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UNITED STATES


SECURITIES AND EXCHANGE COMMISSION


Washington, D.C. 20549











FORM 10-QSB


(Mark One)


|x | QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ---------------------------------------------------------------------------------




| | For the quarterly period ended June 30, 2001.
| | ---------------------------------------------




or





| ̈ | TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT.
|- | ----------------------------------------------------------------




Commission File Number: 000-27800





FREDERICK BREWING CO.


(Exact Name of Small Business Issuer as Specified in Its Charter)





|Maryland                          |  | 52-1769647          | 
|--------------------------------- |  | ------------------- | 
|(State or Other Jurisdiction      |  | (I.R.S. Employer    | 
|of Incorporation or Organization) |  | Identification No.) | 




4607 Wedgewood Boulevard, Frederick, Maryland 21703


(Address of Principal Executive Offices)





(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)





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





State the number of shares outstanding of each of the issuers classes of common equity, as of the
latest practicable date:





|Title of Each Class             |  | Number of Shares Outstanding as ofAugust 13, 2001
|------------------------------- |  | -------------------------------------------------
|Common Stock, $0.0004 Par Value |  | 8,596,211                                        




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





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FREDERICK BREWING CO.





INDEX TO FORM 10-QSB


June 30, 2001





|           |  |                                                                                                       |  | Page No.
|---------- |  | ----------------------------------------------------------------------------------------------------- |  | --------
|PART I.    |  | FINANCIAL INFORMATION                                                                                 |  | 3       
|          
|          
|          
|Item 1.    |  | Financial Statements                                                                                  |  | 3       
|          
|          
|          
|           |  | Balance Sheet (unaudited) June 30, 2001                                                               |  | 3       
|          
|          
|          
|           |  | Statements of Operations (unaudited) for the three and six-months ended June 30, 2001

     
and 2000 |  | 4       
|          
|          
|          
|           |  | Statements of Cash Flows (unaudited) for the three and six-months ended June 30, 2001

     
and 2000 |  | 5       
|          
|          
|          
|           |  | Notes to Financial Statements (unaudited)                                                             |  | 6       
|          
|          
|          
|Item 2.    |  | Managements Discussion and Analysis of Financial Condition and Results of

     
Operations          |  | 8       
|          
|          
|          
|PART II.   |  | OTHER INFORMATION                                                                                     |  | 18      
|          
|          
|          
|Item 3.    |  | Default Upon Senior Securities                                                                        |  | 18      
|          
|          
|          
|Item 6.    |  | Exhibits and Reports on Form 8-K                                                                      |  | 18      
|          
|          
|          
|SIGNATURES |  | 19                                                                                                   




PART I.    FINANCIAL INFORMATION





Item 1.    Financial Statements





FREDERICK BREWING CO.





BALANCE SHEET


June 30, 2001


(Unaudited)





|ASSETS                                                                                                                                             
|---------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                                   
|                                                                                                                                                   
|                                                                                                                                                   
|Current assets:                                                                                                                                    
|Cash                                                                                                                                               
|Restricted cash                                                                                                                                    
|Trade receivables, net of allowance for doubtful accounts of $31,716                                                                               
|Inventories, net                                                                                                                                   
|Prepaid expenses and other current assets                                                                                                          
|                                                                                                                                                   
|Total current
assets                                                                                                                               
|Property, plant and equipment, net of accumulated depreciation of $2,774,920                                                                       
|Intangibles, net of accumulated amortization of $497,795                                                                                           
|Goodwill, net of accumulated amortization of $205,071                                                                                              
|                                                                                                                                                   
|Total assets                                                                                                                                       
|                                                                                                                                                   
|                                                                                                                                                   
|                                                                                                                                                   
|                                                                                                                                                   
|
|                                                                                                                                                   
|                                                                                                                                                   
|                                                                                                                                                   
|Current liabilities:                                                                                                                               
|Current maturities of long-term debt                                                                                                               
|Current portion of capital lease obligation                                                                                                        
|Accounts payable                                                                                                                                   
|Accrued liabilities                                                                                                                                
|                                                                                                                                                   
|Total current
liabilities                                                                                                                          
|Long term debt, net of current portion                                                                                                             
|Capital lease obligation, net of current portion                                                                                                   
|                                                                                                                                                   
|Total
liabilities                                                                                                                                  
|                                                                                                                                                   
|Commitments and Contingencies                                                                                                                      
|Stockholders deficit:                                                                                                                             
|Preferred Stock$0.01 par value, 1,000,000 shares authorized; cumulative,
convertible

               Series A, 1,455 shares issued and outstanding
|Common Stock$.0004 par value, 19,000,000 shares authorized; 8,596,211 shares
issued

               and outstanding                               
|Additional paid-in capital                                                                                                                         
|Accumulated deficit                                                                                                                                
|                                                                                                                                                   
|                                                                                                                                                   
|                                                                                                                                                   
|                                                                                                                                                   
|Total stockholders
deficit                                                                                                                        
|                                                                                                                                                   
|                                                                                                                                                   
|                                                                                                                                                   
|                                                                                                                                                   
|Total liabilities and
stockholders deficit                                                                                                        
|                                                                                                                                                   




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





FREDERICK BREWING CO.





