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 March 31, 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 May 15, 2002 was 3,178,409 shares.

<PAGE>

                          CAPITAL BEVERAGE CORPORATION
                                   FORM 10-QSB
                                 March 31, 2002

                                      INDEX
                                                                      PAGE
                                                                     NUMBER

PART I.  FINANCIAL INFORMATION


Item 1.  Consolidated Financial Statements (Unaudited)

           Balance Sheet as of March 31, 2002                            3

           Statement of Operations for the three-months
              ended March 31, 2002 and 2001                              4

           Statement of Cash Flows for the three-months
              ended March 31, 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
                     d/b/a Diversified Distributors Network

                           CONSOLIDATED BALANCE SHEET

                                 MARCH 31, 2002
                                   (Unaudited)



                                     ASSETS

CURRENT ASSETS:
     Cash                                                  $             27,425
     Accounts receivable - trade, net of
       allowance for doubtful accounts of $346,106                      455,072
     Inventories                                                      3,501,657
     Prepaid expenses and other                                           9,624
                                                             -------------------
         TOTAL CURRENT ASSETS                                         3,993,778

PROPERTY AND EQUIPMENT, less accumulated depreciation
       of $113,829                                                      270,001

OTHER ASSETS:
     Intangible assets                                                5,218,462
     Other assets                                                       147,037
                                                             -------------------
                                                                    $ 9,629,278
                                                             ===================

                      LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES:
     Cash overdraft                                        $            759,237
     Accounts payable                                                 2,179,596
     Accrued expenses and taxes                                         167,527
     Revolving loans                                                  1,671,625
     Due to officer                                                       5,148
     Deposits payable                                                    15,000
     Current portion of long-term debt                                  836,448
     Current portion of capital lease obligations                        48,549
     Accrued dividends on preferred stock                               100,000
                                                             -------------------
         TOTAL CURRENT LIABILITIES                                    5,783,130
                                                             -------------------

CAPITAL LEASE OBLIGATIONS                                               145,020

LONG-TERM DEBT                                                        2,046,420

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                                             (4,096,244)
                                                             -------------------
         TOTAL STOCKHOLDERS' EQUITY                                   1,654,708
                                                             -------------------
                                                           $          9,629,278
                                                             ===================



    The accompanying notes are an integral part of the financial statements.
                                        3
<PAGE>

                          CAPITAL BEVERAGE CORPORATION

                     d/b/a Diversified Distributors Network

                      CONSOLIDATED STATEMENTS OF OPERATIONS

                                                Three Months Ended March 31,
                                              ----------------------------------
                                                 2002                    2001
                                              ----------------------------------
                                             (Unaudited)            (Unaudited)

SALES                                     $   6,075,053        $      2,632,568

COST OF GOODS SOLD                            4,557,319               2,154,529
                                          -------------------   ----------------
GROSS PROFIT                                  1,517,734                 478,039
                                          -------------------   ----------------
OPERATING EXPENSES
     Selling and delivery                       422,169                 233,020
     General and administrative               1,593,997                 566,961
                                          -------------------   ----------------
                                              2,016,166                 799,981
                                          -------------------   ----------------
LOSS FROM OPERATIONS                           (498,432)               (321,942)

INTEREST EXPENSE                               (123,302)                (15,048)

INTEREST INCOME                                   2,302                     120
                                          -------------------   ----------------
NET LOSS                                  $    (619,432)        $      (336,870)
                                          ===================   ================

LOSS PER  COMMON SHARE -
  BASIC AND DILUTED                       $       (0.19)         $        (0.13)
                                           ==================   ================

WEIGHTED AVERAGE NUMBER OF COMMON SHARES      3,178,409               2,678,409
                                           ==================   ================




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

                                        4
<PAGE>

                          CAPITAL BEVERAGE CORPORATION
                     d/b/a Diversified Distributors Network

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>

                                                                Three Months Ended March 31,
                                                          ---------------------------------------------
                                                                  2002                    2001
                                                          ---------------------------------------------
                                                              (Unaudited)            (Unaudited)

