CBR BREWING CO INC - 10-Q Quarterly Report

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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-Q

[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934

For the quarterly period ended September 30, 2002

[ ] 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: 33-26617A

CBR BREWING COMPANY, INC.
------------------------------------------------------
(Exact name of registrant as specified in its charter)

Florida 65-0145422
- ------------------------------- ----------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)

23/F., Hang Seng Causeway Bay Building
28 Yee Wo Street, Causeway Bay, Hong Kong
------------------------------------------------------------
(Address of principal executive offices, including Zip Code)

Registrant's telephone number, including area code: 852-2866-2301

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

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

As of September 30, 2002, the Company had 5,010,013 shares of Class A Common
Stock and 3,000,000 shares of Class B Common Stock issued and outstanding.

Documents incorporated by reference: None

CBR BREWING COMPANY, INC. AND SUBSIDIARIES

INDEX

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

Consolidated Balance Sheets - September 30, 2002 (Unaudited)
and December 31, 2001

Consolidated Statements of Operations (Unaudited) - Three
Months and Nine Months Ended September 30, 2002 and 2001

Consolidated Statements of Cash Flows (Unaudited) - Nine
Months Ended September 30, 2002 and 2001

Notes to Consolidated Financial Statements (Unaudited) - Three
Months and Nine Months Ended September 30, 2002 and 2001

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

Item 3. Quantitative and Qualitative Disclosures about Market Risk

Item 4. Controls and Procedures

PART II. OTHER INFORMATION

Item 6. Exhibits and Reports on Form 8-K

SIGNATURES

CERTIFICATIONS

2

CBR BREWING COMPANY, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS

September 30, 2002 December 31, 2001
------------------------ -------------------------
RMB USD RMB USD
----------- ------------ ------------ -----------
(Unaudited) (Unaudited)

ASSETS
Current assets:
Cash 111,825,200 13,472,916 71,366,480 8,598,371
Accounts receivable, net (Note 3) 61,468,391 7,405,830 59,978,050 7,226,271
Bills receivable 17,499,300 2,108,349 4,465,000 537,952
Inventories (Note 4) 59,859,706 7,212,013 53,313,982 6,423,371
Amounts due from related
companies (Note 5) 1,071,055 129,043 1,069,599 128,867
Income taxes receivable 1,927,759 232,260 - -
Prepayments and deposits 15,309,446 1,844,512 14,827,385 1,786,432
Other receivables 33,679,231 4,057,739 11,460,511 1,380,784
----------- ------------ ------------ -----------

Total current assets 302,640,088 36,462,662 216,481,007 26,082,048

Interest in an associated company
(Note 6) 185,027,990 22,292,529 259,164,383 31,224,624

Property, plant and equipment, net
(Note 7) 136,489,597 16,444,530 217,668,104 26,225,073
----------- ------------ ------------ -----------

Total assets 624,157,675 75,199,721 693,313,494 83,531,745
=========== ============ ============ ===========

(continued)

3

CBR BREWING COMPANY, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (CONTINUED)

September 30, 2002 December 31, 2001
-------------------------- ------------------------
RMB USD RMB USD
------------ ------------ ----------- -----------

(Unaudited) (Unaudited)
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Bank borrowings 116,032,146 13,979,777 109,835,524 13,233,196
Accounts payable 15,617,937 1,881,679 21,699,421 2,614,388
Accrued liabilities 187,075,785 22,539,251 144,429,286 17,401,119
Amounts due to related companies
(Note 5) 534,064 64,345 2,435,577 293,443
Amount due to an associated company
(Note 8) 260,933,300 31,437,747 210,805,218 25,398,219
Sales taxes payable 15,506,693 1,868,276 23,160,813 2,790,459
------------ ------------ ----------- -----------

Total current liabilities 595,699,925 71,771,075 512,365,839 61,730,824
------------ ------------ ----------- -----------

Long-term liabilities:
Bank borrowings 11,533,872 1,389,623 12,400,211 1,494,001
Advance from a related company
(Note 9) 11,000,000 1,325,301 - -
------------ ------------ ----------- -----------

Total long-term liabilities 22,533,872 2,714,924 12,400,211 1,494,001
------------ ------------ ----------- -----------

Minority interests (Note 10) - - - -
------------ ------------ ----------- -----------

Contingencies (Note 12)

Common stock:
-Class A, US$0.0001 par value,
90,000,000 shares authorized,
5,010,013 shares outstanding 4,273 515 4,273 515
-Class B, US$0.0001 par value,
10,000,000 shares authorized,
3,000,000 shares outstanding 2,559 308 2,559 308
Additional paid-in capital 107,361,845 12,935,162 107,361,845 12,935,162
General reserve and enterprise
development funds 18,735,220 2,257,255 16,108,349 1,940,765
Retained earnings (deficit) (120,180,019) (14,479,518) 45,070,418 5,430,170
------------ ------------ ----------- -----------

Total shareholders' equity 5,923,878 713,722 168,547,444 20,306,920
------------ ------------ ----------- -----------

Total liabilities and shareholders'
equity 624,157,675 75,199,721 693,313,494 83,531,745
============ ============ =========== ===========

See accompanying notes to the consolidated financial statements.

4

CBR BREWING COMPANY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

Three Months Ended Nine Months Ended Three Months Ended
September 30, 2002 September 30, 2002 September 30, 2001
------------- ------------ ------------- ------------ -------------------
RMB USD RMB USD RMB
------------- ------------ ------------- ------------ -------------------

Sales 137,418,923 16,556,497 497,344,472 59,921,021 181,239,840
Sales taxes (4,784,662) (576,465) (15,619,077) (1,881,817) (5,700,267)
------------- ------------ ------------- ------------ -------------------

Net sales 132,634,261 15,980,032 481,725,395 58,039,204 175,539,573
Cost of sales, including net inventory
transferred from an associated
company of RMB 13,529,348 and
RMB 41,784,234 for the three months
and nine months ended September 30,
2002, respectively, and RMB 21,058,068
and RMB 50,603,657 for the three and
nine months ended September 30, 2001,
respectively; inventory purchased from
related companies of RMB 58,667,365
and RMB 221,247,110 for the three
months and nine months ended
September 30,2002, respectively, and
RMB 89,360,090 and RMB 275,329,511
for the three months and nine months
ended September 30, 2001, respectively;
and royalty fee paid to a related
company of RMB 695,553 and
RMB 2,523,108 for the three months
and nine months ended September 30,
2002, respectively, and RMB 1,104,665
and RMB 3,013,126 for the three months
and nine months ended September 30,
2001,respectively (Note 5) (102,006,200) (12,289,904) (339,377,662) (40,888,875) (110,278,908)
------------- ------------ ------------- ------------ -------------------

Gross profit 30,628,061 3,690,128 142,347,733 17,150,329 65,260,665

Selling, general and administrative
expenses (43,373,556) (5,225,729) (167,752,548) (20,211,150) (57,622,319)
Impairment of property, plant and
equipment (Note 7) (29,000,000) (3,493,976) (69,000,000) (8,313,253) (2,750,000)
Investment in subsidiary written off
(Note 7) - - - - -
Restructuring costs (Note 11) - - - - (988,054)
Gain on disposal of property, plant and
equipment 94,950 11,440 94,950 11,440 -
------------- ------------ ------------- ------------ -------------------

Operating (loss) income (41,650,545) (5,018,137) (94,309,865) (11,362,634) 6,650,292

Interest income 170,848 20,584 426,120 51,340 549,577
Interest expense (1,605,381) (193,419) (5,928,483) (714,274) (1,926,718)
------------- ------------ ------------- ------------ -------------------

(Loss) income before income taxes,
minority interests and equity in
(loss) earnings of an associated
company (43,085,078) (5,190,972) (99,812,228) (12,025,568) 5,273,151
Income taxes - - (325,894) (39,264) 1,624,580
------------- ------------ ------------- ------------ -------------------

(Loss) income before minority interests
and equity in (loss) earnings of an
associated company (43,085,078) (5,190,972) (100,138,122) (12,064,832) 6,897,731
Minority interests (Note 10) - - (18,553,467) (2,235,357) (1,500,000)
------------- ------------ ------------- ------------ -------------------

(Loss) income before equity in (loss)
earnings of an associated company (43,085,078) (5,190,972) (118,691,589) (14,300,189) 5,397,731
Equity in (loss) earnings of an
associated company (16,375,619) (1,972,966) (43,931,977) (5,293,009) (1,253,603)
------------- ------------ ------------- ------------ -------------------

Net (loss) income for the period (59,460,697) (7,163,938) (162,623,566) (19,593,198) 4,144,128
============= ============ ============= ============ ===================

Net (loss) income per common share
(Note 1)
- basic and diluted (7.42) (0.89) (20.30) (2.45) 0.52
============= ============ ============= ============ ===================

Weighted average number of common
shares outstanding
- basic and diluted 8,010,013 8,010,013 8,010,013 8,010,013 8,010,013
============= ============ ============= ============ ===================

Nine Months Ended
September 30, 2001
-------------------
RMB
-------------------

Sales 591,200,099
Sales taxes (16,136,351)
-------------------

Net sales 575,063,748
Cost of sales, including net inventory
transferred from an associated
company of RMB 13,529,348 and
RMB 41,784,234 for the three months
and nine months ended September 30,
2002, respectively, and RMB 21,058,068
and RMB 50,603,657 for the three and
nine months ended September 30, 2001,
respectively; inventory purchased from
related companies of RMB 58,667,365
and RMB 221,247,110 for the three
months and nine months ended
September 30,2002, respectively, and
RMB 89,360,090 and RMB 275,329,511
for the three months and nine months
ended September 30, 2001, respectively;
and royalty fee paid to a related
company of RMB 695,553 and
RMB 2,523,108 for the three months
and nine months ended September 30,
2002, respectively, and RMB 1,104,665
and RMB 3,013,126 for the three months
and nine months ended September 30,
2001,respectively (Note 5) (414,342,257)
-------------------

Gross profit 160,721,491

Selling, general and administrative
expenses (184,694,938)
Impairment of property, plant and
equipment (Note 7)
Investment in subsidiary written off
(Note 7) (1,224,109)
Restructuring costs (Note 11) (22,309,236)
Gain on disposal of property, plant and
equipment -
-------------------

Operating (loss) income (50,256,792)

Interest income 1,017,277
Interest expense (6,047,447)
-------------------

(Loss) income before income taxes,
minority interests and equity in
(loss) earnings of an associated
company (55,286,962)
Income taxes (40,000)
-------------------

(Loss) income before minority interests
and equity in (loss) earnings of an
associated company (55,326,962)
Minority interests (Note 10) 17,169,258
-------------------

(Loss) income before equity in (loss)
earnings of an associated company (38,157,704)
Equity in (loss) earnings of an
associated company 6,812,639
-------------------

Net (loss) income for the period (31,345,065)
===================

Net (loss) income per common share
(Note 1)
- basic and diluted (3.91)
===================

Weighted average number of common
shares outstanding
- basic and diluted 8,010,013
===================

See accompanying notes to the consolidated financial statements.

5

CBR BREWING COMPANY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

Nine Months Ended Nine Months Ended
September 30, 2002 September 30, 2001
-------------------------- ------------------
RMB USD RMB
------------ ------------ ------------------

CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss (162,623,566) (19,593,198) (31,345,065)
Adjustments to reconcile net loss to
net cash provided by operating activities:
Allowance for doubtful accounts 21,000,000 2,530,120 18,900,000
Depreciation and amortization 19,297,598 2,325,012 22,476,910
Impairment of property, plant and equipment 69,000,000 8,313,253 2,750,000
Write-off of investment in subsidiary - - 1,224,109
Gain on disposal of property, plant and
equipment (94,950) (11,440) -
Minority interests 18,553,467 2,235,357 (17,169,258)
Equity in loss (earnings) of an
associated company 43,931,977 5,293,009 (6,812,639)

Changes in operating assets and liabilities:
(Increase) decrease in -
Accounts receivable (22,490,341) (2,709,679) (30,225,446)
Bills receivable (13,034,300) (1,570,397) 18,172,471
Inventories (6,545,724) (788,642) 8,074,740
Amounts due from related companies (1,456) (176) (645,484)
Income taxes receivable (1,927,759) (232,260) -
Prepayments and deposits (482,061) (58,080) (5,951,781)
Other receivables (22,218,720) (2,676,955) (35,970,155)
Increase (decrease) in -
Accounts payable (6,081,484) (732,709) (17,867,940)
Accrued liabilities 42,646,499 5,138,132 48,345,376
Amount due to an associated company 50,128,082 6,039,528 40,241,478
Income taxes payable - - (5,656,663)
Sales taxes payable (7,654,120) (922,183) 2,446,050
------------ ------------ ------------------

NET CASH PROVIDED BY OPERATING ACTIVITIES 21,403,142 2,578,692 10,986,703
------------ ------------ ------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from disposal of property, plant
and equipment 130,000 15,663 -
Purchases of property, plant and equipment (7,154,141) (861,945) (6,799,481)
------------ ------------ ------------------

NET CASH USED IN INVESTING ACTIVITIES (7,024,141) (846,282) (6,799,481)
------------ ------------ ------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
New bank borrowings 85,000,000 10,240,964 20,534,607
Repayment of bank borrowings (79,669,717) (9,598,761) (23,000,000)
Advance from a related company 11,000,000 1,325,301 -
Decrease in amounts due to related companies (4,019,980) (484,335) (12,064,194)
Dividend received from an associated company 30,204,416 3,639,086 -
Payment of cash dividend to minority interest (16,435,000) (1,980,120) (1,500,000)
------------ ------------ ------------------

NET CASH PROVIDED BY (USED IN) FINANCING
ACTIVITIES 26,079,719 3,142,135 (16,029,587)
------------ ------------ ------------------

Net increase (decrease) in cash 40,458,720 4,874,545 (11,842,365)
Cash at beginning of period 71,366,480 8,598,371 90,313,060
------------ ------------ ------------------

Cash at end of period 111,825,200 13,472,916 78,470,695
============ ============ ==================

See accompanying notes to the consolidated financial statements.

6

CBR BREWING COMPANY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
THREE MONTHS AND NINE MONTHS ENDED SEPTEMBER 30, 2002 AND 2001

1. ORGANIZATION AND PRINCIPAL ACTIVITIES

CBR Brewing Company, Inc. (the "Company", which term shall include, when the
context so requires, its subsidiaries and affiliates), formerly Natural Fuels,
Inc. and National Sweepstakes, Inc., was originally incorporated as Video
Promotions, Inc. on April 20, 1988 under the laws of the State of Florida.

At December 31, 2001, the Company's then principal shareholder was Shenzhen
Huaqiang Holdings Limited ("Huaqiang"), incorporated in the People's Republic of
China (the "PRC"), which owned indirectly 63.2% of the outstanding Class A
common stock and 80% of the outstanding Class B common stock. Huaqiang is a
company controlled by the Province of Guangdong. Effective January 10, 2002,
Zhaoqing City Lan Wei Alcoholic Beverage (Holdings) Limited ("Lan Wei") acquired
from Huaqiang all of its equity interest in the Company. The transaction has
been approved by the relevant PRC governmental authorities in April 2002. Lan
Wei is a company controlled by the City of Zhaoqing.

In February 2002, Lan Wei acquired common shares representing an additional
approximately 7.2% equity interest in the Company from a third party in a
private transaction. Management and the board of directors of the Company were
changed on January 22, 2002. As part of the transaction, Lan Wei also acquired
Huaqiang's 19.6% equity interest in Noble China Inc., a Canadian public company.

Substantially all of the beer currently sold by the Company is marketed under
the Pabst Blue Ribbon label, and is brewed under a sublicense agreement with
Guangdong Blue Ribbon Group Co., Ltd. ("Guangdong Blue Ribbon"), which, through
an assignment and transfer, obtained its license from Pabst Brewing Company
("Pabst US"). The term of this sub-license will expire on November 7, 2003.