STATEMENTS OF OPERATIONS


For the Three and Six Months Ended June 30, 2001 and 2000


(Unaudited)





|                                                                 |  | Three Months Ended

June 30, |   | Six Months Ended

June 30,
|---------------------------------------------------------------- |  | ---------------------------- | - | --------------------------
|
|Proprietary Brands Sales                                         |  | $  615,771                   |   |                           
|Co-Pack Fees                                                     |  | 137,693                      |   |                           
|                                                                 |  |                              |   |                           
|Gross sales                                                      |  | 753,464                      |   |                           
|Less: returns and allowances, and excise taxes                   |  | 76,033                       |   |                           
|                                                                 |  |                              |   |                           
|Net sales                                                        |  | 677,431                      |   |                           
|Cost of sales                                                    |  | 785,834                      |   |                           
|                                                                 |  |                              |   |                           
|Gross loss                                                       |  | (108,403                     | ) |                           
|Selling, general and administrative expense                      |  | 386,863                      |   |                           
|                                                                 |  |                              |   |                           
|Operating loss                                                   |  | (495,266                     | ) |                           
|Interest expense, net                                            |  | 182,017                      |   |                           
|                                                                 |  |                              |   |                           
|Net loss                                                         |  | $(677,283                    | ) |                           
|                                                                 |  |                              |   |                           
|Net loss per common share:basic and diluted                     |  |                              |  
|Net loss per common sharebasic and diluted                      |  | $      (0.08                 | ) |                           
|                                                                 |  |                              |   |                           
|Weighted average common sharesbasic and

               diluted |  | 8,596,211                    |   |                           
|                                                                 |  |                              |   |                           




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





FREDERICK BREWING CO.





STATEMENTS OF CASH FLOWS


For the Three and Six Months Ended June 30, 2001 and 2000


(Unaudited)





|                                                                                            |  | Three Months Ended

June 30, |   | Six Months Ended

June 30,
|------------------------------------------------------------------------------------------- |  | ---------------------------- | - | --------------------------
|
|Cash flows from operating activities:                                                       |  |                              |  
|Net loss                                                                                    |  | $(677,283                    | ) |                           
|Adjustments to reconcile net loss to net cash used in

               operating activities:
|Depreciation                                                                                |  | 112,211                      |   |                           
|Amortization                                                                                |  | 79,344                       |   |                           
|Change in operating assets and liabilities:                                                
|Trade
receivables                                                                           |  | (114,506                     | ) |                           
|Inventories                                                                                 |  | (46,378                      | ) |                           
|Prepaid assets                                                                              |  | (3,144                       | ) |                           
|Accounts
payable                                                                            |  | (330,416                     | ) |                           
|Accrued
liabilities                                                                         |  | 109,890                      |   |                           
|                                                                                            |  |                              |   |                           
|Net cash used in operating activities                                                       |  | (870,282                     | ) |                           
|Cash flows from investing activities:                                                      
|Purchase of property and equipment                                                          |  | (17,963                      | ) |                           
|Decrease in Restricted cash                                                                 |  |                             |   |                           
|                                                                                            |  |                              |   |                           
|Net cash (used in) provided by investing

             activities                           |  | (17,963                      | ) |                           
|Cash flows from financing activities:                                                      
|Proceeds from debt borrowings                                                               |  | 869,884                      |   |                           
|Payments on capital lease                                                                   |  | (22,826                      | ) |                           
|                                                                                            |  |                              |   |                           
|Net cash provided by financing activities                                                   |  | 847,058                      |   |                           
|                                                                                            |  |                              |   |                           
|Net decrease in cash                                                                        |  | (41,187                      | ) |                           
|Cashbeginning of period                                                                    |  | 41,187                       |   |                           
|                                                                                            |  |                              |   |                           
|Cashend of period                                                                          |  | $                           |   |                           
|                                                                                            |  |                              |   |                           




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





FREDERICK BREWING CO.





NOTES TO FINANCIAL STATEMENTS


June 30, 2001


(Unaudited)





1.    Basis of Presentation





The accompanying unaudited financial statements of Frederick Brewing Co. have been prepared in accordance
with accounting principles generally accepted in the United States of America for interim financial reporting, according to the instructions for Form 10-QSB and Regulation S-B. As such, they do not include all information and footnotes required by
accounting principles generally accepted in the United States of America for complete year-end financial reporting.





The accompanying financial statements of Frederick Brewing for the period ended June 30, 2000 include its
two former, wholly owned subsidiaries, Wild Goose Brewery, Inc. and Brimstone Brewing Company. Frederick Brewing liquidated these subsidiaries effective as of February 1, 2001. At the time of the liquidation, Frederick Brewing conducted no
operations through these subsidiaries; however, Frederick Brewing continues to produce and sell the Wild Goose and Brimstone brands.





2.    Managements Opinion





In the opinion of Frederick Brewings management, Frederick Brewings unaudited financial position
as of June 30, 2001 and the results of its operations and cash flows for the interim period ended June 30, 2001 and the results of its operations and cash flows for the interim period ended June 30, 2000, reflect all adjustments (consisting only of
normal and recurring accruals and other adjustments) necessary to present fairly the results of the interim periods presented. The operating results for the interim periods presented are not necessarily indicative of the results expected for other
interim periods within 2001 or for the year ending December 31, 2001. Information relating to the financial position, results of operations and cash flows of Frederick Brewing as of and for the year ended December 31, 2000 may be found in the
consolidated financial statements included in Frederick Brewings Annual Report filed on Form 10-KSB for the year ended December 31, 2000.





3.    Inventories





Inventories consist of raw ingredients, work in process, packaging materials, finished products and
marketing supplies, and are valued at the lower of cost or market. Cost is determined by the first-in, first-out (FIFO) method. Frederick Brewing periodically reviews the age and marketability of its inventory, and provides obsolescence reserves as
necessary. Net inventories at June 30, 2001 are as follows:





|Raw ingredients          |  | $  51,244 |  
|------------------------ |  | --------- | -
|Work in process          |  | 68,482    |  
|Packaging materials      |  | 253,040   |  
|Finished goods           |  | 73,569    |  
|Marketing supplies       |  | 153,108   |  
|                         |  |           |  
|Inventory, gross         |  | 599,443   |  
|Reserve for obsolescence |  | (55,303   | )
|                         |  |           |  
|Inventory, net           |  | $544,140  |  
|                         |  |           |  




FREDERICK BREWING CO.





