================================================================================
                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   FORM 10-QSB

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
    EXCHANGE ACT OF 1934
    For the quarterly period ended June 30, 1999.

                                       or

[ ] 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: 0-27800

                              Frederick Brewing Co.
        -----------------------------------------------------------------
        (Exact name of small business issuer as specified in its charter)

                  Maryland                                       52-1769647
---------------------------------------------                -------------------
(State or other jurisdiction of incorporation                 (I.R.S. Employer
              or organization)                               Identification No.)

4607 Wedgewood Boulevard, Frederick, Maryland                       21703
---------------------------------------------                    ----------
  (Address of principal executive offices)                       (Zip Code)

                                 (301) 694-7899
                ------------------------------------------------
                (Issuer's telephone number, including area code)

                                 Not Applicable
              ----------------------------------------------------
              (Former name, former address and former fiscal year,
                          if changed since last report)

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

Common Stock, $0.0004 Par Value                            1,845,759
-------------------------------                  -----------------------------
     (Title of Each Class)                       (Number of Shares Outstanding
                                                    as of August 5, 1999)

Transitional Small Business Disclosure Format (Check one):
Yes [ ]      No [X]
================================================================================
<PAGE>

                            Frederick Brewing Company
                           Consolidated Balance Sheet
<TABLE>
<CAPTION>
                                                                                June 30, 1999
                                                                                -------------
                                                                                 (Unaudited)
                                     ASSETS
<S>                                                                             <C>
Current assets:
   Cash and cash equivalents                                                    $       6,511
   Cash - restricted                                                                   12,475
   Trade receivables, net of allowance for doubtful accounts of $27.618               375,087
   Inventories, net of reserve for obsolescence of $48,208                            627,776
   Prepaid expenses, and other current assets                                         158,332
                                                                                -------------
      Total current assets                                                          1,180,181

Property and equipment, net                                                         7,783,612
Intangibles, net of accumulated amortization of $170,347                              372,651
Goodwill, net of accumulated amortization of $387,333                               2,346,781
Other assets                                                                           72,396
                                                                                -------------
      Total assets                                                              $  11,755,621
                                                                                =============

                      LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
   Current maturities of long-term debt                                         $   1,161,129
   Capital lease obligations, current portion                                          44,717
   Short term convertible notes                                                       500,000
   Accounts payable                                                                 1,655,325
   Accrued liabilities                                                                156,588
                                                                                -------------
      Total current liabilities                                                     3,517,759

Long-term debt                                                                      1,019,794
Capital lease obligations                                                           2,629,988
                                                                                -------------
      Total liabilities                                                             7,167,541
                                                                                -------------

Stockholders' equity:
   Preferred stock - $.01 par value, 1,000,000 shares authorized:
      Cumulative, convertible Series A, 1,543 shares issued and outstanding           581,687
      Convertible Series F, 776 shares issued and outstanding                         750,780
      Convertible Series G, 231 shares issued and outstanding                         297,152
      Common stock - $0.0004 par value, 19,000,000 shares authorized,
         1,812,845 shares issued and outstanding                                          724
   Additional paid-in capital                                                      20,718,591
   Accumulated deficit                                                            (17,760,854)
                                                                                -------------
      Total stockholders' equity                                                    4,588,080
                                                                                -------------
      Total liabilities and stockholders' equity                                $  11,755,621
                                                                                =============
</TABLE>

                  The accompanying notes are an integral part
                   of these consolidated financial statements.

                                       2
<PAGE>

                            Frederick Brewing Company
                      Consolidated Statements of Operations
<TABLE>
<CAPTION>
                                                                     Three Months Ended                  Six Months Ended
                                                                          June 30,                           June 30,
                                                                -----------------------------     ------------------------------
                                                                    1999             1998             1999              1998
                                                                    ----             ----             ----              ----
                                                                         (Unaudited)                        (Unaudited)
<S>                                                             <C>              <C>              <C>               <C>
Gross sales                                                     $ 1,003,550      $  1,595,010     $  1,994,508      $  2,609,847
Less: Returns and allowances, and excise taxes                      110,038           130,149          176,894           178,343
                                                                -----------      ------------     ------------      ------------
      Net sales                                                     893,512         1,464,861        1,817,614         2,431,504

      Cost of sales                                                 900,850           986,458        1,757,227         1,803,231
                                                                -----------      ------------     ------------      ------------
      Gross profit                                                   (7,338)          478,403           60,387           628,273

Selling, general and administrative expenses                        543,796         1,187,066        1,302,591         1,901,300
Amortization of deferred public relations costs                           -         1,020,938                -         1,089,000
                                                                -----------      ------------     ------------      ------------
      Operating loss                                               (551,134)       (1,729,601)      (1,242,204)       (2,362,027)

Loss on sale of equipment                                                 -           102,205                -            99,545
Interest expense, net                                               196,517           104,197          350,541           210,435
                                                                -----------      ------------     ------------      ------------
      Net loss                                                     (747,651)       (1,936,003)      (1,592,745)       (2,672,007)

Preferred stock deemed dividend requirements                              -                 -                -           (28,627)
                                                                -----------      ------------     ------------      ------------
Net loss attributable to common shareholders                    $  (747,651)     $ (1,936,003)    $ (1,592,745)     $ (2,700,634)
                                                                ===========      ============     ============      ============
Basic and diluted loss per common share:
      Net loss before preferred stock dividend requirements     $     (0.41)     $      (2.04)    $      (0.87)     $      (3.40)
      Preferred stock dividend requirements                               -                 -                -             (0.04)
                                                                -----------      ------------     ------------      ------------
      Net loss per common share                                 $     (0.41)     $      (2.04)    $      (0.87)     $      (3.44)
                                                                ===========      ============     ============      ============

Weighted average common shares (basic and diluted)                1,821,363           950,283        1,821,363           784,867
</TABLE>

                  The accompanying notes are an integral part
                   of these consolidated financial statements.

