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, 2002
                                       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, Erie Basin, Building #302, 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 August 15, 2002 was 3,178,409 shares.

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                          CAPITAL BEVERAGE CORPORATION
                                   FORM 10-QSB
                                  June 30, 2002

                                      INDEX
                                                                          PAGE
                                                                         NUMBER

PART I.  FINANCIAL INFORMATION


Item 1.  Consolidated Financial Statements (Unaudited)

           Balance Sheet as of June 30, 2002                                3

           Statement of Operations for the three and six-months
            ended June 30, 2002 and 2001                                    4

           Statement of Cash Flows for the six-months
            ended June 30, 2002 and 2001                                    5

           Notes to Consolidated Financial Statements                       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 AND SUBSIDIARY

                     d/b/a DIVERSIFIED DISTRIBUTORS NETWORK

                           CONSOLIDATED BALANCE SHEET

                                  JUNE 30, 2002
                                  (Unaudited)


                                     ASSETS

CURRENT ASSETS:
 Cash                                                             $     319,375
 Accounts receivable - net of allowance for
 doubtful accounts of $127,580                                          528,526
 Inventories                                                          2,565,960
 Prepaid expenses and other current assets                               28,048
                                                                   -------------
         TOTAL CURRENT ASSETS                                         3,441,909

PROPERTY AND EQUIPMENT                                                  267,390

DISTRIBUTION LICENSE                                                  4,358,462

OTHER ASSETS                                                            125,900
                                                                   -------------

                                                                  $   8,193,661
                                                                   =============

                      LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES:
 Cash overdraft                                                   $     805,737
 Accounts payable                                                     2,084,592
 Accrued expenses and taxes                                              91,487
 Current portion of long-term debt                                    2,788,034
 Accrued dividends on preferred stock                                   100,000
                                                                   -------------
         TOTAL CURRENT LIABILITIES                                    5,869,850
                                                                   -------------

CAPITAL LEASE OBLIGATIONS                                               184,226

LONG-TERM DEBT                                                        1,733,668

STOCKHOLDERS' EQUITY:
 Preferred stock, no shares issued and outstanding                          -
 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                                                 (5,345,035)
                                                                   -------------
         TOTAL STOCKHOLDERS' EQUITY                                     405,917
                                                                   -------------
                                                                  $   8,193,661
                                                                   =============


     The accompanying notes are an integral part of the financial statements

                                        3

<PAGE>

                  CAPITAL BEVERAGE CORPORATION AND SUBSIDIARY

                     d/b/a DIVERSIFIED DISTRIBUTORS NETWORK

                      CONSOLIDATED STATEMENTS OF OPERATIONS



                          Three Months Ended June 30,  Six Months Ended June 30,
                          ---------------------------  -------------------------
                                 2002        2001          2002          2001
                              ----------  -----------   -----------  -----------
                              (Unaudited) (Unaudited)   (Unaudited)  (Unaudited)


SALES                       $ 7,847,572  $ 3,260,031  $ 13,922,625  $ 5,892,599

COST OF GOODS SOLD            6,022,093    2,379,187    10,579,412    4,533,716
                             -----------  -----------   ----------   -----------

GROSS PROFIT                  1,825,479      880,844     3,343,213    1,358,883
                             -----------  -----------   -----------  -----------

OPERATING EXPENSES
 Selling and delivery           240,745      221,842       662,914      454,862
 General and administrative   1,845,617      823,201     3,439,614    1,390,162
                              ----------  -----------   -----------  -----------
                              2,086,362    1,045,043     4,102,528    1,845,024
                              ----------  -----------   -----------  -----------

LOSS FROM OPERATIONS           (260,883)    (164,199)     (759,315)    (486,141)

INTEREST EXPENSE               (127,910)     (33,862)     (251,212)     (48,910)

INTEREST INCOME                     -             10         2,302          130

CUMULATIVE EFFECT OF CHANGE
 IN ACCOUNTING PRINCIPLE            -            -        (860,000)         -
                              ----------  -----------   -----------  -----------

NET LOSS                     $ (388,793) $  (198,051) $ (1,868,225) $  (534,921)
                              ==========  ===========   ===========  ===========


LOSS PER COMMON SHARES -
 BASIC AND DILUTED:

