UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10-Q


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


                  For the quarterly period ended June 30, 2006

                                       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.)

         120 Rio Vista Drive, Norwood, New Jersey                  07648
              (Address of principal executive offices)           (Zip Code)

                                 (201) 679-6752
              (Registrant's telephone number, including area code)

                                 Not Applicable
(Former name, former address and former fiscal year, if changed since last
 report)

                               ___________________


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 [ ]

Indicate by check mark whether the registrant is a large accelerated filer, an
accelerated filer, or a non-accelerated filer. See definition of "accelerated
filer and large accelerated filer" in Rule 12b-2 of the Exchange Act. (Check
one):

Large accelerated filer [ ]  Accelerated filer [ ]   Non-accelerated filer [X]

Indicate by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Act).
Yes [X]    No [ ]

The number of shares common stock, $.001 par value, outstanding as of August 14,
2006 was 3,792,045.

<PAGE>

                          CAPITAL BEVERAGE CORPORATION

                          QUARTERLY REPORT ON FORM 10-Q

                                TABLE OF CONTENTS
                                                                            Page
PART I - FINANCIAL INFORMATION
Item 1.    Financial Statements (Unaudited)
           Consolidated Balance Sheets.......................................3
           Consolidated Statements of Operations.............................4
           Consolidated Statements of Cash Flows.............................5
           Notes to Consolidated Financial Statements........................6
Item 2.    Management's Discussion and Analysis of Financial
           Condition and Results of Operations..............................10
Item 3.    Quantitative and Qualitative Disclosures About Market Risks......11
Item 4.    Controls and Procedures..........................................11

PART II - OTHER INFORMATION
Item 1.  - Legal Proceedings................................................12
Item 1A. - Risk Factors.....................................................12
Item 2   - Unregistered Sales of Equity Securities and Use of  Proceeds.....12
Item 3   - Defaults Upon Senior Securities..................................12
Item 4   - Submission of Matters to Vote of Securities Holders..............12
Item 5   - Other Information................................................12
Item 6.  - Exhibits and Reports on Form 8-K.................................12

Signatures

<PAGE>

PART I-FINANCIAL INFORMATION

Item 1. Financial Statements

                   CAPITAL BEVERAGE CORPORATION AND SUBSIDIARY

                           CONSOLIDATED BALANCE SHEETS

                                     ASSETS

                                                June 30,          December 31,
                                                  2006                2005
                                             ----------------    ---------------
                                               (Unaudited)
CURRENT ASSETS:
   Cash                                      $        21,540     $      131,738
   Restricted cash                                 1,367,051          2,013,600
   Other receivable - current portion                      -             54,213
                                             ----------------    ---------------
       TOTAL CURRENT ASSETS                        1,388,591          2,199,551

RESTRICTED CASH                                            -            500,000

OTHER ASSETS                                          11,771             65,984
                                             ----------------    ---------------

                                             $     1,400,362     $    2,765,535
                                             ================    ===============

                      LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES:
   Cash overdraft                            $             -     $          681
   Accounts payable                                1,154,789          1,531,794
   Accrued expenses and taxes                         23,685            754,221
   Federal tax payable                                60,000             85,000
   Capital lease obligations                          53,404             53,404
                                             ----------------    ---------------
       TOTAL CURRENT LIABILITIES                   1,291,878          2,425,100
                                             ----------------    ---------------

STOCKHOLDERS' EQUITY:
   Preferred stock, no shares issued and
   outstanding                                             -                  -
   Common stock, $.001 par value; authorized
   20,000,000 shares; issued and outstanding
   3,792,045 shares                                    3,793              3,793
   Additional paid-in capital                      5,986,249          5,986,249
   Accumulated deficit                            (5,881,557)        (5,649,607)
                                             ----------------    ---------------
       TOTAL STOCKHOLDERS' EQUITY                    108,485            340,435
                                             ----------------    ---------------

                                             $     1,400,362     $    2,765,535
                                             ================    ===============




                 See notes to consolidated financial statements.