NOTES TO FINANCIAL STATEMENTS(Continued)





4.   New Accounting Standards

On July 20, 2001, the Financial Accounting Standards Board (FASB) issued Statement of Financial
Accounting Standards (SFAS) 141, Business Combinations, and SFAS 142, Goodwill and Intangible Assets. SFAS 141 is effective for all business combinations completed after June 30, 2001. SFAS 142 is effective for fiscal years beginning
after December 15, 2001; however, certain provisions of this Statement apply to goodwill and other intangible assets acquired between July 1, 2001 and the effective date of SFAS 142. SFAS 142 requires that goodwill and other purchased intangible
assets no longer be amortized to earnings, but instead be reviewed for impairment.

The Company will continue to amortize goodwill and intangible assets recognized prior to July 1,
2001, under its current method until January 1, 2002, at which time annual and quarterly goodwill and intangible asset amortization of $317,376 and $79,344 will no longer be recognized. By March 31, 2002, the Company will have completed a
transitional fair value based impairment test of goodwill as of January 1, 2002. Impairment losses, if any, resulting from the transitional testing will be recognized in the quarter ended March 31, 2002, as a cumulative effect of a change in
accounting principle.

5.    Net Loss Per Common Share


Frederick Brewing calculates basic and diluted earnings or loss per share in accordance with
Statement of Financial Accounting Standards No. 128, Earnings Per Share, which requires the presentation of basic earnings or loss per share and diluted earnings or loss per share for all periods presented. Basic per share loss is based
on weighted average number of outstanding common shares for the period. Diluted per share loss adjusts the weighted average for the potential dilution that could occur if stock options, warrants, or other convertible securities were exercised or
converted into common stock. Diluted loss per share equals basic earnings per share for 2001 and 2000 because the effects of such items were anti-dilutive.





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





The following is a discussion of the financial condition, changes in financial condition and results of
operations of Frederick Brewing for the three-month and six-month periods ended June 30, 2001 and 2000. This discussion should be read in conjunction with the Managements Discussion and Analysis of Financial Condition and Results of Operations
and the Consolidated Financial Statements and Notes thereto included in Frederick Brewings Form 10-KSB for the fiscal year ended December 31, 2000.





Overview





For the six-month period ended June 30, 2001, Frederick Brewings operating losses decreased by
$393,630 to $1,067,682 compared to $1,461,312 for the comparable period in 2000. Management attributes the decrease in operating losses to a decrease in operating costs, improved production efficiency and an increase in capacity utilization at its
Frederick, Maryland brewery. Management believes that its operating losses will continue to decrease in 2001 due in large part to expected further increases in the capacity utilization rate at Frederick Brewings brewery. Under the production
agreement with Snyder International Brewing Group, LLC (SIBG), Frederick Brewing currently brews Crooked River and Christian Moerlein brands and began brewing the Little Kings brand in July 2001. For the six-month period ended June 30,
2001, Frederick Brewing had produced 3,534 barrels of SIBG brands and other co-packed brands as compared to 252 barrels for the same period in 2000. By brewing the Crooked River, Christian Moerlein and Little Kings brands, management expects that
Frederick Brewings annual production will grow to 30,000 barrels and its current capacity utilization will significantly increase. In an effort to further decrease operating losses, management continues to seek other means by which to decrease
operating costs and to increase capacity utilization at the Frederick, Maryland facility, including exploring opportunities to enter into additional production agreements with other brewers. No assurance can be given, however, that managements
efforts will either result in decreased operating losses or in increased plant utilization.





While Frederick Brewings total barrels produced in the first half of 2001 increased by 1,933 barrels
to 10,319 barrels from 8,386 barrels produced in the first half of 2000, this change is primarily caused by the significant increases in barrels produced by Frederick Brewing under the production agreement with SIBG. Sales of Frederick
Brewings proprietary brands (Blue Ridge, Wild Goose, Brimstone and Hempen) decreased by 1,349 barrels from 8,134 barrels in the first half of 2000 to 6,785 barrels in the first half of 2001. A small percentage of this decrease can be
attributed to the phasing out of the Hempen brands.





To continue to decrease operating losses, management believes that Frederick Brewing must concentrate its
sales, marketing and distribution efforts on increasing sales of its proprietary brands. To this effect, during the fourth quarter of 2000 and in the first half of 2001, Frederick Brewing, through SIBG, hired several sales professionals with
significant beer industry and distributor experience. In addition, Frederick Brewing, through SIBG, continues to recruit qualified beer industry sales professionals for markets not sufficiently covered. In late 2000, Frederick Brewing shifted its
marketing efforts to provide enhanced support to the off-premise retail channels of distribution with emphasis on the national and regional chain store supermarkets, mass merchants and warehouse clubs in the Mid-Atlantic region. Frederick Brewing is
also continuing to provide marketing support to the more traditional on-premise distribution channel in 2001.





In 2000, in an effort to reduce its distribution costs, Frederick Brewing renegotiated its distributor
agreements to reduce depletion allowances, to increase prices charged to distributors and to increase recommended consumer prices and implemented a pre-sell ordering process for all of its products to better forecast finished goods needs. The
pricing changes to the distributor agreements initially resulted in smaller orders from distributors and lower consumer sales in some retail channels that were not well suited to carry Frederick Brewings higher priced brands. Additionally, a
few of Frederick Brewings brands were identified as under-performing. By identifying these under-performing brands, management believes that it will be able to streamline the brand portfolio and concentrate sales and marketing efforts on the
brands that are more likely to succeed.





Currently, Wild Goose is Frederick Brewings best-selling brand. For the period ended June 30, 2001,
Wild Goose sales accounted for 72.6% of Frederick Brewings volume of its proprietary brands, as compared to 62.9% for the same period in 2000. Frederick Brewings management believes that Wild Goose has the greatest future sales potential
of Frederick Brewings proprietary brands; accordingly, management plans to concentrate its sales and marketing efforts on the Wild Goose brands during the second half of 2001.





Management believes that these recently implemented changes in Frederick Brewings distribution and
marketing strategy and improvements in its sales force will have a positive impact on the sales of its products in the second half of 2001; however, due to, among other things, market forces, managements ability to predict future sales is
limited. Frederick Brewings products compete in the domestic specialty beer category of the U.S. brewing industry. This market is highly competitive due to the large number of domestic specialty brewers and market share gains achieved by
import brewers. Sales in this market generally reflect a degree of seasonality with the second and third quarters reflecting stronger sales than the rest of the year. In addition, demand for Frederick Brewings products is subject to changes in
consumers tastes.





