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 September 30, 2005

                                       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 offices)               (Zip Code)

                                 (718) 488-8500
              (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 an accelerated filer (as
defined in Rule 12b-2 of the Act).
         Yes  [  ]         No  [X]


 The number of shares common stock, $.001 par value, outstanding as of
November 21, 2005 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
         Condensed Consolidated Balance Sheets.............................. 4
         Condensed Consolidated Statements of Operations.................... 5
         Condensed Consolidated Statements of Cash Flows.................... 6
         Notes to Condensed Consolidated Financial Statements............... 7
Item 2 - Management's Discussion and Analysis of Financial Condition
          and Results of Operations.........................................14
Item 3 - Quantitative and Qualitative Disclosures About Market Risks........16
Item 4 - Controls and Procedures............................................16

PART II - OTHER INFORMATION
Item 1 - Legal Proceedings..................................................17
Item 2 - Changes in Securities and Use of Proceeds..........................17
Item 3 - Defaults Upon Senior Securities....................................17
Item 4 - Submission of Matters to Vote of Securities Holders................17
Item 5 - Other Information..................................................17
Item 6 - Exhibits and Reports on Form 8-K...................................17
Signatures







                                       2

<PAGE>

PART I-FINANCIAL INFORMATION

Item 1. Financial Statements



























                                       3

<PAGE>

                CAPITAL BEVERAGE CORPORATION AND SUBSIDIARY

                  d/b/a DIVERSIFIED DISTRIBUTORS NETWORK

                       CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>


                                                                September 30,    December 31,
                                                                   2005              2004
                                                             ---------------   ---------------
                              ASSETS                           (Unaudited)
CURRENT ASSETS:
<S>                                                          <C>               <C>
     Cash                                                    $       87,243    $       96,220
     Accounts receivable - net of allowance for
        doubtful accounts of $60,842                                486,342           698,792
     Inventories                                                  1,048,961         2,097,338
     Prepaid expenses and other current assets                      135,860           147,905
                                                             ---------------   ---------------
        TOTAL CURRENT ASSETS                                      1,758,406         3,040,255

PROPERTY AND EQUIPMENT                                               76,906           127,765

DISTRIBUTION LICENSE - HELD FOR SALE                              1,065,718         1,065,718

OTHER ASSETS                                                         52,483           288,122
                                                             ---------------   ---------------

                                                             $    2,953,513    $    4,521,860
                                                             ===============   ===============

                  LIABILITIES AND STOCKHOLDERS' DEFICIT

CURRENT LIABILITIES:
     Accounts payable                                        $   4,406,357    $    2,846,455
     Cash overdraft                                                 51,081           367,424
     Accrued expenses and taxes                                     96,659           117,328
     Revolving loans                                               932,130         2,007,356
     Loan payable                                                2,850,531         2,500,000
     Current portion of long-term debt                              60,000           104,738
     Current portion of capital lease obligations                   52,712            12,716
                                                            ---------------   ---------------
        TOTAL CURRENT LIABILITIES                                8,449,470         7,956,017
                                                            ---------------   ---------------
CAPITAL LEASE OBLIGATIONS                                            1,176            56,204

LONG-TERM DEBT                                                      17,500            18,905

STOCKHOLDERS' DEFICIT:
     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                                       (11,504,675)       (9,499,308)
                                                            ---------------   ---------------

        TOTAL STOCKHOLDERS' DEFICIT                             (5,514,633)       (3,509,266)
                                                            ---------------   ---------------

                                                            $    2,953,513    $    4,521,860
                                                            ===============   ===============

</TABLE>



            See notes to unaudited consolidated financial statements.

                                        4

<PAGE>

                   CAPITAL BEVERAGE CORPORATION AND SUBSIDIARY

                     d/b/a DIVERSIFIED DISTRIBUTORS NETWORK

                      CONSOLIDATED STATEMENTS OF OPERATIONS



<TABLE>
<CAPTION>

                                                      Three Months Ended September 30,     Nine Months Ended September 30,
                                                      ---------------------------------   ----------------------------------
                                                            2005             2004               2005              2004
                                                      ------------------ --------------   -----------------   --------------
                                                         (Unaudited)       (Unaudited)       (Unaudited)        (Unaudited)
<S>                                                   <C>                <C>              <C>                 <C>
NET SALES                                             $       4,378,898  $   7,043,376    $     14,443,014    $  21,277,066
COST OF SALES                                                 3,428,556      5,083,885          10,989,929       15,446,912
                                                      ------------------ --------------   -----------------   --------------
GROSS PROFIT                                                    950,342      1,959,491           3,453,085        5,830,154
                                                      ------------------ --------------   -----------------   --------------

