SECURITIES AND EXCHANGE COMMISSION

                             WASHINGTON, D.C. 20549

                                   FORM 10-QSB

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

                         For Quarter Ended June 30, 2001
                                       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.)

                  700 Columbia Street Brooklyn, New york 11231
                 -----------------------------------------------
               (Address of Principal Executive Office) (Zip Code)

                                 (718) 488-8500
                                 --------------
               (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 July 1, 2001 was 3,178,409 shares.


<PAGE>
                          CAPITAL BEVERAGE CORPORATION
                                   FORM 10-QSB
                                  June 30, 2001

                                      INDEX
                                                                          PAGE
                                                                         NUMBER

PART I.      FINANCIAL INFORMATION


Item 1.      Consolidated Financial Statements (Unaudited)

              Balance Sheet as of June 30, 2001                           2

              Statement of Operations for the three-months
               and six-months ended June 30, 2001 and 2000                3

              Statement of Cash Flows for the six-months
               ended June 30, 2001 and 2000                               4

             Notes to Consolidated Financial Statements                   5-6

Item 2.      Management's Discussion and Analysis or Plan of Operations   7-8

PART II.     OTHER INFORMATION

Item 6.      Exhibits and reports on Form 8-K                              9

Signatures                                                                10



<PAGE>

                          CAPITAL BEVERAGE CORPORATION
                           CONSOLIDATED BALANCE SHEET
                                  JUNE 30, 2001
                                   (Unaudited)



                                     ASSETS

CURRENT ASSETS:
 Cash                                                             $     4,402
 Accounts receivable - trade net of allowance of $83,000              663,135
 Inventories                                                        2,340,000
 Prepaid expenses and other                                            91,774
                                                                  -------------
    TOTAL CURRENT ASSETS                                            3,099,311

PROPERTY AND EQUIPMENT, less accumulated depreciation of $42,447      275,520

OTHER ASSETS:
 Intangible assets, less accumulated amortization of $680,000       5,835,885
 Deferred expenses                                                    225,539
 Other assets                                                         111,290
                                                                  -------------
                                                                  $ 9,547,545
                                                                  =============

                      LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES:
 Accounts payable                                                 $ 2,495,152
 Cash overdraft                                                         9,143
 Accrued expenses and taxes                                           207,861
 Notes payable                                                      4,858,980
 Current portion of long-term debt                                     84,156
 Current portion of capital lease obligations                          44,415
 Accrued dividends on preferred stock                                 175,000
                                                                  -------------
    TOTAL CURRENT LIABILITIES                                       7,874,707
                                                                  -------------

CAPITAL LEASE OBLIGATIONS                                             144,698

LONG-TERM DEBT                                                        361,467

STOCKHOLDERS' EQUITY:
 Common stock, $ .001 par value; authorized 20,000,000 shares;
  issued and outstanding 3,178,409 shares                               3,179
 Additional paid-in capital                                         5,747,773
 Accumulated deficit                                               (4,584,279)
                                                                  -------------
    TOTAL STOCKHOLDERS' EQUITY                                      1,166,673
                                                                  -------------
                                                                  $ 9,547,545
                                                                  =============











    The accompanying notes are an integral part of the financial statements.
                                        2
<PAGE>
                          CAPITAL BEVERAGE CORPORATION


                      CONSOLIDATED STATEMENTS OF OPERATIONS


                          Three Months Ended June 30,  Six Months Ended June 30,
                          ---------------------------  -------------------------
                            2001             2000         2001         2000
                          ---------     -------------  ----------  -------------
                         (Unaudited)     (Unaudited)  (Unaudited)   (Unaudited)


SALES                   $  3,260,031     $ 4,614,009    $5,892,599   $8,684,829

COST OF GOODS SOLD         2,379,187       3,749,819     4,533,716    7,227,615
                           ---------     -------------  ----------  ------------

GROSS PROFIT                 880,844         864,190     1,358,883    1,457,214
                           ---------     -------------  ----------  ------------