                                       3
<PAGE>

                            Frederick Brewing Company
                      Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
                                                                     Three Months Ended                  Six Months Ended
                                                                          June 30,                           June 30,
                                                                -----------------------------     ------------------------------
                                                                    1999             1998             1999              1998
                                                                    ----             ----             ----              ----
                                                                         (Unaudited)                        (Unaudited)
<S>                                                              <C>             <C>              <C>               <C>
Cash flows from operating activities:
   Net loss                                                      $ (747,651)     $ (1,936,003)    $ (1,592,745)     $ (2,672,007)
   Adjustments to reconcile net loss to net cash
      for operating activities:
      Depreciation and amortization                                 285,404           267,946          569,064           504,223
      Writeoff of accounts receivable                                 2,325                 -            2,325                 -
      Loss on writeoff of equity in minority interest                     -                 -            1,584                 -
      Amortization of deferred public relations costs                     -         1,020,938                -         1,089,000
      Loss on sale of equipment                                           -           102,205                -            99,545
      Change in operating assets and liabilities:
         Trade receivables                                          (24,529)         (118,067)          35,806          (182,458)
         Inventories                                                183,282          (149,546)         171,010          (349,816)
         Prepaid expenses and other current assets                      776            48,357             (426)         (137,150)
         Other assets                                                     -           114,686                -            83,008
         Accounts payable                                           180,377            92,078          440,097           137,304
         Accrued liabilities                                         26,945            53,089          (21,063)         (517,236)
                                                                 ----------      ------------     ------------      ------------
      Net cash used in operating activities                         (93,071)         (504,317)        (394,258)       (1,945,587)
                                                                 ----------      ------------     ------------      ------------

Cash flows from investing activities:
   Purchase of property and equipment                              (146,171)             (254)        (152,280)         (288,320)
   Purchase of intangibles                                             (647)          (90,711)          (2,355)          (90,711)
   Proceeds from sale of equipment                                        -            77,260                -            94,060
                                                                 ----------      ------------     ------------      ------------
      Net cash used in investing activities                        (146,818)          (13,705)        (154,635)         (284,971)
                                                                 ----------      ------------     ------------      ------------

Cash flows from financing activities:
   Payments on debt obligations                                      51,493           (67,515)         (15,871)         (140,609)
   Payments on capital leases                                       (11,016)          (31,704)         (21,724)          (45,896)
   Proceeds from issuance of short term notes                       198,061                 -          500,000                 -
   Restricted cash                                                        -            12,475                -                 -
                                                                 ----------      ------------     ------------      ------------
      Net cash provided by/(used in) financing activities           238,538           (86,744)         462,405          (186,505)
                                                                 ----------      ------------     ------------      ------------

Net decrease in cash and cash equivalents                            (1,351)         (604,766)         (86,488)       (2,417,063)

Cash and cash equivalents, beginning of period                        7,862           800,583           92,999         2,612,880

                                                                 ----------      ------------     ------------      ------------
Cash and cash equivalents, end of period                         $    6,511      $    195,817     $      6,511      $    195,817
                                                                 ==========      ============     ============      ============
</TABLE>

                  The accompanying notes are an integral part
                   of these consolidated financial statements.

                                       4
<PAGE>

                            FREDERICK BREWING COMPANY
                              Index To Form 10-QSB
                                  June 30, 1999

PART 1.    FINANCIAL INFORMATION

Item 1.    Financial Statements

             Consolidated Balance Sheets (unaudited) at June 30, 1999

             Consolidated Statements of Operations (unaudited) for the
               Three and six months ended June 30, 1999 and 1998

             Consolidated Statements of Cash Flows (unaudited) for
               the Three and six months ended June 30, 1999 and 1998

             Notes to Consolidated Financial Statements (unaudited)

Item 2.    Management's Discussion and Analysis

PART II.   OTHER INFORMATION

Item 1.    Legal Proceedings

Item 2.    Changes in Securities

Item 3.    Defaults on Senior Securities

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

Item 5.    Other Information

Item 6.    Exhibits and Reports

PART III.  SIGNATURES

                                       5
<PAGE>

                            FREDERICK BREWING COMPANY
                   Notes To Consolidated Financial Statements
                                  June 30, 1999
                                  (Unaudited)

1. Basis of Presentation

The accompanying unaudited consolidated financial statements of Frederick
Brewing Company (the "Company") have been prepared in accordance with generally
accepted accounting principles for interim financial reporting, with
instructions from Form 10-QSB and Regulation S-B. As such, they do not include
all information and footnotes required by generally accepted accounting
principles for complete year-end financial reporting. In the opinion of Company
management, all normal recurring accruals and other adjustments considered
necessary for a fair presentation of an interim consolidated financial position
and the interim consolidated results of operations have been included.

Operating results for the three and six months ended June 30, 1999 are not
necessarily indicative of the results that may be expected for other interim
periods within 1999 or for the year ending December 31, 1999. Information
relating to the financial position, results of operations, and cash flows of the
Company as of and for the year ended December 31, 1998 may be found in the
financial statements included in the Company's Annual Report filed on Form
10-KSB for the year ended December 31, 1998.

Future Prospects

The Company's ability to meet its obligations is dependent on achieving
operating profitably and in generating positive cash flows. This operational
improvement requires the Company to either eliminate or substantially reduce
excess brewing capacity, and also requires the Company to obtain additional
financing from third parties.

On November 4, 1998, the Company retained West-Finance Corporation to advise and
assist the Company in: 1) refinancing the First Union National Bank debt, 2)
raising additional working capital, and 3) seeking candidates for acquisition by
the Company, a merger with the Company, or an acquisition of the Company. The
Company has made numerous contacts and engaged in preliminary, but unsuccessful,
discussions with numerous parties toward each of these objectives.

In April and June of 1999 the Company raised approximately $500,000 with a short
term loan from a consortium of investors collateralized by the Company's rights
in the Wild Goose brands, trademarks, copyrights and other intellectual
property. On June 30, 1999 the Company's Board of Directors agreed to grant
SIBG, an unrelated third party, the exclusive right to negotiate and perform due
diligence leading toward a transaction in which SIBG would acquire majority
control of the Company's voting stock in exchange for cash. The agreement
further provided that the exclusive right of SIBG was to terminate on July 25,
1999. On July 28, 1999 the Company received $50,000 cash from SIBG to extend
their exclusive right to negotiate with the Company through August 8, 1999. The
extended exclusivity agreement expired on August 8, 1999 with the mutual consent
of the parties. The Company and SIBG are, however, continuing to negotiate and
draft all of the documents necessary to complete the transaction, as well as the
documentation needed from third parties.

If the transaction with SIBG closes as discussed to date, management believes
SIBG may simultaneously acquire and exercise the Company's option to purchase
the brewery land and building in Frederick, Maryland; may enter into a contract
brewing agreement with the Company to commit to producing 5,000 to 35,000
barrels per year of various brands controlled by SIBG and affiliates; and may
arrange to refinance the Company's debt to First Union National Bank.