The Company is a holding company and its principal subsidiaries are engaged in
the production and sale of beer in the PRC. The Company's wholly-owned
subsidiary, High Worth Holdings Limited ("Holdings"), is a holding company that
was formed to effect the acquisition of a 60% interest in Zhaoqing Blue Ribbon
High Worth Brewery Ltd. ("High Worth JV"). High Worth JV is a Sino-foreign
equity joint venture enterprise that was registered in the PRC on July 2, 1994
in which Guangdong Blue Ribbon, an unrelated joint stock limited company
incorporated in the PRC, and Holdings hold 40% and 60% interests, respectively.

On October 31, 1994, High Worth JV acquired a 100% interest in Zhaoqing Brewery,
including Zhaoqing Brewery's 40% interest in Zhaoqing Blue Ribbon Brewery Noble
Ltd. ("Noble Brewery"). Prior to the acquisition of the entire interest in
Zhaoqing Brewery by High Worth JV, Zhaoqing Brewery was a wholly-owned
subsidiary of Guangdong Blue Ribbon. Noble Brewery is a Sino-foreign equity
joint venture enterprise which was registered in the PRC on October 8, 1993, in
which Goldjinsheng Holding Limited ("Goldjinsheng"), an unrelated party, and
Zhaoqing Brewery hold 60% and 40% interests, respectively. Zhaoqing Brewery and
Noble Brewery are both engaged in the production and sale of beer products in
the PRC.

In April 1995, Zhaoqing Brewery ceased the production of Zhaoqing beer and
commenced the production of Pabst Blue Ribbon beer. Pursuant to the terms of a
sub-license agreement which also expires on November 7, 2003, Guangdong Blue
Ribbon granted Zhaoqing Brewery the right to produce and distribute Pabst Blue
Ribbon beer under Pabst trademarks in the PRC at a royalty fee of US$11.70 for
each metric ton produced.

Noble Brewery's principal product line is Pabst Blue Ribbon beer under the Pabst
trademarks which were also granted by Guangdong Blue Ribbon. Pursuant to the
terms of a sub-license agreement, Guangdong Blue Ribbon granted Noble Brewery
the right in the PRC to use two specific Pabst trademarks for the production,
promotion, distribution and sale of beer under such trademarks. However, the
production right of Noble Brewery is confined exclusively to the Guangdong
Province and it does not preclude High Worth JV's production right in Guangdong.
The sub-license

7

CBR BREWING COMPANY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)(CONTINUED)
THREE MONTHS AND NINE MONTHS ENDED SEPTEMBER 30, 2002 AND 2001

1. ORGANIZATION AND PRINCIPAL ACTIVITIES (continued)

agreement is valid until November 7, 2003. In consideration for the sub-license
granted, Noble Brewery is committed to pay Guangdong Blue Ribbon a royalty fee
of US$0.10 for each carton of bottled or canned beer produced.

On February 19, 1995, Zhaoqing Blue Ribbon Beer Marketing Company Limited (the
"Marketing Company") was registered as a limited company in the PRC and owned
70% by Zhaoqing Brewery and 30% by Guangdong Blue Ribbon. The Marketing Company
was appointed as the sole distributor to conduct the distribution, marketing and
promotion of all Pabst Blue Ribbon beer products produced by Zhaoqing Brewery
and Noble Brewery. The Marketing Company started to purchase beer products from
Zhaoqing Brewery and Noble Brewery in April 1995 and July 1995, respectively.

On April 5, 1995, CBR Finance (BVI) Ltd. (the "Finance Company"), which is
wholly-owned by the Company, was incorporated in the British Virgin Islands
("BVI"). The Finance Company has remained dormant since incorporation.

In January 1996, Zhaoqing Brewery transferred all of its operating assets and
liabilities to High Worth JV pursuant to the original Joint Venture Agreement,
the Asset Transfer Agreement signed in May 1994, and the relevant government
regulations. Subject to the completion of certain legal procedures and
documentation, investments in Noble Brewery and the Marketing Company will be
transferred to High Worth JV. Zhaoqing Brewery is currently acting as the
nominee for High Worth JV with respect to the investments in Noble Brewery and
the Marketing Company. Accordingly, when the following context so requires,
Zhaoqing Brewery and High Worth JV are used interchangeably to refer to the same
entity.

Upon the completion of the required procedures and documentation, all of the
assets and liabilities formerly controlled by Zhaoqing Brewery will then be
transferred to High Worth JV. Since January 1996, the operating activities of
Zhaoqing Brewery have been part of High Worth JV. The Company is expecting the
completion of the approval procedures by the end of 2002.

On January 13, 1998, High Worth JV entered into a joint venture contract with
Zao Yang Brewery in Hubei Province to establish a new brewery. The new brewery
was designated Zao Yang Blue Ribbon High Worth Brewery Limited ("Zao Yang High
Worth Brewery"), with a total capital investment of RMB 29,280,000, allocated
55% to High Worth JV and 45% to Zao Yang Brewery. Zao Yang High Worth Brewery
commenced the production of Pabst Blue Ribbon beer in June 1998 based on the
sub-license granted by Guangdong Blue Ribbon in May 1998. Commencing June 1998,
the Marketing Company also began purchasing Zao Yang High Worth Brewery's
production of Pabst Blue Ribbon beer for distribution.

On January 20, 1998, Zhaoqing Brewery and Goldjinsheng entered into an agreement
which calls for the interest of Goldjinsheng in Noble Brewery to be transferred
to Linchpin Holdings Limited ("Linchpin"), a wholly-owned subsidiary of Noble
China Inc. In March 1999, approval from the relevant PRC authorities for the
registration of the aforesaid transfer for Linchpin was obtained. Linchpin and
Zhaoqing Brewery currently own 60% and 40% equity interests in Noble Brewery,
respectively.

Effective December 31, 1997, the Company, through High Worth JV, entered into a
Settlement Agreement with Guangdong Blue Ribbon to acquire a 51% interest in
Sichuan Brewery, equivalent to an effective interest of 31%. Prior to the
completion of the 51% interest acquisition, pursuant to an Equity Transfer
Agreement signed on January 19, 1999, High Worth JV received a 15%
consideration-free equity interest in Sichuan Brewery, equivalent to an
effective interest of 9%.

On June 5, 1999, the business of Sichuan Brewery was transferred to Sichuan High
Worth Brewery. The total registered and paid-up capital of Sichuan High Worth
Brewery was RMB 51,221,258. High Worth JV's 15% equity interest is
consideration-free but is entitled to share in the profits of Sichuan High Worth
Brewery.

8

CBR BREWING COMPANY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)(CONTINUED)
THREE MONTHS AND NINE MONTHS ENDED SEPTEMBER 30, 2002 AND 2001

1. ORGANIZATION AND PRINCIPAL ACTIVITIES (continued)

During April 2001, as a result of continuing operating losses and adverse market
conditions, the Company conducted discussions with its partners in Sichuan High
Worth Brewery, resulting in an agreement to withdraw from Sichuan High Worth
Brewery. The Company agreed to give up its effective interest of 9% in Sichuan
High Worth Brewery, and was released from any liability for the brewery's
accumulated losses. As part of this agreement, Sichuan High Worth Brewery's
right to produce Pabst Blue Ribbon beer was terminated. This transaction did
not have any impact on the Company's results of operations or financial
position, since the sales of Sichuan High Worth Brewery in the Sichuan region
have been reallocated between Zhaoqing Brewery and Noble Brewery and the
interest in Sichuan High Worth Brewery was acquired for no consideration.

On October 18, 1999, Holdings, through its newly incorporated wholly-owned
subsidiary, March International Group Limited ("March International"), signed a
formal Joint Venture Agreement with Jilin Province Jiutai City Brewery (40%) and
Jilin Province Chuang Xiang Zhi Yie Ltd. (9%), both of which are unaffiliated
PRC companies, to form Jilin Lianli (CBR) Brewing Company Ltd. ("Jilin Lianli
Brewery"). Subsequent to the improvement of the brewing equipment and the
installation of the new packing line, Jilin Lianli Brewery commenced operations
in May 2000. However, due to weak market response and the inability of the
Chinese local partners to honor their portion of the working capital commitment,
the production and operation of Jilin Lianli Brewery was formally terminated in
December 2000. As of December 31, 2001, the Company has written off a total of
RMB 13,788,500 with respect to this investment. On July 9, 2002, March
International was formally dissolved.

NOBLE CHINA INC. - Noble China Inc. has publicly reported that in May 1999 it
entered into a license agreement with Pabst US granting it the right to utilize
the Pabst Blue Ribbon trademarks in connection with the production, promotion,
distribution and sale of beer in China for 30 years commencing in November 2003.
In consideration for the license agreement, Noble China Inc. reported that it
had paid Pabst US US$5,000,000 for the right to use the Pabst Blue Ribbon
trademarks and agreed to pay royalties based on gross sales.

Management has met with representatives of Noble China Inc. in an attempt to
explore a renewal of the Pabst Blue Ribbon sub-license agreement, which expires
on November 7, 2003. As at September 30, 2002, the Company has not yet obtained
a renewal of the Pabst Blue Ribbon sub-license agreement. The inability of the
Company to obtain a sub-license from Noble China Inc. or to renew the Company's
sub-license or enter into some other form of strategic relationship under
acceptable terms and conditions to allow the Company to continue to produce and
distribute Pabst Blue Ribbon beer in China would have a material adverse effect
on the Company's future results of operations, financial position and cash
flows.

During December 2000, the Company and Noble China Inc. signed a memorandum
pursuant to which a management committee was established to evaluate the
potential to coordinate and enhance the operations of Zhaoqing Brewery, Noble
Brewery and the Marketing Company. Effective January 1, 2001, the management,
marketing, production and operations of Zhaoqing Brewery, Noble Brewery and the
Marketing Company were pooled together under a newly-created management entity
named "Blue Ribbon Enterprises" in order to achieve improved coordination of
human, financial, production and marketing activities. Under this arrangement:

(a) Certain administrative expenses of the Marketing Company, Zhaoqing
Brewery and Noble Brewery, as well as the total production volume of
Zhaoqing Brewery and Noble Brewery and the related direct variable
costs incurred for beer production of the two breweries, were pooled
and re-allocated among Zhaoqing Brewery and Noble Brewery at a 1 to 2
ratio, respectively, in proportion to each brewery's respective
production capacities. In order to maximize production efficiencies at
the present reduced levels of sales volume, Noble Brewery is currently
producing all of the beer sold by both Zhaoqing Brewery and Noble
Brewery.

9

CBR BREWING COMPANY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)(CONTINUED)
THREE MONTHS AND NINE MONTHS ENDED SEPTEMBER 30, 2002 AND 2001

1. ORGANIZATION AND PRINCIPAL ACTIVITIES (continued)

(b) Certain direct selling expenses and advertising expenses incurred by
the Marketing Company relating to the sale of beer products from the
two breweries are allocated among Zhaoqing Brewery and Noble Brewery
at a 1 to 2 ratio, respectively, either through intercompany transfer
pricing adjustment or direct absorption.

The administrative, direct selling and advertising expenses of the Marketing
Company and the direct variable costs incurred for beer production of the two
breweries were allocated at cost. This pooled management structure is expected
to achieve greater efficiency and improved operating profitability. However,
Zhaoqing Brewery, Noble Brewery and the Marketing Company each remain as legally
distinct entities. The management committee is also responsible for commencing
a study to evaluate the formation of a new unified company.

Under the new management team, the Company implemented a restructuring program
that eliminated the positions of a total of 538 employees, of which 313 were
from Zhaoqing Brewery, 177 were from Noble Brewery and 48 were from the
Marketing Company. Restructuring payments to these employees totaled RMB
20,396,494 by Zhaoqing Brewery, RMB 8,729,830 by Noble Brewery and RMB 1,912,742
by the Marketing Company for the nine months ended September 30, 2001. The
Company recorded aggregate restructuring costs of RMB 22,309,236 for the nine
months ended September 30, 2001, of which RMB 988,054 of such restructuring
costs were recorded during the three months ended September 30, 2001.

Noble China Inc. has recently publicly reported that it was experiencing severe
financial difficulties, was unable to meet its financial commitments and is
insolvent, and is considering various courses of action.

On July 19, 2002, Noble China Inc. announced that the Shandong Court ruled
against it and ordered it to pay claims of US$3,999,988 and RMB 20,000,000 plus
legal costs of RMB 541,210, and interest from June 21, 2001 within one month of
the judgment. The litigation was related to a claim by China Coastal Development
Ltd. (see Note 6). Noble China Inc. further asserted that it would appeal the
Shandong Court's decision to the Supreme Court of the PRC.

On July 22, 2002, Noble China Inc. held its Annual and General Meeting of
Shareholders. A Special Meeting of Shareholders and a Meeting of Debenture
holders were also held on July 22, 2002 to seek approval for certain amendments
to the 9% Convertible Subordinated Debentures and to the Trust Indenture
governing the Debentures. Noble China Inc. has CN$30,000,000 of outstanding
Debentures. As a result of ongoing discussions between the major Debenture
holder and indirectly a major shareholder of Noble China Inc., the City of
Zhaoqing, regarding a possible restructuring of Noble China Inc., the amendments
to the Debentures and to the Trust Indenture were not presented for a vote at
the Special Meeting of Shareholders and at the Meeting of Debenture holders;
both such meetings were instead adjourned to times and places to be determined.
The Board of Directors of Noble China Inc. was re-elected and confirmed its
short-term assistance to facilitate the negotiations between the major
shareholder of Noble China Inc. and the major Debenture holder. The Directors
of Noble China Inc. indicated that if the major shareholder and major Debenture
holder could not reach a resolution on an appropriate restructuring plan that
the Board of Directors could support in the interest of all shareholders and
Debenture holders within 60 days, the Board of Directors would resign.

On September 3, 2002, Noble China Inc.'s report for the three months ended June
30, 2002 disclosed that although the major shareholder and the major Debenture
holder were continuing their discussions, no meaningful process had been noted
and the Directors planned to resign on September 20, 2002.

10

CBR BREWING COMPANY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)(CONTINUED)
THREE MONTHS AND NINE MONTHS ENDED SEPTEMBER 30, 2002 AND 2001

1. ORGANIZATION AND PRINCIPAL ACTIVITIES (continued)

On September 24, 2002, a press release by Noble China Inc. announced that one of
its three directors had resigned on September 20, 2002, and that the remaining
two directors intended to resign. On November 12, 2002, Noble China Inc. held a
meeting of shareholders to elect a new Board of Directors to consist of three
members; three candidates nominated by Lan Wei, the major shareholder of the
Company, were elected to the Board of Directors.

The Company is currently unable to predict the effect that these recent
developments may have on future operations, including any effect on the
Company's ability to obtain a sub-license to produce and distribute Pabst Blue
Ribbon beer in China effective from November 7, 2003, or the impact on Noble
Brewery, the Company's affiliate (see Notes 6 and 7).

During the three months ended June 30, 2002, as a result of the uncertainty with
respect to the renewal of the Pabst Blue Ribbon sub-license and the continuing
negotiations between the Company's major shareholder and the major Debenture
holders of Noble China Inc. regarding the future of Noble China Inc., combined
with reduced sales, continuing operating losses and various legal and business
issues, the Company conducted an evaluation of the carrying value of its
property, plant and equipment as well as the related estimated cash flows. As a
result of this evaluation, the Company recorded a provision for impairment of
RMB 40,000,000 with respect to the property, plant and equipment of Zhaoqing
Brewery. During the three months ended September 30, 2002, due to a further
decrease in sales, the Company re-evaluated the carrying value of its property,
plant and equipment, as well as the related estimated cash flows. As a result of
this re-evaluation, the Company recorded an impairment charge of RMB 29,000,000
with respect to Zao Yang High Worth Brewery. As a result of these evaluations,
the Company recorded total impairment charges of RMB 29,000,000 and RMB
69,000,000 for the three months and nine months ended September 30, 2002,
respectively. These impairment charges were based on certain assumptions
regarding the Company's future cash flows and other factors used to determine
the fair value of its property, plant and equipment, including the assumption
that the Company may not be granted a renewal of the sub-license to produce
Pabst Blue Ribbon beer after the existing sub-license expires on November 7,
2003. If these estimates or the related assumptions change adversely in the
future, the Company may be required to record an additional impairment charge.