                                        3
<PAGE>

                   CAPITAL BEVERAGE CORPORATION AND SUBSIDIARY

                      CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>


                                                 Three Months Ended June 30,        Six Months Ended June 30,
                                               -------------------------------   ------------------------------
                                                    2006             2005             2006            2005
                                               --------------   --------------   -------------   --------------
                                                 (Unaudited)       (Unaudited)      (Unaudited)     (Unaudited)

<S>                                            <C>              <C>              <C>             <C>
REVENUES                                       $           -    $           -    $          -    $           -
                                               --------------   --------------   -------------   --------------

COSTS AND EXPENSES:
    General and administrative                        56,601          235,968         123,524          464,863
    Bad debt reserve                                 108,426                -         108,426                -
                                               --------------   --------------   -------------   --------------
                                                     165,027          235,968         231,950          464,863
                                               --------------   --------------   -------------   --------------

LOSS FROM CONTINUING OPERATIONS                     (165,027)        (235,968)       (231,950)        (464,863)

DISCONTINUED OPERATIONS:
    Interest expense                                       -         (202,503)              -         (405,002)
    Loss from discontinued operations                      -         (288,265)              -         (406,981)
                                               --------------   --------------   -------------   --------------

NET LOSS                                       $    (165,027)   $    (726,736)   $   (231,950)   $   1,276,846)
                                               ==============   ==============   =============   ==============

NETLOSS PER SHARE - CONTINUING OPERATIONS
    Basic                                      $       (0.04)   $       (0.06)   $      (0.06)   $       (0.12)
                                               ==============   ==============   =============   ==============
    Diluted                                    $       (0.04)   $       (0.06)   $      (0.06)   $       (0.12)
                                               ==============   ==============   =============   ==============

NET LOSS PER SHARE - DISCONTINUED OPERATIONS
    Basic                                      $           -    $       (0.13)   $          -    $       (0.21)
                                               ==============   ==============   =============   ==============
    Diluted                                    $           -    $       (0.13)   $          -    $       (0.21)
                                               ==============   ==============   =============   ==============

NET LOSS PER SHARE
    Basic                                      $       (0.04)   $       (0.19)   $      (0.06)   $       (0.34)
                                               ==============   ==============   =============   ==============
    Diluted                                    $       (0.04)   $       (0.19)   $      (0.06)   $       (0.34)
                                               ==============   ==============   =============   ==============

WEIGHTED AVERAGE NUMBER OF SHARES:
    Basic                                          3,792,045        3,792,045       3,792,045        3,792,045
                                               ==============   ==============   =============   ==============
    Diluted                                        3,792,045        3,792,045       3,792,045        3,792,045
                                               ==============   ==============   =============   ==============

</TABLE>
                 See notes to consolidated financial statements.

                                        4
<PAGE>

                   CAPITAL BEVERAGE CORPORATION AND SUBSIDIARY

                            STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>

                                                                   Six Months Ended June 30,
                                                             ------------------------------------
                                                                   2006                2005
                                                             ----------------   -----------------
                                                                 (Unaudited)        (Unaudited)

CASH FLOWS FROM OPERATING ACTIVITIES:
<S>                                                          <C>                <C>
     Net loss from continuing operations                     $      (231,950)   $       (464,863)
                                                             ----------------   -----------------
     Adjustments to reconcile net loss from continuing
      operations to net cash used in operating activities:
           Bad debt reserve                                          108,426                   -
     Changes in discontinued operations:
        Loss from discontinued operations                                  -            (811,983)
        Depreciation and amortization                                      -              75,139
     Changes in discontinued assets and liabilities:
        Accounts receivable                                                -             281,553
        Inventories                                                        -             634,069
        Prepaid expenses                                                   -                 213
        Other assets                                                       -             163,539
        Deposits payable                                                   -              15,000
        Revolving loans                                                    -            (865,176)
        Proceeds from loan payable                                         -             350,531
        Payments of long-term debt                                         -             (13,643)
     Changes in assets and liabilities:
        Accounts payable                                            (377,005)            947,370
        Accrued expenses and taxes                                  (730,536)                  -
        Federal tax payable                                          (25,000)                  -
                                                             ----------------   -----------------
           Total adjustments                                      (1,024,115)            776,612
                                                             ----------------   -----------------

NET CASH (USED IN) PROVIDED BY OPERATING ACTIVITIES               (1,256,066)            311,749
                                                             ----------------   -----------------

CASH FLOWS FROM FINANCING ACTIVITIES:
     Cash overdraft                                                     (681)           (278,171)
     Principal payments of capital lease obligations                       -              (9,754)
                                                             ----------------   -----------------
NET CASH USED IN FINANCING ACTIVITIES                                   (681)           (287,925)
                                                             ----------------   -----------------