Until Frederick Brewing can achieve operating profitability, it will need to continue to borrow additional
amounts from SIBG or other financing sources. Frederick Brewing has no availability remaining under the $5.0 million unsecured revolving note from SIBG. To meet Frederick Brewings short term working capital needs, SIBG may increase the amounts
available to Frederick Brewing under the SIBG note. To fund this increased availability, SIBG may conduct a private equity offering to raise additional funds or may borrow additional amounts from C. David Snyder, Frederick Brewings Chairman
and Chief Executive Officer, on a case-by-case basis. No assurances can be given, however, that SIBG will be able to raise or borrow additional funds and that SIBG will subsequently lend such amounts to Frederick Brewing. To meet its long-term
needs, Frederick Brewing continues to explore obtaining financing from other sources, including possibly a line of credit that is secured by Frederick Brewings equipment. No assurances, however, can be given that any such financing
arrangements can be obtained and, if obtained, upon what terms such financing would be provided to Frederick Brewing.





Results of Operations





| | Three Months Ended June 30, 2001 to Three Months Ended June 30, 2000.
| | ---------------------------------------------------------------------




Gross Sales





Gross sales for the three-month periods ended June 30, 2001 and 2000 were $753,464 and $762,449,
respectively, a decreaseof $8,985 or 1.2%. Gross sales of Frederick Brewings proprietary brands (Blue Ridge, Wild Goose, Brimstone and Hempen) for the three-month periods ended June 30, 2001 and 2000 were $615,771 and $738,671,
respectively, a decrease of $122,900 or 16.6%. The decrease in gross sales of proprietary brands was related to:





| | · | a reduction in Hempen sales due to managements decision to phase out these brands;
| | - | -----------------------------------------------------------------------------------




| | · | a continuing decrease in the sales of the Blue Ridge brands;
| | - | ------------------------------------------------------------




| | · | reduced orders from distributors due to changes made in 2000 to Frederick Brewings distribution agreements with its
distributors; and
| | - | --------------------------------------------------------------------------------------------------------------------------------------




| | · | the continuing effects of the sales restructuring efforts and shift in marketing efforts that took place in late 2000 and in
the first quarter of 2001.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------




Gross sales attributable to co-pack fees charged under the production agreement with SIBG for the three-month periods ended June 30, 2001 and 2000 were $137,693 and
$23,778, respectively, an increase of $113,915 or 479.0%.





Total shipped barrels increased to 5,255 barrels for the three-month period ended June 30, 2001 from 4,443
barrels for the comparable period in 2000, an increaseof 812 barrels or 18.3%. Shipped barrels increased
for the three-month period ended June 30, 2001 as a result of an increase in SIBG brands produced under the production agreement with SIBG.





Selling Price Per Barrel





The average selling price per barrel decreased by $28.23, or approximately 16.4 %, to $143.38 per barrel for
the three-month period ended June 30, 2001 from $171.61 for the comparable period in 2000. The decrease in the selling price per barrel was primarily due to a significant increase in barrels shipped under Frederick Brewings production
agreement with SIBG for the three-month period ending June 30, 2001. In the beer industry, the selling price per barrel for barrels produced under production agreements is typically much lower than the selling price per barrel for brewers
proprietary brands. Frederick Brewing continues to position its proprietary brands (Wild Goose, Blue Ridge and Brimstone) in the consumer market as high-quality specialty-crafted products. The average selling price per barrel for Frederick
Brewings proprietary brands increased by $1.43 per barrel to $171.43 for the three-month period ended June 30, 2001 from $170.00 for the comparable period in 2000.





Frederick Brewing packages its brands in bottles and kegs. Assuming the same level of production, an
increase in the number of bottles produced and a decrease in the number of kegs produced would contribute to an increase in revenue per barrel because the selling price per equivalent barrel is higher for bottles than for kegs. Keg sales as a
percentage of total equivalent barrels of core brands were 31.1% for the three-month period ended June 30, 2001, as compared to 32.8% for the comparable period in 2000. The slight increase in bottles produced for the three-month period ended June
30, 2001 did not have a significant impact on selling price per barrel.





Returns and Allowances





Product returns and allowances were $39,849 for the three-month period ended June 30, 2001 compared to
$62,469 for the comparable period in 2000. The reduction in returns and allowances for the three-month period ended June 30, 2001 can be attributed to the decrease in gross sales and Frederick Brewings use of a consistent return and allowance
policy for product returns.





Excise Taxes





State and federal excise taxes were $36,184 for the three-month period ended June 30, 2001 and $44,768 for
the comparable period in 2000, representing 4.8% and 5.9% of gross sales, respectively. State excise tax rates and methods of computing taxes vary, depending on where the beer is sold. In some states, such as Maryland and Pennsylvania, the brewer is
required to pay the tax; in others, such as Virginia, and also in the District of Columbia, the tax is paid by the purchasing distributor. Frederick Brewing currently pays $7 per barrel federal excise tax on all beer sold within the United States.
Excise taxes are charged only upon the sale of Frederick Brewings proprietary brands. The decrease in excise taxes paid results from the mix of sales by state and lower volumes of proprietary brands shipped for the three-month period ended
June 30, 2001.





Cost of Sales





For the three-month periods ended June 30, 2001 and 2000, the cost of sales was $785,834, or $149.54 per
barrel, and $716,404, or $161.24 per barrel, respectively. Cost of sales was determined using the number of barrels of proprietary brands and co-packed brands shipped by Frederick Brewing for the three-month periods ended June 30, 2001 and 2000. The
cost of sales for the three-month period ended June 30, 2001 increased to 116.0% of net sales from 109.3% for the comparable period in 2000. Variable costs were $535,924 or $101.98 per barrel, for the three-month period ended June 30, 2001 compared
to $426,804, or $96.06 per barrel, for the comparable period in 2000. Fixed overhead costs for the three-month period ended June 30, 2001 decreased by $39,690 to $249,910 from $289,600 for the comparable period in 2000.