OPERATING EXPENSES
 Selling and delivery        221,842         408,899       454,862      784,657
 General and administrative  823,201         476,256     1,390,162      967,439
                           ---------     -------------  ----------  ------------
                           1,045,043         885,155     1,845,024    1,752,096
                           ---------     -------------  ----------  ------------

LOSS FROM OPERATIONS        (164,199)        (20,965)     (486,141)    (294,882)

INTEREST EXPENSE             (33,862)        (12,569)      (48,910)     (25,298)

INTEREST INCOME                   10           8,560           130       19,230
                           ---------     -------------  ----------  ------------

NET LOSS                    (198,051)        (24,974)     (534,921)    (300,950)

PREFERRED STOCK DIVIDENDS       -            (21,000)         -         (42,000)
                           ---------     -------------  ----------  ------------

NET LOSS APPLICABLE TO
 COMMON SHAREHOLDERS    $   (198,051)    $   (45,974)   $ (534,921)  $ (342,950)
                           =========     =============  ==========  ============

LOSS PER  COMMON SHARE -
 BASIC AND DILUTED      $      (0.07)    $     (0.02)   $    (0.20)  $    (0.14)
                           =========     =============  ==========  ============

WEIGHTED AVERAGE NUMBER
 OF COMMON SHARES          2,760,827       2,378,409     2,719,845    2,378,409
                           =========     =============   =========  ============











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

                                        3
<PAGE>
                          CAPITAL BEVERAGE CORPORATION

                      CONSOLIDATED STATEMENT OF CASH FLOWS
                                   (Unaudited)


                                                     Six Months Ended June 30,
                                                  ------------------------------
                                                      2001             2000
                                                  ------------     -------------
                                                   (Unaudited)      (Unaudited)

CASH FLOWS FROM OPERATING ACTIVITIES:
 Net loss                                         $ (534,921)      $ (300,950)
                                                  ------------     -------------
 Adjustments to reconcile net loss to
  net cash (used in) provided by
  operating activities:

   Depreciation and amortization                     121,217           88,933
   Bad debts                                             151             -

 Changes in assets and liabilities:
  Increase in accounts receivable                    (50,825)        (282,237)
  Increase in inventories                           (185,204)          (2,123)
  Increase in prepaid expenses                       (71,516)         (56,476)
  Increase in deferred expenses                      (10,284)            -
  Decrease in other assets                            24,020           36,567
  Increase in accounts payable and
   accrued expenses                                  548,009          638,829
                                                  ------------     -------------
                                                     375,568          423,493
                                                  ------------     -------------
NET CASH (USED IN) PROVIDED BY
 OPERATING ACTIVITIES                               (159,353)         122,543
                                                  ------------     -------------

CASH FLOWS FROM INVESTING ACTIVITIES
 Capital expenditures                                   -             (20,549)
 Cash overdraft                                        9,143             -
 Cash acquired in acquisition                         38,824             -
                                                  ------------     -------------
NET CASH (USED IN) PROVIDED BY
 INVESTING  ACTIVITIES                                47,967          (20,549)
                                                  ------------     -------------

CASH FLOWS FROM FINANCING ACTIVITIES:
 Principal payments of capital lease
  obligations                                        (19,907)          16,165
 Payments of long-term debt                          (39,629)            -
 Payment of dividends                                (25,000)            -
 Increase (decrease) in  notes payable                 8,982          (36,342)
                                                  ------------     -------------
NET CASH USED IN BY FINANCING ACTIVITIES             (75,554)         (20,177)
                                                  ------------     -------------

NET (DECREASE) INCREASE IN CASH                     (186,940)          81,817

CASH - BEGINNING OF PERIOD                           191,342          897,934
                                                  ------------     -------------

CASH - END OF PERIOD                              $    4,402       $  979,751
                                                  ============     =============

SUPPLEMENTAL DISCLOSURE OF CASH FLOW
 INFORMATION:

 Cash paid for interest                           $   48,910       $   25,298
                                                  ============     =============

 Cash paid for income taxes                       $    3,096       $     -
                                                  ============     =============











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

                                        4
<PAGE>
                          CAPITAL BEVERAGE CORPORATION

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                                  June 30, 2001

                                   (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.

