FORM 10-QSB

                       SECURITIES AND EXCHANGE COMMISSION

                             WASHINGTON, D.C. 20549


[X]               QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934

                        For Quarter Ended March 31, 1998
                                       OR

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

                                For the transition period from          to

                         Commission file number: 0-13181

                          CAPITAL BEVERAGE CORPORATION
             (Exact Name of Registrant as Specified in its Charter)

                   Delaware                          13-3878747
       State or other jurisdiction of             (I.R.S. Employer
       incorporation or organization               Identification No.)

                 1111 East Tremont Avenue, Bronx, New York 10460
               (Address of Principal Executive Office) (Zip Code)

                                 (718) 409-2337
               (Registrant's telephone number including area code)

         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

         The number of shares of  registrant's  Common  Stock,  $.001 par value,
         outstanding as of May 12, 1998 was 2,378,409 shares.





<PAGE>



                          CAPITAL BEVERAGE CORPORATION
                                   FORM 10-Q
                                 March 31, 1998
                                     INDEX




PART I.   FINANCIAL INFORMATION
                                                                          PAGE
Item 1.   Financial Statements (Unaudited)                               NUMBER


          Balance sheets as of March 31, 1998 and December 31, 1997           3

          Statements of Operations for the three-month periods
          ended March 31, 1998 and 1997                                       4

          Statements of Cash Flows for the three-month periods
          ended March 31, 1998 and 1997                                       5

          Notes to Financial Statements                                       6

Item 2.   Management's Discussion and Analysis of Financial Condition
          and Results of Operations                                           7


PART II.  OTHER INFORMATION

Item 6.   Exhibits and Reports on Form 8-K                                    8

Signatures                                                                    9










                                      -2-

<PAGE>

                          CAPITAL BEVERAGE CORPORATION

                                 BALANCE SHEETS
                                   

                                              March 31,             December 31,
                                                1998                   1997
                                             (Unaudited)
                                           --------------         --------------
                                     ASSETS

CURRENT ASSETS:
     Cash                                $     2,527,513        $     2,843,870
     Accounts receivable - trade,
         net of allowance for doubtful
         accounts of $65,000                     624,975                855,472
     Inventories                                 524,124                426,290
     Prepaid expenses and other                  243,622                  9,548
                                           --------------         --------------
         TOTAL CURRENT ASSETS                  3,920,234              4,135,180

PROPERTY AND EQUIPMENT, less accumulated 
         depreciation of $18,011 and $61,965, 
         respectively                             49,012                 50,058

OTHER ASSETS:
     Intangible assets, less accumulated
         amortization of $360,000 and 
         $320,000, respectively                1,240,000              1,280,000
     Deposits                                      3,290                  3,290
                                           --------------         --------------

                                         $     5,212,536        $     5,468,528
                                           ==============         ==============

                      LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES:
     Accounts payable                    $       150,012        $        67,135
     Accrued expenses and taxes                  102,158                112,601
     Current portion of long-term debt            63,848                 62,480
     Accrued dividends on preferred stock        207,113                186,113
                                           --------------         --------------
         TOTAL CURRENT LIABILITIES               523,131                428,329
                                           --------------         --------------

LONG-TERM DEBT                                   611,191                627,676
                                           --------------         --------------

STOCKHOLDERS' EQUITY:
     7% Cumulative Series B Preferred 
         Stock, par value $.01; issued 
         and outstanding 300,000 shares 
         (Liquidation value $1,200,000)            3,000                  3,000
     Common stock, $ .001 par value; 
         authorized 20,000,000 shares;
         issued and outstanding 2,378,409 
         shares                                    2,379                  2,379
     Additional paid-in capital                5,365,573              5,365,573
     Accumulated deficit                      (1,292,738)              (958,429)
                                           --------------         --------------
         TOTAL STOCKHOLDERS' EQUITY            4,078,214              4,412,523
                                           --------------         --------------