The Company has been in discussions with SIBG at various times since late 1998.
Negotiations concerning the stock purchase, real estate purchase, contract
brewing, the refinance of the First Union National Bank

                                       6
<PAGE>

debt, negotiations to settle and compromised the Company's financial obligations
to its other creditors and to resolve issues with its preferred stock
shareholders are at an advanced stage, and if SIBG proceeds substantially as
contemplated, the terms of those transactions will likely prove acceptable to
the Company's Board of Directors.

However, the exclusivity agreement states in part "there has been no meeting of
the minds as to the material terms of any proposal". No definitive agreements
have been executed with SIBG, and there can be no assurance that such agreements
will be executed, or will be closed even if executed. Neither the Company nor
SIBG is yet obligated to execute agreements or to close on any transaction.
Several conditions must be satisfied before any transaction can be completed,
and many of these are beyond the control of the Company and management. Some of
these conditions include: 1) one or more of SIBG's members must agree to
contribute the cash needed to allow SIBG to purchase the Company's common stock;
2) SIBG, its counsel, auditors, and other advisors must complete and be
satisfied with the results of its due diligence review of the Company, its
condition, and its business prospects; 3) the Company and SIBG must agree to
terms and negotiate mutually acceptable agreements between themselves and with
third parties including: (a) a purchase or pay-off of the First Union National
Bank debt; (b) the approval of the United States Small Business Administration
which is a secured creditor of the Company; (c) the negotiation of a mutually
acceptable agreement for the purchase by SIBG of the real estate now owned by
Blue II, LLC; (d) the agreement of the Company's numerous unsecured creditors,
equipment lessors, and other suppliers to payment terms acceptable to SIBG; 4)
the termination or modification of the Company's employment contracts with
senior management; and 5) numerous others many of which may not be foreseen by
the Company.

No assurance can be given that these conditions can or will be met in a timely
manner or on terms that are acceptable or favorable to the Company. The
exclusivity agreement with SIBG generally prohibited the Company from
soliciting, encouraging, discussing, or considering other proposals or of
providing non-public information to other parties who may be interested in
providing the Company with financing until August 8, 1999. There is the risk
that the Company will not be able to raise funds to sustain operations if the
transaction with SIBG does not close or is not closed in a timely manner.

Presently the Company is in default under the payment terms of an equipment loan
to a national bank. In June 1999 the Company agreed to pay the bank $50,000 (in
two installments) in return for the banks agreement not to demand repayment of
the loan until June 30, 1999. The Company failed to make the second installment
payment and negotiated a further extension of the bank's forbearance through
August 15, 1999 as well as to refinance the loan. There can be no assurance that
the bank will agree to forbear beyond that date or that the loan can be
refinanced. The Company is also in default on numerous other obligations
including rental payments due to Blue II, payments due on several equipment
leases, and payments due to outside vendors and professionals. There can be no
assurance that these creditors will refrain from taking legal action against the
Company, or attempt to place the Company into involuntary bankruptcy.

The Company received a letter dated September 15, 1998 (the "notice letter")
from Nasdaq Stock Market Inc. ("Nasdaq") stating that the Company's common stock
may be de-listed from the Nasdaq Small-Cap Market for failure to maintain a
minimum bid of $1.00 per share. In summary, the notice letter stated that if the
Company failed to achieve a closing bid price of $1.00 per share for ten
consecutive trading days during the 90-day calendar period ending December 14,
1998, the common stock would be subject to de-listing. The Company requested,
and Nasdaq approved, an extension of time to allow shareholder approval of a
reverse stock split in an effort to boost the stock price. In March 1999 the
Company affected a 1 for 10 reverse stock split, however the stock price did not
remain above the $1.00 closing bid for ten consecutive trading days as required
by Nasdaq. In April 1999 Nasdaq notified the Company that its common stock had
been de-listed from the Nasdaq Small-Cap Market. As of August 5, 1999, the
common stock has been trading on the Electronic Bulletin Board under the symbol
BLUE.

If the Company is not successful in completing a transaction with SIBG it will
seek to obtain short-term financing from third parties that have previously
purchased equity or loaned funds to finance its operations.

                                       7
<PAGE>

The Company is also exploring the option of merging with, or selling assets to,
another craft-brewer or industry participant with greater financial resources to
help ensure its meets its obligations. The Company could also seek protection
under Chapter 11 of the bankruptcy code to allow additional time to explore
other alternatives to eliminate or reduce excess capacity. The Company has not
yet decided on a definitive alternative course of action, but has been in active
discussions of such options since the expiration of the exclusivity agreement.

2. Principles of Consolidation

The Consolidated financial statements for the three and six months ended June
30, 1999 include the accounts of the Company and its wholly owned subsidiaries
Wild Goose Brewery, Inc. ("Wild Goose") and Brimstone Brewing Company
("Brimstone") since their acquisitions on January 28 and January 15, 1998
respectively.

3. Cash and Cash Equivalents

Cash and cash equivalents are stated at cost, which approximates fair value, and
consists of amounts on hand and in a highly liquid short-term investment account
with a major bank. All cash equivalents have original maturities to three months
or less. A short-term investment of $12,475 is shown as restricted cash, and
represents pledged collateral to ensure the Company's performance of site
improvement work required by the local Frederick County government.

4. Trade Receivables

Trade receivable result primarily from product sales to wholesale distributors.
The Company periodically reviews the financial strength of its distributors, and
provides allowances for anticipated losses as necessary. At June 30, 1999 there
was $27,618 in allowance for doubtful accounts.