 NET LOSS BEFORE CUMULATIVE
  EFFECT OF CHANGE
  IN ACCOUNTING PRINCIPLE   $    (0.12) $     (0.07)  $     (0.32) $     (0.20)
 CUMULATIVE EFFECT OF CHANGE
  IN ACCOUNITNG PRINCIPLE   $      -    $       -     $     (0.27) $       -
                             ----------  -----------   -----------  -----------
NET LOSS                    $    (0.12) $     (0.07)  $     (0.59) $     (0.20)
                             ==========  ===========   ===========  ===========

WEIGHTED AVERAGE NUMBER
 OF COMMON SHARES             3,178,409    2,760,827     3,178,409    2,719,845
                             ==========  ===========   ===========  ===========





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


                                        4

<PAGE>

                   CAPITAL BEVERAGE CORPORATION AND SUBSIDIARY

                     d/b/a DIVERSIFIED DISTRIBUTORS NETWORK

                            STATEMENTS OF CASH FLOWS


                                                    Six Months Ended June 30,
                                                    ----------------------------
                                                         2002            2001
                                                    -----------      -----------
                                                     (Unaudited)     (Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
 Net loss                                          $(1,868,225)      $ (534,921)
                                                    -----------       ----------
 Adjustments to reconcile net loss to
  net cash used in operating activities:
   Depreciation and amortization                        59,395          121,217
   Bad Debts                                               -                151
   Change in accounting principle                      860,000

 Changes in assets and liabilities:
  Accounts receivable                                 (147,336)         (50,825)
  Inventories                                         (651,068)        (185,204)
  Prepaid expenses                                     (18,797)         (71,516)
  Deferred expenses                                        -            (10,284)
  Other assets                                          19,147           24,020
  Accounts payable and accrued expenses               (261,890)         548,009
  Cash overdraft                                       805,737            9,143
                                                    -----------       ----------
   Total adjustments                                   665,188          384,711
                                                    -----------       ----------

NET CASH USED IN OPERATING ACTIVITIES               (1,203,037)        (159,353)
                                                    -----------       ----------

CASH FLOWS FROM INVESTING ACTIVITIES
     Capital expenditures                              (39,960)             -
     Cash acquired in acquisition                          -             38,824
                                                    -----------       ----------
NET CASH (USED IN) PROVIDED BY INVESTING               (39,960)          38,824
ACTIVITIES                                          -----------       ----------

CASH FLOWS FROM FINANCING ACTIVITIES:
     Principal payments of capital lease
      obligations                                      (25,184)         (19,907)
     Due to officer                                    (19,148)             -
     Payments of long-term debt                       (504,722)         (39,629)
     Payment of dividends                              (25,000)         (25,000)
     Notes payable                                    (136,361)           8,982
                                                    -----------       ----------
NET CASH PROVIDED BY (USED IN) FINANCING              (710,415)         (75,554)
 ACTIVITIES                                         -----------       ----------

NET DECREASE IN CASH                                (1,953,411)        (186,940)

CASH - BEGINNING OF PERIOD                           2,272,786          191,342
                                                    -----------       ----------

CASH - END OF PERIOD                               $   319,375       $    4,402
                                                    ===========       ==========

SUPPLEMENTAL DISCLOSURE OF CASH FLOW
     INFORMATION:
         Cash paid for interest                    $   251,212       $   55,713
                                                    ===========       ==========

SUPPLEMENTAL NON-CASH INVESTING AND
 FINANCING ACTIVITIES:
     Capital lease obligations                     $      -          $  180,942
                                                    ===========       ==========




     The accompanying notes are an integral part of the financial statements

                                        5

<PAGE>

                          CAPITAL BEVERAGE CORPORATION
                     d/b/a Diversified Distributors Network

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                                  June 30, 2002

                                   (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  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.  DISTRIBUTION LICENSE

               Effective  January 1, 2002, the Company adopted SFAS Nos. 141 and
          142. SFAS 142  eliminates  amortization  of goodwill and certain other
          intangible   assets,   but  requires  annual  testing  for  impairment
          (comparison  of fair market  value to carrying  value).  Fair value is
          estimated  using the present  value of expected  future cash flows and
          other  measures.   The  Company  used  a  discount  rate  of  6%.  The
          transitional  impairment test for the distribution  rights resulted in
          an non-cash  charge of $860,000 in the first quarter of 2002 which was
          recorded as a  cumulative  effect of change in  accounting  principle.
          Pursuant to SFAS 142 an impairment test was performed during the first
          quarter of 2002. The  impairment  test concludes that the Company will
          recover  the full  amount of the  distribution  license  over 20 years
          based on forecasts  which begin with actual sales as of April 30, 2002
          which  increase  5%  annually   thereafter  for  increased  sales  and
          inflation.