COSTS AND EXPENSES:
    Selling and delivery                                        230,546        399,969             883,862        1,160,957
    General and administrative                                1,226,007      1,313,987           3,872,139        4,084,798
    Non-cash compensation                                             -              -                   -           91,724
    Amortization and depreciation                                34,534         38,257             109,673          113,544
                                                      ------------------ --------------   -----------------   --------------
                                                              1,491,087      1,752,213           4,865,674        5,451,023
                                                      ------------------ --------------   -----------------   --------------

INCOME FROM OPERATIONS                                         (540,745)       207,277          (1,412,589)         379,131

INTEREST EXPENSE, net                                          (187,776)      (184,666)           (592,778)        (540,621)
                                                      ------------------ --------------   -----------------   --------------

NET INCOME (LOSS)                                     $        (728,521) $      22,611    $     (2,005,367)   $    (161,490)
                                                      ================== ==============   =================   ==============

INCOME (LOSS) PER SHARE - BASIC AND DILUTED           $           (0.19) $        0.01    $          (0.53)   $       (0.04)
                                                      ================== ==============   =================   ==============

WEIGHTED AVERAGE NUMBER OF SHARES
    USED IN CALCULATION OF BASIC AND
    DILUTED LOSS PER SHARE                                    3,792,045      3,792,045           3,792,045        3,792,045
                                                      ================== ==============   =================   ==============
</TABLE>




            See notes to unaudited consolidated financial statements.

                                        5

<PAGE>

                   CAPITAL BEVERAGE CORPORATION AND SUBSIDIARY

                     d/b/a DIVERSIFIED DISTRIBUTORS NETWORK

                      CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>

                                                                 Nine Months Ended September 30,
                                                               ------------------------------------
                                                                    2005               2004
                                                               ---------------   ------------------
                                                                 (Unaudited)        (Unaudited)

CASH FLOWS FROM OPERATING ACTIVITIES:
<S>                                                            <C>               <C>
     Net loss                                                  $   (2,005,367)   $        (161,490)
                                                               ---------------   ------------------
     Adjustments to reconcile net loss to net cash (used in)
        provided by operating activities:
            Depreciation and amortization                             109,673              205,268

     Changes in assets and liabilities:
        Accounts receivable                                           212,450             (407,288)
        Inventories                                                 1,048,377             (467,099)
        Prepaid expenses                                               12,045              (25,317)
        Other assets                                                  176,824              (13,785)
        Accounts payable and accrued expenses                       1,539,234              451,110
                                                               ---------------   ------------------
            Total adjustments                                       3,098,603             (257,111)
                                                               ---------------   ------------------

NET CASH (USED IN) PROVIDED BY OPERATING ACTIVITIES                 1,093,236             (418,601)
                                                               ---------------   ------------------

CASH FLOWS FROM INVESTING ACTIVITIES
     Purchase of machinery and equipment                                    -              (15,333)
                                                               ---------------   ------------------
NET CASH USED IN INVESTING ACTIVITIES                                       -              (15,333)
                                                               ---------------   ------------------

CASH FLOWS FROM FINANCING ACTIVITIES:
     Revolving loans                                               (1,075,226)             384,758
     Cash overdraft                                                  (316,343)                   -
     Proceeds from loan payable                                       350,531                    -
     Principal payments of capital lease obligations                  (15,032)             (16,125)
     Payments of long-term debt                                       (46,143)             (69,010)
                                                               ---------------   ------------------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES                (1,102,213)             299,623
                                                               ---------------   ------------------

NET INCREASE (DECREASE) IN CASH                                        (8,977)            (134,311)

CASH - BEGINNING OF PERIOD                                             96,220              189,276
                                                               ---------------   ------------------

CASH - END OF PERIOD                                           $       87,243    $          54,965
                                                               ===============   ==================

SUPPLEMENTAL DISCLOSURE OF CASH FLOW
     INFORMATION:
        Cash paid for interest                                 $      475,564    $         456,631
                                                               ===============   ==================
</TABLE>


            See notes to unaudited consolidated financial statements.