5. Inventories

Inventories consist of raw ingredients, work in process, packaging materials,
and finished product, and are valued at the lower of cost or market. Cost is
determined by the first-in, first-out (FIFO) method. The Company periodically
reviews the age and marketability if its inventory, and provides obsolescence
reserves as necessary. Net inventories at June 30, 1999 are as follows:

           Raw ingredients......................................... $  98,764
           Work in process.........................................    68,536
           Packaging materials.....................................   141,623
           Finished goods..........................................   367,061
           Inventory, gross........................................   675,984
           Reserve for obsolescence................................   (48,208)
           Inventory, net.......................................... $ 627,776

6. Property and Equipment

Property and equipment are recorded at cost and depreciated over the estimated
useful lives of the individual asset groups. Straight-line depreciation is used
for financial reporting, and accelerated methods used for tax reporting. The
estimated useful lives used for financial reporting are as follows: brewing
equipment, 7 to 20 years; automobiles and trucks, 5 years; furniture and
fixtures, 3 to 7 years. Leasehold improvements are recorded at cost and
amortized over the shorter of the terms of the related lease, or over the
estimated useful life of the improvement. On retirement or disposition of
property and equipment, its cost and accumulated depreciation are removed from
the accounts and any resulting gain or loss is reflected in operations. Repair
and maintenance costs to property and equipment is expended in the year
incurred. Property and equipment at June 30, 1999 are as follows:

                                       8
<PAGE>

           Brewing equipment....................................... $ 4,350,236
           Brewery building........................................   3,000,000
           Leasehold improvements..................................   1,621,833
           Automobiles and trucks..................................     184,204
           Furniture and fixtures..................................     138,395
           Property and equipment, gross...........................   9,294,668
           Accumulated depreciation................................  (1,511,056)
           Property and equipment, net............................. $ 7,783,612

7. Intangible Assets

Intangible assets consist of trademarks, copyrights, and loan origination costs
related to existing debt obligations. Trademarks and copyrights are amortized
over 5 years on the straight-line basis. Loan origination costs are amortized
over the term of their related loan. Intangible asset amortization expense for
the three and six months ended June 30, 1999 was $23,728 and $46,330
respectively.

8. Goodwill

Goodwill represents the excess purchase price paid for Wild Goose over the value
of the net assets acquired, and is being amortized over 10 years (120 months)
from the date of its acquisition. Goodwill amortization expense for the three
and six months ended June 30, 1999 was $68,353 and $136,706 respectively.

9. Long-Term Debt

Long-term debt and the current maturity portion of long-term debt are $2,180,923
at June 30, 1999. Debt is itemized as follows: 1) a note for $1,113,756 payable
to a major bank, collateralize by the Company's brewing equipment; 2) a $947,482
loan payable to the United States Small Business Administration, secured by a
secondary lien on the Company's brewery equipment; 3) a $8,625 loan payable to a
major bank, collateralize by the Company's automobiles and trucks; and 4) a
$111,060 note payable to the local Frederick County government for sewer
connections.

10. Capital Leases

The Company leases the land and building housing the brewery, both of which
qualify for capital lease treatment. The current and long-term portion of the
capital lease is $2,674,705 at June 30, 1999. The Company has the option to
purchase the land and building after March 1, 2003.

11. Stockholders Equity

During the three months ended June 30, 1999 the Company issued 108,394 shares of
common stock on the conversion of 73 shares of Series G preferred stock. Total
weighted common shares for the three and six months ended June 30, 1999 were
1,821,363 and 1,821,363 respectively.

12. Revenue Recognition

Revenue is recognized upon shipment of finished product to wholesale
distributors. The Company has established 180 days as an acceptable shelf life
for product, and will reimburse distributors for 50% of all out of date product
destroyed in the first year of each new distribution agreement.

13. Income Taxes

The Company accounts for income taxes under the asset and liability method.
Deferred income taxes are recognized for their tax consequences in future years
by the differences between the tax basis of assets and liabilities and their
financial reporting values at each year-end. This is based on enacted tax laws
and statutory rates applicable to the periods in which the differences are
expected to affect taxable income.

                                        9
<PAGE>

Valuation allowances are established as necessary to reduce deferred tax assets
to the amount they may realize if disposed. Income tax expense represents the
current tax provision for the period plus the change during the period in
deferred tax assets and liabilities. Net operating losses have been incurred in
the three and six months ended June 30, 1999 and 1998, and the Company has not
recorded a provision for income taxes payable.

14. Basic and Diluted Loss per Common Share

Statement of Financial Accounting Standards No. 128, "Earnings Per Share",
requires the presentation of basic (loss) per share and diluted (loss) per
share. Basic (loss) per share is based on the weighted-average number of
outstanding common shares for the period. Diluted (loss) per share adjusts the
weighted average common shares for any potential dilution that could occur if
stock options, warrants, or other convertible securities were exercised or
converted into common shares. There is no difference between basic and diluted
loss per share in 1999.

                                       10
<PAGE>

                            FREDERICK BREWING COMPANY
    Management's Discussion and Analysis of Financial Conditions and Results
            For the Three and Six Months Ended June 30, 1999 and 1998

Overview of Significant Activities

A net loss of ($747,651) or ($0.41) per weighted-average common share was
generated during the second quarter of 1999, compared to a net loss of
($1,936,003) or ($2.04) per average common share in the second quarter of 1998.
Year to date 1999, a loss of ($1,592,745) or ($0.87) per average common share
compares favorably to the year to date 1998 loss of ($2,672,007) or ($3.40) per
common share before preferred stock deemed dividends.

There were 1,910,400 weighted-average common shares outstanding in the second
quarter ended June 30, 1999, and 1,910,400 average common shares outstanding in
the six months ending June 30, 1999. For the period ended June 30, 1998 there
were 950,283 (restated to reflect the one-for-ten reverse stock split approved
at the March 23, 1999 Special Meeting of Stockholders) weighted average common
shares outstanding during the second quarter, and 784,867 (restated) average
shares outstanding year-to-date.

The Company's second quarter 1999 gross sales decreased 37% to $1,003,550 from
$1,595,010 in the second quarter of 1998. The decrease resulted primarily from
fall-off in demand in all product lines as sales, marketing and promotional
efforts in remote markets were curtailed. However second quarter 1999 gross
sales are up 1.3% over first quarter gross 1999 gross sales of $990,958. 1999
year to date gross sales of $1,994,508 were 24% below the same period in 1998 at
$2,609,847, again reflecting curtailed sales, marketing, and promotional
efforts.

Concerted ongoing effort has been made to either eliminate or more closely
control overhead spending. For example, overall employment at the Company has
been reduced from 51 persons at the beginning of the second quarter of 1998 to
31 presently. The $543,796 of selling, general, and administrative expenses for
the second quarter of 1999 was down $643,270 or 54% from the $1,187,086 second
quarter 1998 spending. Cost savings were experienced in many operating areas.
Year to date 1999 SG&A expenses of $1,302,591 were $598,709 or 31% below year to
date 1998 spending of $1,901,300.

Review of Operations

The following table sets forth data derived from the Company's Consolidated
Statement of Operations expressed as a percentage of net sales, for the three
and six months ended June 30, 1999 and 1998.