INCREASE (DECREASE) IN CASH                                       (1,256,066)             23,824

CASH - BEGINNING OF PERIOD                                         2,645,338              96,220
                                                             ----------------   -----------------

CASH - END OF PERIOD                                         $     1,388,591    $        120,044
                                                             ================   =================

SUPPLEMENTAL DISCLOSURE OF CASH FLOW
     INFORMATION:
        Cash paid for interest                               $             -    $        347,220
                                                             ================   =================
        Cash paid for taxes                                  $        25,000    $              -
                                                             ================   =================
</TABLE>



                 See notes to consolidated financial statements.

                                        5
<PAGE>

                   CAPITAL BEVERAGE CORPORATION AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                     SIX MONTHS ENDED JUNE 30, 2006 AND 2005

                                   (Unaudited)

1.       DESCRIPTION OF BUSINESS

         Capital Beverage Corporation (the "Company" or "Capital") was formed in
         December 1995 to operate as a wholesale distributor of beer and other
         beverages in New York City. In December 1998, CAP Communications, Ltd.
         ("Cap Com"), a wholly-owned subsidiary, was organized to market
         domestic and long distance prepaid telephone calling cards to
         distributors and to the general public.

         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.

         As of September 15, 2005, the Company, entered into an Asset Purchase
         Agreement (the "Asset Purchase Agreement") with Oak Beverages, Inc., a
         New York corporation ("Oak"), pursuant to which the Company agreed to
         sell, and Oak agreed to purchase (the "Asset Sale"), the Company's
         exclusive distribution rights for the Pabst brands, Pittsburgh brands
         and Ballantine brands (the "Assets"). The Asset Purchase Agreement
         contained customary representations and warranties, conditions to
         closing (including shareholder and brewer approval and the distribution
         by the Company of an Information Statement on Schedule 14C (the
         "Information Statement") to its stockholders), and termination and
         indemnification provisions. On December 16, 2005, the Company closed
         the sale of the Assets to Oak.

                                       6

<PAGE>

         The Company will continue to use the proceeds from the sale of the
         Assets for working capital purposes, including the payment of
         indebtedness, trade payables and other outstanding obligations.
         Following the full payment of its creditors, the Company may elect to
         acquire another entity, issue dividend(s) to its stockholders or invest
         the net proceeds in the discretion of the Board of Directors and
         management of the Company. Management currently anticipates that
         additional transactions may take the form of a dissolution of the
         corporation, the liquidation of its remaining assets, and the ultimate
         distribution to stockholders of any assets remaining after satisfaction
         of our liabilities, including personnel termination and related costs,
         sale transaction expenses and final liquidation costs. In event of such
         dissolution, the residual proceeds of the sale of the Assets would
         become part of a pool of assets governed by the plan of dissolution.
         Alternatively, management may elect to invest the net proceeds from the
         sale of the Assets in assets or operations acquired by the Company. In
         such an event, no assets will be distributed to the stockholders.


2.       GOING CONCERN

         The accompanying financial statements have been prepared on a
         going-concern basis, which presumes that the Company will be able to
         continue to meet its obligations and realize its assets in the normal
         course of business.

         As shown in the accompanying financial statements, the Company has a
         history of losses with an accumulated deficit of $5,881,557 at June 30,
         2006. These conditions raise substantial doubt about the Company's
         ability to continue as a going concern. The Company's continuation as a
         going concern is dependent upon its ability to ultimately attain
         profitable operations, generate sufficient cash flow to meet its
         obligations, and obtain additional financing as may be required.



                                       7
<PAGE>

3.       SIGNIFICANT ACCOUNTING POLICIES

         Principles of Consolidation - The financial statements include the
         accounts of the Company and Cap Com, its wholly-owned subsidiary. All
         significant intercompany balances and transactions have been eliminated
         in consolidation.

         Cash and Cash Equivalents - Cash and cash equivalents include cash on
         hand and cash in banks in demand and time deposit accounts with
         maturities of 90 days or less.

         Income Taxes - The Company follows Statement of Financial Accounting
         Standards No. 109 - Accounting for Income Taxes, which requires
         recognition of deferred tax assets and liabilities for the expected
         future tax consequences of events that have been included in the
         financial statements or tax returns. Under this method, deferred tax
         assets and liabilities are based on the differences between the
         financial statement and tax bases of assets and liabilities using
         enacted tax rates in effect for the year in which the differences are
         expected to reverse.

