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 September 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.)

                 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 November 13, 2001 was 3,178,409 shares.



<PAGE>


                          CAPITAL BEVERAGE CORPORATION
                                   FORM 10-QSB
                               September 30, 2001

                                      INDEX
                                                                         PAGE
                                                                        NUMBER

PART I.      FINANCIAL INFORMATION


Item 1.      Consolidated Financial Statements (Unaudited)

              Balance Sheet as of September 30, 2001                      F-2

              Statement of Operations for the nine-months and
               three months ended September 30, 2001 and 2000             F-3

              Statement of Cash Flows for the nine-months
               ended September 30, 2001 and 2000                          F-4

             Notes to Financial Statements                                F-5

Item 2.      Management's Discussion and Analysis or Plan of Operations   1-2

PART II.     OTHER INFORMATION

Item 6.      Exhibits and reports on Form 8-K                              3

Signatures                                                                 4



<PAGE>
                           CAPITAL BEVERAGE CORPORATION
                           CONSOLIDATED BALANCE SHEET
                               SEPTEMBER 30, 2001
                                   (Unaudited)



                                     ASSETS

CURRENT ASSETS:
     Cash                                                         $       8,906
     Accounts receivable-trade,
      net of allowance for doubtful accounts of $83,000                 611,392
     Inventories                                                      3,139,751
     Prepaid expenses and other                                          28,084
                                                                   -------------
         TOTAL CURRENT ASSETS                                         3,788,133

PROPERTY AND EQUIPMENT,
 less accumulated depreciation of $109,004                              262,108

OTHER ASSETS:
     Intangible assets,
      less accumulated amortization of $992,887                       5,735,401
     Deferred expenses                                                  225,539
     Other assets                                                       131,736
                                                                   -------------

                                                                  $  10,142,917
                                                                   =============

                      LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES:
     Accounts payable                                             $   2,709,639
     Accrued expenses and taxes                                         154,905
     Cash overdraft                                                     537,738
     Current portion of long-term debt                                   86,448
     Current portion of capital lease obligations                        42,645
     Line of credit                                                   5,106,838
     Deposits payable                                                    15,000
     Accrued dividends on preferred stock                               150,000
                                                                   -------------
         TOTAL CURRENT LIABILITIES                                    8,803,213
                                                                   -------------

CAPITAL LEASE OBLIGATIONS                                               137,081

LONG-TERM DEBT                                                          338,708

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                                             (4,887,037)
                                                                   -------------
         TOTAL STOCKHOLDERS' EQUITY                                     863,915
                                                                   -------------

                                                                  $  10,142,917
                                                                   =============








    The accompanying notes are an integral part of the financial statements.
                                        2

<PAGE>

                          CAPITAL BEVERAGE CORPORATION


                      CONSOLIDATED STATEMENTS OF OPERATIONS


<TABLE>
<CAPTION>
                                         Three Months Ended September 30,                Nine Months Ended September 30,
                                  ----------------------------------------------   ----------------------------------------------
                                            2001                     2000                    2001                     2000
                                  -----------------------------------------------------------------------------------------------
                                          (Unaudited)            (Unaudited)              (Unaudited)             (Unaudited)


<S>                           <C>                      <C>                     <C>                      <C>
SALES                         $            7,717,846   $            4,560,450  $           13,610,445   $           13,245,279

COST OF GOODS SOLD                         5,738,187                4,071,027              10,271,903               11,298,642
                                  ---------------------    ---------------------   ---------------------    ---------------------

GROSS PROFIT                               1,979,659                  489,423               3,338,542                1,946,637
                                  ---------------------    ---------------------   ---------------------    ---------------------

OPERATING EXPENSES:
 Selling and delivery                        512,049                  406,726                 966,911                1,191,383
 General and administrative                1,620,755                  527,358               3,010,917                1,494,797
                                  ---------------------    ---------------------   ---------------------    ---------------------
                                           2,132,804                  934,084               3,977,828                2,686,180
                                  ---------------------    ---------------------   ---------------------    ---------------------

LOSS FROM OPERATIONS                        (153,145)                (444,661)               (639,286)                (739,543)

INTEREST EXPENSE                            (149,616)                 (26,646)               (198,526)                 (40,190)

OTHER INCOME                                    -                     100,000                    -                     100,000

INTEREST INCOME                                 -                       9,987                     130                   27,331
                                  ---------------------    ---------------------   ---------------------    ---------------------

NET LOSS                                    (302,761)                (361,320)               (837,682)                (652,402)

PREFERRED STOCK DIVIDENDS                       -                       3,500                    -                     (45,500)
                                  ---------------------    ---------------------   ---------------------    ---------------------

NET LOSS APPLICABLE TO
 COMMON SHAREHOLDERS          $             (302,761)  $             (357,820) $             (837,682)  $             (697,902)
                                  =====================    =====================   =====================    =====================

LOSS PER  COMMON SHARE
 - BASIC AND DILUTED          $                (0.10)  $                (0.13) $                (0.29)  $                (0.29)
                                  =====================    =====================   =====================    =====================

WEIGHTED AVERAGE NUMBER
 OF COMMON SHARES                           3,178,409                2,678,409               2,874,380                2,378,409
                                  =====================    =====================   =====================    =====================



</TABLE>








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

                                        3
<PAGE>
                          CAPITAL BEVERAGE CORPORATION

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (Unaudited)


                                                 Nine Months Ended September 30,
                                                 -------------------------------
                                                      2001              2000
                                                 -------------------------------
                                                   (Unaudited)      (Unaudited)