2.       FUTURE EFFECTS OF RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

                  In June 2001, the Financial Accounting Standards Board issued
         Statements of Financial Accounting Standards No. 141, Business
         Combinations, and No. 142, Goodwill and Other Intangible Assets,
         effective for fiscal years beginning after December 15, 2001. Under the
         new rules, goodwill and intangible assets deemed to have indefinite
         lives will no longer be amortized but will be subject to annual
         impairment tests in accordance with the Statements. Other intangible
         assets will continue to be amortized over their useful lives. The
         Company will apply the new rules on accounting for goodwill and other
         intangible assets beginning in the first quarter of 2002. Application
         of the non- amortization provisions of the Statement are not expected
         to have a material effect on the Company's financial position or
         operations.

3.       ACQUISITION

                  Capital Beverage Corporation (the "Company") entered into an
         Asset Purchase Agreement, dated May 4, 2001 (the "Agreement"), to
         acquire certain assets and liabilities of Prospect Beverages Inc., a
         New York corporation ("Prospect"). Prospect is a Brooklyn based Pabst
         Distributor of Colt-45 Malt Liquor and other beverages.

                  Pursuant to the Agreement, the Company purchased all of the
         assets of Prospect's business which relate to Prospect's business of
         distributing beverages, including among other things, beer distribution
         rights, properties, rights, leases, interests, goods and customer lists
         of Prospect. The purchase price of the assets consists of the
         assumption by the Company of

                                       5
<PAGE>


         certain liabilities of Prospect and the issuance to Prospect
         shareholders of five hundred thousand (500,000) shares of the common
         stock of the Company.

                  Pabst Brewing Company, the key supplier approved the transfer
         of the distribution rights for the Pabst Brewing Company brands from
         Prospect to the Company.

                  On June 29, 2001, the Company closed on the acquisition of the
         assets of Prospect. The common stock issued to Prospect shareholders
         was recorded at $.76 ($.84 closing price on May 4, 2001 less a 10%
         discount) per share.

                  The acquisition was recorded using the purchase method of
         accounting by which the assets are valued at fair market value at the
         date of acquisition. The following table summarizes the acquisition.


Purchase price                           $               380,000
Liabilities assumed                                    6,267,358
Fair value of assets acquired                         (6,897,010)
                                               ------------------
Reduction of long-term assets            $              (249,652)
                                               ==================

                  The following unaudited pro-forma condensed statement of
         operations for the six months ended June 30, 2001 and 2000 reflects the
         combined results of Capital Beverage and Prospect as if the acquisition
         had occurred on January 1, 2000.


                                    June 30, 2001      June 30, 2000
                                   ---------------    ---------------
Revenues                     $        14,798,937    $  17,961,254
                                   ---------------    ---------------
Gross Profit                           3,157,031        3,330,081
                                   ---------------    ---------------
Operating Expenses                     3,869,967        3,861,182
                                   ---------------    ---------------
Net Loss                     $          (962,723)   $    (875,459)
                                   ---------------    ---------------
Net Loss Per Share           $             (0.30)   $       (0.30)
                                   ---------------    ---------------




                                       6
<PAGE>


           MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN 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.

           Statements in this Form 1O-QSB that are not statements of historical
  or current fact constitute "forward-looking statements" within the meaning of
  the Private Securities Litigation Reform Act of 1995. Such forward-looking
  statements involve known and unknown risks, uncertainties and other unknown
  factors that could cause the actual results of the Company to be materially
  different from the historical results or from any future results expressed or
  implied by such forward-looking statements. In addition to statements that
  explicitly describe such risks and uncertainties, readers are urged to
  consider statements labeled with the terms "believes," "belief," "expects,"
  "intends," "anticipates" or "plans" to be uncertain and forward-looking. The
  forward- looking statements contained herein are also subject generally to
  other risks and uncertainties that are described from time to time in the
  Company's reports and registration statements filed with the Securities and
  Exchange Commission.