CASH FLOWS FROM OPERATING ACTIVITIES:
<S>                                                      <C>                      <C>
     Net loss                                            $     (619,432)          $    (336,870)
                                                          ---------------------   ---------------------
     Adjustments to reconcile net loss to net cash
      used in operating activities:
         Depreciation and amortization                           16,824                  53,609

     Changes in assets and liabilities:
         Increase in accounts receivable                        (73,882)                (16,802)
         (Increase) decrease in inventories                  (1,586,765)                505,552
         (Increase) decrease  in prepaid expenses                  (373)                  3,073
         Increase in deferred expenses                                -                 (10,284)
         (Increase) decrease in other assets                     (1,990)                   (393)
         Increase in deposits payable                            15,000                       -
         Increase (decrease) in accounts payable and
           accrued expenses                                     (90,847)               (218,760)
                                                          ---------------------   ---------------------
                                                             (1,722,033)                315,995
                                                          ---------------------   ---------------------
NET CASH USED IN OPERATING ACTIVITIES                        (2,341,465)                (20,875)
                                                          ---------------------   ---------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
     Revolving loans                                            (13,058)                      -
     Payments to officer                                        (14,000)                      -
     Principal payments of capital lease obligations            (15,841)                (12,943)
     Payment of accrued dividends on preferred stock            (25,000)                      -
     Cash overdraft                                             759,237                       -
     Payment of long-term debt                                 (458,873)                      -
     Decrease in  note payable                                 (136,361)                (19,600)
                                                          ---------------------   ---------------------
NET CASH USED IN FINANCING ACTIVITIES                            96,104                 (32,543)
                                                          ---------------------   ---------------------
NET DECREASE IN CASH                                         (2,245,361)                (53,418)

CASH - BEGINNING OF PERIOD                                    2,272,786                 191,342
                                                          ---------------------   ---------------------
CASH - END OF PERIOD                                      $      27,425           $     137,924
                                                          =====================   =====================

SUPPLEMENTAL DISCLOSURE OF CASH FLOW
     INFORMATION:

     Cash paid for interest                               $     123,302  $               15,048
                                                          =====================   =====================
</TABLE>





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

                                        5
<PAGE>


                          CAPITAL BEVERAGE CORPORATION

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                                 March 31, 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.


                                       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 three months ended March 31, 2001 were $6,075,053
reflecting an increase of  $3,442,485  or 131% from  $2,632,568 of net sales for
the three months  ended March 31,  2001.  The increase in the three months ended
March 31, 2002 resulted primarily from the acquisition of Prospect Beverage Inc.
in June, 2001.

        Cost of sales was $4,557,319 or 75% of net sales for the three month
period in 2002,  as  compared  to  $2,154,529  or 82% of net sales for the three
month period  ended in 2001.  The decrease in cost of goods sold as a percentage
of sales for the three  months ended March 31,  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 three-month period
ended March 31, 2002 were  $2,016,166 as compared to $799,981 for the respective
2001  period.  The  increase  in the three  months  ended March 31, 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 three-month period ended March 31,2002 was
$123,302 as compared to $15,048 for the respective 2001 period.  The increase in
the three-month period ended March 31,2002 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 three-month period ended March 31, 2002 was
$2,302 as compared to $120 for the respective  2001 period.  The increase in the
three-month period resulted from interest earned on the escrow funds relating to
the sale of the Miller rights.

                                       7
<PAGE>

Liquidity and Capital Resources

         Cash used in operations for the three months ended March 31, 2002
was  $2,341,465.  The increase in  inventories  of $1,586,765  was due to higher
purchases of inventory  caused by the  additional  products added to our product
line due to the acquisition.

         Working capital decreased from $(1,037,327) at December 31, 2001
to $(1,789,352) at March 31, 2002 due to the operating loss of the Company.

         At March 31, 2002, the Company's primary sources of liquidity
were  $27,425  in cash,  $455,072  in  accounts  receivable  and  $3,501,657  in
inventories.

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




                                       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:      None







                                       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: May 15, 2002                          /s/Carmine N. Stella, President and
                                               Chief Executive Officer,
                                               as Registrant's duly authorized
                                               officer

                                            /s/Carol Russell,
                                               Secretary and Treasurer











                                       10


<PAGE>