During 2002, the Company implemented a series of new sales programs to launch
various newly developed or modified local brand beers into the market, including
brands such as "Lanli", "Lancheng", "Lanshi", "Xile" and "Zhaopi". Together
with the local brand beer "Di Huang Quan" produced by Zao Yang High Worth
Brewery, the Company intends to increase its relative marketing efforts on these
new local brands. If the Company is unable to obtain a new sub-license to
produce Pabst Blue Ribbon beer after November 7, 2003, these new local brands
would be expected to become the main product lines and the major source of
revenues for High Worth JV and Zao Yang High Worth Brewery after the expiration
of the Pabst sub-license on November 7, 2003. However, pursuant to the joint
venture agreement of Noble Brewery, the Company will continue to manage the
daily operation of Noble Brewery until the expiration of the joint venture on
June 10, 2013. It is expected that Noble Brewery will continue to produce and
sell Pabst Blue Ribbon beer after November 7, 2003.

2. BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES

BASIS OF PRESENTATION - The unaudited consolidated financial statements have
been prepared in accordance with accounting principles generally accepted in the
United States of America. The unaudited consolidated financial statements
include the results of operations of Zhaoqing Brewery, the Marketing Company and
Zao Yang High Worth Brewery on a consolidated basis and Noble Brewery under the
equity method of accounting for investments. Commencing April 1, 2001, the
operations of Jilin Lianli Brewery have been excluded from the Company's
consolidated financial statements. The unaudited consolidated financial
statements include the Marketing Company, as the Company has effective control
of the Marketing Company through its board of directors.

COMMENTS - The accompanying consolidated financial statements are unaudited, but
in the opinion of the management of the Company, contain all adjustments, which
include normal recurring adjustments, necessary to present fairly the Company's

11

CBR BREWING COMPANY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)(CONTINUED)
THREE MONTHS AND NINE MONTHS ENDED SEPTEMBER 30, 2002 AND 2001

2. BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES (continued)

financial position at September 30, 2002, its results of operations for the
three months and nine months ended September 30, 2002 and 2001, and its cash
flows for the nine months ended September 30, 2002 and 2001. The consolidated
balance sheet as of December 31, 2001 is derived from the Company's audited
financial statements.

Certain information and footnote disclosures normally included in financial
statements that have been prepared in accordance with accounting principles
generally accepted in the United State of America have been condensed or omitted
pursuant to the rules and regulations of the Securities and Exchange Commission,
although management of the Company believes that the disclosures contained in
these financial statements are adequate to make the information presented herein
not misleading. These unaudited interim consolidated financial statements
should be read in conjunction with the audited consolidated financial statements
included in the Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 2001, as filed with the Securities and Exchange Commission. A
summary of the Company's significant accounting policies is included in the
Company's Annual Report on Form 10-K for the fiscal year ended December 31,
2001.

The results of operations for the three months and nine months ended September
30, 2002 are not necessary indicative of the results of operations to be
expected for the full fiscal year ending December 31, 2002.

GOING CONCERN - The accompanying unaudited consolidated financial statements
have been prepared assuming that the Company will continue as a going concern,
which contemplates the realization of assets and the satisfaction of liabilities
in the normal course of business. The carrying amounts of assets and
liabilities presented in the accompanying unaudited consolidated financial
statements do not purport to represent the realizable or settlement values. The
Company has suffered recurring operating losses and had a working capital
deficit at December 31, 2001 and September 30, 2002. The Company's independent
certified public accountants, in their independent auditors' report on the
consolidated financial statements as of and for the year ended December 31,
2001, have expressed substantial doubt about the Company's ability to continue
as a going concern.

During 2001, the Company experienced decreased sales and a net loss for the
second successive year, reduced cash flows, diminished working capital, and
intense competition. These pressures continued during the three months and nine
months ended September 30, 2002, and are expected to continue for the remainder
of 2002 and into 2003, resulting in continuing net losses. The Company has
implemented an overhaul of its operations and marketing programs through the
efforts of the management committee. With the pooling of the resources of
Zhaoqing Brewery, Noble Brewery and the Marketing Company, the Company
implemented a large scale restructuring plan in 2001 in which almost one-third
of the work force was eliminated. Although effective control of the Company
changed on January 22, 2002 and a new management team was appointed to operate
the Company in 2002, the Company anticipates that the consolidation plan will
continue. However, there can be no assurances that the Company will be able
to re-establish sales volume growth and return to profitability in the near
term. Should the Company not return to profitability and the operating losses
continue into the near future, the Company may consider more severe
restructuring alternatives.

The Company anticipates that its operating cash flow, combined with cash on
hand, bank lines of credit, and other external credit sources, and the credit
facilities provided by affiliates or related parties, are adequate to satisfy
the Company's working capital requirements in the near term. However, due to
declining sales and diminishing working capital resources during 2002, the
Company has revised its capital expenditures program. Approximately 25% of the
2002 annual repair and maintenance budget scheduled for Zhaoqing Brewery and
Noble Brewery has been deferred until 2003. If the foregoing assumptions prove
to be inaccurate, the Company's cash flow may be adversely affected, which would
negatively impact the ability of the Company to conduct operations at current
levels and continue as a going concern.

12

CBR BREWING COMPANY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)(CONTINUED)
THREE MONTHS AND NINE MONTHS ENDED SEPTEMBER 30, 2002 AND 2001

2. BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES (continued)

USE OF ESTIMATES - The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities,
disclosure of contingent assets and liabilities at the date of the financial
statements, and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.

FOREIGN CURRENCY TRANSLATION - The financial records and the statutory financial
statements of the Company's subsidiaries and associated company in the PRC are
maintained in Renminbi, the functional currency and the currency of the PRC. In
preparing the financial statements, all foreign currency transactions are
translated into Renminbi using the applicable rates of exchange for the
respective periods. Monetary assets and liabilities denominated in foreign
currencies have been translated into Renminbi using the rate of exchange
prevailing at the balance sheet date. Foreign currency exchange gains or losses
are included in the unaudited consolidated statements of operations.

The Company's share capital is denominated in United States dollars ("US$") and
for reporting purposes, the US$ share capital amounts have been translated into
Renminbi ("RMB") at the applicable rates prevailing on the transaction dates.

Translation of amounts from RMB into US$ is for the convenience of the reader
only and has been made at US$1.00 = RMB8.30. No representation is made that the
Renminbi amounts could have been, or could be, converted into United States
dollars at that rate or at any other rate.

COMPREHENSIVE INCOME - The Company reports comprehensive income in accordance
with Statement of Financial Accounting Standards ("SFAS") No. 130, "Reporting
Comprehensive Income". Comprehensive income is defined to include all changes
in equity during a period from non-owner sources. Comprehensive income (loss)
equaled the net loss for the three months and nine months ended September 30,
2002 and 2001.

NET INCOME (LOSS) PER COMMON SHARE ("EPS") - Basic EPS excludes the dilutive
effects of stock options, warrants and convertible securities, if any, and is
computed by dividing net income (loss) available to common stockholders by the
weighted average number of common shares outstanding during the period. Diluted
EPS reflects the potential dilution that would occur if securities or other
contracts to issue common stock, such as convertible preferred stock, warrants
to purchase common stock and common stock options, were exercised or converted
into common stock.

At September 30, 2002, potentially dilutive securities representing 200,000
shares of common stock were outstanding, consisting of stock options to purchase
60,000 shares exercisable at $3.87 per share and 140,000 shares exercisable at
$0.72 per share. At September 30, 2001, potentially dilutive securities
representing 580,000 shares of common stock were outstanding, consisting of
stock options to purchase 220,000 shares at prices ranging from $3.87 to $4.26
per share, and 360,000 shares at prices ranging from $0.72 to $0.79 per share.
For the three months and nine months ended September 30, 2002 and 2001, common
shares issuable upon exercise of outstanding stock options were excluded from
the calculation of diluted EPS since the exercise prices exceeded the average
fair market value of the common stock for all periods presented, and thus would
have been anti-dilutive. Accordingly, basic and diluted EPS are the same for
all periods presented.

NEW ACCOUNTING PRONOUNCEMENTS - In June 2001, the Financial Accounting Standards
Board ("FASB") issued Statement of Financial Accounting Standards No. 142,
"Goodwill and Other Intangible Assets" ("SFAS No. 142"), which is effective
January 1, 2002. SFAS No. 142 requires, among other things, the discontinuance
of goodwill amortization. In addition, SFAS No. 142 includes provisions for the
reclassification of certain existing recognized intangibles as goodwill,
reassessment of the useful lives of the existing recognized intangibles,

13

CBR BREWING COMPANY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)(CONTINUED)
THREE MONTHS AND NINE MONTHS ENDED SEPTEMBER 30, 2002 AND 2001

2. BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES (continued)

reclassification of certain intangibles out of previously reported goodwill and
the identification of reporting units for purposes of assessing potential future
impairments of goodwill. SFAS No. 142 also requires the Company to complete a
transitional goodwill impairment test six months from the date of adoption. The
adoption of SFAS No. 142 did not have a significant impact on the Company's
financial statements.

In August 2001, the FASB issued SFAS No. 143, "Accounting for Asset Retirement
Obligations" ("SFAS No. 143"). SFAS No. 143 addresses the diverse accounting
practices for obligations associated with the retirement of tangible long-lived
assets and the associated asset retirement costs. The Company will be required
to adopt SFAS No. 143 effective January 1, 2003. The Company is reviewing SFAS
No. 143 to determine what effect, if any, its adoption will have on the
Company's financial statements.

In August 2001, the FASB issued SFAS No. 144, "Accounting for the Impairment or
Disposal of Long-Lived Assets" ("SFAS No. 144"), which is effective January 1,
2002. SFAS No. 144 supersedes SFAS No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lives Assets to Be Disposed Of", and a portion of
APB Opinion No. 30, "Reporting the Results of Operations". SFAS No. 144
provides a single accounting model for long-lived assets to be disposed of and
significantly changes the criteria that would have to be met to classify an
asset as held-for-sale. Classification as held-for-sale is an important
distinction since such assets are not depreciated and are stated at the lower of
fair value or the carrying amount. SFAS No. 144 also requires expected future
operating losses from discontinued operations to be displayed in the period(s)
in which the losses are incurred, rather than as of the measurement date as
presently required. The adoption of SFAS No. 144 did not have a significant
impact on the Company's financial statements.

In July 2002, the FASB issued SFAS No. 146, "Accounting for Costs Associated
with Exit or Disposal Activities," which requires companies to recognize costs
associated with exit or disposal activities when they are incurred rather than
at the date of a commitment to an exit or disposal plan. Such costs covered by
the standard include lease termination costs and certain employee severance
costs that are associated with a restructuring, discontinued operation, plant
closing, or other exit or disposal activity. SFAS No. 146 replaces the previous
accounting guidance provided by the Emerging Issues Task Force Issue No. 94-3,
"Liability Recognition for Certain Employee Termination Benefits and Other Costs
to Exit an Activity (including Certain Costs Incurred in a Restructuring)." SFAS
No. 146 is to be applied prospectively to exit or disposal activities initiated
after December 31, 2002. The Company does not anticipate that the adoption of
SFAS No. 146 will have a significant impact on its financial statements.

14

CBR BREWING COMPANY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)(CONTINUED)
THREE MONTHS AND NINE MONTHS ENDED SEPTEMBER 30, 2002 AND 2001

3. ACCOUNTS RECEIVABLE

The balance of accounts receivable is presented in the accompanying consolidated
financial statements net of the allowance for doubtful accounts. The Company
provided an allowance for doubtful accounts for the three months and nine months
ended September 30, 2002 of RMB 7,719,117 and RMB 21,000,000, respectively, as
compared to RMB 3,300,000 and RMB 18,900,000 for the three months and nine
months ended September 30, 2001, respectively. Changes in the allowance for
doubtful accounts for the three months and nine months ended September 30, 2002
and 2001 were as follow:

2002 2001
------------------------- -------------------------
RMB USD RMB USD
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
------------ ----------- ------------ -----------

Balance as at January 1, 104,632,067 12,606,273 81,652,544 9,837,656
Provision for doubtful
accounts for the three
months ended March 31, 6,500,000 783,133 6,300,000 759,036
------------ ----------- ------------ -----------
Balance as at March 31, 111,132,067 13,389,406 87,952,544 10,596,692
Provision for doubtful
accounts for the three
months ended June 30, 6,780,883 816,974 9,300,000 1,120,482

Accounts written off during
the three months ended
June 30, (32,052,974) (3,861,804) - -
------------ ----------- ------------ -----------
Balance as at June 30, 85,859,976 10,344,576 97,252,544 11,717,174
Provision for doubtful
accounts for the three
months ended September 30, 7,719,117 930,014 3,300,000 397,590
------------ ----------- ------------ -----------
Balance as at September 30, 93,579,093 11,274,590 100,552,544 12,114,764
============ =========== ============ ===========

4. INVENTORIES

Inventories consisted of the following at September 30, 2002 and December 31,
2001:

September 30, 2002 December 31, 2001
----------------------- ------------------------
RMB USD RMB USD
---------- ----------- ----------- -----------
(Unaudited) (Unaudited)

Raw materials 31,417,289 3,785,216 24,120,013 2,906,026
Work in progress 4,737,950 570,837 5,802,324 699,075
Finished goods 23,704,467 2,855,960 23,391,645 2,818,270
---------- ----------- ----------- -----------
59,859,706 7,212,013 53,313,982 6,423,371
========== =========== =========== ===========

5. RELATED PARTIES TRANSACTIONS AND ARRANGEMENTS

(a) Sales of raw materials

The Company sold raw materials and beer products of RMB 6,530,790 and RMB
3,268,549 to Noble Brewery during the three months ended September 30, 2002 and
2001, respectively. The Company sold raw materials and beer products of RMB
19,504,504 and RMB 19,758,250 to Noble Brewery during the nine months ended
September 30, 2002 and 2001, respectively. These transactions were carried out
at cost between the parties.

15

CBR BREWING COMPANY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)(CONTINUED)
THREE MONTHS AND NINE MONTHS ENDED SEPTEMBER 30, 2002 AND 2001

5. RELATED PARTIES TRANSACTIONS AND ARRANGEMENTS (continued)

(b) Purchases of beer products

During the three months ended September 30, 2002 and 2001, the Group purchased
beer products for resale from Noble Brewery amounting to RMB 58,667,365 and RMB
89,360,090, respectively, and the Group purchased beer products from Sichuan
High Worth Brewery for resale amounting to RMB nil and RMB nil, respectively.

During the nine months ended September 30, 2002 and 2001, the Group purchased
beer products for resale from Noble Brewery amounting to RMB 221,247,110 and RMB
264,846,954, respectively, and the Group purchased beer products from Sichuan
High Worth Brewery for resale amounting to RMB nil and RMB 10,482,557,
respectively. These transactions were carried out on agreed terms between the
parties.

During the nine months ended September 30, 2002 and 2001, the Group purchased
RMB 61,288,738 and RMB 70,361,907 of beer products from Noble Brewery pursuant
to the management arrangement of re-allocating the total production volume at a
1 to 2 ratio among Zhaoqing Brewery and Noble Brewery (see "NOBLE CHINA INC." at
Note 1). This amount represents the direct variable cost of producing these
beer products.

(c) Royalty fee

For the three months ended September 30, 2002 and 2001, a royalty fee of RMB
695,553 and RMB 1,104,665, respectively, was payable to Guangdong Blue Ribbon
for the right to use the Pabst trademarks in the PRC. For the nine months ended
September 30, 2002 and 2001, a royalty fee of RMB 2,523,108 and RMB 3,013,126,
respectively, was payable to Guangdong Blue Ribbon for the right to use the
Pabst trademarks in the PRC.

(d) Amounts due from related companies

The amounts due from related companies primarily represent receivable balances
from Guangdong Blue Ribbon and its group of companies arised from normal
inter-company business transactions. The amounts are unsecured, interest-free
and repayable on demand.

