $9,366,493              $8,424,897
Less excise taxes. . . . . . . . . . . . . .     446,788                 506,298
                                              ----------  ----------  ----------  ---------
Net sales. . . . . . . . . . . . . . . . . .   8,919,705       100.0   7,918,599      100.0
Cost of sales. . . . . . . . . . . . . . . .   6,289,352        70.5   5,713,906       72.2
                                              ----------  ----------  ----------  ---------
Gross margin . . . . . . . . . . . . . . . .   2,630,353        29.5   2,204,693       27.8
Selling, general and administrative expenses   2,475,558        27.7   1,981,127       25.0
                                              ----------  ----------  ----------  ---------
Operating income . . . . . . . . . . . . . .     154,795         1.8     223,566        2.8
Other income, net. . . . . . . . . . . . . .     161,874         1.8     219,431        2.8
                                              ----------  ----------  ----------  ---------
Income before income taxes . . . . . . . . .     316,669         3.6     442,997        5.6
Provision for  income taxes. . . . . . . . .           -           -           -          -
                                              ----------  ----------  ----------  ---------
Net income . . . . . . . . . . . . . . . . .  $  316,669         3.6  $  442,997        5.6
                                              ==========  ==========  ==========  =========

Basic and diluted net income per share . . .  $     0.04              $     0.06
                                              ==========              ==========
Weighted  average basic shares outstanding .   7,920,376               7,924,514
                                              ==========              ==========
Weighted  average diluted shares outstanding   8,077,134               7,926,029
                                              ==========              ==========

OPERATING DATA (IN BARRELS):
  Beer barrels shipped . . . . . . . . . . .      31,600                  30,000
  Soda barrels shipped . . . . . . . . . . .      15,100                  11,000
                                              ==========              ==========
  Total barrels shipped. . . . . . . . . . .      46,700                  41,000
                                              ==========              ==========
  Annual production capacity at period end .     200,000                 172,000
                                              ==========              ==========
</TABLE>


                                        9
<PAGE>
<TABLE>
<CAPTION>
                                                              SIX MONTHS ENDED JUNE 30,
                                                             --------------------------
                                                   % OF          % OF
                                                   2001       NET SALES        2000      NET SALES
                                               ------------  ------------  ------------  ----------
<S>                                            <C>           <C>           <C>           <C>
Gross sales . . . . . . . . . . . . . . . . .  $15,944,313                 $14,947,829
Less excise taxes . . . . . . . . . . . . . .      724,594                     861,743
                                               ------------  ------------  ------------  ----------
Net sales . . . . . . . . . . . . . . . . . .   15,219,719         100.0    14,086,086       100.0
Cost of sales . . . . . . . . . . . . . . . .   11,246,909          73.9    10,422,639        74.0
                                               ------------  ------------  ------------  ----------
Gross margin. . . . . . . . . . . . . . . . .    3,972,810          26.1     3,663,447        26.0
Selling, general and administrative expenses.    4,645,679          30.5     3,742,153        26.5
                                               ------------  ------------  ------------  ----------
Operating loss. . . . . . . . . . . . . . . .     (672,869)         (4.4)      (78,706)       (0.5)
Other income, net . . . . . . . . . . . . . .      263,100           1.7       311,852         2.2
                                               ------------  ------------  ------------  ----------
(Loss) income before income taxes . . . . . .     (409,769)         (2.7)      233,146         1.7
Provision for  income taxes . . . . . . . . .            -             -             -           -
                                               ------------  ------------  ------------  ----------
Net (loss) income . . . . . . . . . . . . . .  $  (409,769)         (2.7)  $   233,146         1.7
                                               ============  ============  ============  ==========

Basic and diluted net income (loss) per share  $     (0.05)                $      0.03
                                               ============                ============
Weighted  average basic shares outstanding. .    7,894,132                   8,036,612
                                               ============                ============
Weighted  average diluted shares outstanding.    7,894,132                   8,042,377
                                               ============                ============

OPERATING DATA (IN BARRELS):
  Beer barrels shipped. . . . . . . . . . . .       53,900                      53,500
  Soda barrels shipped. . . . . . . . . . . .       24,900                      19,500
                                               ------------                ------------
  Total barrels shipped . . . . . . . . . . .       78,800                      73,000
                                               ============                ============
  Annual production capacity at period end. .      200,000                     172,000
                                               ============                ============
</TABLE>