                                        6

<PAGE>

                   CAPITAL BEVERAGE CORPORATION AND SUBSIDIARY
                    (d/b/a Diversified Distributors Network)

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                  NINE MONTHS ENDED SEPTEMBER 30, 2005 AND 2004
                                   (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 consolidated financial
         statements should be read in conjunction with the consolidated
         financial statements and notes thereto contained in the Company's
         Annual Report on Form 10-K.

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 $11,504,675 and
         $9,499,308 at September 30, 2005 and December 31, 2004, respectively.
         The Company also has a working capital deficiency of $6,691,064 and
         $4,915,762 at September 30, 2005 and December 31, 2004, respectively.
         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.

         The Board of Directors and management of the Company have concluded
         that based on the Company's relatively small size, the illiquidity of
         the trading market for the Company's common stock, the Company's lack
         of growth, thin profit margins in the beer and malt beverage
         distribution industry, and the fact that the beverage distribution
         industry favors relatively large distributors because of economies of
         scale; it would be in all of the stockholders' interests to sell
         substantially all of the Company's assets at a fair price. (See Note 3)

                                       7

<PAGE>

                  After completion of the Asset Sale and 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:

     o        residual inventory and equipment not part of the Asset Sale; and
     o        accounts receivable in the approximate amount of $250,000.

The Company will not have any ongoing operations subsequent to the Asset Sale,
except for the collection of accounts receivable and the payment of its
liabilities.

         -    The Company will continue to be a public company;

         -    The Company's common stock will continue to trade in the
              over-the-counter market or be quoted on the OTC Bulletin Board(R);

         -    The Company will use the proceeds from the Asset Sale for working
              capital purposes, including the payment of indebtedness, trade
              payables and other outstanding obligations. Following the 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.


3.       SALE OF DISTRIBUTION RIGHTS

                  On September 14, 2005, Capital Beverage Corporation, a
         Delaware corporation (the "Company"), entered into an Asset Purchase
         Agreement (the "Agreement") with Oak Beverages, Inc. , a New York
         corporation ("Oak"), pursuant to which the Company has agreed to sell,
         and Oak has agreed to purchase, the exclusive distribution rights
         within a designated territory for the Pabst, Pittsburgh and Best beer
         and malt beverage brands. The purchase price to be paid by Oak at
         closing will be $9.3 million, of which at least $1.5 million will be
         deposited with an escrow agent for at least 18 months for post closing
         indemnification claims which may be asserted by Oak. It is anticipated
         that the proposed transactions will close during the fourth quarter of
         2005 and that the proceeds from the transaction will be used by the
         Company to repay outstanding indebtedness and for working capital
         purposes. The Agreement contains customary representations and
         warranties, conditions to closing (including stockholder 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.

                                       8

<PAGE>

                  Immediately following the execution of the Agreement, certain
         stockholders (the "Approving Stockholders") of the Company holding an
         aggregate of 1,900,000 shares of the Company's common stock,
         representing 50.1% of the shares outstanding, signed a written consent
         of stockholders approving the Agreement and the exhibits and schedules
         thereto as well as the transactions contemplated thereby. The Approving
         Stockholders are Carmine N. Stella, the Company's President, Chief
         Executive Officer and Chairman of the Board, Anthony Stella, the
         Company's Vice President of Sales and Marketing (and the brother of
         Carmine Stella), Michael Matrisciani, a director of the Company, Daniel
         Matrisciani, the Company's Vice President of Operations and a director,
         Alex Matrisciani and Monty Matrisciani (each of whom are the brothers
         of Michael and Daniel Matrisciani).

