<PAGE>





                        SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                              REPORT ON FORM 10-KSB

             X    Annual Report pursuant to Section 13 or 15(d) of the
                  Securities Exchange Act of 1934

         For the fiscal year ended December 31, 2000.

                  Transition Report pursuant to Section 13 or 15(d) of
                  The Securities Exchange Act of 1934


   For the transition period from ___________________ to ___________________.

                          Commission File No. 0-13181


                          CAPITAL BEVERAGE CORPORATION
             (Exact name of registrant as specified in its charter)

                 Delaware                        13-3878747

(State of or other jurisdiction           (IRS Employer Identification No.)
 of incorporation or organization)

1111 East Tremont Avenue,  Bronx, New York                       10460
------------------------------------------                       -----
(Address of Principal Executive Officers)                      (Zip Code)

Registrant's telephone number, including area code: (718) 409-2337

Securities registered pursuant to Section 12(b) of the Act:  None.
                                                             ----

Securities registered pursuant to Section 12(g) of the Act:

                     Common Stock, par value $.001 per share
                                (Title of Class)

Units consisting of one (1) share of Common Stock, par value $.001 per share
 and one-half (1/2) Class A Redeemable Common Stock Purchase Warrant
                                (Title of Class)

Class A Redeemable Common Stock Purchase Warrant
                                (Title of Class)

        Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Sections 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 if  disclosure  of  delinquent  filers  pursuant
to  Item  405 of the  Regulation  S-B is not  contained  in  this  form,  and no
disclosure  will  be  contained,  to the  best  of  registrant's  knowledge,  in
definitive proxy or information statements incorporated by reference in Part III
of this Form 10-KSB or any amendment to this Form 10-KSB. [X]

         Issuer's revenues for its most recent fiscal year were $17,172,121.

         The aggregate  market value of the voting stock held by non- affiliates
of the  Registrant,  computed by reference to the closing price of such stock as
of March 27, 2001, was approximately $1,359,907.

         Number of shares  outstanding of the issuer's  Common Stock as of March
27, 2001 was 2,678,409.


                    DOCUMENTS INCORPORATED BY REFERENCE: None

<PAGE>



                                     PART I

Item 1.  BUSINESS.

         Statements  in this Form 10-K 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.

General

         Capital  Beverage   Corporation   ("Capital"  and  the  "Company")  was
incorporated  under the laws of the State of Delaware  on  December 5, 1995.  In
January 1996, the Company acquired from Consolidated Beverage  Corporation,  the
right to become the  exclusive  distributor  ("Pabst  Distribution  Rights") for
certain beer and malt liquor products ("Pabst  Products")  manufactured by Pabst
Brewing Company  ("Pabst").  The consideration paid by the Company for the Pabst
Distribution  Rights was One Million Six Hundred Thousand Dollars  ($1,600,000),
payable Eight  Hundred  Thousand  Dollars  ($800,000) in cash and the balance by
delivery of a series of 120 promissory notes, each in the amount of Ten Thousand
Dollars ($10,000)  (collectively,  the "Consolidated  Notes").  The Consolidated
Notes bear interest at 9% per annum,  which  interest is included in the monthly
$10,000 payments.  If the Company defaults in payment of any of the Consolidated
Notes,  such  default may result in a  re-conveyance  of the Pabst  Distribution
Rights to Consolidated Beverage Corporation.

         On April 30, 1999 Miller  Brewing  Company  acquired  certain brands of
alcoholic   beverage  from  the  Pabst  Brewing  Company   resulting  in  a  new
distribution  agreement for certain brands held by Capital Beverage.  The brands
of Olde  English and Hamm's are the two brands  which  Capital now  contracts to
purchase from the Miller Brewing Company on an exclusive basis.

         On July 18,  1998  and  July  30,  1998  Capital  Beverage  signed  two
distributor   agreements  with  Pittsburgh  Brewing  Company  ("Pittsburgh")  to
distribute on an exclusive  basis in the entire state of New York, the following
brands:

          Brigade,  Brigade Light,  Brigade Ice,  Brigade N/A, Prime Time Lager,
          Prime  Time Malt  Liquor,  Iron City,  Iron City  Light,  Light  Twist
          Acapulco Lime, Iron City

<PAGE>



          Twist,  Rio Cherry,  Old German,  Augustiner,  Evil Eye Ale,  Evil Eye
          Black Jack, Evil Eye Amber Lager, Evil Eye Honey Brown

         All of the  distributor  agreements are subject to termination on short
notice by the brewers.