QUARTER ENDED JUNE 30, 2001 COMPARED TO QUARTER ENDED JUNE 30, 2000

     Gross  Sales.  Gross  sales  increased  11.2%  to $9,366,000 for the second
quarter  ended  June  30,  2001 from $8,425,000 in the same quarter of the prior
year.  This  increase  in  gross sales was the result of increased sales in both
divisions, wholesale beverage and alehouse restaurants. Wholesale beverage sales
increased  11.0%  to $7,044,000 in the second quarter of 2001 from $6,347,000 in
the same quarter of 2000. This increase was primarily due to a 37.3% increase in
Thomas  Kemper Soda barrels shipped to 15,100 barrels from 11,000 barrels in the
same  quarter  of  the  prior year. Alehouse sales increased 11.7% to $2,322,000
from  $2,078,000 for quarters ended June 30, 2001 and 2000, respectively, due to
increased  patronage  at  the  Seattle  alehouse. Total wholesale beer shipments
increased 5.3% to 31,600 barrels for the second quarter of 2001 from 30,000 over
the  same  quarter  of  the  prior  year.  Of total beer shipments, Pyramid beer
increased  7.8%  to  29,800 barrels while Thomas Kemper beer shipments decreased
22.7%  to  1,800  barrels  for  the  second quarter of 2001 compared to the same
quarter of the prior year. The beer product mix shifted to a lower percentage of
draft sales to 37.7% for the quarter ended June 30, 2001 from 39.9% for the same
quarter  of  the  prior  year.

     Excise  Taxes. Excise taxes decreased to 4.8% of gross sales for the second
quarter  ended June 30, 2001 from 6.0% of gross sales in the same quarter of the
prior  year. The decrease in excise taxes as a percentage of gross sales was due
mainly  to a greater portion of alehouse and soda sales during the quarter ended
June 30, 2001, which do not bear excise tax, and a lower Washington state excise
tax.

     Gross  Margin.  Gross  margin  increased 19.3% to $2,630,000 for the second
quarter  ended  June  30,  2001 from $2,205,000 in the same quarter of the prior
year.  Gross  margin  as  a  percentage  of net sales increased to 29.5% for the
second  quarter ended June 30, 2001 from 27.8% for the same quarter of the prior
year.  This increase as a percentage of net sales was due primarily to increased
sales  volume  overall  and  cost  efficiencies  in  the  alehouse  division.

     Selling,  General  and  Administrative  Expenses.  Selling,  general  and
administrative  expenses  increased  25.0% to $2,476,000 from $1,981,000 for the
quarters  ended  June  30,  2001  and  2000,  respectively. Selling, general and
administrative  expenses as a percent of net sales increased to 27.7% from 25.0%
for  the  same quarter of the prior year. This increase in expense was primarily
due  to  a  charge  of  $180,000  related to the new equity arrangement with the
company's  CEO  and  non-recurring  refunds  of  excise  taxes  of approximately
$150,000  recorded  as a reduction in general and administrative expenses during
the  prior  year.

     Other  Income, net. Other income decreased 26.0% to $162,000 for the second
quarter  ended  June  30, 2001 from $219,000 for the second quarter of the prior
year. The decrease was due primarily to lower interest income during the current
year.

     Income  Taxes.  The Company recorded no income tax benefit or provision for
the  quarters ended June 30, 2001 and 2000. As of December 31, 2000, the Company
had  deferred  tax  assets  arising  from  deductible temporary differences, tax
losses,  and  tax  credits  offset  against  certain deferred tax liabilities. 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 asset
representing  tax  loss  and  credit carryforwards is dependent on the Company's


                                       10
<PAGE>
ability  to  generate  future  U.S. taxable income. 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 Income. Net income decreased $126,000 to $317,000 for the quarter ended
June 30, 2001 from $443,000 reported for the same quarter of the prior year. The
decrease  in  net  income  was  due  mainly  to  increased  selling, general and
administrative  expenses  for  the  second  quarter  ended  June  30,  2001.