                  The Company and Oak also entered into a Sub-Distribution
         Agreement dated as of September 14, 2005 (the "Sub-Distribution
         Agreement"), pursuant to which Oak will become a Company
         sub-distributor of certain Pabst beers and malt beverages. The
         Sub-Distribution Agreement will become effective when the Company files
         an Information Statement on Schedule 14C with the Securities and
         Exchange Commission and shall terminate on the earlier of (i) the
         closing of the transactions contemplated by the Agreement, (ii) the
         termination of the Agreement, or (iii) 90 days following September 14,
         2005. Under the terms of the Sub-Distribution Agreement , Oak will have
         the right to distribute the Pabst brands to customers located in
         Brooklyn, Staten Island, Manhattan and the Bronx, and in exchange for
         such rights, Oak will pay Pabst directly for its product purchases and,
         during the first 45 days following the effective date of the Agreement,
         will pay to Capital $.50 for each case and $2.00 for each barrel
         received. The purchase price to be paid by Oak to Capital in connection
         with the closing of the transactions contemplated by the Asset Purchase
         Agreement shall for purchases made during such 45 day period be reduced
         by an amount equal to: (i) $.25 for each case purchased by Oak and sold
         by Oak to customers in the territory, (ii) $.50 for each case purchased
         by Oak but not sold to such customers, (iii) $1.00 for each barrel
         purchased by Oak and sold by Oak to customers in the territory, and
         (iv) $2.00 for each barrel purchased by Oak but not sold to such
         customers. If the Asset Purchase Agreement is terminated by either
         party for any reason, the Company will be required to pay to Oak the
         credits described above.

4.       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.

         Inventories - Inventories of beer and other beverage products are
         stated at the lower of cost, determined by the first-in, first-out
         method, or market.

         Shipping and handling costs - The Company accounts for shipping and
         handling costs as a component of "Cost of Sales".

                                       9

<PAGE>

         Property and Equipment - Property and equipment are stated at cost and
         are depreciated over the estimated useful lives of the related assets,
         ranging from 5 to 39 years. Depreciation is computed on the
         straight-line and accelerated methods for both financial reporting and
         income tax purposes. Depreciation expense for the nine months ended
         September 30, 2005 and 2004 was $27,885 and $32,201, respectively.

         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.

         Distribution License - The Company's license to distribute certain
         beverage products in New York City, is recorded at cost. The license
         has an indefinite life and is tested annually for impairment under SFAS
         142. Pursuant to SFAS 142 the Company took an impairment of the
         distribution license in the first quarter of 2002 in the amount of
         $860,000 which was recorded as a cumulative effect of change in
         accounting principle. At December 31, 2004, the Company impaired the
         Distribution License by $3,336,744. (see Note 5)

         Revenue Recognition - Wholesale sales are recognized at the time goods
         are shipped.

         Loss per Common Share - 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.

                                       10

<PAGE>

         Stock based compensation - Financial Accounting Statement No. 123,
         Accounting for Stock Based Compensation, encourages, but does not
         require companies to record compensation cost for stock-based employee
         compensation plans at fair value. The Company has chosen to continue to
         account for stock-based compensation using the intrinsic method
         prescribed in Accounting Principles Board Opinion No. 25, Accounting
         for Stock Issued to Employees, and related interpretations.
         Accordingly, compensation cost for stock options is measured as the
         excess, if any, of the quoted market price of the Company's stock at
         the date of the grant over the amount an employee must pay to acquire
         the stock. The Company has adopted the "disclosure only" alternative
         described in SFAS 123 and SFAS 148, which require pro forma disclosures
         of net income and earnings per share as if the fair value method of
         accounting had been applied.

         New Accounting Pronouncements - In December 2004, the FASB issued
         Statement 123r (revised 2004) which is a revision of FASB Statement No.
         123, Accounting for Stock-Based Compensation. This Statement supersedes
         APB Opinion No. 25, Accounting for Stock Issued to Employees, and its
         related implementation guidance. This Statement establishes standards
         for the accounting for transactions in which an entity exchanges its
         equity instruments for goods or services. It also addresses
         transactions in which an entity incurs liabilities in exchange for
         goods or services that are based on the fair value of the entity's
         equity instruments or that may be settled by the issuance of those
         equity instruments. This Statement focuses primarily on accounting for
         transactions in which an entity obtains employee services in
         share-based payment transactions. This Statement requires a public
         entity to measure the cost of employee services received in exchange
         for an award of equity instruments based on the grant-date fair value
         of the award (with limited exceptions). That cost will be recognized
         over the period during which an employee is required to provide service
         in exchange for the award--the requisite service period (usually the
         vesting period). FASB 123r will have a significant impact on the
         consolidated financial statements of the Company through the expensing
         of stock option grants. However the Company does not anticipate
         granting any stock options in the foreseeable future.