(e) Amounts due to related companies

As of September 30, 2002 and December 31, 2001, the amounts due to related
companies consisted of payable balances to Guangdong Blue Ribbon and its group
of companies of RMB 534,000 and RMB 2,400,000, respectively. The balances in
2001 with group companies of Guangdong Blue Ribbon arose from the purchases of
raw materials. The balances in 2002 with Guangdong Blue Ribbon consist
primarily of dividends payable and royalty fees.

The balances are unsecured, interest-free and repayable on demand.

(f) Loans to related companies

During the three months ended March 31, 2002, the Company loaned RMB 5,500,000
to Zao Yang High Worth Brewery. The loan was unsecured, with interest at 3.6%
per annum and was repayable on December 31, 2002. During the three months ended
March 31, 2002, Zao Yang High Worth Brewery advanced RMB 5,500,000 to Guangdong
Blue Ribbon. The advance to Guangdong Blue Ribbon was unsecured, with no
agreed-upon interest and no fixed date of repayment. During the three months
ended June 30, 2002, both of these loans were repaid in full.

For information with respect to matters relating to Noble China Inc., see "NOBLE
CHINA INC." at Note 1.

16

CBR BREWING COMPANY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)(CONTINUED)
THREE MONTHS AND NINE MONTHS ENDED SEPTEMBER 30, 2002 AND 2001

6. INTEREST IN AN ASSOCIATED COMPANY

The unlisted investment represents the Company's 40% equity interest in Noble
Brewery held by a 60% owned subsidiary. The condensed unaudited statements of
operations of Noble Brewery for the three months and nine months ended September
30, 2002 and 2001 are presented below.

Three Months Ended Nine Months Ended Three Months Ended Nine Months Ended
September 30,2002 September 30,2002 September 30,2001 September 30, 2001
------------ ----------- ------------- ------------ ------------------- ------------------
RMB USD RMB USD RMB RMB
------------ ----------- ------------- ------------ ------------------- ------------------

Net sales 69,731,612 8,401,399 221,247,110 26,656,278 83,521,230 248,663,629
============ =========== ============= ============ =================== ==================
Net income (loss) (46,764,046) (5,634,222) (124,404,942) (14,988,547) 7,440,993 1,494,126
============ =========== ============= ============ =================== ==================
The Company's
share of net
income (loss)
after adjustment
of unrealized
intercompany
profit and other
intercompany
adjustments (16,375,619) (1,972,966) (43,931,977) (5,293,009) (1,253,603) 6,812,639
============ =========== ============= ============ =================== ==================

The following is summarized balance sheet information of Noble Brewery:

September 30,2002 December 31, 2001
------------------------- ------------------------
RMB USD RMB USD
------------ ----------- ------------ ----------

(Unaudited) (Unaudited)

Current assets 212,238,053 25,570,850 261,423,849 31,496,850
Property, plant and equipment 237,848,128 28,656,401 360,162,062 43,393,020
Restricted bank deposits 35,700,000 4,301,205 35,700,000 4,301,205
------------ ----------- ------------ ----------
Total assets 485,786,181 58,528,456 657,285,911 79,191,075
============ =========== ============ ==========

Current liabilities 136,035,465 16,389,816 107,619,213 12,966,172
Deferred income taxes 13,218,000 1,592,530 13,218,000 1,592,530
Equity 336,532,716 40,546,110 536,448,698 64,632,373
------------ ----------- ------------ ----------
Total liabilities and equity 485,786,181 58,528,456 657,285,911 79,191,075
============ =========== ============ ==========

During the three months ended June 30, 2002, as a result of reduced sales and
continuing operating losses, Noble Brewery conducted an evaluation of the
carrying value of its property, plant and equipment, as well as the related
estimated future cash flows, which included the assumption that Noble Brewery
would obtain the renewal of the Pabst Blue Ribbon sub-license from its major
shareholder prior to the expiration of the existing sub-license on November 7,
2003. As a result of this evaluation, Noble Brewery recorded a provision for
impairment of plant, machinery and equipment of RMB 65,000,000 for the three
months ended June 30, 2002. Due to a further decrease in sales for the three
months ended September 30, 2002, Noble Brewery re-evaluated the carrying value
of its property plant and equipment, as well as the related estimated cash
flows. As a result of this re-evaluation, Noble Brewery recorded a further
impairment charge of RMB 36,500,000 for the three months ended September 30,
2002, resulting in a total impairment charge of RMB 101,500,000 for the nine
months ended September 30, 2002. However, Noble China Inc., the majority
shareholder of Noble Brewery, is experiencing certain financial difficulties and
management uncertainty (see Note 1).

The Company is currently unable to predict the effect of Noble China Inc.'s
financial difficulties and management uncertainty on Noble Brewery, including
Noble China Inc.'s ability to grant a sub-license to Noble Brewery to produce
Pabst Blue Ribbon beer. If Noble China Inc. is unable to renew the Pabst
sub-license with Noble Brewery, or if other related estimates and assumptions
change adversely in the future, Noble Brewery may be required to record an
additional impairment charge.

17

CBR BREWING COMPANY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)(CONTINUED)
THREE MONTHS AND NINE MONTHS ENDED SEPTEMBER 30, 2002 AND 2001

6. INTEREST IN AN ASSOCIATED COMPANY (continued)

On April 3, 2002, Noble Brewery was served with an preservation order from the
High Court of Shandong Province freezing a portion of its bank accounts with
aggregate balances of approximately RMB 35,700,000, in connection with
litigation between Noble China Inc., Shandong Noble Brewery Ltd. and China Coast
Property Development Ltd, with respect to Noble China Inc.'s 1994 investment in
Shandong Shouguang Brewery Co. Ltd. China Coast Property Development Ltd. is
asserting a total claim against Noble China Inc. of approximately RMB
53,100,000. Noble China Inc., through its wholly-owned subsidiary, Linchpin,
owns a 60% interest in Noble Brewery.

The court order specified that a total of RMB 53,100,000 was to be retained by
Noble Brewery pending resolution of the litigation. Accordingly, in addition to
the RMB 35,700,000 of funds frozen, Noble Brewery will also be obligated to
withhold potential dividend distributions or equity interests due to Linchpin
Holdings Limited of RMB 17,400,000. Noble Brewery has engaged legal counsel in
the PRC to file a challenge to the court order, but there can be no assurances
that this effort will be successful.

As a consequence of the preservation order, the remaining cash not affected by
such court order has been transferred either to High Worth JV or the Marketing
Company in trust and is being held on behalf of Noble Brewery for the purpose of
funding the operations of Noble Brewery. As of September 30, 2002, High Worth
JV and the Marketing Company hold RMB nil and RMB 29,900,000, respectively, for
the account of Noble Brewery. The amount is included in cash and amount due to
an associated company in the accompanying unaudited consolidated balance sheet
as of September 30, 2002.

Management of Noble Brewery believes that Noble Brewery's operations will not be
impaired as a result of the court order freezing a portion of its bank accounts,
and that Noble Brewery has adequate working capital resources to fund its
operating requirements in the near term.

In May 2002, Noble Brewery declared a dividend distribution of RMB 75,511,040,
of which RMB 30,204,416 has been paid to High Worth JV, while the dividend
payable to Linchpin amounting to RMB 45,306,624 can only be remitted to Linchpin
when the preservation order is released and approval from the Foreign Exchange
Bureau is obtained.

On July 19, 2002, Noble China Inc. announced that the Shandong Court ruled
against it and ordered it to pay the amount of claims in the sum of US$3,999,988
and RMB 20,000,000 plus legal costs of RMB 541,210, and interest from June 21,
2001 within one month of the judgment. Noble China Inc. announced that it would
appeal the Shandong Court's decision to the Supreme Court of the PRC (see Note
1).

On September 29, 2002, the Shandong Court issued a new preservation order to
those banks where Noble Brewery kept its previously frozen funds, requesting
them to extend the period of preservation for an additional six months until
March 3, 2003.

7. IMPAIRMENT OF PROPERTY, PLANT AND EQUIPMENT AND WRITE-OFF OF INVESTMENT
IN SUBSIDIARY

During December 2000, the Company decided to terminate the production and
operation of Jilin Lianli Brewery, as a result of which the Company recorded a
provision for impairment of plant, machinery and equipment of RMB 6,000,000 at
December 31, 2000. During the three months ended March 31, 2001, the Company
recorded a further provision for impairment of plant, machinery and equipment at
Jilin Lianli Brewery of RMB 2,750,000. During the three months ended June 30,
2001, the Company wrote off its remaining investment in Jilin Lianli Brewery of
RMB 1,224,109. As of December 31, 2001, the Company has written off a total of
RMB 13,788,500 with respect to its investment in this subsidiary.

18

CBR BREWING COMPANY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)(CONTINUED)
THREE MONTHS AND NINE MONTHS ENDED SEPTEMBER 30, 2002 AND 2001

7. IMPAIRMENT OF PROPERTY, PLANT AND EQUIPMENT AND WRITE-OFF OF INVESTMENT
IN SUBSIDIARY (continued)

During the three months ended June 30, 2002, as a result of the uncertainty with
respect to the renewal of the Pabst Blue Ribbon sub-license and continuing
negotiations between the Company's major shareholder and the major Debenture
holders of Noble China Inc. regarding the future of Noble China Inc., combined
with reduced sales, continuing operating losses and various legal and business
issues, the Company conducted an evaluation of the carrying value of its
property, plant and equipment, as well as the related expected future cash
flows. As a result of this evaluation, the Company recorded a provision for
impairment of RMB 40,000,000 with respect to the property, plant and equipment
of Zhaoqing Brewery. During the three months ended September 30, 2002, due to a
further decrease in sales, the Company re-evaluated the carrying value of its
property, plant and equipment, as well as the related estimated cash flows. As a
result of this re-evaluation, the Company recorded an impairment charge of RMB
29,000,000 with respect to Zao Yang High Worth Brewery. As a result of these
evaluations, the Company recorded total impairment charges of RMB 29,000,000 and
RMB 69,000,000 for the three months and nine months ended September 30, 2002,
respectively. These impairment charges were based on certain assumptions
regarding the Company's future cash flows and other factors used to determine
the fair value of its property, plant and equipment, including the assumption
that the Company may not be granted a renewal of the sub-license to produce
Pabst Blue Ribbon beer after the existing sub-license expires on November 7,
2003. If these estimates or the related assumptions change adversely in the
future, the Company may be required to record an additional impairment charge.
In addition, during the three months and nine months ended September 2002, Noble
Brewery also recorded a provision for impairment of plant, machinery and
equipment of RMB 36,500,000 and RMB 101,500,000, respectively, as a result of
its reassessment of the fair value of its property, plant and equipment and the
related expected cash flow (see Note 5).

8. AMOUNT DUE TO AN ASSOCIATED COMPANY

The amount due to an associated company represents amounts payable to Noble
Brewery. In 2001, these obligations resulted from the sale of beer products by
Noble Brewery to the Marketing Company, as well as from the sale of raw
materials and other beer products to Zhaoqing Brewery by Noble Brewery and other
recurring intercompany transactions. Subsequent to the Preservation Order (see
Note 6), Noble Brewery transferred the remaining cash not affected by the court
order either to High Worth JV or the Marketing Company in trust. This cash is
being held on behalf of Noble Brewery for the purpose of funding the operations
of Noble Brewery. As of September 30, 2002, High Worth JV and the Marketing
Company hold RMB nil and RMB 29,900,000, respectively, for the account of Noble
Brewery. As of September 30, 2002 and December 31, 2001, the total amount due
to an associated company was RMB 260,933,300 and RMB 210,805,218, respectively,
which was unsecured, interest-free and repayable on demand.

9. ADVANCE FROM A RELATED COMPANY

During the three months and nine months ended September 30, 2002, Zao Yang High
Worth Brewery received an advance of RMB nil and RMB 11,000,000, respectively,
from its local partner, Zao Yang Brewery, which is the 45% shareholder of Zao
Yang High Worth Brewery. The advance due to Zao Yang Brewery was unsecured,
interest-free and had no fixed term of repayment. Pending the completion and
official approval of an agreement to increase the registered share capital by
approximately RMB 24,445,000, which will be allocated in proportion to the
existing shareholder ratio of 55% to 45% between High Worth JV and Zao Yang
Brewery, respectively, the advance from Zao Yang Brewery will be converted into
share capital of Zao Yang High Worth Brewery. High Worth JV will contribute its
share of additional capital through the offsetting of the amounts due from Zao
Yang High Worth Brewery. This advance has been utilized to fund the working
capital requirements of Zao Yang High Worth Brewery.

19

CBR BREWING COMPANY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)(CONTINUED)
THREE MONTHS AND NINE MONTHS ENDED SEPTEMBER 30, 2002 AND 2001

10. DIVIDEND TO MINORITY INTEREST AND MINORITY INTERESTS

During the nine months ended September 30, 2002, the Board of Directors of High
Worth JV declared the 7th to 10th dividend distributions, entitling Holdings and
Guangdong Blue Ribbon to a total of approximately RMB 27,830,199 and RMB
18,553,467, respectively. The minority interest's 40% portion of the dividend
is recorded as a liability at the declaration date and is included in amounts
due to related companies in the accompanying consolidated balance sheets.
During the nine months ended September 30, 2002, dividends of RMB 27,830,199 and
RMB 16,435,000 were distributed to Holdings and Guangdong Blue Ribbon,
respectively.

As a result of the substantial operating losses incurred by the Company during
the year ended December 31, 2001 and the nine months ended September 30, 2002,
and the cumulative effect of paying dividends based on distributable earnings
calculated in accordance with PRC accounting standards, which were higher than
the distributable earnings determined under United States accounting standards,
the minority interests at September 30, 2002 reflected an aggregate debit
balance of RMB 87,233,116. Since the minority interest parties have no legal
obligation to fund these obligations to the Company, the debit balance of RMB
87,233,116 was charged to operations during the nine months ended September 30,
2002. The Company expects to continue to charge to operations any future debit
balances of the minority interest parties.

In addition, pursuant to the relevant laws and regulations of Sino-foreign joint
venture enterprises, when High Worth JV distributes its profits, it is required
to make appropriation to reserve funds and enterprise development funds at a
percentage as determined by the board of directors in accordance with the PRC
accounting standards and regulations. During the three months and nine months
ended September 30, 2002, the Company made an appropriation of RMB nil and RMB
2,626,871 to its general reserve and enterprise development funds.

11. RESTRUCTURING COSTS

During May 2001, the Company implemented a restructuring program that eliminated
the position of a total of 538 employees, of which 313 were from Zhaoqing
Brewery, 177 were from Noble Brewery and 48 were from the Marketing Company.
Restructuring and termination payments to these employees totaled RMB 20,396,494
by Zhaoqing Brewery, RMB 8,729,830 by Noble Brewery and RMB 1,912,742 by the
Marketing Company for the nine months ended September 30, 2001. The Company
recorded aggregate restructuring costs of RMB 22,309,236 for the nine months
ended September 30, 2001, of which RMB 988,054 of such restructuring costs were
recorded during the three months ended September 30, 2001.

12. CONTINGENCIES

For information with respect to licensing and legal matters related to Noble
China Inc., see "NOBLE CHINA INC." at Notes 1 and 6, respectively.

20

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS

Cautionary Statement Pursuant to Safe Harbor Provisions of the Private
Securities Litigation Reform Act of 1995:

This Quarterly Report on Form 10-Q for the quarterly period ended September
30, 2002 contains "forward-looking" statements within the meaning of Section 27A
of the Securities Act of 1933, as amended, including statements that include the
words "believes", "expects", "anticipates", or similar expressions. These
forward-looking statements include, among others, statements concerning the
Company's expectations regarding sales trends, gross margin trends, operating
costs, the availability of funds to finance capital expenditures and operations,
facility expansion plans, competition, and other statements of expectations,
beliefs, future plans and strategies, anticipated events or trends, and similar
expressions concerning matters that are not historical facts. The
forward-looking statements in this Quarterly Report on Form 10-Q for the
quarterly period ended September 30, 2002 involve known and unknown risks,
uncertainties and other factors that could the cause actual results, performance
or achievements of the Company to differ materially from those expressed in or
implied by the forward-looking statements contained herein.