Variable costs include raw materials, packaging materials, liquid costs and variable labor costs directly
related to the production and packaging of beer. Variable and fixed overhead costs include costs related to the following operational departments: brewing, cellaring, packaging, quality assurance, warehousing, maintenance and production management.
Fixed costs include depreciation expense, salary personnel costs and rent.





The decrease in cost of sales per barrel for the three-month period ended June 30, 2001 was primarily caused
by Frederick Brewings cost of goods sold being absorbed over increased barrel shipments, 5,255 barrels for the period ended June 30, 2001 compared to 4,443 barrels for the comparable period in 2000. For the three-month period ended June 30,
2001, Frederick Brewings brewing facility operated at a level of 21.0% of plant capacity compared to 17.7% for the comparable period in 2000. Frederick Brewings capacity utilization has a significant impact on gross profit. When
facilities are operating at their maximum designed production capacities (100,000 barrels designed annual capacity for Frederick Brewing), profitability is favorably affected by spreading fixed operating costs over a larger sales base. Because the
actual production level is substantially below the facilitys maximum designed production capacity, gross margins are negatively impacted. This impact is reduced when actual utilization levels increase.





Selling, General and Administrative Expenses and Management Fees





Selling, general and administrative expenses for the three-month period ended June 30, 2001 decreased
$178,918, or approximately 31.6%, to $386,863 from $565,781 for the comparable period in 2000. This decrease was due, in part, to reductions in accounting and legal costs and a reduction in management fees due to SIBG. Effective April 1, 2001, SIBG
reduced the monthly management fee owed by Frederick Brewing under the management agreement from $30,000 to $15,000. The management fee was reduced to reflect a decrease in certain management services provided by SIBG. These services are now being
provided by Albert W. Spinelli, Frederick Brewings Executive Vice President and General Manager, and Andrew W. Tveekrem, Frederick Brewings Brewmaster. Mr. Spinellis and Mr. Tveekrems salaries are paid by Frederick
Brewing.





Interest Expense (net)





Net interest expense increased $21,737, or approximately 13.6%, to $182,017 for the three-month period ended
June 30, 2001 compared to $160,280 for the comparable period in 2000. A substantial portion of the interest expense incurred during the three-month period ended June 30, 2001 related to indebtedness incurred by Frederick Brewing in connection with
the capital lease of its brewing facility and interest due SIBG for working capital advances under the SIBG note.





Results of Operations





| | Six Months Ended June 30, 2001 to Six Months Ended June 30, 2000.
| | -----------------------------------------------------------------




Gross Sales





Gross sales for the six-month periods ended June 30, 2001 and 2000 were $1,451,266 and $1,469,326
respectively, a decreaseof $18,060 or 1.2%. Gross sales of Frederick Brewings proprietary brands (Blue Ridge, Wild Goose, Brimstone and Hempen) for the six-month periods ended June 30, 2001 and 2000 were $1,207,548 and $1,423,843,
respectively, a decrease of $216,295 or 15.2%. The decrease in gross sales of proprietary brands was related to:





| | · | a reduction in Hempen sales due to managements decision to phase out these brands;
| | - | -----------------------------------------------------------------------------------




| | · | a continuing decrease in the sales of the Blue Ridge brands;
| | - | ------------------------------------------------------------




| | · | reduced orders from distributors due to changes made in 2000 to Frederick Brewings distribution agreements with its
distributors; and
| | - | --------------------------------------------------------------------------------------------------------------------------------------




| | · | the continuing effects of the sales restructuring efforts and shift in marketing efforts that took place in late 2000 and in
the first quarter of 2001.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------




Gross sales attributable to co-pack fees charged under the production agreement with SIBG for the six-month periods ended June 30, 2001 and 2000 were $243,718 and
$45,483, respectively, an increase of $198,235 or 435.8%.





Total shipped barrels increased to 10,319 barrels for the six-month period ended June 30, 2001 from 8,386
barrels for the comparable period in 2000, an increaseof 1,933 barrels or 23.1%. Shipped barrels increased for the six-month period ended June 30, 2001 as a result of an increase in SIBG brands produced under the production agreement with
SIBG.





Selling Price Per Barrel





The average selling price per barrel decreased by $34.57, more than 19.7%, to $140.64 per barrel for the
six-month period ended June 30, 2001 from $175.21 for the comparable period in 2000. The decrease in the selling price per barrel was primarily due to a significant increase in barrels shipped under Frederick Brewings production agreement with
SIBG for the six-month period ending June 30, 2001. In the beer industry, the selling price per barrel for barrels produced under production agreements is typically much lower than the selling price per barrel for brewers proprietary brands.
Frederick Brewing continues to position its proprietary brands (Wild Goose, Blue Ridge and Brimstone) in the consumer market as high-quality specialty-crafted products. The average selling price per barrel for Frederick Brewings proprietary
brands increased by $2.93 per barrel to $177.97 for the six-month period ended June 30, 2001 from $175.04 for the comparable period in 2000.





Frederick Brewing packages its brands in bottles and kegs. Assuming the same level of production, an
increase in the number of bottles produced and a decrease in the number of kegs produced would contribute to an increase in revenue per barrel because the selling price per equivalent barrel is higher for bottles than for kegs. Keg sales as a
percentage of total equivalent barrels of core brands were 28.3% for the six-month period ended June 30, 2001, as compared to 29.9% for the comparable period in 2000. The slight increase in bottles produced for the six-month period ended June 30,
2001 did not have a significant impact on selling price per barrel.





Returns and Allowances





Product returns and allowances were $101,603 for the six-month period ended June 30, 2001 compared to
$135,884 for the comparable period in 2000. The reduction in returns and allowances for the six-month period ended June 30, 2001 can be attributed to the decrease in gross sales and Frederick Brewings use of a consistent return and allowance
policy for product returns.