         Strategy

         Management  of the  Company  believes  it has  developed  a strategy to
effectively  market,  sell and distribute beer products throughout its marketing
territory.  This strategy  includes plans to expand the Company's  customer base
and increase sales and marketing  efforts.  The Company will continue to utilize
both "pre-sell" and "driver-sell"  sales people to drive  distribution.  In late
1999 and early 2000 the Company added two additional brands from Pittsburgh. One
of those brands,  "Night Flight" is owned and brewed by the Company. The Company
applied for and received a brewer's permit in mid 1999. As a brewer, the Company
has  broadened  and  strengthened  its  strategic  approach  to a position  as a
dominant  distribution  company.  Owning and  distributing  its own product line
allows the Company to somewhat control its own destiny as it seeks to expand its
product portfolio.

         In early 2000 the  Company  has  continued  to pursue its  strategy  of
building a quality  non-alcoholic  brand portfolio.  The agreement  reached with
Hansen's  Beverage  company of California to distribute  its product line in the
metropolitan New York area is the first major move in this direction.

         The Company will continue to seek other  additions to its product lines
that compliment the brand portfolio.

Expanding Customer Base

         In 1999 the Company turned the Pittsburgh  brand beer "Prime Time" into
a well known brand with a substantial customer base in the metropolitan New York
area. By mid-year the Company,  after obtaining its brewery license,  introduced
its own brand,  "Night Flight" and this brand is steadily growing. In 2000 these
brands accounted for over 900,000 case sales (12oz. equivalents)

         The  Company has  tripled  its  customer  base in the past year and has
become an effective alternative for brands seeking distribution in the difficult
New York  market.  The  Company  will  continue  to look at  products  that will
compliment  its existing brand  portfolio and allow for continued  growth in its
active customer base. To further this growth the Company has initiated a plan to
extend its direct distribution operation into the Long Island, New York market.

Sales and Marketing

         The  Company  employs  sales  people to obtain  new  accounts  for beer
distribution  and to increase  sales of beverages to existing  accounts for such
products in their marketing  territory.  In addition to employing a sales staff,
the Company employs sales supervisors who oversee this effort. These supervisors
work on  execution  of the sales  and  marketing  programs  of the  Company  and
directly handle key accounts.

         The Company creates  promotional  materials to assist the  distribution
and sales  effort.  In late  1999 the  Company  added a full time  merchandising
department to its sales team.

         The Company's  sales personnel will continue to receive formal training
both at Company and brewery  initiated  seminars.  The Company will  continue to
utilize the efforts of a training coordinator to conduct seminars on such topics
as brewing processes, sales call role playing and time management.

         The supervisors are also responsible for preparing weekly schematics on
key store resets  (both shelf and cooler) to secure the most  visible  positions
for maximum consumer exposure. Shelf allocations are periodically reviewed under
the  supervision  of the V.P.  of Sales  and  Marketing  to  assure  that  space
allocations  and  placement   comply  with  retailer   policies,   distribution,
philosophies and recommendations from suppliers.

         The  Company  offers  bonuses  to sales  personnel  who market and sell
additional  product to existing  customers  and  maintain  established  goals on
reorders of  products.  This  incentive  program is designed to achieve long and
steady growth for additional product placements.

         Consistent  with the  Company's  plan to expand its customer  base,  it
expects to incur additional selling and marketing costs in the next fiscal year.
These costs will be associated with the planned  acquisition of a Brooklyn based
distributor, Prospect Beverage.

<PAGE>

Distribution

         The  Company   has   implemented   a  strategy  to  achieve   effective
distribution  of their products in their  territory.  Under this  strategy,  the
Company acts as an exclusive  distributor  for its products  subject to policies
and  procedures  determined  by the brewers so that all orders for products come
through the Company.  The products are sold into the marketplace in a variety of
ways.

         The Company  maintains its pre-sell sales force and continues to expand
its driver-sell sales force added in 1999 to increase its direct distribution in
the  entire  metropolitan  market.  Beyond  that and  because of the size of its
territory the Company also relies on independent  licensed beverage  wholesalers
that are responsible  for hiring and  maintaining  their own staffs and trucking
fleets to distribute their products to the wholesale and/or retail customers.