SIX MONTHS ENDED JUNE 30, 2001 COMPARED TO SIX MONTHS ENDED JUNE 30, 2000

     Gross  Sales.  Gross  sales increased 6.7% to $15,944,000 for the six month
period  ended June 30, 2001 from $14,948,000 in the same six month period of the
prior  year.  This  increase  in  gross sales was mainly the result of increased
wholesale  soda  and  alehouse sales. Wholesale beverage sales increased 5.6% to
$11,812,000  in the six month period ended June 30, 2001 from $11,183,000 in the
same period of 2000.  This increase was due to a 27.7% increase in Thomas Kemper
Soda barrels shipped to 24,900 barrels from 19,500 barrels in the same six month
period  of  the  prior  year.  Alehouse  sales increased 9.7% to $4,132,000 from
$3,765,000  for  six  months  ended June 30, 2001 and 2000, respectively, due to
increased  sales  prices  and  patronage at both alehouse restaurants. Wholesale
beer  shipments increased slightly to 53,900 barrels for the first six months of
2001  from  53,500  over  the  same  period of the prior year. Of wholesale beer
shipments,  Pyramid  beer  increased  3.0% to 50,700 barrels while Thomas Kemper
beer  shipments  decreased 24.9% to 3,200 barrels for the second quarter of 2001
compared to the same quarter of the prior year. The beer product mix was similar
for  both  periods,  as  percentage  of draft sales was 41.0% for the six months
ended  June  30,  2001  versus  40.9%  for  the  same  period of the prior year.

     Excise  Taxes.  Excise  taxes  decreased to 4.5% of gross sales for the six
month period ended June 30, 2001 from 5.8% of gross sales for the same six month
period  of the prior year. The decrease in excise taxes as a percentage of gross
sales  was  due  to a higher proportion of alehouse and soda sales, which do not
bear  excise  tax,  and  a  lower  Washington  state  excise  tax.

     Gross  Margin.  Gross margin increased 8.5% to $3,973,000 for the six month
period  ended June 30, 2001 from $3,663,000 for the same six month period of the
prior  year. Gross margin as a percentage of net sales improved to 26.1% for the
six month period ended June 30, 2001 from 26.0% for the same six month period of
the  prior  year.  Although gross margins in the alehouse division have improved
due  to  cost  efficiencies,  these  improvements  have been offset by increased
energy  costs  company-wide.

     Selling,  General  and  Administrative  Expenses.  Selling,  general  and
administrative  expenses  increased 24.4% to $4,656,000 for the six month period
ended  June  30,  2001  from  $3,742,000  for the same period of the prior year.
Selling,  general  and  administrative  expenses  as a percent of net sales also
increased  to  30.5%  from  26.5%  for  the  same period of the prior year. This
increase in expense was primarily due to increased marketing expense of $363,000
related  to a brand awareness campaign, a non cash charge of $180,000 related to
the  new  equity arrangement with the company's CEO and non-recurring refunds of
excise  taxes  of  approximately $150,000 recorded as a reduction in general and
administrative  expenses  during  the  prior  year.

     Other  Income,  net.  Other  income decreased to $263,000 for the six month
period  ended  June  30, 2001 from $312,000 for the same six month period of the
prior  year.  The  decrease  was  due primarily to a decrease in interest income
during  the  current  year.

     Income  Taxes.  The  Company  recorded  no income tax provision for the six
month periods ended June 30, 2001 and 2000. As of December 31, 2000, the Company
had  deferred  tax  assets  arising  from  deductible temporary differences, tax
losses,  and  tax  credits  offset  against  certain deferred tax liabilities. 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 asset
representing  tax  loss  and  credit carryforwards is dependent on the Company's
ability  to  generate  future  U.S. taxable income. 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)  Income.  The  net loss for the six month period ended June 30,
2001  was  $410,000,  a decrease of $643,000, compared to net income of $233,000
reported  for  the same period of the prior year. The net loss was due mainly to
increased  selling,  general  and  administrative  expense.