CASH FLOWS FROM OPERATING ACTIVITIES:
 Net loss                                      $    (837,682)   $      (652,402)
                                                 --------------  ---------------
 Adjustments to reconcile net loss
  to net cash provided by operating
  activities:
   Depreciation and amortization                     233,914            139,609

 Changes in assets and liabilities:
  Accounts receivable                                 (1,069)           (60,796)
  Inventories                                        984,955            135,477
  Prepaid expenses                                     7,826           (197,112)
  Deferred expenses                                   10,284               -
  Other assets                                        (3,574)            36,567
  Accounts payable and accrued expenses             (709,540)           364,323
  Deposits payable                                    15,000               -
                                                 --------------  ---------------
                                                     537,796            418,068
                                                 --------------  ---------------

NET CASH USED IN OPERATING ACTIVITIES               (299,886)          (234,334)
                                                 --------------  ---------------

CASH FLOWS FROM INVESTING ACTIVITIES
 Cash overdraft                                      537,738               -
 Capital expenditures                                   -                (4,121)
                                                 --------------  ---------------
NET CASH USED IN INVESTING ACTIVITIES                537,738             (4,121)
                                                 --------------  ---------------


CASH FLOWS FROM FINANCING ACTIVITIES:
 Principal payments of
  capital lease obligations                          (29,294)           (10,929)
 Payment of accrued dividends
  on preferred stock                                 (50,000)          (399,613)
 Increase in  note payable                           196,744            (17,974)
                                                 --------------  ---------------
NET CASH USED IN BY FINANCING ACTIVITIES             117,450           (428,516)
                                                 --------------  ---------------

NET DECREASE IN CASH                                (182,436)          (666,971)

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

CASH - END OF PERIOD                           $       8,906    $       230,963
                                                 ==============  ===============

SUPPLEMENTAL DISCLOSURE OF CASH FLOW
 INFORMATION:

 Cash paid for interest                        $     198,526    $        40,190
                                                 ==============  ===============

 Cash paid for income taxes                    $        -       $          -
                                                 ==============  ===============











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

                                        4
<PAGE>

                         CAPITAL BEVERAGE CORPORATION

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                               September 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.       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 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 15, 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.



                                        5

<PAGE>



                  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 nine months ended September 30, 2001 and 2000
         reflects the combined results of Capital Beverage and Prospect as if
         the acquisition had occurred on January 1, 2000.

<TABLE>
<CAPTION>

                                          September 30,                     September 30,
                                              2001                               2000
                                   ---------------------------        --------------------------
<S>                                             <C>                               <C>
Revenues                     $                      22,516,783 $                      28,011,380
                                   ---------------------------        --------------------------
Gross Profit                                         5,136,690                         3,498,554
                                   ---------------------------        --------------------------
Operating Expenses                                   6,002,771                         5,109,290
                                   ---------------------------        --------------------------
Net Loss                     $                     (1,265,484) $                     (1,746,459)
                                   ---------------------------        --------------------------
Net Loss Per Share           $                          (0.40) $                          (0.55)
                                   ---------------------------        --------------------------


</TABLE>




                                        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 nine months ended September 30, 2001 were $13,610,445,
  reflecting an increase of $365,166 or 3% from the $13,245,279 of net sales for
  the nine months ended September 30, 2000. The increase in the nine months
  ended September 30, 2001 resulted from the acquisition of Prospect Beverages
  Inc.

        Cost of sales was $10,271,903 or 76% of net sales for the nine month
  period in 2001, as compared to $11,298,642 of 86% of net sales for the nine
  month period ended in 2000. The decrease in cost of goods sold as a percentage
  of sales for the nine months ended September 30, 2001, was due primarily to
  better margins attributed to the selling of Colt 45 and other Pabst products
  acquired in the acquisition of Prospect Beverages, Inc.

        Selling, general and administrative expenses for the nine-month period
  ended September 30, 2001 were $3,977,828 as compared to $2,686,180 for the
  respective 2000 period. The increase in the nine months ended September 30,
  2000 was due primarily to the acquisition of Prospect Beverages, Inc.

        Interest expense for the nine-month period ended September 30, 2001 was
  $198,526 as compared to $40,190 for the respective 2000 period. The increase
  in the nine-month period ended September 30, 2001 was due primarily to
  interest paid on the CBC note, which was added to complete the acquisition in
  June 2001.

        Interest income for the nine month period ended September 30, 2001 was
  $130 as compared to $27,331 for the respective 2000 period. The decrease in
  the nine month period resulted from the decrease in average cash balance
  invested in the Vista account.



                                        1

<PAGE>



      Liquidity and Capital Resources

               Cash used in operations for the nine months ended September 30,
      2001 was $299,886. The increase in inventories of $984,955 was due to
      higher purchases of inventory caused by the additional products added to
      our product line to the acquisition.

               Working capital decreased from $592,543 at December 31, 2000 to
      ($5,015,080) at September 30, 2001 as a result of the losses generated for
      the nine month period ended September 30, 2001 and the incurrence of bank
      debt for the purchase of franchise rights from Prospect.

               At September 30, 2001, the Company's primary sources of liquidity
      were $8,906 in cash, $611,392 in accounts receivable and $3,139,751 in
      inventories.

               Management believes it has sufficient sources of working capital
      to adequately meet the Company's needs through the end of 2001.








                                        2

<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:

                     Number                     Description

                         (a)                         Reports on Form 8-K

                     Form 8-K was filed on July 16, 2001 pertaining to the
                     acquisition of certain assets and liabilities of Prospect
                     Beverages Inc.

                                        3

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



                                        /s/Carol Russell,
                                           Secretary and Treasurer






                                        4