         The  Company's   objective  in  utilizing   these  alternate  means  of
distribution  to  service  each  sector  within  the  territory  is to  increase
effective sales and distribution efforts.

Advertising

         The Company intends to present to the trade and the consumer an ongoing
marketing campaign.  To achieve this, the Company will establish and maintain an
advertising  and  marketing  budget.  Such  budget  will  be used  primarily  to
participate in various  advertising  programs  established  by the breweries.  A
proposed  budget of $.05 per case  based upon  monthly  estimated  sales  during
Fiscal 2001 of 100,000 cases will enable the Company to allocate $5000 per month
toward this advertising.

Employees

         As of December 31, 2000, the Company  employed a staff of 59, including
2   sales   supervisors,   3   sales   manager,   34   sales   people,   and  20
managerial/administrative  and distribution employees. The Company does not have
any collective  bargaining agreements and has not experienced any work stoppages
as a result of labor disputes.  The Company considers its employee  relations to
be good.

Competition

         The  business  conducted  by the Company is highly  competitive.  As of
December 31, 2000, the Company competed with  approximately 7 other companies in
the  metropolitan  New  York  area  that  are  engaged  in  businesses  that are
substantially  similar to that engaged in by the Company.  Some of the Company's
competitors are better  capitalized,  better financed more  established and more
experienced  than the Company and may offer beer,  beverage and related products
at lower prices or concessions than the Company.  Should the Company not be able
to compete effectively,  its results of operations and financial condition could
be materially adversely affected.

Sources of Supply

         In addition to  purchasing  products  directly  from Pabst,  Miller and
Pittsburgh  Brewing,  the Company intends to purchase  products from a number of
nationally   known  beer  and   beverage   companies.   Since  there  are  other
manufacturers  of alcoholic and nonalcoholic  products sold by the Company,  the
Company  does not  anticipate  difficulty  in  obtaining  such  products  if its
relationship  with one or more of its  suppliers  terminates.  Management of the
Company believes that except for Miller and Pittsburgh, the loss of any supplier
will not adversely affect the Company's  business.  Termination of the Company's
Distributorship  Agreement with Miller and/or Pittsburgh could have a materially
adverse effect on the business of the Company.

Seasonality

         The Company's business is subject to substantial  seasonal  variations.
Historically,  a significant portion of the Company's net sales and net earnings
have been  realized  during the month of December  and the months of May through
September,  and  levels  of net  sales  and net  earnings  have  generally  been
significantly  lower during the period from  October  through  April  (excluding
December). The Company believes that this is the general pattern associated with
other  beverage  distributors  with  which it  competes.  If for any  reason the
Company's sales were to be  substantially  below seasonal norms during the month
of  December  and/or  the  months  of  May  through  September,   the  Company's
anticipated revenues and earnings could be materially and adversely affected.
<PAGE>

Government Regulation

         Wholesale and retail  distribution of alcoholic  beverages is regulated
by federal and state law. The Company's business is highly regulated by federal,
state and local laws and  regulations.  The company  must comply with  extensive
laws and regulations regarding such matters as state and regulatory approval and
licensing  requirements,  trade and pricing  practices,  permitted  and required
labeling,  advertising,  promotion and marketing  practices,  relationships with
distributors and related  matters.  Since the Company intends to distribute such
alcoholic  beverages  in New York  State,  the  Company  is  required  to obtain
authorization  from the Federal Bureau of Alcohol,  Tobacco and Firearms  (BATF)
and the New York State Liquor Authority (SLA). The Company has received from the
BATF and SLA its required  licenses.  In the experience of management,  although
such agencies may impose conditions on the grant of such licenses, such licenses
are ordinarily  granted.  In the event, either the SLA or the BATF should impose
conditions on the grant of such licenses,  the Company intends to take all steps
necessary to satisfy such conditions. There can be no assurance that the various
governmental regulations applicable to the beverage industry will not be changed
so as to impose more stringent  requirements on the Company.  If the Company was
to fail to be in compliance with any applicable  governmental  regulation,  such
failure  could  cause the  Company's  licenses to be revoked and have a material
adverse effect on the business of the Company. The Company's beer operations may
be  subject to  increased  taxation  by  federal,  state and local  governmental
agencies as compared with those of non-alcohol related business. In addition, if
federal or state  excise  taxes are  increased,  the  Company  may have to raise
prices to maintain  present profit margins.  The Company does not believe that a
price  increase  due to increased  taxes will reduce unit sales,  but the actual
effect  will  depend  on the  amount  of any  such  increase,  general  economic
conditions and other  factors.  Higher taxes may reduce overall demand for beer,
and thus negatively impact sales of the Company's beer products.