                             Percentage of Net Sales
<TABLE>
<CAPTION>
                                                                  Three Months               Six Months
                                                               ------------------        ------------------
                                                                1999         1998         1999         1998
                                                                ----         ----         ----         ----
<S>                                                            <C>         <C>           <C>          <C>
           Gross sales                                         112.3%       108.9%       109.7%       107.3%
           Less: Returns and allowances, and excise taxes       12.3          8.9          9.7          7.3
           Net sales                                           100.0        100.0        100.0        100.0
           Cost of sales                                       101.4         67.3         97.3         74.2
           Gross profit/(loss)                                  (1.4)        32.7          2.7         25.8
           Selling, general and administrative expenses         60.2         81.0         71.0         78.2
           Amortization of deferred public relations costs       0.0         69.7          0.0         44.8
           Operating loss                                      (61.6)      (118.0)       (68.3)       (97.2)
           Loss on sale of equipment                             0.0          7.0          0.0          4.1
           Interest expense, net                                22.0          7.1         19.3          8.6
           Net loss                                            (83.6)      (132.1)       (87.6)      (109.9)
</TABLE>

                                       11
<PAGE>

                            Per Barrel Operating Data
<TABLE>
<CAPTION>
                                                                  Three Months               Six Months           Calendar Year
                                                             ----------------------      ------------------       -------------
                                                               1999          1998          1999         1998           1998
                                                               ----          ----          ----         ----           -----
<S>                                                            <C>         <C>           <C>          <C>            <C>
           Barrels sold                                         5,717         8,861        11,314       14,567         31,464
           Gross sales per barrel sold                       $ 175.54      $ 180.00      $ 176.29     $ 179.16       $ 175.49
           Less: Returns and allowances, and excise taxes       19.25         14.69         15.63        12.24          11.98
           Cost of sales per barrel sold:
           Direct materials                                     74.97         58.16         71.19        59.27          74.78
           Direct labor                                         14.85         10.63         14.04        11.92          11.86
           Production overheads - variable                      12.57         12.64         12.52        14.18          17.49
           Production overheads - fixed                         55.18         29.90         57.56        38.42          29.32
           Total cost of sales per barrel sold                 157.57        111.33        157.57       123.79         133.45
           Gross profit per barrel sold                      $  (2.27)     $  53.98      $   4.36     $  43.13       $  30.06
</TABLE>
Gross Sales

Gross sales for the second quarters of 1999 and 1998 were $1,003,550 and
$1,595,010 respectively, representing a quarter to quarter sales decrease of
$591,460 or 37%. Sales of Wild Goose and Brimstone product, which was originally
acquired in January 1998, accounted for $576,600 of the 1999 sales and $689,100
of the 1998 sales. Blue Ridge and Hempen product sales were $373,800 in 1999 and
$764,500 in 1998. Contract brewing revenues, merchandise sales, and billed
freight account for the remainder of revenue in the second quarters of both 1999
and 1998.

Unit sales volumes of 5,717 barrels in the second quarter of 1999, and 8,861
barrels in the second quarter of 1998 represent a 3,144 barrel (35%) quarter to
quarter decrease. While all brands showed volume declines, 1,411 barrels or 45%
of the decrease reflects lower shipments of the Hempen brand family and 403
barrels or 13% of the decrease reflects that the three small contract brewing
companies with which the Company previously did business have exited the
packaged beer market. The remaining decline of 1,328 barrels or 42% of the
decline is attributable to the Blue Ridge, Wild Goose and Brimstone product
lines.

Gross sale revenue per barrel sold in the second quarters of 1999 and 1998 were
$175.54 and $180.00 respectively. Unit sales revenues include sales to certain
discount beer clubs in 1999 and to certain foreign countries in 1998 at
discount. Reversing the effects of these discounted transactions produce second
quarter per barrel prices of $180.61 for 1999 and $179.95 for 1998.

Year to date June sales were $1,994,508 in 1999 and $2,609,847 in 1998,
representing a year to year decrease of $615,339 or 24%.

Unit sales volumes of 11,314 barrels for year to date June 1999 were 3,253
barrels (22%) below the 14,567 barrels of 1998. While sales of all brands
declined, 97% of this decline was experienced in the second quarter of 1999.

Gross sales revenue per barrel sold year to date June 1999 and 1998 was $176.29
and $179.16 respectively. Again these unit sales revenues include discounted
sales to beer clubs and foreign countries in 1999 and 1998 respectively.
Reversing the effects of these discount transactions would show per barrel
prices of $178.76 in 1999 and $180.53 in 1998.

Heightened competition among domestic craftbrewers as well as from importers,
which has become particularly intense in the Mid-Atlantic region, has harmed
craftbrewed brand sales and has caused numerous craftbrewing companies to
withdraw from the market, close or consolidate breweries in recent months. Both
the Company's brands and those formerly produced under contract for others have
suffered in this environment.

The Company is working to restore sales and revenue growth by taking
several steps, all of which should take effect by the end of 1999: (1) restore
some portion of the sales and marketing budget previously reduced; (2) align at
least some of the Company's brands with those of SIBG or another brewer to
provide sales and marketing support outside the Company's local market area; (3)
re-introduce National Premium, a super-premium brand of traditional North
American lager, in bottles and six-packs; and (4) increase brewing volume and
revenue perhaps by producing at lease some of SIBG's brands or those of another
brewer under contract. No assurances can be given that these steps will be taken
or that, if taken, they will result in future sales or revenue increases. In
particular, the Company's current liquidity position must improve substantially
to permit increased marketing and sales expenditures or the introduction of new
packaged products.

Returns and Allowances, and Excise Taxes

Returns and allowances decreased $3,000 to $37,100 in the second quarter of 1999
from $40,100 in the second quarter of 1998. Year to date returns and allowances
increased $25,600 in 1999 to $72,800 from $47,200 in 1998 reflecting Company
efforts to expand sales by granting additional wholesaler allowances.

                                       12
<PAGE>

Excise taxes decreased $17,111 to $72,938 in the second quarter of 1999 from
$90,049 in 1998. Year to date excise taxes decreased $27,049 in 1999 to $104,094
from $131,143 in 1998. Excise taxes reflect the current sales mix of product
shipments between state jurisdictions and generally decline with volumes
shipped. Some states, including Maryland and Pennsylvania, require the brewer to
pay the excise tax. Other states, including Virginia and the District of
Columbia, require those distributors who receive the beer to pay the excise tax.
In addition, while the federal excise tax rate is standard at the Company's
production volume, state excise tax rates vary from state to state.