               The Company acquired these exclusive rights to distribute  within
          the five  boroughs  of New  York  City as part of the  agreement  with
          Prospect in May 2001.  The rights  consist of the Pabst  brands  which
          make up  approximately  58% of sales and  include  brand names such as
          Colt 45,  Champale and Old Milwaukee.  The  Pittsburgh  brands make up
          approximately 16% of sales and include brand names such as Nighflight,
          Mustang  Lager and  Primetime.  Other  brands make up 26% of sales and
          consist mostly of Hansens Energy Drinks.  The Company  determined that
          these  rights  have  an  indefinite  life  because  the  terms  of the
          agreements are indefinite.  Furthermore, the franchise law of New York
          State, states that any terminated distributor is entitled to get "fair
          market value" for the brand distribution rights.

                                       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

     Net  sales  for the  six  months  ended  June  30,  2002  were  $13,922,625
reflecting an increase of  $8,030,026  or 136% from  $5,892,599 of net sales for
the six months  ended June 30,  2001.  The increase in the six months ended June
30, 2002 resulted  primarily from the  acquisition of Prospect  Beverage Inc. in
June, 2001.

     Cost of sales was  $10,579,412 or 76% of net sales for the six month period
in 2002,  as compared to $4,533,716 or 77% of net sales for the six month period
ended in 2001.  The decrease in cost of goods sold as a percentage  of sales for
the six months  ended June 30,  2002,  was due  primarily to the addition of new
brands  which  were  added  to our  portfolio  in the  acquisition  of  Prospect
Beverages, Inc. in June of 2001, specifically the Colt 45 label.

     Selling, general and administrative expenses for the six-month period ended
June 30, 2002 were  $4,102,528 as compared to $1,845,024 for the respective 2001
period.  The increase in the six months ended June 30, 2002 was due primarily to
the costs incurred in the acquisition of Prospect Beverages Inc., as well as the
increase in costs to deliver the higher sales volume.

     Interest  expense for the six-month  period ended June 30,2002 was $251,212
as compared to $48,910  for the  respective  2001  period.  The  increase in the
six-month  period ended June 30,2002 was due  primarily to interest  paid on the
new CBC Bank line of credit and additional  leases acquired with the acquisition
in June of 2001.

     Interest income for the six-month  period ended June 30, 2002 was $2,302 as
compared to $130 for the respective  2001 period.  The increase in the six-month
period resulted from interest earned on the escrow funds relating to the sale of
the Miller rights.

                                       7
<PAGE>

     Cumulative  effect of change  in  accounting  principle  of  $860,000  is a
write-down of the distribution  license based on the impairment test pursuant to
SFAS 142.

      Liquidity and Capital Resources

     Cash  used in  operations  for the six  months  ended  June  30,  2002  was
$1,203,037.  The increase in inventories of $651,068 was due to higher purchases
of inventory caused by the additional  products added to our product line due to
the acquisition. Accounts payable and accrued expense increased by $261,890

     Working  capital  decreased  from  $(1,037,327)  at  December  31,  2001 to
$(2,427,942) at June 30, 2002 due to the operating loss of the Company.

     At June 30, 2002, the Company's  primary sources of liquidity were $319,375
in cash, $528,526 in accounts receivable and $2,565,960 in inventories.

     Management  believes  it has  sufficient  sources  of  working  capital  to
adequately meet the Company's needs through the end of 2002.

    Critical Accounting Policies

     A summary of significant  accounting  policies is included in Note 2 to the
audited  consolidated  financial  statements  included in the  Company's  annual
report on Form 10-KSB for the year ended December 31, 2001.  Management believes
the  application of these policies on a consistent  basis enables the Company to
provide reliable and useful  information  about the Company's  operating results
and financial conditions.


                                       8
<PAGE>

PART II - OTHER INFORMATION


Item 1.  LEGAL PROCEEDINGS
         -----------------

                  Not applicable

Item 2.  CHANGES IN SECURITIES AND USE OF PROCEEDS
         -----------------------------------------

                  Not applicable

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:
                             99.1 Certification of Chief Executive Officer
                             99.2 Certification of Treasurer


                                       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 19, 2002               /s/Carmine N. Stella, President and
                                       Chief Executive Officer,
                                       as  Registrant's duly authorized officer



                                    /s/Carol Russell,
                                       Secretary and Treasurer








                                       10






















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