5.       DISTRIBUTION RIGHTS - HELD FOR SALE

         The Company acquired these exclusive license rights to distribute
         within the five boroughs of New York City valued at $5,218,462 as part
         of the agreement with Prospect Beverages Inc. in May 2001. The rights
         consist of the Pabst brands which make up approximately 73% of sales
         and include brand names such as Colt 45, Champale and Old Milwaukee.
         The Pittsburgh brands make up approximately 17% of sales and include
         brand names such as Nightflight, Mustang Lager and Primetime. All other
         brands make up less than 10% of the product line. 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.

         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 a
         non-cash charge of $860,000 in the first quarter of 2002 which was
         recorded as a cumulative effect of change in accounting principle.

                                       11

<PAGE>

         On April 14, 2003, the Company purchased from Metropolitan Beer
         Distributing Corp the exclusive right to purchase the brand rights of
         Pabst Blue Ribbon Beer for the additional territory of the Bronx county
         for $44,000. This permits the Company to promote, advertise, market,
         sell and distribute at wholesale and retail this beverage in the five
         boroughs of New York.

         At December 31, 2004, the Company recorded an impairment of their
         distribution license in the amount of $3,336,744. The decision to
         impair the distribution license was based on the Company's net loss for
         the year ended December 31, 2004. The Company had revised its cash flow
         recoverability analysis to include the year ended December 31, 2004.
         The cash flow analysis showed that the Company will recover
         approximately $1,021,000 twenty years from the balance sheet date.

6.       LOANS PAYABLE AND REVOLVING LOANS

         The Company has a revolving loan with Entrepreneur Growth Capital, LLC
         ("EGC"). The loan limit is $2,500,000 and carries an interest rate of
         prime plus 2%. The loan is collateralized by the Company's accounts
         receivable, inventory, pledged property and distribution rights. The
         outstanding balance was $932,130 and $2,007,356 at September 30, 2005
         and December 31, 2004, respectively.

         On December 11, 2003, the Park Slope Group, LLC ("LLC"), a single
         member limited liability company whose sole member is Addie Realty
         Properties, Inc. ("Addie"), which in turn is wholly owned by certain
         officers of the Company loaned the Company $2,500,000 maturing on
         December 11, 2005 and accruing interest at 12% per annum.

         Addie and the officers of the Company have entered into this
         transaction in order to permit the Company to pay off its term loan
         with EGC, to pay down a portion of its revolving credit promissory note
         and agreement with ECG, and to restructure and amend its revolving
         credit agreement with EGC upon terms more favorable than those
         presently existing and available to the Company from EGC. Addie has
         transferred certain real property to the LLC. The LLC agreed to borrow
         $2,500,000, secured by a mortgage to Seaway Capital Corp. ("Seaway")
         under credit terms more favorable than those which could presently be
         obtained by Capital. The LLC is lending the net proceeds of its loan
         from Seaway to Capital. Addie and the officers have also entered into
         an agreement with EGC to pay the net proceeds of the Seaway loan to EGC
         for the benefit of Capital to pay off its term loan with EGC, to pay
         down a portion of Capital's revolving credit promissory note and
         agreement with EGC, and to restructure and amend Capital's revolving
         credit agreement with EGC upon terms more favorable than those
         presently existing and available to Capital from EGC.

         On March 17, 2005, the Company received a loan in the amount of
         $350,531. This loan is due on demand and does not accrue any interest.

                                       12

<PAGE>

7.       LONG-TERM DEBT

         Long-term debt consists of the following on September 30, 2005
         and December 31, 2004:

         Promissory note payable to Consolidated,
         due in monthly installments of $5,000
         until January, 2007


                                                  $     77,500    $    123,643
         Less current portion                          (60,000)       (104,738)
                                                  -------------   -------------
                                                  $     17,500    $     18,905
                                                  =============   =============


         On July 25, 2005, the Company reached a settlement with Consolidated
         Beverage Corp. to pay the balance due to Consolidated. The Company
         shall pay Consolidated the total sum of $112,500 representing the
         remaining $110,000 owed pursuant to the original agreement and $2,500
         in attorneys fees. The Company shall pay Consolidated $12,500 upon the
         execution of the Stipulation of Settlement and $10,000 on July 15,
         2005. The Company will pay Consolidated $5,000 per month until January,
         2007, to pay off the remaining balance.