Cost of Sales

Second quarter 1999 cost of sales of $900,850, or $157.57 per barrel sold, is
made up of variable product costs (raw ingredients, packaging materials, and
direct production labor) of $428.600 or $89.82 per barrel; and production
overhead expenses (management and supervisory salaries and benefits, quality
assurance, brewery repairs and maintenance, depreciation and amortization,
utilities, equipment rentals, and building lease payments) of $472,250 or $67.75
per barrel sold. Second quarter 1998 cost of sales was $986,458 or $111.33 per
barrel sold, composed of direct variable costs of $609,600 or $68.79 per barrel
sold, and Management believes that neither second quarter 1999 or second quarter
1998 cost of sales accurately indicate either the Company's actual costs of
production or of trends in those costs. Reported second quarter 1999 costs were
artificially inflated due to a one-time adjustment in materials cost of $88,157
($15.42 per barrel) made necessary to adjust for a computational error in the
Company's report for the first quarter of 1999. Without this adjustment, cost of
goods would have been reduced to $812,693 ($142.15 per barrel) in the second
quarter of 1999.

The reported cost of sales during the second quarter of 1998 was artifically
depressed by two events: a positive adjustment of approximately $50,000 in
materials cost, reflecting the resolution in favor of the Company of a billing
dispute with one of the Company's suppliers and approximately a $34,640
understatement of materials costs due to an error in accounting for the usage of
certain materials inventory acquired from Wild Goose (this error was corrected
by way of an inventory adjustment at year end 1998). Absent these items, the
cost of sales for the second quarter of 1998 would have increased to ($120.88
per barrel).

Production overhead expenses experienced during the second quarter of 1999
include approximately $43,840 in expenses that will not continue into future
periods. Approximately $19,000 in salary and fringe benefits expenses were
incurred during the second quarter of 1999 for two employees whose positions
were eliminated during the quarter. An extraordinary $24,750 in additional rent
expense was incurred during the quarter to extend the Company's option to
purchase the brewery land and building. If the Company does exercise the
purchase option, the additional rent will be credited to the purchase price.
In any case, the additional rent liability ceased effective August, 1999.
Excluding these charges and ignoring the adjustment in materials costs as
discussed above would reduce cost of sales to $768,853 ($134.49 per barrel).

To provide what management considers to be a more meaningful comparison, a table
displaying full-year 1998 operating data is provided. The adjusted per barrel
cost of sales as derived above do not differ materially from corresponding data
for all of 1998, despite increased depreciation expense, higher health insurance
costs and significantly lower production volumes over which to spread those
fixed costs.

Year to date 1999 cost of sales was $1,757,227, or $155.31 per barrel sold,
composed of variable product costs of $964,200 or $85.23 per barrel sold, and
production overhead expense of $793,027 or $70.08 per barrel sold. Year to date
1998 cost of sales were $1,803,231, or $123.79 per barrel sold, made up of
$1,038,200 of variable product costs or $71.27 per barrel sold, and production
overhead expense of $765,031 or $52.52 per barrel sold.

For the reasons discussed above, management urges caution in drawing conclusions
concerning trends in the cost of sales or future production costs based on these
calculation.

Selling, General and Administrative Expenses

Selling, general and administrative expenses ("SG&A") in the second quarters of
1999 and 1998 were $543,796 and $1,187,066 respectively, a decrease of $643,270
or 54%. Savings of $35,000 in depletion allowances, $105,200 in indirect salary
and benefits, $73,500 of sales department travel and entertainment, $129,000 of
advertising and other marketing expenses, $135,200 of outside audit, legal, and
financial relations, and $165,370 in other expenses make up the difference.

Year to date 1999 and 1998 SG&A expenses were $1,302,591 and $1,901,300
respectively, a decrease of $598,709 or 31%. A depletion cost increase of
$57,300; off-set by savings of $168,300 in indirect salary and benefits;
$115,000 in sales department travel and entertainment; $181,100 in advertising
and other marketing expense savings; $31,900 in outside audit, legal, and
financial relations savings; and $171,008 in other costs make up the decrease.

Amortization of Deferred Public Relations Costs

There was a one-time, $1,020,938, expense representing the accelerated
amortization of deferred investor relations expense in the second quarter of
1998, and $1,089,000 of investor relations year-to-date June 30, 1998. There
were no similar investor relations in 1999.

Loss on Sale of Equipment

There was a loss on the sale of equipment of $102,205 in the second quarter of
1998, and a year to date June 30, 1998 loss of $99,545. Both reflect the sale of
old Wild Goose equipment. There were no equipment sales in 1999.

                                       13
<PAGE>

Interest Expense (net)

Net interest expense was $196,517 in the second quarter of 1999 compared to
$104,197 in the second quarter of 1998, and $350,541 for the first six months of
1999 versus $210,435 in the first half of 1998. A substantial portion of the
interest expenses incurred during 1999 and 1998 relates to the debt obligations
the Company has with a major bank for the building and equipment financing, and
with the United States Small Business Administration for additional equipment
financing.

Provision For Income Taxes

The Company has experienced net operating losses during both 1999 and 1998 and
no provisions for income taxes have been provided for on the Consolidated
Statements of Operations. The Company has recorded a full valuation allowance
against the net deferred tax asset.

Liquidity and Capital Resources

The Company has recorded losses from operations since 1993, and has funded its
operations primarily from private and public placements of common and preferred
stock. As of June 30, 1999 the Company had a working capital deficit of
$2,337,578.

Net cash used in operating activities was $93,071 in the second quarter of 1999,
versus a use of funds of $504,317 in the second quarter of 1999. Year-to-date
net cash used in operations activities was $394,258 in 1999 versus $1,945,587 in
1998.

Net cash used for investing was $146,818 in the second quarter of 1999 compared
to $13,705 in 1998 and $154,635 year-to-date 1999 versus $284,971 in 1998.

Net cash from financing in the second quarter of 1999 was $238,538 versus a use
of funds of $86,744 in the second quarter of 1998. Net cash from financing was
$462,405 year-to-date 1999 versus a use of funds of $186,505 in 1998.