         Use of Estimates - The preparation of financial statements in
         conformity with generally accepted accounting principles requires
         management to make estimates and assumptions that affect the reported
         amounts of assets and liabilities and disclosure of contingent assets
         and liabilities at the date of the financial statements and the
         reported amounts of revenue and expenses during the reporting period.
         Actual results could differ from those estimates.

         Fair Value of Financial Instruments - The Company considers its
         financial instruments, which are carried at cost, to approximate fair
         value due to their near-term maturities.

         Income (loss) per Common Share - Net income (loss) per common share is
         based on the weighted average number of shares outstanding. Potential
         common shares includable in the computation of fully diluted per share
         results are not presented in the financial statements as their effect
         would be anti-dilutive. The outstanding options excluded in the
         computation amounted to 1,850,000 at June 30, 2006.

         New Accounting Pronouncements - In February 2006, the FASB issued FASB
         Statement No. 155, which is an amendment of FASB Statements No. 133 and
         140. This Statement; a) permits fair value remeasurement for any hybrid
         financial instrument that contains an embedded derivative that
         otherwise would require bifurcation, b) clarifies which interest-only
         strip and principal-only strip are not subject to the requirements of
         Statement 133, c) establishes a requirement to evaluate interests in
         securitized financial assets to identify interests that are
         freestanding derivatives or that are hybrid financial instruments that
         contain an embedded derivative requiring bifurcation, d) clarifies that
         concentrations of credit risk in the form of subordination are not
         embedded derivatives, e) amends Statement 140 to eliminate the
         prohibition on a qualifying special-purpose entity from holding a
         derivative financial instrument that pertains to a beneficial interest
         other than another derivative financial instrument. This Statement is
         effective for financial statements for fiscal years beginning after
         September 15, 2006. Earlier adoption of this Statement is permitted as
         of the beginning of an entity's fiscal year, provided the entity has
         not yet issued any financial statements for that fiscal year.
         Management believes this Statement will have no impact on the financial
         statements of the Company once adopted.

                                       8

<PAGE>

         In March 2006, the FASB issued FASB Statement No. 156, which amends
         FASB Statement No. 140. This Statement establishes, among other things,
         the accounting for all separately recognized servicing assets and
         servicing liabilities. This Statement amends Statement 140 to require
         that all separately recognized servicing assets and servicing
         liabilities be initially measured at fair value, if practicable. This
         Statement permits, but does not require, the subsequent measurement of
         separately recognized servicing assets and servicing liabilities at
         fair value. An entity that uses derivative instruments to mitigate the
         risks inherent in servicing assets and servicing liabilities is
         required to account for those derivative instruments at fair value.
         Under this Statement, an entity can elect subsequent fair value
         measurement to account for its separately recognized servicing assets
         and servicing liabilities. By electing that option, an entity may
         simplify its accounting because this Statement permits income statement
         recognition of the potential offsetting changes in fair value of those
         servicing assets and servicing liabilities and derivative instruments
         in the same accounting period. This Statement is effective for
         financial statements for fiscal years beginning after September 15,
         2006. Earlier adoption of this Statement is permitted as of the
         beginning of an entity's fiscal year, provided the entity has not yet
         issued any financial statements for that fiscal year. Management
         believes this Statement will have no impact on the financial statements
         of the Company once adopted.

5.       DISCONTINUED OPERATIONS

         The Company's sale of its Distribution License has been accounted of
         under the requirements of paragraph 30 of Statements of Financial
         Accounting Standards ("SFAS") 144 "Accounting for the Impairment or
         Disposal of Long-Lived Assets".

6.       OTHER RECEIVABLE

         On October 21, 2005 the Company signed a Stipulation of Settlement with
         Blue Ox Distributors, LLC (Blue Ox), where as Blue Ox has agreed to pay
         the Company as further consideration for the termination of the
         Exclusive United States Distribution Agreement in the amount of
         $100,000 plus interest of $8,425.93. Blue Ox will pay Capital $6,023.66
         per month beginning April 1, 2006 until the balance is paid in full. As
         of August 2006, the Company hasn't received any payments and has
         decided to reserve 100% of the receivable as of June 30, 2006.