8.       CONTINGENCIES

         On or about February 28, 2005, the Company was named as a defendant in
         an action which commenced in the United States District Court for the
         Central District of California. The complaint alleges federal trademark
         infringement and dilution, unfair competition and false advertising,
         and civil conspiracy. The plaintiffs are seeking a permanent injunction
         to enjoin the defendants from using certain Blue Ox marks and related
         actions as well as damages and reasonable attorneys' fees. The parties
         are negotiating a settlement of this action and will set a date with
         the District Court for the hearing on the settlement. The Company
         believes, after consultation with counsel, that some of its defense
         costs and certain attorneys fees in connection with this action will be
         subject to coverage by the Company's insurance.

         On or about April 12, 2005, the Company and an officer of the Company
         were named as defendants in a breach of contract action. The plaintiffs
         allege, that the Company defaulted on its payment under a promissory
         note. The complaint seeks monetary damages of approximately $180,000
         and reasonable attorney fees. The parties have agreed to meet to
         discuss a possible settlement of this action. The Company has been
         making payments on this note and was late on several payment in the
         first quarter of 2004. This note is recorded on the Company's balance
         sheet.

                                       13

<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, 2004 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

Results of Operations

Net sales for the nine months ended September 30, 2005 were $14,443,014,
reflecting a decrease of $6,834,052 or 32% from the $21,277,066 of net sales for
the nine months ended September 30, 2004. This decrease in the nine months ended
September 30, 2005 resulted primarily from the following events: poor weather
conditions in the first quarter of this year as well as the effect of the price
increase in last year's second quarter which created a substantial buy in by our
account base in the month of March last year. Additionally, due to manufacturers
price increases in our Pittsburgh products Capital was forced to scale down our
marketing scope in outside markets as well as in New York due to uncompetitive
pricing. This price effect also forced Capital to discontinue selling various
imported labels which were low volume high margin items used as tag along sales
to the leading high volume Pittsburgh products.

Cost of sales was $10,989,929 or 76 % of net sales for the nine months ended
September 30, 2005, as compared to $15,446,912 or 73% of net sales for the nine
months ended September 30, 2004. The cost of sales as a percentage of net sales
was higher than last year due to a change in the customer base. Capital decided
to sell more products in the wholesale division in the second quarter to relieve
some of its selling and delivery costs.

Selling, general and administrative expenses for the nine months ended September
30, 2005 were $4,756,001 as compared to $5,245,755 for the respective 2004
period, reflecting a decrease in overall expenses. The decrease in the nine
months ended September 30, 2005 was due primarily to the substantial decrease in
our sales volume.

Non-cash compensation decreased by $91,724 to $-0- in the nine month period
ended September 30, 2005 from the nine month period ended September 30, 2004.

                                       14

<PAGE>

Depreciation and amortization expenses for the nine months ended September 30,
2005 were $109,673 as compared to $113,544 for the respective 2004 period.

Interest expense for the nine month period ended September 30, 2005 was $592,778
compared to $540,621 for the respective 2004 period. The increase in the nine
month period ended September 30, 2005 was due primarily to the higher cost of
borrowing associated with Capital's exceeding their negotiated line of credit at
various times during the first quarter to meet its obligations.

Liquidity and Capital Resources

Cash provided by operations for the nine months ended September 30, 2005 was
$1,093,235. This was primarily due to a decrease in inventories and an increase
in accounts payable at September 30, 2005.

Cash used in financing activities resulted primarily from paying down revolving
loans and cash overdraft offset by proceeds from loans payable.

Working capital deficiency increased from ($4,915,762) at December 31, 2004 to
($6,691,064) at September 30, 2005 due to the net loss incurred for the nine
months.

At September 30, 2005 the Company's primary sources of liquidity were $87,243 in
cash, $486,342 in accounts receivable and $1,048,961 in inventories.