Excise Taxes





State and federal excise taxes were $66,088 for the six-month period ended June 30, 2001 and $77,752 for the
comparable period in 2000, representing 4.6% and 5.3% of gross sales, respectively. State excise tax rates and methods of computing taxes vary, depending on where the beer is sold. In some states, such as Maryland and Pennsylvania, the brewer is
required to pay the tax; in others, such as Virginia, and also in the District of Columbia, the tax is paid by the purchasing distributor. Frederick Brewing currently pays $7 per barrel federal excise tax on all beer sold within the United States.
Excise taxes are charged only upon the sale of Frederick Brewings proprietary brands. The decrease in excise taxes paid results from the mix of sales by state and lower volumes of proprietary brands shipped for the six-month period ended June
30, 2001.





Cost of Sales





For the six-month periods ended June 30, 2001 and 2000, the cost of sales was $1,511,474, or $146.47 per
barrel, and $1,566,523, or $186.80 per barrel, respectively. Cost of sales was determined using the number of barrels of proprietary brands and co-packed brands shipped by Frederick Brewing for the six-month periods ended June 30, 2001 and 2000. The
cost of sales for the six-month period ended June 30, 2001 decreased to
117.8% of net sales from 124.7% for the comparable period in 2000. Variable costs were $1,011,836, or $98.06 per barrel, for the six-month period ended June 30, 2001 compared to $968,523, or $115.49 per barrel, for the comparable period in 2000.
Fixed overhead costs for the six-month period ended June 30, 2001 decreased by $98,362 to $499,638 from $598,000 for the comparable period in 2000.





Variable costs include raw materials, packaging materials, liquid costs and variable labor costs directly
related to the production and packaging of beer. Variable and fixed overhead costs include costs related to the following operational departments: brewing, cellaring, packaging, quality assurance, warehousing, maintenance and production management.
Fixed costs include depreciation expense, salary personnel costs and rent.





The decrease in cost of sales per barrel for the six-month period ended June 30, 2001 was primarily caused
by Frederick Brewings cost of goods sold being absorbed over an increased barrel shipment, 10,319 barrels for the six-month period ended June 30, 2001 compared to 8,386 barrels for the comparable period in 2000. For the six-month period ended
June 30, 2001, Frederick Brewings brewing facility operated at a level of 20.6% of plant capacity compared to 16.7% for the comparable period in 2000. Frederick Brewings capacity utilization has a significant impact on gross profit. When
facilities are operating at their maximum designed production capacities (100,000 barrels designed annual capacity for Frederick Brewing), profitability is favorably affected by spreading fixed operating costs over a larger sales base. Because the
actual production level is substantially below the facilitys maximum designed production capacity, gross margins are negatively impacted. This impact is reduced when actual utilization levels increase.





Selling, General and Administrative Expenses and Management Fees





Selling, general and administrative expenses for the six-month period ended June 30, 2001 decreased $310,696
or approximately 27.0%, to $839,783 from $1,150,479 for the comparable period in 2000. This decrease was due, in part, to reductions in accounting and legal costs and a reduction in management fees due to SIBG. Effective April 1, 2001, SIBG reduced
the monthly management fee owed by Frederick Brewing under the management agreement from $30,000 to $15,000. The management fee was reduced to reflect a decrease in certain management services provided by SIBG. These services are now being provided
by Albert W. Spinelli, Frederick Brewings Executive Vice President and General Manager, and Andrew W. Tveekrem, Frederick Brewings Brewmaster. Mr. Spinellis and Mr. Tveekrems salaries are paid by Frederick
Brewing.





Interest Expense (net)





Net interest expense increased $62,975, or approximately 21.1%, to $362,129 for the six-month period ended
June 30, 2001 compared to $299,154 for the comparable period in 2000. A substantial portion of the interest expense incurred during the six-month period ended June 30, 2001 related to indebtedness incurred by Frederick Brewing in connection with the
capital lease of its brewing facility and interest due SIBG for working capital advances under the SIBG note.





Liquidity and Capital Resources





Frederick Brewing has recorded losses from operations since 1993 and has funded its operations primarily
from private and public placements of common and preferred stock and, since August 24, 1999, from unsecured working capital advances from SIBG. As of June 30, 2001, Frederick Brewing had a working capital deficit of $6,989,499. Net cash used in
operating activities was $870,282 for the three-month period ended June 30, 2001 as compared to $703,293 for the comparable period in 2000. Net cash used in operating activities was $1,282,742for the six-month period ended June 30, 2001 as
compared to $1,283,213 for the comparable period in 2000.





Net cash used ininvesting activities was $17,963 for the three-month period ended June 30,
2001,which represented equipment purchases of $17,963 as compared to net cash used in investing activities of $95,318 for the comparable period in 2000. Net cash provided byinvesting activities was $27,113 for the six-month period
ended June 30, 2001, which resulted from a change in restricted cash of $51,071 reduced by equipment purchases of $23,958 as compared to net cash provided by investing activities of $29,324 for the comparable period in 2000.





Net cash provided by financing activities was $847,058 for the three-month period ended June 30, 2001
representing the utilization of working capital loans from SIBG of $869,884 offset by payments on capital lease and debt obligations of $22,826. Net cash provided by financing activities was $692,659 for the comparable period in 2000. Net cash
provided by financing activities was $1,238,492 for the six-month period ended June 30, 2001 representing the utilization of working capital loans from SIBG of $1,274,757 offset by payments on capital lease and debt obligations of $36,265. Net cash
provided by financing activities was $1,205,663 for the comparable period in 2000.