     7.  INCOME TAXES

         At December 31, 2005 the Company had a net operating loss carryover of
         $335,000 available as offsets against future taxable income, if any,
         which expire at various dates through 2025. The Company has a deferred
         tax asset of $219,000 arising from net operating loss deductions and an
         alternative minimum tax credit and has recorded a valuation allowance
         for the full amount of such deferred tax asset. At December 31, 2005,
         the Company recorded an income tax provision of $85,000 resulting from
         the alternative minimum taxes. The Company paid $25,000 decreasing the
         liability to $60,000 as of June 30, 2006.

8.       CONCENTRATION OF CREDIT RISK

         The Company maintains its cash balances at various financial
         institutions. These balances are insured by the Federal Deposit
         Insurance Corporation up to $100,000. The Company has not experienced
         any losses in such accounts and believes it is not exposed to any
         significant credit risk on cash on deposit.

                                       9

<PAGE>

                Special Note Regarding Forward-Looking Statements


         This Quarterly Report on Form 10-Q contains "forward-looking"
statements within the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as amended. For
this purpose any statements contained herein that are not statements of
historical fact may be deemed to be forward-looking statements. Without limiting
the foregoing, the words "believes," "anticipates," "plans," "expects" and
similar expressions are intended to identify forward-looking statements. These
statements involve unknown risks, uncertainties and other factors, which may
cause our actual results to differ materially from those implied by the forward
looking statements. Among the important factors that could cause actual results
to differ materially from those indicated by such forward-looking statements
include those risks identified in "Item 7 - Management's Discussion and Analysis
of Financial Condition and Results of Operations" and other risks identified in
our Form 10-K for the year ended December 31, 2005 and presented elsewhere by
management from time to time. Such forward-looking statements represent
management's current expectations and are inherently uncertain. Investors are
warned that actual results may differ from management's expectations.

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


         MANAGEMENT DISCUSSION AND ANALYSIS


         As of December 16, 2005, the Company closed the sale of the Assets to
Oak, pursuant to the terms and conditions of the Asset Purchase Agreement. The
purchase price paid by Oak for the Assets was Nine Million Three Hundred
Thousand Dollars ($9,300,000.00), of which One Million Five Hundred Thousand
Dollars ($1,500,000.00), was deposited with an escrow agent, pursuant to the
terms of an escrow agreement, for at least 18 months for post closing
indemnification claims which may be asserted by Oak (the "Escrow"). A
substantial amount of the proceeds from the transaction were used by the Company
to repay outstanding indebtedness and for working capital purposes.

         The Company will continue to use the proceeds from the sale of the
Assets for working capital purposes, including the payment of indebtedness,
trade payables and other outstanding obligations. Following the full payment of
its creditors, the Company may elect to acquire another entity, issue
dividend(s) to its stockholders or invest the net proceeds in the discretion of
the Board of Directors and management of the Company. Management currently
anticipates that additional transactions may take the form of a dissolution of
the corporation, the liquidation of its remaining assets, and the ultimate
distribution to stockholders of any assets remaining after satisfaction of our
liabilities, including personnel termination and related costs, sale transaction
expenses and final liquidation costs.

         After application of the net proceeds in the manner contemplated, and
assuming ultimate release to us of the entire escrowed amount, and after
deduction of transaction costs in connection with the Asset Sale, the Company
will hold:

        1. equipment not part of the Asset Sale; and
        2. cash in the approximate range of $250,000 to $500,000.

                                       10
<PAGE>

         We will continue to incur claims, liabilities and expenses, which will
reduce the realizable value of our remaining assets and the amount potentially
available for distribution to stockholders. Claims, liabilities and expenses
from operations (such as salaries, directors' and officers' insurance, payroll
and taxes, legal, accounting and consulting fees and miscellaneous office
expenses) will continue to be incurred subsequent to the Asset Sale. These
expenses will have to be satisfied from our remaining assets and, therefore,
will reduce the net realizable value of those assets.

         The Company intends to comply with the periodic reporting requirements
of the Exchange Act for so long as we are subject to those requirements. We have
an obligation to continue to comply with the applicable reporting requirements
of the Securities Exchange Act of 1934, as amended, even though compliance with
such reporting requirements is economically burdensome.

         As of December 2, 2005, all employees were terminated, except for
Carmine Stella who will continue to serve as the Company's Chief Executive
Officer.