  Results of Operations

        Sales for the six months ended June 30, 2001 were $5,892,599 reflecting
  a decrease of $2,792,230 or 32% from the $8,684,829 of net sales for the six
  months ended June 30, 2000. The decrease in the six months ended June 30, 2001
  resulted from the removal of the popular Heineken brand. Cost of sales was
  $4,533,716 or 77% of net sales for the six-month period in 2001, as compared
  to $7,227,615 or 83% of net sales for the six month period ended in 2000. The
  decrease in cost of goods sold as a percentage of sales for the six months
  ended June 30,2001, is due primarily to the removal of the Heineken brand
  which was sold as a lead item at a lower gross margin than products in our
  primary brand portfolio.

        Selling, general and administrative expenses for the six-month period
  ended June 30, 2001 were $1,845,024 as compared to $1,752,096 for the
  respective 2000 period. The increase in the six months ended June 30, 2001was
  due primarily to the additional expenses incurred for the acquisition of
  Prospect Beverages, Inc., the Brooklyn based Colt 45 wholesaler for the 5
  boroughs of New York City. The acquisition was completed on June 29, 2001 and
  the result of this impact will be reflected in our next quarterly statement.

        Interest expense for the six-month period ended June 30, 2001 was
  $48,910 as compared to $25,298 for the respective 2000 period. The increase in
  the six-month period ended June 30, 2001 is due to additional leases acquired
  for additional fixed assets in fiscal 2000. Interest income for the six-month
  period ended June 30, 2001 was $130 as compared to $19,230 for the respective
  2000 period. The decrease in the six-month period resulted from the decrease
  in average cash balance invested in the Vista account.





                                        7

<PAGE>









      Liquidity and Capital Resources

               Cash used in operations for the six months ended June 30, 2001
      was $159,353. The increase in inventories of $185,204 was due to higher
      purchases of inventory for the summer season.

               Working capital decreased from $592,543 at December 31, 2000 to
      ($4,775,396) at June 30, 2001 as a result of the losses generated for the
      six month period ended June 30, 2001 and the incurrence of bank debt for
      the purchase of franchise rights.

               At June 30, 2001, the Company's primary sources of liquidity were
      $4,402 in cash, $663,135 in accounts receivable and $2,340,000 in
      inventories.

               Management believes it has sufficient sources of working capital
      to adequately meet the Company's needs through the end of 2000.



























                                        8

<PAGE>











PART II - OTHER INFORMATION


Item 1.      LEGAL PROCEEDINGS

                     Not applicable

Item 2.      CHANGES IN SECURITIES AND USE OF PROCEEDS

                On June 29, 2001, the Company issued 500,000 shares of its
             common stock in connection with the acquisition of Prospect
             Beverages, Inc. The shares of common stock were issued pursuant to
             Section 4(2) of the Securities Act of 1933. See "Managements
             Discussion and Analysis of Financial Condition".

Item 3.      DEFAULTS UPON SENIOR SECURITIES

                     Not applicable

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


                     Not applicable

Item 5.      OTHER INFORMATION

                     Not applicable

Item 6.      EXHIBITS AND REPORTS ON FORM 8-K


                     (a)        Exhibits:

                     Number                     Description

                         (b)                         Reports on Form 8-K

                     Form 8-K was filed on May 14, 2001 pertaining to the
                     acquisition of certain assets and liabilities of Prospect
                     Beverages Inc.

                                        9

<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: August 14, 2001                /s/Carmine N. Stella, President and
                                        Chief Executive Officer,
                                        as  Registrant's duly authorized officer



                                     /s/Carol Russell,
                                        Secretary and Treasurer





























                                       10