Summary of Business Operations and Corporate Structure:

The Company produces principally Pabst Blue Ribbon beer for distribution
throughout China. In general, the beer market in China is experiencing a steady
overall growth rate, although the growth in the Company's beer sales has been
hindered by the general softening in demand for premium beers and the intense
competitive environment in the Chinese beer market.

The Company's brewing facilities and primary operating entities are as
follows:

ZHAOQING BREWERY: The original facilities of Zhaoqing Brewery were
constructed between 1978 and 1980 with annual production capacity based on old
brewing technology of 50,000 metric tons or 425,000 barrels of beer. With the
implementation of the new brewing technology and the purchase of additional
equipment, Zhaoqing Brewery reached an annual production capacity of 100,000
metric tons or 850,000 barrels by the end of 1995. During March 1995, Zhaoqing
Brewery discontinued production of all domestic brands and commenced exclusive
production of Pabst Blue Ribbon beer on a full-scale basis. However, beer that
does not meet Pabst Blue Ribbon quality standards is generally packaged and
distributed as local brand beer. In anticipation of the possible non-renewal of
Zhaoqing Brewery's sub-license to produce Pabst Blue Ribbon beer, Zhaoqing
Brewery has commenced the production of various newly developed or modified
local brand beers in order to meet the needs of the lower to medium market
segment.

NOBLE BREWERY: The original facilities of Noble Brewery were constructed
between 1988 and 1990 with annual production capacity of approximately 80,000
metric tons or 680,000 barrels of beer. During July 1994, a second brewing
facility was completed, which increased annual production capacity by an
additional 120,000 metric tons or 1,020,000 barrels of beer. The second brewing
facility commenced full-scale production during late 1994. Noble Brewery has
produced Pabst Blue beer exclusively since it commenced operations. In 2002,
Noble Brewery also commenced production of various newly developed local brand
beers in order to meet the needs of the lower to medium market segment.

ZAO YANG HIGH WORTH BREWERY: The original facilities of Zao Yang High
Worth Brewery were constructed between 1980 and 1985 with annual production
capacity based on old brewing technology of approximately 40,000 metric tons or
340,000 barrels of beer. Zao Yang High Worth Brewery commenced the production
of Pabst Blue Ribbon beer in June 1998, and the Marketing Company began
purchasing Zao Yang High Worth Brewery's production of Pabst Blue Ribbon beer
for distribution. In addition, Zao Yang High Worth Brewery also produces
domestic brand beer under the brand name "Di Huang Quan" and sells directly to
distributors in nearby regions.

21

MARKETING COMPANY: During February 1995, the Marketing Company was
established to conduct the distribution, marketing and promotion throughout
China of the Pabst Blue Ribbon beer produced by the Company's breweries. The
Company owns a 42% net interest in the Marketing Company. The consolidated
financial statements include the results of operations of the Marketing Company
on a consolidated basis, as the Company has effective control of the board of
directors of the Marketing Company.

The Marketing Company regulated the production of Pabst Blue Ribbon beer by
the Company's Pabst Blue Ribbon brewing facilities in 2002 and 2001 in
accordance with their respective production capacities in order to balance
warehouse inventory levels and accommodate projected market demand.

The Company conducts a substantial portion of its purchases through related
parties, and has additional significant continuing transactions with such
parties.

Overview:

The year ended December 31, 2001 was another difficult and disappointing
year for the Company, with decreased sales, increased costs, a net loss for the
second successive year, reduced cash flows, diminished working capital, and
intense competition. These pressures continued during the nine months ended
September 30, 2002, and the Company expects these pressures to further continue
over the near-term. As a result of the strong competition from foreign premium
beer and the aggressive pricing strategies of some major local breweries,
management anticipates that the market demand for high priced foreign premium
labels will still be stagnant in the near-term as consumers continue to shift to
lower priced beers but with improved quality. The competition among major
Chinese breweries to maintain market share is also expected to place continuing
pressure on the Company's operating results during the near-term.

The Company has implemented an overhaul of its operations and marketing
programs through the efforts of the management committee. With the pooling of
the resources of Zhaoqing Brewery, Noble Brewery and the Marketing Company, the
Company implemented a large scale restructuring plan in 2001 in which almost
one-third of the work force was eliminated. Although effective control of the
Company changed on January 22, 2002 and a new management team has been appointed
to operate the Company in 2002, the Company anticipates that the consolidation
plan will continue. In addition, the Company will continue to broaden its
product line through the introduction of new local brand beers and to
consolidate its distribution network.

With the pooling of the resources of Zhaoqing Brewery, Noble Brewery and
the Marketing Company, as well as the continuing financial support from its
principal shareholder and affiliates, the Company believes it has the requisite
operating and financial resources to continue its operations in the near term.
In addition, the Company has implemented a series of revised promotional
program, including the reducing the selling price of some of its beer products,
in order to stimulate the regional distributors to raise their sales. However,
there can be no assurances that the Company will be able to re-establish sales
volume growth and to return to profitability in the near term. Should the
Company not return to profitability and the operating losses continue in the
near future, the Company may consider more severe restructuring alternatives.

The accompanying unaudited consolidated financial statements have been
prepared assuming that the Company will continue as a going concern, which
contemplates the realization of assets and the satisfaction of liabilities in
the normal course of business. The carrying amounts of assets and liabilities
presented in the accompanying unaudited consolidated financial statements do not
purport to represent the realizable or settlement values. The Company has
suffered recurring operating losses and had a working capital deficit at
December 31, 2001 and September 30, 2002. The Company's independent certified
public accountants, in their independent auditors' report on the consolidated
financial statements as of and for the year ended December 31, 2001, have
expressed substantial doubt about the Company's ability to continue as a going
concern.

The Company anticipates that its operating cash flow, combined with cash on
hand, bank lines of credit, and other external credit sources, and the credit
facilities provided by affiliates or related parties, are adequate to satisfy
the Company's working capital requirements for the near term. However, due to
declining sales and diminishing working capital resources, the Company has
revised its capital expenditures program. Approximately 25% of the 2002 annual
repair and maintenance budget scheduled for Zhaoqing Brewery and Noble Brewery
has been deferred until 2003. If the foregoing assumptions prove to be
inaccurate, the Company's cash flow may be adversely affected, which would
negatively impact the ability of the Company to conduct operations at current
levels and continue as a going concern.

22

During the three months ended June 30, 2002, as a result of the uncertainty
with respect to the renewal of the Pabst Blue Ribbon sub-license and continuing
negotiations between the Company's major shareholder and the major Debenture
holders of Noble China Inc. regarding the future of Noble China Inc., combined
with reduced sales, continuing operating losses and various legal and business
issues, the Company conducted an evaluation of the carrying value of its
property, plant and equipment, as well as the related expected future cash
flows. As a result of this evaluation, the Company recorded a provision for
impairment of RMB 40,000,000 with respect to the property, plant and equipment
of Zhaoqing Brewery. During the three months ended September 30, 2002, due to a
further decrease in sales, the Company re-evaluated the carrying value of its
property, plant and equipment, as well as the related estimated cash flows. As a
result of this re-evaluation, the Company recorded an impairment charge of RMB
29,000,000 with respect to Zao Yang High Worth Brewery. As a result of these
evaluations, the Company recorded total impairment charges of RMB 29,000,000 and
RMB 69,000,000 for the three months and nine months ended September 30, 2002,
respectively. These impairment charges were based on certain assumptions
regarding the Company's future cash flows and other factors used to determine
the fair value of its property, plant and equipment, including the assumption
that the Company may not be granted a renewal of the sub-license to produce
Pabst Blue Ribbon beer after the existing sub-license expire on November 7,
2003. If these estimates or the related assumptions change adversely in the
future, the Company may be required to record an additional impairment charge.
In addition, during the three months and nine months ended September 2002, Noble
Brewery also recorded a provision for impairment of plant, machinery and
equipment of RMB 36,500,000 and RMB 101,500,000, respectively, as a result of
its reassessment of the fair value of its property, plant and equipment and the
related expected cash flow.

Licensing Arrangements and Relationship with Noble China Inc.:

Through a Sublicense Agreement dated May 6, 1994 between Pabst Zhaoqing,
the then subsidiary of Guangdong Blue Ribbon, and High Worth JV, High Worth JV
acquired a sub-license to utilize Pabst trademarks in conjunction with the
production and marketing of beer in China and other Asian countries except Hong
Kong, Macau, Japan and South Korea. The sub-license is subject to a prior
License Agreement between Pabst US and Pabst Zhaoqing, and a subsequent Assets
Transferring Agreement among Pabst Zhaoqing, Pabst US and Guangdong Blue Ribbon.
The License Agreement expires on November 7, 2003.

Noble China Inc. is the 60% shareholder of Noble Brewery. Noble China Inc.
has publicly reported that in May 1999 it entered into a license agreement with
Pabst Brewing Company granting it the right to utilize the Pabst Blue Ribbon
trademarks in connection with the production, promotion, distribution and sale
of beer in China for 30 years commencing in November 2003. In consideration for
the license agreement, Noble China Inc. reported that it had paid Pabst Brewing
Company US$5,000,000 for the right to use the Pabst Blue Ribbon trademarks and
agreed to pay royalties based on gross sales.

Management has met with representatives of Noble China Inc. in an attempt
to explore a renewal of the Pabst Blue Ribbon sub-license agreement. As of
September 30, 2002, the Company has not yet obtained a renewal of the Pabst Blue
Ribbon sub-license agreement. The inability of the Company to obtain a
sub-license from Noble China Inc. or to renew the Company's sub-license or enter
into some other form of strategic relationship under acceptable terms and
conditions to allow the Company to continue to produce and distribute Pabst Blue
Ribbon beer in China would have a material adverse effect on the Company's
future results of operations, financial position and cash flows.

During December 2000, the Company and Noble China Inc. signed a memorandum
pursuant to which a management committee was established to evaluate the
potential to coordinate and enhance the operations of Zhaoqing Brewery, Noble
Brewery and the Marketing Company. Effective January 1, 2001, the management,
marketing, production and operations of Zhaoqing Brewery, Noble Brewery and the
Marketing Company were pooled together under a newly-created management entity
named "Blue Ribbon Enterprises" to achieve improved coordination of human,
financial, production and marketing activities. Under this arrangement:

23

(a) Certain administrative expenses of the Marketing Company, Zhaoqing Brewery
and Noble Brewery, as well as the total production volume of Zhaoqing
Brewery and Noble Brewery and the related direct variable costs incurred
for beer production of the two breweries, were pooled and re-allocated
among Zhaoqing Brewery and Noble Brewery at a 1 to 2 ratio, respectively,
in proportion to each brewery's respective production capacities. In order
to maximize production efficiencies at the present reduced levels of sales
volume, Noble Brewery is currently producing all of the beer sold by both
Zhaoqing Brewery and Noble Brewery.

(b) Certain direct selling expenses and advertising expenses incurred by the
Marketing Company relating to the sale of beer products from the two
breweries are allocated among Zhaoqing Brewery and Noble Brewery at a 1 to
2 ratio, respectively, either through intercompany transfer pricing
adjustment or direct absorption.

The administrative, direct selling and advertising expenses of the
Marketing Company and the direct variable costs incurred for beer production of
the two breweries were allocated at cost. This pooled management structure is
expected to achieve greater efficiency and improved operating profitability.
However, Zhaoqing Brewery, Noble Brewery and the Marketing Company each remain
as legally distinct entities. The management committee is also responsible for
commencing a study to evaluate the formation of a new unified company.

The Company's controlling shareholder, Lan Wei, owns a 19.6% equity
interest in Noble China Inc., which it acquired in January 2002 as part of the
transaction in which it acquired a controlling interest in the Company. The
Company's prior controlling shareholder, Huaqiang, acquired this 19.6% equity
interest in Noble China Inc. during 2001.

Noble China Inc. has also recently publicly reported that it was
experiencing severe financial difficulties, was unable to meet its financial
commitments and is insolvent, and is considering various courses of action.

On July 19, 2002, Noble China Inc. announced that the Shandong Court ruled
against it and ordered it to pay claims of US$3,999,988 and RMB 20,000,000 plus
legal costs of RMB 541,210, and interest from June 21, 2001 within one month of
the judgment. The litigation was related to a claim by China Coastal Development
Ltd. Noble China Inc. further asserted that it would appeal the Shandong Court's
decision to the Supreme Court of the PRC.

On July 22, 2002, Noble China Inc. held its Annual and General Meeting of
Shareholders. A Special Meeting of Shareholders and a Meeting of Debenture
holders were also held on July 22, 2002 to seek approval for certain amendments
to the 9% Convertible Subordinated Debentures and to the Trust Indenture
governing the Debentures. Noble China Inc. has CN$30,000,000 of outstanding
Debentures. As a result of ongoing discussions between the major Debenture
holder and indirectly a major shareholder of Noble China Inc., the City of
Zhaoqing, regarding a possible restructuring of Noble China Inc., the amendments
to the Debentures and to the Trust Indenture were not presented for a vote at
the Special Meeting of Shareholders and at the Meeting of Debenture holders;
both such meetings were instead adjourned to times and places to be determined.
The Board of Directors of Noble China Inc. was re-elected and confirmed its
short-term assistance to facilitate the negotiations between the major
shareholder of Noble China Inc. and the major Debenture holder. The Directors
of Noble China Inc. indicated that if the major shareholder and major Debenture
holder could not reach a resolution on an appropriate restructuring plan that
the Board of Directors could support in the interest of all shareholders and
Debenture holders within 60 days, the Board of Directors would resign.

On September 3, 2002, Noble China Inc.'s report for the three months ended
June 30, 2002 disclosed that although the major shareholder and the major
Debenture holder were continuing their discussions, no meaningful process had
been noted and the Directors planned to resign on September 20, 2002.

24

On September 24, 2002, a press release by Noble China Inc. announced that
one of its three directors had resigned on September 20, 2002, and that the
remaining two directors intended to resign. On November 12, 2002, Noble China
Inc. held a meeting of shareholders to elect a new Board of Directors to consist
of three members; three candidates nominated by Lan Wei, the major shareholder
of the Company, were elected to the Board of Directors.

The Company is currently unable to predict the effect that this recent
developments may have on future operations, including any effect on the
Company's ability to obtain a sub-license to produce and distribute Pabst Blue
Ribbon beer in China effective from November 7, 2003, or the impact on Noble
Brewery, the Company's affiliate.

During the three months ended June 30, 2002, as a result of the uncertainty
with respect to the renewal of the Pabst Blue Ribbon sub-license and the
continuing negotiations between the Company's major shareholder and the major
Debenture holders of Noble China Inc. regarding the future of Noble China Inc.,
combined with reduced sales, continuing operating losses and various legal and
business issues, the Company conducted an evaluation of the carrying value of
its property, plant and equipment. As a result of this evaluation, the Company
recorded a provision for impairment of RMB 40,000,000 with respect to the
property, plant and equipment of Zhaoqing Brewery. During the three months ended
September 30, 2002, due to a further decrease in sales, the Company re-evaluated
the carrying value of its property, plant and equipment, as well as the related
estimated cash flows. As a result of this re-evaluation, the Company recorded an
impairment charge of RMB 29,000,000 with respect to Zao Yang High Worth Brewery.
As a result of these evaluations, the Company recorded total impairment charges
of RMB 29,000,000 and RMB 69,000,000 for the three months and nine months ended
September 30, 2002, respectively. These impairment charges were based on certain
assumptions regarding the Company's future cash flows and other factors used to
determine the fair value of its property, plant and equipment, including the
assumption that the Company may not be granted a renewal of the sub-license to
produce Pabst Blue Ribbon beer after the existing sub-license expires on
November 7, 2003. If these estimates or the related assumptions change adversely
in the future, the Company may be required to record an additional impairment
charge.