LIQUIDITY AND CAPITAL RESOURCES

     Net cash provided by operating activities during the six month period ended
June 30, 2001 was $1,077,000 compared to $1,371,000 for the same period of the
prior year. This decrease was due primarily to the increase in net loss for the
current period.  Net cash used in investing activities for the six months ended
June 30, 2001 was $428,000 compared to net cash used in investing activities of
$92,000 for the same period of the prior year. The cash used in investing
activities in 2001 included funds used to expand the Seattle alehouse seating
area and signage and install production equipment in the Berkeley brewery.  The
prior year expenditures were partially offset by proceeds from the sale of old
production equipment and collection of a long-term note receivable. At June 30,
2001, the Company had working capital of $7,147,000 compared to $7,431,000 at
December 31, 2000.


                                       11
<PAGE>
     On December 15, 1999, the Company 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 repurchases 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 June 30, 2001, the Company has
repurchased 445,998 shares at an average price of $1.94 per share.

     The Company had a $5,000,000 line of credit (the Line of Credit) for
short-term operating needs which expired on July 31, 2001. Borrowings under the
Line of Credit would have accrued interest at either the bank's prime rate or at
LIBOR plus 150 basis points. The Company is currently negotiating a new Line of
Credit. As of June 30, 2001, the Company had not borrowed on the Line of Credit.

     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. Capital expenditures in 2001 are
expected to be comparable to the 2000 expenditures. Planned projects include the
continued upgrading of brewery equipment and alehouse facilities in the Seattle
and Berkeley locations. 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 reserves, together with cash from
operations and borrowings under a Line of Credit, will be sufficient for the
Company's working capital needs.

     The Company's future cash requirements and cash flow expectations are
closely related to its expansion plans. The Company generally expects to meet
future financing needs through cash on-hand, cash flow from operations and, to
the extent required and available, additional bank borrowings.


RISK FACTORS AND FORWARD LOOKING STATEMENTS

     The Company does not provide forecasts of future financial performance.
However this report does contain forward-looking statements within the meaning
of Section 21E of the Securities Exchange Act of 1934, which are subject to the
"safe harbor" created by that section.  There are numerous important factors
that could cause results to differ materially from those anticipated by some of
the statements made by the Company. Investors are cautioned that all
forward-looking statements involve a high degree of risk and 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, 2000.


PART  II.  --  OTHER  INFORMATION

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

     The  annual  shareholder  meeting  was  held  on  May  3, 2001.  During the
meeting,  the  election  of  two  directors  was submitted to a vote of security
holders  and  duly  elected  for  terms  of  three years each.  Martin Kelly was
re-elected  by  a  vote  of  7,587,318  for and 34,693 votes were withheld. Kurt
Dammeier  was  re-elected  by  a  vote  of  7,585,318  for and 36,693 votes were
withheld. The terms of office as directors continued after the meeting for Scott
Barnum,  George  Hancock  and  Nancy  Mootz.

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
     10.10     Amended  and Restated Employment Agreement between the Registrant
               and  Martin  Kelly
     10.13     Promissory Note between the Registrant and Martin Kelly
     10.14     Promissory Note between the Registrant and Martin Kelly
     10.15     Stock  Purchase  and Restriction Agreement between the Registrant
               and  Martin  Kelly

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


                                       12
<PAGE>
(B)  REPORTS  ON  FORM  8-K

     None filed during the quarter ended June 30, 2001.

ITEMS 1, 2, 3, AND 5 OF PART II ARE NOT APPLICABLE AND HAVE BEEN OMITTED.


                                    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  August  14,  2001.

                                PYRAMID BREWERIES INC.



                                By:   /s/ L. WAYNE DRURY
                                   ----------------------------------
                                    L. Wayne Drury, Vice President
                                    and Chief Financial Officer


                                By:   /s/ R. MARTIN KELLY
                                   ----------------------------------
                                    R. Martin Kelly, President
                                    and Chief Executive Officer


     DATE: August 14, 2001


                                       13
<PAGE>
                                  EXHIBIT INDEX

EXHIBIT
  NO.     DESCRIPTION
          -----------

10.10     Amended  and  Restated Employment Agreement between the Registrant and
          Martin  Kelly

10.13     Promissory  Note  between  the  Registrant  and  Martin  Kelly

10.14     Promissory  Note  between  the  Registrant  and  Martin  Kelly

10.15     Stock  Purchase  and  Restriction Agreement between the Registrant and
          Martin  Kelly


                                       14
<PAGE>