Item 2.  PROPERTIES.

         The  Company  leases two  locations  in the Bronx.  The main office and
picking  location  for  products  are  at  1111  E.  Tremont  Avenue.  There  is
approximately  10,000 sq. ft. of usage at this  location at a cost of $4,000 per
month.  The lease on this location is with East Tremont  Partners.  East Tremont
Partners  is a New  York  partnership  in which  Mr.  Stella  holds a  one-sixth
interest.  Management of the Company  believes that the rent paid by the Company
under  this  lease is less than  what it would be  required  to pay for  similar
premises  within  the area in which the  Company's  administrative  offices  are
located.
         The  Company  also  leases  space for  additional  storage at 425 Devoe
Avenue.  The premise  has  approximately  15,000 sq. ft.  which cost the Company
$7,000 per month.  Management believes that the rent paid by it under this lease
is also less than the fair market value of similar  premises  within the area in
which such premises are located.

         Management  believes that the facilities used by it in the operation of
its business are  adequately  covered by insurance and are suitable and adequate
for their respective purposes.

<PAGE>


Item 3. LEGAL PROCEEDINGS.

         Management  is not  aware of any  material  legal  proceedings  pending
against the Company.

Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
        ----------------------------------------------------

         (a)    On  December 6, 2000,  the Company  held  its  annual meeting of
Shareholders.

         (b)    At said meeting, the following five individuals were elected  by
the  following  vote to serve as  directors  until the next  annual  meeting  of
stockholders and until their successors are elected and qualified:

                           FOR                                  AGAINST

Carmine Stella          2,440,145                               21,460
Carol Russell           2,440,145                               21,460
Robert A. Vessa         2,440,145                               21,460
Dawn A. Collins         2,440,145                               21,460
Joseph M. Luzzi         2,440,145                               21,460

         (c)      At said meeting 2,457,845 shares of Common Stock were voted in
favor of and 3,760  shares of Common  Stock were voted  against to a proposal to
ratify the  appointment of Feldman Sherb & Co., P.C. to serve as the independent
certified public accountants for the 2001 fiscal year.

<PAGE>




                                     PART II

Item 5.  MARKET FOR REGISTRANT'S COMMON
           EQUITY AND RELATED STOCKHOLDER MATTERS.

         The  Company's  Units,  Common  Stock  and Class A  Warrants  commenced
trading on the Nasdaq  SmallCap  Market on the  effectiveness  of the  Company's
Initial Public  Offering on July 17, 1997 under the symbols  "CBEVU," "CBEV" and
"CBEVW,"  respectively.  The Common Stock and Warrants are regularly  quoted and
traded on the Nasdaq  SmallCap  Market.  The Company's Units were de-listed from
trading on August 29, 1997

         The  following  table  indicates  the  high  and  low  prices  for  the
Company's, Common Stock and Class A Warrants for the period from January 1, 1998
to December  31,  2000 based upon  information  supplied  by the NASDAQ  system.
Prices  represent  quotations  between  dealers  without  adjustments for retail
markups, markdowns or commissions, and may not represent actual transactions.

Common Stock

1998 Fiscal Year                               Quoted Price
----------------                               ------------
                                               High             Low
                                               ----             ---
First Quarter                                  7                4.5
Second Quarter                                 7.47             6.37
Third Quarter                                  7.5              4.87
Fourth Quarter                                 6                4.5


1999 Fiscal Year                               Quoted Price
----------------                               ------------
                                               High             Low
                                               ----             ---
First Quarter                                  6.688            4.813
Second Quarter                                 8.563            3.00
Third Quarter                                  3.750            2.063
Fourth Quarter                                 5.00             2.50

2000 Fiscal Year                               Quoted Price
----------------                               ------------
                                               High             Low
                                               ----             ---
First Quarter                                  4.125            2.25
Second Quarter                                 4.313            1.875
Third Quarter                                  3.188            1.625
Fourth Quarter                                 1.625            .313