The Company's ability to meet its obligations is dependent on achieving
operating profitably and in generating positive cash flows. This operational
improvement requires the Company to either eliminate or substantially reduce
excess brewing capacity, and also requires the Company to obtain additional
financing from third parties.

On November 4, 1998, the Company retained West-Finance Corporation to advise and
assist the Company in: 1) refinancing the First Union National Bank debt, 2)
raising additional working capital, and 3) seeking candidates for acquisition by
the Company, a merger with the Company, or an acquisition of the Company. The
Company has made numerous contacts and engaged in preliminary, but unsuccessful,
discussions with numerous parties toward each of these objectives.

In April and June of 1999 the Company raised approximately $500,000 with a short
term loan from a consortium of investors collateralized by the Company's rights
in the Wild Goose brands, trademarks, copyrights and other intellectual
property. On June 30, 1999 the Company's Board of Directors agreed to grant
SIBG, an unrelated third party, the exclusive right to negotiate and perform due
diligence leading toward a transaction in which SIBG would acquire majority
control of the Company's voting stock in exchange for cash. The agreement
further provided that the exclusive right of SIBG was to terminate on July 25,
1999. On July 28, 1999 the Company received $50,000 cash from SIBG to extend
their exclusive right to negotiate with the Company through August 8, 1999. The
extended exclusivity agreement expired on August 8, 1999 with the mutual consent
of the parties. The Company and SIBG are, however, continuing to negotiate and
draft all of the documents necessary to complete the transaction, as well as the
documentation needed from third parties.

                                       14
<PAGE>

If the transaction with SIBG closes as discussed to date, management believes
SIBG may simultaneously acquire and exercise the Company's option to purchase
the brewery land and building in Frederick, Maryland; may enter into a contract
brewing agreement with the Company to commit to producing 5,000 to 35,000
barrels per year of various brands controlled by SIBG and affiliates; and may
arrange to refinance the Company's debt to First Union National Bank.

The Company has been in discussions with SIBG at various times since late 1998.
Negotiations concerning the stock purchase, real estate purchase, contract
brewing, the refinance of the First Union National Bank debt, negotiations to
settle and compromised the Company's financial obligations to its other
creditors and to resolve issues with its preferred stock shareholders are at an
advanced stage, and if SIBG proceeds substantially as contemplated, the terms of
those transactions will likely prove acceptable to the Company's Board of
Directors.

However, the exclusivity agreement states in part "there has been no meeting of
the minds as to the material terms of any proposal". No definitive agreements
have been executed with SIBG, and there can be no assurance that such agreements
will be executed, or will be closed even if executed. Neither the Company nor
SIBG is yet obligated to execute agreements or to close on any transaction.
Several conditions must be satisfied before any transaction can be completed,
and many of these are beyond the control of the Company and management. Some of
these conditions include: 1) one or more of SIBG's members must agree to
contribute the cash needed to allow SIBG to purchase the Company's common stock;
2) SIBG, its counsel, auditors, and other advisors must complete and be
satisfied with the results of its due diligence review of the Company, its
condition, and its business prospects; 3) the Company and SIBG must agree to
terms and negotiate mutually acceptable agreements between themselves and with
third parties including: (a) a purchase or pay-off of the First Union National
Bank debt; (b) the approval of the United States Small Business Administration
which is a secured creditor of the Company; (c) the negotiation of a mutually
acceptable agreement for the purchase by SIBG of the real estate now owned by
Blue II, LLC; (d) the agreement of the Company's numerous unsecured creditors,
equipment lessors, and other suppliers to payment terms acceptable to SIBG; 4)
the termination or modification of the Company's employment contracts with
senior management; and 5) numerous others many of which may not be foreseen by
the Company.

No assurance can be given that these conditions can or will be met in a timely
manner or on terms that are acceptable or favorable to the Company. The
exclusivity agreement with SIBG generally prohibited the Company from
soliciting, encouraging, discussing, or considering other proposals or of
providing non-public information to other parties who may be interested in
providing the Company with financing until August 8, 1999. There is the risk
that the Company will not be able to raise funds to sustain operations if the
transaction with SIBG does not close or is not closed in a timely manner.

Presently the Company is in default under the payment terms of an equipment loan
to a national bank. In June 1999 the Company agreed to pay the bank $50,000 (in
two installments) in return for the banks agreement not to demand repayment of
the loan until June 30, 1999. The Company failed to make the second installment
payment and negotiated a further extension of the bank's forbearance through
August 15, 1999 as well as to refinance the loan. There can be no assurance that
the bank will agree to forbear beyond that date or that the loan can be
refinanced. The Company is also in default on numerous other obligations
including rental payments due to Blue II, payments due on several equipment
leases, and payments due to outside vendors and professionals. There can be no
assurance that these creditors will refrain from taking legal action against the
Company, or attempt to place the Company into involuntary bankruptcy.

The Company received a letter dated September 15, 1998 (the "notice letter")
from Nasdaq Stock Market Inc. ("Nasdaq") stating that the Company's common stock
may be de-listed from the Nasdaq Small-Cap Market for failure to maintain a
minimum bid of $1.00 per share. In summary, the notice letter stated that if the
Company failed to achieve a closing bid price of $1.00 per share for ten
consecutive trading days during the 90-day calendar period ending December 14,
1998, the common stock would be subject to de-

                                       15
<PAGE>

listing. The Company requested, and Nasdaq approved, an extension of time to
allow shareholder approval of a reverse stock split in an effort to boost the
stock price. In March 1999 the Company affected a 1 for 10 reverse stock split,
however the stock price did not remain above the $1.00 closing bid for ten
consecutive trading days as required by Nasdaq. In April 1999 Nasdaq notified
the Company that its common stock had been de-listed from the Nasdaq Small-Cap
Market. As of August 5, 1999, the common stock has been trading on the
Electronic Bulletin Board under the symbol BLUE.

If the Company is not successful in completing a transaction with SIBG it will
seek to obtain short-term financing from third parties that have previously
purchased equity or loaned funds to finance its operations. The Company is also
exploring the option of merging with, or selling assets to, another craft-brewer
or industry participant with greater financial resources to help ensure its
meets its obligations. The Company could also seek protection under Chapter 11
of the bankruptcy code to allow additional time to explore other alternatives to
eliminate or reduce excess capacity. The Company has not yet decided on a
definitive alternative course of action, but has been in active discussions of
such options since the expiration of the exclusivity agreement.