During 2002, the Company implemented a series of new sales programs to
launch various newly developed or modified local brand beers into the market,
including brands such as "Lanli", "Lancheng", "Lanshi", "Xile" and "Zhaopi".
Together with the local brand beer "Di Huang Quan" produced by Zao Yang High
Worth Brewery, the Company intends to increase its relative marketing efforts on
these new local brands. If the Company is unable to obtain a new sub-license to
produce Pabst Blue Ribbon beer after November 7, 2003, these new local brands
would be expected to become the main product lines and the major source of
revenues for High Worth JV and Zao Yang High Worth Brewery after the expiration
of the Pabst sub-license on November 7, 2003. However, pursuant to the joint
venture agreement of Noble Brewery, the Company will continue to manage the
daily operation of Noble Brewery until the expiration of the joint venture on
June 10, 2013. It is expected that Noble Brewery will continue to produce and
sell Pabst Blue Ribbon beer after November 7, 2003.

Critical Accounting Policies:

The Company prepares its consolidated financial statements in accordance
with accounting principles generally accepted in the United States of America.
The preparation of these financial statements requires the use of estimates and
assumptions that affect the reported amounts of assets and liabilities and the
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amount of revenues and expenses during the reporting
period. Management periodically evaluates the estimates and judgments made,
including those related to interest in an associated company, income taxes,
impairment of assets and allowance for doubtful accounts. Management bases
their estimates and judgments on historical experience and on various factors
that are believed to be reasonable under the circumstances. Actual results may
differ from these estimates as a result of different assumptions or conditions.

The following critical accounting policies affect the more significant
judgments and estimates used in the preparation of the Company's consolidated
financial statements.

Interest in an Associated Company:

The Company accounts for its 40% interest in Noble Brewery using the equity
method of accounting. At September 30, 2002, the total value of the Company's
interest in Noble Brewery was RMB 185,027,990, representing 30% of the Company's
total assets. At December 31, 2001, the total value of the Company's interest

25

in Noble Brewery was RMB 259,164,383, representing 37.4% of the Company's total
assets. The net sales of Noble Brewery for the nine months ended September 30,
2002 decreased by RMB 27,416,519 or 11.0% to RMB 221,247,110, as compared to RMB
248,663,629 for the nine months ended September 30, 2001. During the three
months and nine months ended September 30, 2002, because of reduced sales and
continuing operating losses, Noble Brewery conducted an evaluation of the
carrying value of its property, plant and equipment, as well as the related
estimated future cash flows, as a result of which Noble Brewery recorded a
provision for impairment of plant, machinery and equipment of RMB 36,500,000 and
RMB 101,500,000, respectively. As a result of these factors, the Company's
share of the net loss from Noble Brewery for the nine months ended September 30,
2002 was RMB 43,931,977, as compared to net income of RMB 6,812,639 for the nine
months ended September 30, 2001. In assessing the impairment of its interest in
an associated company, the Company uses assumptions regarding the estimated
future cash flows and other factors to determine the fair value of its
investment, including the assumption that Noble Brewery will continue to produce
Pabst Blue Ribbon beer after November 7, 2003. If these estimates or the
related assumptions change in the future, the Company may be required to record
additional impairment charges for this investment. In addition, Noble China
Inc., the majority shareholder of Noble Brewery, is experiencing certain
financial difficulties and management uncertainty. The Company is currently
unable to predict the effect of Noble China Inc.'s financial difficulties and
management uncertainties on Noble Brewery, including Noble China Inc.'s ability
to grant a sub-license to Noble Brewery to produce Pabst Blue Ribbon beer.

Income Taxes:

The Company records a valuation allowance to reduce its deferred tax assets
to the amount that is more likely than not to be realized. In the event the
Company was to determine that it would be able to realize its deferred tax
assets in the future in excess of its recorded amount, an adjustment to the
deferred tax asset would be credited to operations in the period such
determination was made. Likewise, should the Company determine that it would
not be able to realize all or part of its deferred tax asset in the future, an
adjustment to the deferred tax asset would be charged to operations in the
period such determination was made.

Impairment of Assets:

The Company's long-lived assets include property, plant and equipment. At
September 30, 2002, the net value of property, plant and equipment was RMB
136,489,597, which accounted for 21.9% of the Company's total assets. At
December 31, 2001, the net value of property, plant and equipment was RMB
217,668,104, which accounted for 31.4% of the Company's total assets. In
assessing the impairment of property, plant and equipment, the Company makes
assumptions regarding the estimated future cash flows and other factors to
determine the fair value of the respective assets. For the nine months ended
September 30, 2001, an impairment charge of RMB 2,750,000 was recorded with
respect to property, plant and equipment.

During the three months ended June 30, 2002, as a result of the uncertainty
with respect to the renewal of the Pabst Blue Ribbon sub-license and continuing
negotiations between the Company's major shareholder and the major Debenture
holders of Noble China Inc. regarding the future of Noble China Inc., combined
with reduced sales, continuing operating losses and various legal and business
issues, the Company conducted an evaluation of the carrying value of its
property, plant and equipment, as well as the related expected future cash
flows. As a result of this evaluation, the Company recorded a provision for
impairment of RMB 40,000,000 with respect to the property, plant and equipment
of Zhaoqing Brewery. During the three months ended September 30, 2002, due to a
further decrease in sales, the Company re-evaluated the carrying value of its
property, plant and equipment, as well as the related estimated cash flows. As a
result of this re-evaluation, the Company recorded an impairment charge of RMB
29,000,000 with respect to Zao Yang High Worth Brewery. As a result of these
evaluations, the Company recorded total impairment charges of RMB 29,000,000 and
RMB 69,000,000 for the three months and nine months ended September 30, 2002,
respectively. These impairment charges were based on certain assumptions
regarding the Company's future cash flows and other factors used to determine
the fair value of its property, plant and equipment, including the assumption
that the Company may not be granted a renewal of the sub-license to produce
Pabst Blue Ribbon beer after the existing sub-license expire on November 7,
2003. If these estimates or the related assumptions change adversely in the
future, the Company may be required to record an additional impairment charge.

26

Allowance for Doubtful Accounts:

The Company uses the allowance method to account for uncollectible accounts
receivable. The Company periodically adjusts the allowance for doubtful
accounts based on management's continuing review of accounts receivable. This
analysis by management is based on prior years' experience, as well as an
analysis of current economic and business trends. Management expects to
continue to update the allowance for doubtful accounting during 2002.

The Company records full allowance for accounts receivable that have been
outstanding in excess of 365 days. For accounts receivable that have been
outstanding for 365 days or less, the Company determines an appropriate
allowance based on individual circumstances.

Consolidated Results of Operations:

Three Months Ended September 30, 2002 and 2001 -

Sales: During the three months ended September 30, 2002, net sales of beer
products decreased by RMB 42,905,312 or 24.4% to RMB 132,634,261, as compared to
RMB 175,539,573 for the three months ended September 30, 2001. The Company sold
42,133 metric tons of beer to distributors during the three months ended
September 30, 2002, as compared to 39,276 metric tons of beer sold during the
three months ended September 30, 2001, an increase of 2,857 metric tons or 7.3%.
The increase in sales volume was attributable in part to the increase in sales
of local brand beers, which are sold at a much lower price than Pabst Blue
Ribbon beer products. Despite the increase in the volume of beer sold, net
sales of beer products decreased significantly due to the lower sales prices of
local brand beers, as well as the lowering of the selling price for some of the
Pabst Blue Ribbon beer products in order to encourage distributors to enhance
their respective promotional activities.

During the three months ended September 30, 2002 and 2001, approximately
82.6% and 93.3% of net sales, respectively, were generated by the sale of
products under the Pabst Blue Ribbon brand name.

Gross Profit: For the three months ended September 30, 2002, gross profit
was RMB 30,628,061 or 23.1% of total net sales, as compared to gross profit of
RMB 65,260,665 or 37.2% of total net sales for the three months ended September
30, 2001. Gross margin from beer sales decreased to 23.1% in 2002 as compared
to 37.2% in 2001 as a result of the lowering of the selling price for some of
the Pabst Blue Ribbon beer products, as well as the increase in sales volume of
lower profit margin local brand beers.

The Company expects that it will continue to experience pressure on its
gross profit in the near-term due to a continuing softness in consumer demand
for Pabst Blue Ribbon beer in China, which the Company believes is attributable
to a change in the consumption pattern in China caused by increasing competition
from other foreign premium brand beers and other major local brewers.

Selling, General and Administrative Expenses: For the three months ended
September 30, 2002, selling, general and administrative expenses were RMB
43,373,556 or 32.7% of net sales, consisting of selling expenses of RMB
26,748,668 and general and administrative expenses of RMB 16,624,888. Net of an
allowance for doubtful accounts of RMB 7,719,117 for the three months ended
September 30, 2002, general and administrative expenses were RMB 8,905,771.

For the three months ended September 30, 2001, selling, general and
administrative expenses were RMB 57,622,319 or 32.8% of net sales, consisting of
selling expenses of RMB 42,693,866 and general and administrative expenses of
RMB 14,928,453. Net of an allowance for doubtful accounts of RMB 3,300,000 for
the three months ended September 30, 2001, general and administrative expenses
were RMB 11,628,453.

27

Selling expenses include costs relating to the advertising, promotion,
marketing and distribution of Pabst Blue Ribbon beer and other local brand name
beers in China. Selling expenses decreased by RMB 15,945,198 or 37.3% in 2002
as compared to 2001, and as a percent of net sales, to 20.2% in 2002 from 24.3%
in 2001. Selling expenses decreased in 2002 as compared to 2001, both on an
absolute basis and as a percentage of sales, as a result of a change in the
Company's marketing strategy to lower the selling price for some of its Pabst
Blue Ribbon beer products to encourage distributors to enhance their respective
promotional activities in different geographical sales regions. By lowering the
selling price, the Company was able to reduce amounts expended for selling
expenses. A portion of the reduction in selling expenses was used to support
new advertising and promotional campaigns for the Company's local brand name
beers, which can be implemented with smaller budgets. In addition, effective
July 1, 2001, selling expenses fluctuate as a result of a change in the method
by which the Company calculates the reimbursement by Zhaoqing Brewery and Noble
Brewery of selling expenses incurred by the Marketing Company through beer
pricing and direct charges. However, since the operations of Noble Brewery are
not consolidated with the Company's operations, the reallocation of such costs
can have a distortive effect on the Company's consolidated operating expenses
and operating ratios. To the extent the Company's working capital resources are
sufficient, the Company intends to continue its advertising and promotional
program in an attempt to support and maintain the sales of Pabst Blue Ribbon
beer and other local brand name beers.

Effective April 2001, the Zhaoqing City tax authority informed the
Marketing Company that it was implementing new tax rules that regulate the
maximum allowable expenses involved in advertising and promotional activities
conducted through the public media by PRC enterprises. The maximum allowable
advertising and promotional expenses cannot exceed 2.0% and 0.5% of total gross
sales, respectively. Any amounts exceeding these limits are not tax deductible.
As a result, beginning in May 2001, an adjustment was made to the ex-factory
price charged by the breweries to the Marketing Company and the method by which
advertising and promotional activities are allocated by the Marketing Company,
in order that a portion of the advertising and promotional expenses are absorbed
by the breweries, which are not subject to the new rule. Prior to this change,
all of the advertising and promotional expenses were incurred by the Marketing
Company. For the three months ended September 30, 2002, advertising and
promotional expenses totaling approximately RMB 11,336,423 were reallocated from
the Marketing Company to Zhaoqing Brewery and Noble Brewery, with one-third
being allocated to Zhaoqing Brewery and two-thirds being allocated to Noble
Brewery, either through the adjustment of ex-factory prices or direct
absorption.

Selling expenses are recognized through the consolidation of the operations
of the Marketing Company. The Marketing Company incurs such expenses on behalf
of all of the Pabst Blue Ribbon brewing facilities in China, even though not all
of the results of operations of such facilities are reflected in the Company's
operations. Although the Marketing Company is budgeted annually to operate at
break-even levels, based on agreed upon ex-factory prices that the Marketing
Company pays to the breweries to purchase their production of Pabst Blue Ribbon
beer, actual profitability, particularly on an interim basis, is subject to
substantial variability. Under the pooled management arrangement, operating
losses arising from unbudgeted selling and advertising expenses incurred by the
Marketing Company are being reallocated back to Zhaoqing Brewery and Noble
Brewery in proportion to their respective production capacities commencing July
1, 2001. The Company expects that the reallocation of these unbudgeted selling
and advertising expenses will allow the Marketing Company to operate at
approximately breakeven levels during 2002, excluding the allowance for doubtful
accounts. These reallocated costs are reflected in the operating results of
Zhaoqing Brewery and Noble Brewery. During the three months ended September 30,
2002, the Marketing Company had an operating loss of RMB 6,627,282, as compared
to operating income of RMB 12,902,210 for the three months ended September 30,
2001.

General and administrative expenses consist of the management office
operating costs of Zhaoqing Brewery, the Marketing Company and Zao Yang High
Worth Brewery, the costs associated with the operation of the Company's
executive offices, and the legal and accounting and other costs associated with
the operation of a public company. Excluding the allowance for doubtful
accounts, general and administrative expenses decreased by RMB 2,722,682 or
23.4% in 2002 as compared to 2001, but remained relatively constant as a
percentage of net sales, at 6.7% in 2002 as compared to 6.6% in 2001, as a
result of implementation of cost reduction measures made possible through the
pooling of the management office function among Zhaoqing Brewery, Noble Brewery
and the Marketing Company and the reduction of employees through the
restructuring program.

28

The allowance for doubtful accounts, which is calculated based primarily on
the age of outstanding accounts receivable, increased to 5.8% of net sales in
2002, as compared to 1.9% of net sales in 2001, as a result of the increase in
the ageing of the outstanding accounts receivable during 2002. However,
accounts receivable are typically outstanding for a longer period of time in
China than in the United States.

Impairment of Property, Plant and Equipment: During December 2000, the
Company decided to terminate the production and operation of Jilin Lianli
Brewery, as a result of which the Company recorded a provision for impairment of
plant, machinery and equipment of RMB 6,000,000 at December 31, 2000. During
the three months ended March 31, 2001, the Company recorded a further provision
for impairment of plant, machinery and equipment of RMB 2,750,000. During the
three months ended June 30, 2001, the Company wrote off its remaining investment
in Jilin Lianli Brewery of RMB 1,224,109. As of December 31, 2001, the Company
had written off a total of RMB 13,788,500 with respect to its investment in this
subsidiary.

During the three months ended June 30, 2002, as a result of the uncertainty
with respect to the renewal of the Pabst Blue Ribbon sub-license and continuing
negotiations between the Company's major shareholder and the major Debenture
holders of Noble China Inc. regarding the future of Noble China Inc., combined
with reduced sales, continuing operating losses and various legal and business
issues, the Company conducted an evaluation of the carrying value of its
property, plant and equipment, as well as the related expected future cash
flows. As a result of this evaluation, the Company recorded a provision for
impairment of RMB 40,000,000 with respect to the property, plant and equipment
of Zhaoqing Brewery. During the three months ended September 30, 2002, due to a
further decrease in sales, the Company re-evaluated the carrying value of its
property, plant and equipment, as well as the related estimated cash flows. As a
result of this re-evaluation, the Company recorded an impairment charge of RMB
29,000,000 with respect to Zao Yang High Worth Brewery for the three months
ended September 30, 2002. This impairment charge was based on certain
assumptions regarding the Company's future cash flows and other factors used to
determine the fair value of its property, plant and equipment, including the
assumption that the Company may not be granted a renewal of the sub-license to
produce Pabst Blue Ribbon beer after the existing sub-license expire on November
7, 2003. If these estimates or the related assumptions change adversely in the
future, the Company may be required to record an additional impairment charge.

Restructuring Costs: During May and July 2001, the Company implemented a
restructuring program that eliminated the position of a total of 538 employees,
of which 313 were from Zhaoqing Brewery, 177 were from Noble Brewery and 48 were
from the Marketing Company. Restructuring and termination payments to these
employees totaled RMB 20,396,494 by Zhaoqing Brewery, RMB 8,729,830 by Noble
Brewery and RMB 1,912,742 by the Marketing Company. The Company recorded
restructuring costs of RMB 988,054 for the three months ended September 30,
2001.