Class A Warrants

1998 Fiscal Year                               Quoted Price
----------------                               ------------
                                               High             Low
                                               ----             ---
First Quarter                                  1.62             .62
Second Quarter                                 2.94             1.12
Third Quarter                                  3                1
Fourth Quarter                                 2                .75


1999 Fiscal Year                               Quoted Price
----------------                               ------------
                                               High             Low
                                               ----             ---
First Quarter                                  2.125            1.00
Second Quarter                                 2.750             .750
Third Quarter                                   .938             .500
Fourth Quarter                                 1.125             .375


2000 Fiscal Year                               Quoted Price
----------------                               ------------
                                               High             Low
                                               ----             ---
First Quarter                                  .938             .500
Second Quarter                                 .719              .375
Third Quarter                                  .813             .375
Fourth Quarter                                 .375             .031

         On March 27, 2001 the closing  price of the Common Stock as reported on
NASDAQ SmallCap  Market was $.7187.  On March 27, 2001 the closing price for the
Class A Warrant reported on NASDAQ SmallCap was $.0312.  On March 27, 2001 there
were 19 holders of record of Common Stock.

<PAGE>

Item 6.           MANAGEMENT'S DISCUSSION
                  AND ANALYSIS OR PLAN OF OPERATION


         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   operations  and  financial
conditions.  This  discussion  should be read in conjunction  with the financial
statements and notes thereto appearing elsewhere herein.

Results of Operations

         Year ended December 31, 2000 ("Fiscal  2000") as compared to year ended
December 31, 1999 ("Fiscal 1999").

         Net sales  for the year  ended  December  31,  2000  were  $17,172,121,
reflecting an increase of $4,268,967  or 33% from the  $12,903,154  of net sales
for the year ended  December 31, 1999.  The increase in the year ended  December
31, 2000 resulted from the addition of the popular Heineken brand as well as the
addition of the Hansen Beverage line to our portfolio of products. Cost of sales
was  $14,537,102 or 85% of net sales for Fiscal 2000, as compared to $10,428,057
or 81% of net sales for fiscal 1999.

         The  increase  in cost of goods sold as a  percentage  of sales for the
year ended  December 31, 2000,  is due primarily to the addition of the Heineken
brand  which sold as a lead item at a lower gross  margin  than  products in our
primary brand portfolio.

         Selling,  general and administrative expenses were $3,632,677 in Fiscal
2000 as compared to $3,165,742  for fiscal 1999.  The increase in the year ended
December 31, 2000 results from the increased costs to deliver the  substantially
higher sales generated in this period.

         Interest  expense  for year  ended  December  31,  2000 was  $55,872 as
compared to $53,385 for the  respective  1999  period.  The increase in the year
ended  December 31, 2000 is due to  additional  leases  acquired for  additional
fixed assets in fiscal  2000.  Interest  income for the year ended  December 31,
2000 was  $29,689 as compared to $71,966 for the  respective  1999  period.  The
decrease in the  twelve-month  period resulted from the decrease in average cash
balance invested in the Vista account.

Liquidity and Capital Resources

         Cash  used in  operations  for the year  ended  December  31,  2000 was
$411,540. The increase in inventories of $78,137 was due to normalized levels of
product associated with the higher sales volume.

         Working  capital  decreased  from  $1,812,050  at December  31, 1999 to
$592,543 at December 31, 2000 as a result of the losses incurred in operations.

         At December 31, 2000 the Company's  primary  sources of liquidity  were
$191,342 in cash, $404,738 in accounts receivable and $1,034,791 in inventories.

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

Item 7.  FINANCIAL STATEMENTS.

         See  financial  statements  following  Item 13 of this Annual Report on
Form 10-KSB.

Item 8.  CHANGES IN AND DISAGREEMENT WITH ACCOUNTANTS
              ON ACCOUNTING AND FINANCIAL DISCLOSURE.

         None.

<PAGE>

                                    PART III

Item 9.  DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL
           PERSONS; COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE

ACT.

Directors and Executive Officers

         The names and ages of the directors, executive officers and significant
employees, and promoters of the Company are set forth below.