Impact of Inflation

The Company has not attempted to calculate the impact of inflation on
operations, but does not believe that inflation has had a material impact in
recent years. Management does believe any future cost increases in raw
ingredients, packaging materials, direct labor costs, overhead payroll costs,
and general operating expenses due to inflation could have a significant impact
on the Company's results of operations to the extent that these additional costs
could not be transferred to distributors.

Impact of Year 2000 Issue

The Company has developed a plan to review and, as appropriate, to modify or
replace certain portions of its computer system software in order to recognize
and utilize dates beyond December 31, 1999. The Company presently believes that
with modifications to existing software and conversion to new software the Year
2000 issue will be resolved within its own systems. The Company has also
established an internal auditing process to track and verify the results of its
plan and tests. With the exception of the Company's telecommunications system,
the Company and its vendors have determined that all mission-critical computer
hardware and software, including PLC's and other computer chips embedded in
brewing, packaging and other mechanical systems are either Y2K compliant or are
not date-sensitive. The Company has repaired or replaced, tested and is
currently operating all such systems identified as sensitive to the Y2K problem.
Revised software for the telecommunications system has been ordered and should
be installed and tested by September 15, 1999. Management believes the Company
is currently on schedule to substantially complete the renovation, validation,
and implementation phases of its plan with respect to mission-critical systems
in September 1999.

The Company is working with key external parties, including banks, utilities,
other vendors, and third party payers, to assess the efforts made by these
parties with respect to their own systems and to determine the extent to which
their systems are vulnerable to the Year 2000 issue. The Company has not yet
received sufficient information from these parties about their plans to be able
to predict the outcome of their efforts. The Company is also developing a
contingency plan that is expected to address financial and operational problems
that might arise on January 1, 2000. This contingency plan will include
identifying back-up processes that do not rely on computers whenever possible.

The Company has incurred and expects to continue to incur expenses for internal
staff time, as well as costs for software modification or replacement in order
to achieve Year 2000 compliance. It is expected that conversion of the primary
software programs will be completed in August 1999 with testing to follow in
September 1999. The Company estimates that these costs will total approximately
$15,000 with the majority of this being incurred by August 1999. The cost of the
Year 2000 program and the date on which the Company plans to complete Year 2000
modifications are based on estimates which reflect numerous assumptions about
future events such as continued availability of certain resources, the timing
and effectiveness of third party modification plans, and other factors. The
Company can give no assurance that these estimates will be achieved, and actual
results could differ materially from the Company's plans. Specific factors that
might cause material differences include the availability and cost of personnel
trained in this area of expertise, the ability to locate and correct relevant
computer source codes and embedded

                                       16
<PAGE>

technology, the results of internal and external testing, and the timeliness and
effectiveness of third party modification efforts.

If the modifications and conversions referred to above are not made, or are not
completed on a timely basis, the Year 2000 issue could have a material and
adverse effect on the Company's business, financial condition, and results of
operations. Even if the Company's internal efforts are successful, failure of
third parties to which the Company is financially or operationally linked to
address their own system problems could have a material impact on the Company.

Forward-Looking Information

The Private Securities Litigation Reform Act of 1995 provides a "safe Harbor"
for certain forward-looking statements made by the Company in its disclosures to
the public. There is certain information contained herein, in the Company's
press releases, and in oral statements made by officers of the Company which are
forward-looking statements as defined by such act. When used herein, in the
Company's press releases, and in oral statements, the words "estimate",
"project", "anticipate", "expect", "intend", "believe", "plans", and similar
expressions are intended to identify forward-looking statements. Because such
forward-looking statements involve risk and uncertainty there are important
factors that could cause actual results to differ materially from those
expressed or implied by such forward-looking statements.

                                       17
<PAGE>

                            FREDERICK BREWING COMPANY
                                Other Information
            For the Three and Six Months Ended June 30, 1999 and 1998

Item 1. Legal Proceedings

The Company's landlord Blue II, LLC has been granted an Order of Restitution,
permitting Blue II to re-enter and evict the Company from the brewery premises.
The Company has also been the subject of legal actions that have been initiated
by certain of its other creditors. While no single action is, by itself,
material, the total amount sought exceeds $35,000. The Company and SIBG are
negotiating with these creditors to settle and compromise the claims, subject to
closing the SIBG transaction.

Item 2. Changes in Securities

During the three months ended June 30, 1999, the Company issued 108,394 shares
of the Company's common stock upon the conversion of 73 shares of Series G
Preferred Stock. During the six months ended June 30, 1999, the Company issued
3,795,102 shares (379,510 post-split shares) of common stock on the conversion
of 210 shares of Series E, 224 shares of Series F, and 270 shares of Series G
Preferred Stock.

Item 3. Defaults Upon Senior Securities

The Company is in default of its secured loans from First Union National Bank
and the Small Business Administration. The Bank has granted the Company
forbearance from further collection action through August 15, 1999. The Company
and SIBG is negotiating to settle and compromise the amounts due to these
creditors whose debts are expected to be paid by August 31, 1999, subject to
closing the SIBG transaction.

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

Not applicable

Item 5. Other Information

None.

Item 6. Exhibits and Reports on Form 8-K

(a) Exhibits filed
    10.1   Agreement Between Snyder International Brewing Group, LLC and
           Frederick Brewing Co. Dated June 30, 1999
    10.2   Agreement Between Snyder International Brewing Group, LLC and
           Frederick Brewing Co. Dated July 25, 1999
    10.3   Third Forbearance Agreement by and among First Union National Bank,
           the Maryland Economic Development Corporation, the Maryland
           Industrial Development Financing Authority and Frederick Brewing Co.
           dated July 19, 1999.
    27.1   Financial Data Schedule
    99.1   Safe Harbor Under the Private Securities Litigation Reform Act of
           1995
    99.2   Press Release, July 26, 1999
    99.3   Press Release, August 9, 1999

(b) Reports on Form 8-K
    None.

                                       18
<PAGE>

                                   SIGNATURES

         In accordance with the requirements of the Securities and Exchange Act
of 1934, the Registrant has caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.


                                             Frederick Brewing Co.


Date:  August 12, 1999                       /s/ Kevin E. Brannon
                                             -----------------------------------
                                             Kevin E. Brannon
                                             Chairman of the Board and
                                             Chief Executive Officer


Date:  August 12, 1999                       /s/ Leslie P. Harper
                                             -----------------------------------
                                             Leslie P. Harper
                                             Chief Financial Officer

                                       19