Operating Income (Loss): For the three months ended September 30, 2002,
the operating loss was RMB 41,650,545 or 31.4% of net sales. For the three
months ended September 30, 2001, operating income was RMB 6,650,292 or 3.8% of
net sales. The Company incurred an operating loss in 2002 as compared to
operating income in 2001 primarily as a result of a reduction in net sales due
to the lowering of the selling price of certain Pabst Blue Ribbon products, as
well as the increase in the sales volume of lower priced local brand beers,
which have lower margins.

Interest Expense: For the three months ended September 30, 2002, interest
expense decreased by RMB 321,337 or 16.7% to RMB 1,605,381, as compared to RMB
1,926,718 for the three months ended September 30, 2001. Interest expense
decreased in 2002 as compared to 2001 as a result of a decrease in the average
interest rate.

Income Taxes: Commencing in 2001, the Company is required to pay local
income tax at the full normal rate of 33% on its profit as determined in
accordance with PRC accounting standards applicable to the Company's operations
in the PRC. Accordingly, for the three months ended September 30, 2002, income
tax expense was RMB nil, as compared to an income tax benefit of RMB 1,624,580
for the three months ended September 30, 2001. Income tax expense is determined
based on the taxable income of the breweries as determined by their PRC
statutory financial statements.

Net Income (Loss): Net loss was RMB 59,460,697 for the three months ended
September 30, 2002, as compared to net income of RMB 4,144,128 for the three
months ended September 30, 2001.

29

Nine Months Ended September 30, 2002 and 2001 -

Sales: During the nine months ended September 30, 2002, net sales of beer
products decreased by RMB 93,338,353 or 16.2% to RMB 481,725,395, as compared to
RMB 575,063,748 for the nine months ended September 30, 2001. The Company sold
122,663 metric tons of beer to distributors during the nine months ended
September 30, 2002, as compared to 125,105 metric tons of beer sold during the
nine months ended September 30, 2001, a decrease of 2,442 metric tons or 2.0%.
The decrease in net sales of beer products in 2002 as compared to 2001 was
primarily attributable to the lower sales prices of local brand beers, as well
as the lowering of the selling price for some of the Pabst Blue Ribbon beer
products in order to encourage distributors to enhance their respective
promotional activities.

During the nine months ended September 30, 2002 and 2001, approximately
90.9% and 93.0% of net sales, respectively, were generated by the sale of
products under the Pabst Blue Ribbon brand name.

Gross Profit: For the nine months ended September 30, 2002, gross profit
was RMB 142,347,733 or 29.5% of total net sales, as compared to gross profit of
RMB 160,721,491 or 27.9% of total net sales for the nine months ended September
30, 2001. Gross margin from beer sales increased to 29.5% in 2002 as compared
to 27.9% in 2001 as a result a reduction in the sales price charged by Noble
Brewery. The sales price was reduced effective July 1, 2001 in order to
compensate the Marketing Company for a portion of budgeted selling and
advertising expenses not realized due to the decrease in sales in 2002. A
reduction in raw material costs and production labor costs also contributed to
the improvement in gross margin.

The Company expects that it will continue to experience pressure on its
gross profit in the near-term due to a continuing softness in consumer demand
for Pabst Blue Ribbon beer in China, which the Company believes is attributable
to a change in the consumption pattern in China caused by the increasing
competition from other foreign premium brand beers and other major local
brewers.

Selling, General and Administrative Expenses: For the nine months ended
September 30, 2002, selling, general and administrative expenses were RMB
167,752,548 or 34.8% of net sales, consisting of selling expenses of RMB
123,178,218 and general and administrative expenses of RMB 44,574,330. Net of
an allowance for doubtful accounts of RMB 21,000,000 for the nine months ended
September 30, 2002, general and administrative expenses were RMB 23,574,330.

For the nine months ended September 30, 2001, selling, general and
administrative expenses were RMB 184,694,938 or 32.1% of net sales, consisting
of selling expenses of RMB 131,724,892 and general and administrative expenses
of RMB 52,970,046. Net of an allowance for doubtful accounts of RMB 18,900,000
for the nine months ended September 30, 2001, general and administrative
expenses were RMB 34,070,046.

Selling expenses include costs relating to the advertising, promotion,
marketing and distribution of Pabst Blue Ribbon beer and other local brand name
beers in China. Selling expenses decreased by RMB 8,546,674 or 6.5% in 2002 as
compared to 2001, but increased as a percent of net sales, to 25.6% in 2002 from
22.9% in 2001. Selling expenses increased as a percentage of net sales in 2002
as compared to 2001 as a result of the decrease in net sales in 2002 as compared
to 2001. Selling expenses decreased on an absolute basis in 2002 as compared to
2001 as a result of change in the Company's marketing strategy to lower the
selling price for some of its Pabst Blue Ribbon beer products to encourage
distributors to enhance their respective promotional activities in different
geographical sales regions. By lowering the selling price, the Company was
able to reduce amounts expended for selling expenses. A portion of the
reduction in selling expenses was used to support new advertising and
promotional campaigns for the Company's local brand name beers, which can be
implemented with smaller budgets. In addition, effective July 1, 2001, selling
expenses fluctuate as a result of a change in the method by which the Company
calculates the reimbursement by Zhaoqing Brewery and Noble Brewery of selling
expenses incurred by the Marketing Company through beer pricing and direct
charges. However, since the operations of Noble Brewery are not consolidated
with the Company's operations, the reallocation of such costs can have a
distortive effect on the Company's consolidated operating expenses and operating
ratios. To the extent that the Company's working capital resources are
sufficient, the Company intends to continue its advertising and promotional
program in an attempt to support and maintain the sales of Pabst Blue Ribbon
beer and other local brand name beers.

30

Effective April 2001, the Zhaoqing City tax authority informed the
Marketing Company that it was implementing new tax rules that regulate the
maximum allowable expenses involved in advertising and promotional activities
conducted through the public media by PRC enterprises. The maximum allowable
advertising and promotional expenses cannot exceed 2.0% and 0.5% of total gross
sales, respectively. Any amounts exceeding these limits are not tax deductible.
As result, beginning in May 2001, an adjustment was made to the ex-factory price
charged by the breweries to the Marketing Company and the method by which
advertising and promotional activities are allocated by the Marketing Company,
in order that a portion of the advertising and promotional expenses are absorbed
by the breweries, which are not subject to the new rule. Prior to this change,
all of the advertising and promotional expenses were incurred by the Marketing
Company. For the nine months ended September 30, 2002, advertising and
promotional expenses totaling approximately RMB 48,386,684 were reallocated from
the Marketing Company to Zhaoqing Brewery and Noble Brewery, with one-third
being allocated to Zhaoqing Brewery and two-thirds being allocated to Noble
Brewery, either through the adjustment of ex-factory prices or direct
absorption.

Selling expenses are recognized through the consolidation of the operations
of the Marketing Company. The Marketing Company incurs such expenses on behalf
of all of the Pabst Blue Ribbon brewing facilities in China, even though not all
of the results of operations of such facilities are reflected in the Company's
operations. Although the Marketing Company is budgeted annually to operate at
break-even levels, based on agreed upon ex-factory prices that the Marketing
Company pays to the breweries to purchase their production of Pabst Blue Ribbon
beer, actual profitability, particularly on an interim basis, is subject to
substantial variability. Under the pooled management arrangement, operating
losses arising from unbudgeted selling and advertising expenses incurred by the
Marketing Company are being reallocated back to Zhaoqing Brewery and Noble
Brewery in proportion to their respective production capacities commencing July
1, 2001. The Company expects that the reallocation of these unbudgeted selling
and advertising expenses will allow the Marketing Company to operate at
approximately breakeven levels during 2002, excluding the allowance for doubtful
accounts. These reallocated costs are reflected in the operating results of
Zhaoqing Brewery and Noble Brewery. As a result of these factors, during the
nine months ended September 30, 2002 and 2001, the Marketing Company incurred
operating losses of RMB 19,814,948 and RMB 30,295,467, respectively, which
reduced consolidated operating results accordingly.

General and administrative expenses consist of the management office
operating costs of Zhaoqing Brewery, the Marketing Company and Zao Yang High
Worth Brewery, the costs associated with the operation of the Company's
executive offices, and the legal and accounting and other costs associated with
the operation of a public company. Excluding the allowance for doubtful
accounts, general and administrative expenses decreased by RMB 10,495,716 or
30.8% in 2002 as compared to 2001, and as a percentage of net sales, decreased
to 4.9% in 2002 from 5.9% in 2001, respectively, primarily as a result of
implementation of cost reduction measures made possible through the pooling of
the management office function among Zhaoqing Brewery, Noble Brewery and the
Marketing Company and the reduction of employees through the restructuring
program.

The allowance for doubtful accounts, which is calculated based primarily on
the age of outstanding accounts receivable, increased to 4.4% of net sales in
2002, as compared to 3.3% of net sales in 2001, as a result of the increase in
the ageing of the outstanding accounts receivable during 2002. However,
accounts receivable are typically outstanding for a longer period of time in
China than in the United States.

Impairment of Property, Plant and Equipment: During December 2000, the
Company decided to terminate the production and operation of Jilin Lianli
Brewery, as a result of which the Company recorded a provision for impairment of
plant, machinery and equipment of RMB 6,000,000 at December 31, 2000. During
the nine months ended September 30, 2001, the Company recorded a further
provision for impairment of plant, machinery and equipment of RMB 2,750,000 and
wrote off its remaining investment in Jilin Lianli Brewery of RMB 1,224,109. As
of December 31, 2001, the Company had written off a total of RMB 13,788,500 with
respect to its investment in this subsidiary.

31

During the three months ended June 30, 2002, as a result of the uncertainty
with respect to the renewal of the Pabst Blue Ribbon sub-license and continuing
negotiations between the Company's major shareholder and the major Debenture
holders of Noble China Inc. regarding the future of Noble China Inc., combined
with reduced sales, continuing operating losses and various legal and business
issues, the Company conducted an evaluation of the carrying value of its
property, plant and equipment, as well as the related expected future cash
flows. As a result of this evaluation, the Company recorded a provision for
impairment of RMB 40,000,000 with respect to the property, plant and equipment
of Zhaoqing Brewery. During the three months ended September 30, 2002, due to a
further decrease in sales, the Company re-evaluated the carrying value of its
property, plant and equipment, as well as the related estimated cash flows. As a
result of this re-evaluation, the Company recorded an impairment charge of RMB
29,000,000 with respect to Zao Yang High Worth Brewery. As a result of these
evaluations, the Company recorded total impairment charges of RMB 69,000,000 for
the nine months ended September 30, 2002. These impairment charges were based on
certain assumptions regarding the Company's future cash flows and other factors
used to determine the fair value of its property, plant and equipment, including
the assumption that the Company may not be granted a renewal of the sub-license
to produce Pabst Blue Ribbon beer after the existing sub-license expire on
November 7, 2003. If these estimates or the related assumptions change adversely
in the future, the Company may be required to record an additional impairment
charge.

Restructuring Costs: During May and July 2001, the Company implemented a
restructuring program that eliminated the position of a total of 538 employees,
of which 313 were from Zhaoqing Brewery, 177 were from Noble Brewery and 48 were
from the Marketing Company. Restructuring and termination payments to these
employees totaled RMB 20,396,494 by Zhaoqing Brewery, RMB 8,729,830 by Noble
Brewery and RMB 1,912,742 by the Marketing Company. The Company recorded
restructuring costs of RMB 22,309,236 for the nine months ended September 30,
2001.

Operating Loss: For the nine months ended September 30, 2002, operating
loss was RMB 94,309,865 or 19.6% of net sales. For the nine months ended
September 30, 2001, operating loss was RMB 50,256,792 or 8.7% of net sales. The
increase in operating loss in 2002 as compared to 2001 was primarily
attributable to a reduction in net sales due to the lowering of the selling
price of certain Pabst Blue Ribbon products, the substantial provision for
impairment of property, plant and equipment in 2002, as well as the increase in
the sales volume of lower priced local brand beers, which have lower margins,
offset in part by a reduction in selling, general and administrative expenses.

Interest Expense: For the nine months ended September 30, 2002, interest
expense decreased by RMB 118,964 or 2.0% to RMB 5,928,483, as compared to RMB
6,047,447 for the nine months ended September 30, 2001. Interest expense
decreased in 2002 as compared to 2001 as a result of a decrease in the average
interest rate.

Income Taxes: Commencing in 2001, the Company is required to pay local
income tax at the full normal rate of 33% on its profit as determined in
accordance with PRC accounting standards applicable to the Company's operations
in the PRC. Accordingly, for the nine months ended September 30, 2002, income
tax expense was RMB 325,894, as compared to RMB 40,000 for the nine months ended
September 30, 2001. Income tax expense is determined based on the taxable
income of the breweries as determined by their PRC statutory financial
statements.

Net Loss: Net loss was RMB 162,623,566 for the nine months ended September
30, 2002, as compared to a net loss of RMB 31,345,065 for the nine months ended
September 30, 2001.

Noble Brewery:

Three Months Ended September 30, 2002 and 2001 -

Sales: For the three months ended September 30, 2002 and 2001, net sales
were RMB 69,731,612 and RMB 83,521,230, respectively, a decrease of RMB
13,789,618 or 16.5%.

During the three months ended September 30, 2002, Noble Brewery sold 21,819
metric tons of beer to the Marketing Company, as compared to 22,919 metric tons
of beer sold to the Marketing Company during the three months ended September
30, 2001. Total beer sold by Noble Brewery to the Marketing Company decreased
by 1,100 metric tons or 4.8% for the three months ended September 30, 2002, as
compared to the three months ended September 30, 2001.

32

Gross Profit: For the three months ended September 30, 2002, gross profit
was RMB 9,669,694 or 13.9% of net sales, as compared to gross profit of RMB
27,653,831 or 33.1% of net sales for the three months ended September 30, 2001.
Gross profit decreased significantly as a result of the reallocation of
unbudgeted selling and advertising expenses incurred by the Marketing Company
through the adjustment of ex-factory prices as well as the increase in volume
sold of low-margin local brand beers.

Selling, General and Administrative Expenses: For the three months ended
September 30, 2002, selling, general and administrative expenses totaled RMB
20,704,939 or 29.7% of net sales, consisting of selling expenses of RMB
11,512,269 and general and administrative expenses of RMB 9,192,670. Net of an
allowance for doubtful accounts of RMB 5,200,000 for the three months ended
September 30, 2002, general and administrative expenses were RMB 3,992,670. For
the three months ended September 30, 2001, selling, general and administrative
expenses totaled RMB 26,616,043 or 31.9% of net sales, consisting of selling
expenses of RMB 21,436,092 and general and administrative expenses of RMB
5,179,951.

Impairment of Property, Plant and Equipment: During the three months ended
June 30, 2002, as a result of reduced sales and continuing operating losses,
Noble Brewery conducted an evaluation of the carrying value of its property,
plant and equipment, as well as the related estimated future cash flows, which
included the assumption that Noble Brewery would obtain the renewal of the Pabst
Blue Ribbon sub-license from its major shareholder prior to expiration of the
existing sub-license on November 7, 2003. As a result of this evaluation, Noble
Brewery recorded a provision for impairment of property, plant and equipment of
RMB 65,000,000 for the three months ended June 30, 2002. Due to a further
decrease in sales for the three months ended September 30, 2002, Noble Brewery
re-evaluated the carrying value of its property, plant and equipment, as well as
the related estimated cash flows. As a result of this re-evaluation, Noble
Brewery recorded a further impairment charge of RMB 36,500,000 for the three
months ended September 30, 2002.

Restructuring Costs: During the three months ended September 30, 2001,
Noble Brewery continued a restructuring program and eliminated the positions of
7 employees, resulting in restructuring and termination expenses of RMB 410,242.

Operating Income (Loss): For the three months ended September 30, 2002,
operating loss was RMB 47,535,245 or 68.2% of net sales. For the three months
ended September 30, 2001, operating income was RMB 823,501 or 1.0% of net sales.