Frederick Brewings ability to meet its obligations on a long-term basis is dependent on achieving
operating profitability and on generating positive cash flows. To achieve these results, Frederick Brewing continues to work to eliminate or substantially reduce excess brewing capacity. In order to meet its short-term obligations, Frederick Brewing
will need to continue to borrow additional amounts from SIBG or from other financing sources. Frederick Brewing currently receives funding for its working capital and other corporate needs under the SIBG note, which is payable on demand and provides
that Frederick Brewing may borrow on a revolving basis up to $5,000,000 in principal, subject to certain limitations. As of August 13, 2001, Frederick Brewing owed$6,025,213 to SIBG. This amount includes principal of $5,425,502 and interest
of $509,895 due under the SIBG note as well as $89,816 in accounts payable to SIBG for amounts due under the management agreement and the sales and marketing agreement with SIBG and for amounts owed for the monthly real estate maintenance fee
related to the lease of the Frederick property. To meet Frederick Brewings short-term working capital needs, SIBG may increase the amounts available to Frederick Brewing under the SIBG note. SIBG currently receives funding for Frederick
Brewings borrowings under the SIBG note from a $5,000,000 line of credit obtained by SIBG from a financial institution (the SIBG Line of Credit) on substantially similar terms and from loans aggregating $1,500,000 in principal
amount from C. David Snyder (the Snyder Notes), which are payable on demand and allow SIBG to borrow on a revolving basis, subject to certain limitations. As of August 13, 2001, there was no availability under the SIBG Line of Credit and
no availability under the Snyder Notes. To fund the increased availability to Frederick Brewing under the SIBG note, SIBG may conduct a private equity offering to raise additional funds, if permitted by the lender of the SIBG Line of Credit, or may
borrow additional amounts from Mr. Snyder on a case-by-case basis; however, any increased availability under the SIBG note will be limited to the amount of any new funds raised by SIBG or borrowed from Mr. Snyder. Moreover, SIBG, which merged with
Crooked River Brewing Company, LLC and Royal Brewing, LLC in 2000 may also utilize some of the funds raised or borrowed by SIBG to fund SIBGs operations. As a result, some or all of the funds may, in fact, not be available to Frederick
Brewing. Furthermore, even though SIBG is owned and controlled by Mr. Snyder, Frederick Brewings Chairman and Chief Executive Officer, SIBG may nonetheless have to demand repayment from Frederick Brewing of amounts outstanding under the SIBG
note if the financial institution providing funding to SIBG demands repayment under the SIBG Line of Credit or if Mr. Snyder demands repayment of the Snyder Notes. To meet its long-term needs, Frederick Brewing continues to explore obtaining
financing arrangements from other sources, including possibly a line of credit secured by Frederick Brewings equipment, although no assurances can be given that any such financing arrangements can be obtained and, if obtained, upon what terms
such financing would be provided to Frederick Brewing.





Impact of Inflation





Frederick Brewing 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 Frederick Brewings result of operations to the extent that these additional costs cannot be transferred to distributors.





Provision for Income Taxes





Frederick Brewing has incurred significant net operating losses during the last several calendar years and
additional losses were incurred for the three-month and six-month periods ended June 30, 2001. As a result, no provision for income taxes has been provided for on the Statements of Operations for the three-month and six-month periods ended June 30,
2001 and 2000. As of June 30, 2001, Frederick Brewing has recorded a full valuation allowance against its deferred tax assets.





Certain Factors That May Affect Future Results





From time to time, information provided by Frederick Brewing, statements by its employees or information
included in its filings with the U.S. Securities and Exchange Commission (including those portions of this Managements Discussion and Analysis that refer to the future) may contain forward-looking statements that are not historical facts.
Those statements are forward-looking within the meaning of the Private Securities Litigation Reform Act of 1995. When used in this Form 10-QSB, the words believes, anticipates, expects,
intends and other predictive, interpretive and similar expressions are intended to identify such forward-looking statements. Such forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause
the actual results of Frederick Brewing to be materially different from expectations expressed or implied by such forward-looking statements. Such factors include, but are not limited to:





| | · | Going Concern.The financial statements included in this report have been prepared assuming
Frederick Brewing will continue as a going concern. Frederick Brewing has sustained significant recurring operating losses and has significant cash commitments to creditors. These facts raise substantial doubt about Frederick Brewings ability
to continue as a going concern.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




| | · | Reliance on SIBG and C. David Snyder. Frederick Brewings success continues to
significantly depend upon the financial support and contributions of Frederick Brewings controlling shareholder, SIBG, and Frederick Brewings Chairman and Chief Executive Officer, C. David Snyder:
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




| | · | Under the management agreement and the sales and marketing agreement with SIBG, SIBG provides extensive management and sales
and marketing services to Frederick Brewing. The management agreement automatically renewed for another one-year term on August 24, 2000 and the sales and marketing agreement renewed for another one-year term on January 1, 2001; however, if SIBG
terminates these agreements, there can be no assurance that Frederick Brewing will be able to attract and hire qualified management and sales and marketing personnel to develop its business and to sell its products;
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




| | · | In the past, Frederick Brewing obtained funding for operations from borrowings under the SIBG note, which, as of August 13,
2001, has no remaining availability. There can be no assurance that SIBG will be able to increase the amounts available to Frederick Brewing under the SIBG note or that Frederick Brewing will be able to borrow funds from other financing sources to
meet its long-term working capital needs. In addition, there can be no assurance that SIBG will not have to demand repayment of the amounts already borrowed under the SIBG note if the financial institution that provides the funding for these loans
to SIBG demands repayment from SIBG, or if Mr. Snyder demands repayment of the Snyder Notes from SIBG. If SIBG demands repayment of the SIBG note, there can be no assurance that Frederick Brewing will be able to obtain alternative financing, or if
such alternative financing is obtained, there can be no assurance as to the terms of the financing; and
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




| | · | SIBGs ownership of other brands has resulted in the four-year agreement for Frederick Brewing to produce and package
the Crooked River, Little Kings and Christian Moerlein brands and may lead to other production agreements to produce and package other SIBG-owned brands. If SIBG terminates the current production agreement with Frederick Brewing and/or determines
not to enter into additional production agreements, there can be no assurance that Frederick Brewing will be able to obtain other production contracts, which are needed to increase plant utilization.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