                                         $     5,212,536        $     5,468,528
                                           ==============         ==============



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

                                        3

<PAGE>
                          CAPITAL BEVERAGE CORPORATION

                            STATEMENTS OF OPERATIONS


                                              Three Months Ended March 31,
                                      ------------------------------------------
                                             1998                   1997
                                      --------------------   -------------------
                                           (Unaudited)          (Unaudited)


SALES                               $           2,223,715  $          1,880,039

COST OF GOODS SOLD                              2,090,542             1,622,111
                                      --------------------   -------------------

GROSS PROFIT                                      133,173               257,928
                                      --------------------   -------------------

OPERATING EXPENSES
     Selling and delivery                          53,915                44,147
     General and administrative                   408,362               333,621
                                      --------------------   -------------------
                                                  462,277               377,768
                                      --------------------   -------------------

LOSS FROM OPERATIONS                             (329,104)             (119,840)

INTEREST EXPENSE                                  (14,883)               25,567

INTEREST INCOME                                    31,836                     -
                                      --------------------   -------------------

LOSS BEFORE INCOME TAXES                         (312,151)             (145,407)

INCOME TAXES                                        1,158                 3,528
                                      --------------------   -------------------

NET LOSS                                         (313,309)             (148,935)

CUMULATIVE PREFERRED 
     STOCK DIVIDENDS                               21,000                35,625
                                      --------------------   -------------------

NET LOSS APPLICABLE TO 
     COMMON SHAREHOLDERS            $            (334,309) $           (184,560)
                                      ====================   ===================

LOSS PER  COMMON SHARE - BASIC      $               (0.14) $              (0.15)
                                      ====================   ===================

WEIGHTED AVERAGE NUMBER OF 
     COMMON SHARES                              2,378,409             1,240,909
                                      ====================   ===================



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

                                        4

<PAGE>
                          CAPITAL BEVERAGE CORPORATION

                             STATEMENT OF CASH FLOWS

                                               Three Months Ended March 31,
                                      ------------------------------------------
                                               1998                  1997
                                      -------------------   --------------------
                                           (Unaudited)            (Unaudited)

CASH FLOWS FROM OPERATING 
        ACTIVITIES:
     Net loss                         $         (334,309)   $          (148,935)
                                      -------------------   --------------------
     Adjustments to reconcile 
       net loss to net cash 
       used in operating activities:
         Depreciation and amortization            41,046                 42,670

     Changes in assets and 
       liabilities:
         Decrease in accounts receivable         230,497                143,226
         (Increase) in inventories               (97,834)               (35,896)
         (Increase) decrease in prepaid 
           expenses                             (234,074)                   167
         Increase (decrease) in accounts
           payable and accrued expenses           72,434                (79,330)
                                      -------------------   --------------------
                                                  12,069                 70,837
                                      -------------------   --------------------

NET CASH USED IN OPERATING 
          ACTIVITIES                            (322,240)               (78,098)
                                      -------------------   --------------------

CASH FLOWS FROM FINANCING 
          ACTIVITIES:
     Due from affiliate                                -                 57,837
     Payments of note payable                    (15,117)               (18,418)

                                      -------------------   --------------------
NET CASH (USED IN) PROVIDED 
     BY FINANCING ACTIVITIES                     (15,117)                39,419
                                      -------------------   --------------------

NET DECREASE IN CASH                            (337,357)               (38,679)

CASH - BEGINNING OF PERIOD                     2,843,870                126,927
                                      -------------------   --------------------

CASH - END OF PERIOD                $          2,506,513  $              88,248
                                      ===================   ====================

SUPPLEMENTAL DISCLOSURE OF CASH FLOW
     INFORMATION:

     Cash paid for interest         $             14,883  $              10,567
                                      ===================   ====================

     Cash paid for taxes            $              1,158  $              11,877
                                      ===================   ====================





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

                                        5


<PAGE>


                           CAPITAL BEVERAGE CORPORATION, INC.