Income Taxes: Commencing in 1999, Noble Brewery was required to pay local
income tax at the full normal rate of 33% on its profit as determined in
accordance with PRC accounting standards applicable to Noble Brewery.
Accordingly, for the three months ended September 30, 2002, income tax expense
was RMB 771,199, as compared to an income tax benefit of RMB 6,617,492 for the
three months ended September 30, 2001.

Net Income (Loss): Net loss was RMB 46,764,046 or 67.1% of net sales for
the three months ended September 30, 2002, as compared to net income of RMB
7,440,993 or 8.9% of net sales for the three months ended September 30, 2001.

Nine Months Ended September 30, 2002 and 2001 -

Sales: For the nine months ended September 30, 2002 and 2001, net sales
were RMB 221,247,110 and RMB 248,663,629, respectively, a decrease of RMB
27,416,519 or 11.0%.

During the nine months ended September 30, 2002, Noble Brewery sold 66,461
metric tons of beer to the Marketing Company, as compared to 66,350 metric tons
of beer sold to the Marketing Company during the nine months ended September 30,
2001. Total beer sold by Noble Brewery to the Marketing Company increased by
111 metric tons or 0.2% for the nine months ended September 30, 2002, as
compared to the nine months ended September 30, 2001.

Gross Profit: For the nine months ended September 30, 2002, gross profit
was RMB 45,209,516 or 20.4% of net sales, as compared to gross profit of RMB
69,453,523 or 27.9% of net sales for the nine months ended September 30, 2001.
Although the volume of beer sold increased slightly during the nine months ended
September 30, 2002, gross profit decreased as a result of the reallocation of
unbudgeted selling and advertising expenses incurred by the Marketing Company
through the adjustment of ex-factory prices as well as the increase in volume
sold of low-margin local brand beers.

33

Selling, General and Administrative Expenses: For the nine months ended
September 30, 2002, selling, general and administrative expenses totaled RMB
67,090,362 or 30.3% of net sales, consisting of selling expenses of RMB
38,302,286 and general and administrative expenses of RMB 28,788,076. Net of an
allowance for doubtful accounts of RMB 12,700,000 for the nine months ended
September 30, 2002, general and administrative expenses were RMB 16,088,076.
For the nine months ended September 30, 2001, selling, general and
administrative expenses totaled RMB 58,365,236 or 23.5% of net sales, consisting
of selling expenses of RMB 31,265,532 and general and administrative expenses of
RMB 27,099,704. Net of an allowance for doubtful accounts of RMB 7,862,472 for
the nine months ended September 30, 2001, general and administrative expenses
were RMB 19,237,232.

Impairment of Property, Plant and Equipment: During the three months ended
June 30, 2002, as a result of reduced sales and continuing operating losses,
Noble Brewery conducted an evaluation of the carrying value of its property,
plant and equipment, as well as the related estimated future cash flows, which
included the assumption that Noble Brewery would obtain the renewal of the Pabst
Blue Ribbon sub-license from its major shareholder prior to expiration of the
existing sub-license on November 7, 2003. As a result of this evaluation, Noble
Brewery recorded a provision for impairment of property, plant and equipment of
RMB 65,000,000 for the three months ended June 30, 2002. Due to a further
decrease in sales for the three months ended September 30, 2002, Noble Brewery
re-evaluated the carrying value of its property, plant and equipment, as well as
the related estimated cash flows. As a result of this re-evaluation, Noble
Brewery recorded a further impairment change of RMB 36,500,000 for the three
months ended September 30, 2002, resulting in a total impairment charge of RMB
101,500,000 for the nine months ended September 30, 2002.

Restructuring Costs: During the nine months ended September 30, 2001,
Noble Brewery implemented a restructuring program and eliminated the positions
of 177 employees, resulting in restructuring and termination expenses of RMB
8,729,830.

Operating Income (Loss): For the nine months ended September 30, 2002,
operating loss was RMB 123,380,846 or 55.8% of net sales. For the nine months
ended September 30, 2001, operating income was RMB 3,075,294 or 1.2% of net
sales.

RMB 65,000,000 for the three months ended June 30, 2002. Due to a further
decrease in sales for the three months ended September 30, 2002, Noble Brewery
re-evaluated the carrying value of its property plant and equipment, as well as
the related estimated cash flows. As a result of this re-evaluation, Noble
Brewery recorded a further impairment charge of RMB 36,500,000 for the three
months ended September 30, 2002, resulting in a total impairment charge of RMB
101,500,000 for the nine months ended September 30, 2002.

Income Taxes: Commencing in 1999, Noble Brewery was required to pay local
income tax at the full normal rate of 33% on its profit as determined in
accordance with PRC accounting standards applicable to Noble Brewery.
Accordingly, for the nine months ended September 30, 2002, income tax expense
was RMB 1,024,096, as compared to RMB 1,581,168 for the nine months ended
September 30, 2001.

Net Income (Loss): Net loss was RMB 124,404,942 or 56.2% of net sales for
the nine months ended September 30, 2002, as compared to net income of RMB
1,494,126 or 0.6% of net sales for the nine months ended September 30, 2001.

Consolidated Financial Condition - September 30, 2002:

Liquidity and Capital Resources -

Operating. For the nine months ended September 30, 2002, the Company's
operations provided cash resources of RMB 21,403,142, as compared to RMB
10,986,703 for the nine months ended September 30, 2001. Despite an increase in
net loss in 2002 as compared to 2001, the Company's operations provided
increased cash resources in 2002 as compared to 2001. The Company's cash
balance increased by RMB 40,458,720 to RMB 111,825,200 at September 30, 2002, as
compared to RMB 71,366,480 at December 31, 2001. Including RMB 29,900,000 of
cash held by the Marketing Company for the account of Noble Brewery, the net
working capital deficit decreased by RMB 2,824,995 to RMB 293,059,837 at
September 30, 2002, as compared to RMB 295,884,832 at December 31, 2001,
resulting in a current ratio at September 30, 2002 of 0.48:1, as compared to
0.42:1 at December 31, 2001.

Bill receivables increased by RMB 13,034,300 or 291.9% to RMB 17,499,300 at
September 30, 2002, as compared to RMB 4,465,000 at December 31, 2001. The
increase in bill receivables was primarily due to a reduction in the use of
endorsed bills receivable for the settlement of payment obligations.

Net of an allowance for doubtful accounts of RMB 21,000,000 for the nine
months ended September 30, 2002, accounts receivable increased by RMB 22,490,341
or 37.5% to RMB 61,468,391 at September 30, 2002, as compared to RMB 59,978,050
at December 31, 2001, reflecting the longer settlement period for accounts
receivable.

34

Inventories increased by RMB 6,545,724 or 12.3% to RMB 59,859,706 at
September 30, 2002, as compared to RMB 53,313,982 at December 31, 2001. The
increase in inventories was primarily due to an unbudgeted increase in raw
materials as a result of the slowdown in sales.

Other receivables increased by RMB 22,218,720 or 193.9% to RMB 33,679,231
at September 30, 2002, as compared to RMB 11,460,511 at December 31, 2001. The
increase in other receivables was primarily due to an increase in prepayments
related to advertising and promotional programs scheduled by the Marketing
Company for subsequent periods.

Accrued liabilities increased by RMB 42,646,499 or 29.5% to RMB 187,075,785
at September 30, 2002, as compared to RMB 144,429,286 at December 31, 2001. The
increase in accrued liabilities was mainly due to an increase in accrued
expenses related to advertising and promotional programs.

The amount due to an associated company increased by RMB 50,128,082 or
23.8% to RMB 260,933,300 at September 30, 2002, as compared to RMB 210,805,218
at December 31, 2001, and represents the amounts due to Noble Brewery from its
sale of Pabst Blue Ribbon beer to the Marketing Company and from its sale of raw
materials (which were purchased under the new pooled management structure) to
Zhaoqing Brewery, as well as other balances arising from recurring intercompany
transactions. These obligations are unsecured, interest-free and repayable on
demand. The repayment schedule for these obligations generally reflects the
collection period for accounts receivable generated by beer sales and normal
trade credit terms for raw material purchases. The amount due to an associated
company also includes cash of RMB 29,900,000 held by the Marketing Company for
the account of Noble Brewery, which is payable at any time upon the request of
Noble Brewery.

Investing. For the nine months ended September 30, 2002, additions to
property, plant and equipment aggregated RMB 7,154,141, which includes
approximately RMB 4,200,000 and RMB 2,950,000 for major replacements of
production equipment in Zao Yang High Worth Brewery and Zhaoqing Brewery,
respectively. Net of the effect of the write off of property, plant and
equipment for the nine months ended September 30, 2001, additions to property,
plant and equipment aggregated RMB 6,799,481, which includes approximately RMB
3,900,000 and RMB 2,900,000 for major replacements of production equipment in
Zao Yang High Worth Brewery and Zhaoqing Brewery, respectively.

The Company anticipates that additional capital expenditures in connection
with the continuing refurbishment of major production facilities at Zhaoqing
Brewery during the remainder of 2002 will be approximately RMB 2,000,000. The
Company believes that it will be able to fund the expected capital expenditures
through internal cash flow and external resources. However, due to declining
sales and diminishing working capital resources during 2002, the Company has
revised its capital expenditures program. Approximately 25% of the 2002 annual
repair and maintenance budget scheduled for Zhaoqing Brewery and Noble Brewery
has been deferred until 2003.

Financing. During the nine months ended September 30, 2002, the Company's
secured bank loans increased by RMB 5,330,283, reflecting new borrowings of RMB
85,000,000 and repayments of RMB 79,669,717. During the nine months ended
September 30, 2001, the Company repaid RMB 23,000,000 of secured bank loans and
incurred new bank borrowings of RMB 20,534,607. The bank loans bear interest at
fixed rates ranging from 5.75% to 7.7%, and are repayable within the next three
years. A substantial portion of the bank loans has been utilized to fund the
working capital requirements of Zhaoqing Brewery and Zao Yang High Worth
Brewery.

During the nine months ended September 30, 2002, Zao Yang High Worth
Brewery received an advance of RMB 11,000,000 from its local partner, Zao Yang
Brewery, which is the 45% shareholder of Zao Yang High Worth Brewery. The
advance was unsecured, interest-free and had no fixed term of repayment. This
advance has been utilized to fund the working capital requirements of Zao Yang
High Worth Brewery.

35

During the three months ended March 31, 2002, the Company loaned RMB
5,500,000 to Zao Yang High Worth Brewery. The loan was unsecured, with interest
at 3.6% per annum and was repayable on December 31, 2002. During the three
months ended March 31, 2002, Zao Yang High Worth Brewery advanced RMB 5,500,000
to Guangdong Blue Ribbon. The advance to Guangdong Blue Ribbon was unsecured,
with no agreed-upon interest and no fixed date of repayment. During the three
months ended June 30, 2002, both of these loans were repaid in full.

During the three months ended June 30, 2002, the Board of Directors of High
Worth JV declared the 7th to 10th dividend distributions, entitling Holdings and
Guangdong Blue Ribbon to a total of approximately RMB 27,830,199 and RMB
18,553,467, respectively. The minority interest's 40% portion of the dividend
is recorded as a liability at the declaration date and is included in amounts
due to related companies in the accompanying consolidated balance sheets.
During the nine months ended September 30, 2002, dividends of RMB 27,830,199 and
RMB 16,435,000 were distributed to Holdings and Guangdong Blue Ribbon,
respectively.

The Company anticipates that its operating cash flow, combined with cash on
hand, bank lines of credit, and other external credit sources, and the credit
facilities provided by affiliates or related parties, are adequate to satisfy
the Company's working capital requirements in the near-term. If the foregoing
assumptions prove to be inaccurate, the Company's cash flow may be adversely
affected, which would negatively impact the ability of the Company to conduct
operations at current levels and continue as a going concern.

36

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Company does not have any market risk with respect to such factors as
commodity prices, equity prices, and other market changes that affect market
risk sensitive investments.

With respect to foreign currency exchange rates, the Company does not
believe that a devaluation or fluctuation of the RMB against the USD would have
a detrimental effect on the Company's operations, since the Company conducts
virtually all of its business in China, and the sale of its products and the
purchase of raw materials and services is settled in RMB. The effect of a
devaluation or fluctuation of the RMB against the USD would affect the Company's
results of operations, financial position and cash flows, when presented in USD
(based on a current exchange rate) as compared to RMB.

As the Company's debt obligations are primarily short-term in nature, with
fixed interest rates, the Company does not have any risk from an increase in
interest rates. However, to the extent that the Company arranges new borrowings
in the future, an increase in interest rates would cause a commensurate increase
in the interest expense related to such borrowings.

ITEM 4. CONTROLS AND PROCEDURES

(a) Evaluation of Disclosure Controls and Procedures

Disclosure controls and procedures are designed to ensure that information
required to be disclosed in the reports filed or submitted under the Exchange
Act of 1934 is recorded, processed, summarized and reported, within the time
periods specified in the rules and forms of the Securities and Exchange
Commission. Disclosure controls and procedures include, without limitation,
controls and procedures designed to ensure that information required to be
disclosed in the reports filed under the Exchange Act of 1934 is accumulated and
communicated to management, including the Chief Executive Officer and Chief
Financial Officer, as appropriate, to allow timely decisions regarding required
disclosure.

Within the 90 days prior to the filing of this report, the Company carried
out an evaluation, under the supervision and with the participation of the
Company's management, including the Company's Chief Executive Officer and Chief
Financial Officer, of the effectiveness of the design and operation of the
Company's disclosure controls and procedures. Based upon and as of the date of
that evaluation, the Chief Executive Officer and Chief Financial Officer
concluded that the Company's disclosure controls and procedures are effective to
ensure that information required to be disclosed in the reports the Company
files and submits under the Exchange Act of 1934 is recorded, processed,
summarized and reported as and when required.

(b) Changes in Internal Controls

There were no changes in the Company's internal controls or in other
factors that could have significantly affected those controls subsequent to the
date of the Company's most recent evaluation.

37

PART II. OTHER INFORMATION

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

(a) Exhibits

A list of exhibits required to be filed as part of this report is set
forth in the Index to Exhibits, which immediately precedes such
exhibits, and is incorporated herein by reference.

(b) Reports on Form 8-K

Three Months Ended September 30, 2002: None

38

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.

CBR BREWING COMPANY, INC.
-------------------------
(Registrant)

Date: November 12, 2002 By: /s/ DA-QING ZHENG
-----------------------------
Da-qing Zheng
Chairman of the Board and
Chief Executive Officer
(Duly authorized officer)

Date: November 12, 2002 By: /s/ GARY C.K. LUI
-----------------------------
Gary C.K. Lui
Vice President and Chief
Financial Officer
(Principal financial officer)

39

CERTIFICATIONS

I, Da-qing Zheng, certify that:

1. I have reviewed this quarterly report on Form 10-Q of CBR Brewing Company,
Inc.;

2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;

3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
quarterly report.

4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

a. designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this quarterly
report is being prepared;

b. evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date of
this quarterly report (the "Evaluation Date"); and

c. presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;

5. The registrant's other certifying officer and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent function):

a. all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; and

b. any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and

6. The registrant's other certifying officer and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and material
weaknesses.

November 12, 2002 By: /s/ DA-QING ZHENG
----------------------------
Da-qing Zheng
Chairman of the Board and
Chief Executive Officer

40

CERTIFICATIONS

I, Gary C.K. Lui, certify that:

1. I have reviewed this quarterly report on Form 10-Q of CBR Brewing Company,
Inc.;

2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;

3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
quarterly report.

4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

a. designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this quarterly
report is being prepared;

b. evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date of
this quarterly report (the "Evaluation Date"); and

c. presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;

5. The registrant's other certifying officer and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent function):

a. all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; and

b. any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and

6. The registrant's other certifying officer and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and material
weaknesses.

November 12, 2002 By: /s/ GARY C.K. LUI
----------------------------
Gary C.K. Lui
Vice President and Chief
Financial Officer

41

INDEX TO EXHIBITS

Exhibit
Number Description of Document
- ------ -----------------------

99.1 Certification Pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002

42