AGGREGATE CONTRACTUAL OBLIGATIONS

                                                     Payment due by period
                                                     ---------------------

Contractual Obligations             Total            Less than 1 year  1-3 years
-----------------------             -----            ----------------  ---------
Long-Term Debt Obligations          $   77,500         $    60,000       $17,500

Capital Lease Obligations           $   53,888         $    52,712       $ 1,176

Revolving Loans                     $  932,130         $   932,130       $   -0-

Loans Payable                       $2,850,531         $ 2,850,531       $   -0-
                                    ----------         -----------       -------
         TOTAL                      $3,914,049         $ 3,895,373       $18,676
                                    ==========         ===========       =======

                                       15

<PAGE>

Item 3.  Quantitative and Qualitative Disclosures About Market Risks


Interest Rate Risk

         The Company has a revolving loan with Entrepreneur Growth Capital, LLC
("EGC"). The loan limit is $2,500,000 and carries an interest rate of prime plus
2%. The Company could be materially adversely affected if there is a significant
rise in interest rates, due to the fact that this revolving loan carries a rate
of prime plus 2%.

Item 4. Controls and Procedures

          As required by SEC Rule 13a-15(b), we carried out an evaluation as of
September 30, 2005, 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.

         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.












                                       16

<PAGE>

PART II--OTHER INFORMATION

Item 1.  Legal Proceedings

         On or about February 28, 2005, the Company was named as a defendant in
an action which commenced in the United States District Court for the Central
District of California, captioned Red Bull GmbH, and Red Bull North America,
Inc. v. Vancol Industries Inc., et al. (Case No. LACV 03-6731-DDP). The
complaint alleges federal trademark infringement and dilution, unfair
competition and false advertising, and civil conspiracy. The parties have
settled this case in principle and have circulated a formal Settlement
Agreement, which has been signed by the Company. The Settlement Agreement does
not entail any payment of monies by the Company to plaintiffs in the case. It is
anticipated that this Settlement Agreement will be fully executed by all parties
in the near future and that this action will then be formally concluded.
          On or about October 24, 2005 Amelia Wallen, a former employee of the
Company filed a verified complaint with the City of New York Commission on Human
Rights captioned, Amelia Wallen v. F.V. Distribution Co., LLC, Monty
Matrisciani, Tom Marigliano, Capital Beverage Corporation, Diversified
Distributors Network. The complaint alleges that the Company terminated Ms.
Wallen's employment and misrepresented the status of the Company based upon Ms.
Wallen's age, national origin and race. Although the Company has been named as a
respondent in this case, the Company believes that there is no basis for Ms.
Wallen's allegations. The Company will be filing a position statement with the
Commission of Human Rights with respect to this matter in the near future.


Item 2 - Changes in Securities and Use of Proceeds - None

Item 3 - Defaults Upon Senior Securities - None

Item 4 - Submission of Matters to Vote of Securities Holders -

            On September 14, 2005, Company entered into an Asset Purchase
Agreement (the "Agreement") with Oak Beverages, Inc. , a New York corporation
("Oak"), pursuant to which the Company agreed to sell, and Oak agreed to
purchase, the exclusive distribution rights within a designated territory for
the Pabst, Pittsburgh and Best beer and malt beverage brands. The purchase price
to be paid by Oak at closing will be $9.3 million, of which at least $1.5
million will be deposited with an escrow agent for at least 18 months for post
closing indemnification claims which may be asserted by Oak.

            On September 15, 2005, Carmine N. Stella, the Company's President,
Chief Executive Officer and Chairman of the Board, Anthony Stella, the Company's
Vice President of Sales and Marketing (and the brother of Carmine Stella),
Michael Matrisciani, a director of the Company, Daniel Matrisciani, the
Company's Vice President of Operations and a director, Alex Matrisciani and
Monty Matrisciani (each of whom are the brothers of Michael and Daniel
Matrisciani), holding an aggregate of 1,900,000 shares of the Company's common
stock, representing 50.1% of the shares outstanding, signed a written consent of
stockholders approving the Agreement and exhibits and schedules thereto as well
as the transactions contemplated thereby. On November 10, 2005, the Company
furnished an Information Statement to the Company's common stock holders
describing the transaction. See Information Statement on Scheduled 14C filed by
the Company with the Securities and Exchange Commission on November 14, 2005.


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

         Form 8-K was filed on September 21, 2005 pertaining to the Entry into a
Material Definitive Agreement under Item 1.01.




                                       17

<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:         November 21, 2005          CAPITAL BEVERAGE CORPORATION
                                                  (Registrant)



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




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