                          NOTES TO FINANCIAL STATEMENTS

MARCH 31, 1998

                                   (Unaudited)


1.       BASIS OF PRESENTATION

                  The accompanying  financial statements reflect all adjustments
         which,  in  the  opinion  of  management,  are  necessary  for  a  fair
         presentation  of the  financial  position and the results of operations
         for the interim periods presented.

                  Certain  financial  information  which is normally included in
         financial  statements is prepared in accordance with generally accepted
         accounting principles,  but which is not required for interim reporting
         purposes has been  condensed  or omitted.  The  accompanying  financial
         statements should be read in conjunction with the financial  statements
         and notes thereto  contained in the Company's Annual Report on Form 10-
         KSB.



                                      -6-



<PAGE>



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

                  The following  discussion  and analysis  provides  information
         which   management   believes  is  relevant   to  an   assessment   and
         understanding  of the  Company's  results of  operations  and financial
         condition.  This  discussion  should  be read in  conjunction  with the
         financial statements and notes thereto appearing elsewhere herein.

a.   Results of Operations

                  Sales for the quarter ended March 31, 1998 were  $2,223,715 as
         compared to sales of  $1,880,039  for the quarter ended March 31, 1997.
         The cost of goods sold as a percentage of sales for the 1998 period was
         94% as compared to 87% for the comparable 1997 period.  The increase in
         cost of goods sold, as a percentage of sales for the three months ended
         March 31,  1998,  is due  primarily  to  discounting  which the Company
         needed  to  maintain  to  be  competitive  both  on an  intrabrand  and
         interbrand brand basis with other wholesalers.

                  Selling,  general and  administrative  expenses  for the three
         month period ended March 31, 1998 were $462,277 as compared to $377,768
         for the respective 1997 period.  The increase in the three month period
         ended  March  31,  1998 is due to fees with  respect  to being a public
         company and increases in office expense, employee benefits,  utilities,
         repairs,  supplies and  maintenance  expenses  which were  necessary to
         support  the  increased  level of sales in fiscal  1998 as  compared to
         fiscal 1997.

                  Interest  expense for the three month  period  ended March 31,
         1998 was $14,883 as compared to $25,567 for the respective 1997 period.
         The  decrease in the three month  period ended March 31, 1998 is due to
         the  reduction  of debt.  Interest  income  of  $31,836  resulted  from
         interest  earned on cash proceeds  received from the public offering of
         the Company's stock.

b.   Material Change in Financial Condition, Liquidity and Capital Resources

                  Cash used in operations for the first quarter of 1998 was
$322,240.  The increase in prepaid expenses of $234,074 was partially offset by 
a $230,497 decrease in accounts receivable.

                  Working capital decreased from $3,706,851 at December 31, 1997
to  $3,397,103  at March 31, 1998 as a result of the cash  required in operating
activities.

                  At March 31, 1998, the Company's  primary sources of liquidity
were $2,527,513 in cash, $624,975 in accounts  receivable,  $524,124 in
inventories, and $243,622 in prepaid and other expenses.

                  Management  believes  it has  sufficient  sources  of  working
capital to adequately meet the Company's needs through the end of 1998.

                                      -7-

<PAGE>



PART II - OTHER INFORMATION


Item 6 - EXHIBITS AND REPORTS ON FORM 8-K

(a)        Exhibits:

           Number                   Description

                27           Financial Data Schedule

(b)        Reports on Form 8-K

           No reports on Form 8-K were filed during the quarter  ended March 31,
1998.

                                      -8-



<PAGE>


                                   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.

                                                   CAPITAL BEVERAGE CORPORATION



Date: May 12, 1998                 /s/ Carmine N. Stella
                                       ----------------------
                                       Carmine N. Stella, President and
                                       Chief Executive Officer,
                                       as  Registrant's duly authorized officer



                                   /s/ Carol Russell
                                       ----------------------
                                       Carol Russell,
                                       Secretary and Treasurer


                                      -9-