| | · | Potential Out-Of-Code Production Loss.Frederick Brewing accrued $350,000 during 1999 for a
potential loss related to allegedly out-of-code product that was exported to, and is currently warehoused in, a non-U.S. market. Frederick Brewings management is currently reviewing the situation and is in discussion with the relevant
authorities in the non-U.S. markets. However, because all arrangements regarding this product were made by former management and, at this point, much information regarding this situation is still unknown, the potential amount of this loss is
difficult to predict.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




| | · | Heavy Dependence on Wholesale Distributors.Frederick Brewing distributes its products only
through independent wholesale distributors for resale to retailers. Accordingly, Frederick Brewing is dependent upon these wholesale distributors to sell Frederick Brewings beers, to assist Frederick Brewing in creating demand for its products
and to provide adequate service to its retail customers. Frederick Brewing renegotiated its distributor agreements in 2000, and management believes that these revised terms are more favorable to Frederick Brewing and are closer to industry
standards. There can be no assurance, however, that Frederick Brewings distributors will respond positively to these changes and increase orders as a result. In addition, there can be no assurance that any of Frederick Brewings wholesale
distributors will devote the resources necessary to provide effective sales and promotional support to Frederick Brewing.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




| | · | Competition.Frederick Brewing competes in the specialty beer segment of the domestic beer
market against a variety of domestic and international brewers, many of whom have substantially greater financial, production, distribution and marketing resources and have achieved a higher level of brand recognition than Frederick Brewing.
Increased competition could result in price reductions, reduced profit margins and loss of market share, all of which would have a material adverse effect on Frederick Brewings financial condition and results of operations.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




| | · | Decrease in Industry Growth.    Beginning in 1997, the overall sales growth of domestic specialty
brewers slowed substantially. Even though certain industry sources indicate that, since 1999, this trend has been reversing, there can be no assurance that the decrease in sales growth of domestic specialty brewers that previously occurred will not
reoccur, which would have a material adverse effect on Frederick Brewings financial condition and results of operations. Moreover, even if the domestic specialty beer category experiences growth in 2001 and beyond, no assurance can be given
that Frederick Brewing will be in a position to take advantage of such growth.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




| | · | Excess Brewing Capacity.Frederick Brewing must substantially reduce its excess brewing
capacity in order to improve its financial performance. Although Frederick Brewing has taken actions to address this issue, such as entering into the production agreement with SIBG, and is exploring additional actions that can be taken to address
this issue, no assurance can be given that such actions will be successful or, if successful, that any increase in utilization will increase the profitability of Frederick Brewing.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




| | · | Restructured Sales Force.    Frederick Brewing must substantially increase sales in order to
improve its financial performance. Even though Frederick Brewings sales force was restructured in 2000, and Frederick Brewing believes its sales force consists of capable, experienced sales persons, no assurances can be given that this new
sales force will be successful in selling Frederick Brewings brands. Additionally, given the competitive market for qualified sales persons, no assurances can be given that these employees will choose to remain with SIBG and Frederick Brewing,
or that if they should choose to leave SIBG and Frederick Brewing, that they can be replaced with equally qualified personnel. A significant turnover in the sales staff could have a material adverse effect on Frederick Brewings
business.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




| | · | Marketing Strategies.Frederick Brewing believes that its new off-premise strategy to pursue
display activity in chain supermarkets and large, regional beverage stores will increase sales. However, no assurances can be given that this marketing strategy will increase sales if retailers do not utilize the display programs and do not agree to
carry more of Frederick Brewings products in support of these programs. Moreover, even if retailers support these programs, no assurances can be given that consumers will purchase more of Frederick Brewings products as a
result.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




These statements are based on certain assumptions and analyses made by Frederick Brewing in light of its
experience and its perception of historical trends, current conditions, expected future developments and other factors it believes are appropriate in the circumstances. These statements are subject to a number of other assumptions, risks,
uncertainties, general economic and business conditions, and the business opportunities (or lack thereof) that may be presented to and pursued by Frederick Brewing. Prospective investors are cautioned that these statements are not guarantees of
future performance and that actual results or developments may differ materially from those projected in the forward-looking statements. The accompanying information contained in this Quarterly Report on Form 10-QSB, including, without limitation,
the information set forth in this section identifies important factors that could cause such differences.





PART II. OTHER INFORMATION





Item 3.    Default Upon Senior Securities





(b)  The holders of Frederick Brewings 8% Cumulative Convertible Preferred Stock, Series A,
par value $.01 per share, are entitled to receive $40 per share per annum in dividends, when and if declared by Frederick Brewings Board of Directors. These dividends are due and payable quarterly in arrears at a rate of $10 per share.
Frederick Brewing has never declared and paid dividends on the Series A stock, and as of June 30, 2001, dividends in arrears totaled $261,900.





Item 6.    Exhibits and Reports on Form 8-K





a.Exhibits





Except as otherwise indicated, the following Exhibits are filed herewith and made a part hereof:





|Exhibit

No. |  | Description                                                                                                                                        
|------------ |  | ---------------------------------------------------------------------------------------------------------------------------------------------------
|10.1         |  | Amendment to Management Agreement, effective as of April 1, 2001, by and between Frederick

Brewing Co. and Snyder International Brewing Group, LLC




b.    Reports on Form 8-K





None.





FREDERICK BREWING CO.





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 13, 2001


| | /s/    C. DAVID
SNYDER
| | ----------------------

| | By:
| | ---

| | C. David Snyder
| | ---------------

| | Chairman of the Board,
| | ----------------------

| | Chief Executive Officer and Treasurer
| | -------------------------------------




Date: August 13, 2001


| | /s/    JAMES
M. GEHRIG
| | ----------------------

| | 
| | 

| | James M. Gehrig
| | ---------------

| | Chief Financial Officer
| | -----------------------




FREDERICK BREWING CO.





EXHIBIT INDEX





|Exhibit |  | Description                                                                                                                                        
|------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------
|10.1    |  | Amendment to Management Agreement, effective as of April 1, 2001, by and between Frederick

Brewing Co. and Snyder International Brewing Group, LLC