RESULTS OF OPERATIONS

         We had no revenue from operations for the six months ended June 30,
2006. Our revenues for the same period in 2005 have been reclassified to
discontinued operations.

         General and administrative expenses for the six months ended June 30,
2006 was $123,524, which consisted mostly of professional fees and salary to our
only remaining employee.

         Bad debt reserve in the amount of $108,426 resulted in our decision to
reserve 100% of the Blue Ox receivable due to non-payment from Blue Ox.

         At March 31, 2006 and December 31, 2005, respectively, we had a working
capital and a working capital deficit of $96,713 and $(225,549), respectively.


Item 3.  Quantitative and Qualitative Disclosures About Market Risks

         All of the Company's indebtedness that would have posed an interest
rate risk have been paid in full. As a result, the Company no longer has an
interest rate risk.

Item 4. Controls and Procedures

         We maintain disclosure controls and procedures that are designed to
ensure that information required to be disclosed in our Securities Exchange Act
reports is recorded, processed, summarized and reported within the time periods
specified in the SEC's rules and forms, and that such information is accumulated
and communicated to our management, including our Chief Executive Officer and
Treasurer, as appropriate, to allow timely decisions regarding required
disclosure. In designing and evaluating the disclosure controls and procedures,
management recognized that any controls and procedures, no matter how well
designed and operated, can provide only reasonable assurance of achieving the
desired control objectives, as ours are designed to do, and management
necessarily was required to apply its judgment in evaluating the cost-benefit
relationship of possible controls and procedures.

         As required by SEC Rule 13a-15(b), we carried out an evaluation as of
June 30, 2006, under the supervision and with the participation of our
management, including our Chief Executive Officer and Treasurer, of the
effectiveness of the design and operation of our disclosure controls and
procedures, as of the end of the quarter covered by this report. Based upon that
evaluation, our Chief Executive Officer and Treasurer concluded that our
disclosure controls and procedures were effective in enabling us to record,
process, summarize and report information required to be included in our
periodic SEC filings within the required time period.

                                       11
<PAGE>

                  There have been no changes in our internal control over
financial reporting that occurred during the period covered by this report that
have materially affected, or are reasonably likely to materially affect, our
internal control over financial reporting.


PART II--OTHER INFORMATION

Item 1.  Legal Proceedings

         The Company was recently named as a defendant in an action commenced in
Supreme Court, Kings County captioned F&V Distribution Company LLC v. Capital
Beverage Corp. and GE Capital Corp. The complaint alleges that the Company and
GE Capital Corp. ("GE Capital"), have constructively abandoned certain equipment
leased by the Company from GE Capital and seeks a declaratory judgment stating
that neither the Company nor GE Capital have any further ownership interest in
the equipment and that F&V Distribution Company LLC may remove and dispose of
the equipment. GE Capital has filed cross-claims in this case against the
Company for breach of the subject lease. Settlement negotiations are underway in
this matter and it is anticipated that this matter will be amicably resolved in
the near future.

Item 1A- Risk Factors- - There have been no material changes in our risk factors
from those disclosed in our 2005 Annual Report on Form 10-K.

Item 2 - Unregistered Sales of Equity Securities and Use of Proceeds - None

Item 3 - Defaults Upon Senior Securities - None

Item 4 - Submission of Matters to Vote of Securities Holders - None

Item 5 - Other Information - None

Item 6.  Exhibits and Reports on Form 8-K

(a)         Exhibits

            31.1     Certification of Chief Executive Officer pursuant to
                     Section 302 of the Sarbanes Oxley Act of 2002

            31.2     Certification of Treasurer pursuant to Section 302 of the
                     Sarbanes Oxley Act of 2002

            32.1     Certification of Chief Executive Officer and Treasurer
                     pursuant to Section 906 of the Sarbanes Oxley Act of 2002

(b)      Reports on Form 8-K None.

                                       12
<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.



Date:         August 14, 2006          CAPITAL BEVERAGE CORPORATION
                                       (Registrant)



                                       By: Carmine N. Stella
                                           -------------------------------------
                                           Carmine N. Stella
                                           President and Chief Executive Officer
                                           (Principal Executive Officer)




                                       By: Carol Russell
                                           -----------------------------------
                                           Carol Russell
                                           Secretary and Treasurer (Principal
                                           Financial Officer and Accounting
                                           Officer)