               Name                 Age   Position Held

         Carmine N. Stella          48    President, Chief Executive Officer,
                                          Chairman of the Board of Directors

         Robert A. Vessa*           50    Director

         Anthony Stella             50    Vice President of Sales and Marketing,
                                          Director

         Carol Russell              45    Secretary, Treasurer and Director

         Dawn A. Collins*           32    Director

         Joseph M. Luzzi*           53    Director
-----------------------
*  Member of the Compensation Committee and Audit Committee.

Carmine N. Stella
-----------------
        Mr. Stella has served as President, Chief Executive Officer and Chairman
of the Board of Directors of the Company since its  inception in December  1995.
From 1991 to the present,  Mr.  Stella has been the sole  officer,  director and
shareholder of VSI, a wholesale and retail seller of alcoholic and  nonalcoholic
beverages  with  $12,000,000 of sales during fiscal 1994 and $7,000,000 of sales
during  fiscal 1995.  From 1986 to 1990,  Mr.  Stella  served as President and a
director  of  Gotham  Wholesale  Beer  Distributors,  a beer  and  non-alcoholic
beverage  wholesaler  with annual  sales in excess of  $20,000,000.  Mr.  Stella
served as a  President  and  Director  of the  Empire  State  Beer  Distributors
Association  from 1984 to 1988. Mr. Stella  received a B.B.A. in Accounting from
Bernard M. Baruch College, New York, New York in 1973.

Robert A. Vessa
---------------
        Mr. Vessa has been a Director of  the  Company  since  October 29, 1997.
From 1984, Mr. Vessa has acted as Business  Affairs  Coordinator and a member of
the Board of Directors of the Empire State Beer  Distributors  Association.  Mr.
Vessa  received a B.B.A.  degree in Marketing  and  Advertising  from Bernard M.
Baruch College, City University of New York in 1973.

Anthony  Stella
---------------
        Mr. Stella has served as Vice  President - Sales  and  Marketing and  an
employee of the Company since inception. Mr. Stella has acted as executive sales
manager  for Vito  Santoro,  Inc.,  Gotham  Wholesale  Beer,  Inc.,  Miller Home
Service,  Inc.  and  College  Point Beer  Distributors  over the past 15 years .
Anthony Stella is the brother of Carmine Stella.

Carol Russell
-------------
        Mrs.  Russell has served as  Secretary,  Treasurer and a Director of the
Company  since  February  1996.  From  1991  Mrs.  Russell  has also  served  as
Controller and Operations Manager of VSI from 1991 to the present.  Mrs. Russell
graduated from Central Commercial High School in New York City in 1973.

Dawn A. Collins
---------------
        Ms.cCollins has been a Director of the Company  since  October 29, 1997.
Ms.  Collins  has  also  served  as  an  accountant   for   Restaurant   Systems
International,  Inc.  since 1995.  From 1993 to 1995,  Ms.  Collins served as an
accountant  for Ocean View  Management.  From 1991 to 1993,  Ms.  Collins was an
accountant with Barr Beatty Devlin & Co., Inc. Ms. Collins  received a B.B.A. in
accounting from Baruch College in 1992.

Joseph M. Luzzi
---------------
        Mr. Luzzi has been a Director of the Company since October 29, 1997. Mr.
Luzzi has also served as President,  Chief Executive Officer and Chairman of the
Board of Directors of Boro Recycling, Inc. since its inception in December 1980.
From  1973 to 1980,  Mr.  Luzzi  was the New York  City  sales  manager  for the
Sunshine  Biscuit  Company,  a  subsidiary  of American  Brands,  Inc. Mr. Luzzi
attended New York City Community College from 1967 to 1969.

<PAGE>


         The Company  has  established  a  compensation  committee  and an audit
committee.  The compensation  committee reviews executive salaries,  administers
any  bonus,  incentive  compensation  and  stock  option  plans of the  Company,
including  the  Company's  1996  Incentive  Stock Option Plan,  and approves the
salaries  and other  benefits  of the  executive  officers  of the  Company.  In
addition,  the  compensation  committee  consults with the Company's  management
regarding  pension  and other  benefit  plans,  and  compensation  policies  and
practices of the Company. The compensation committee consists Robert Vessa, Dawn
Collins and Joseph Luzzi.

         The audit  committee  reviews,  among other matters,  the  professional
services  provided by the Company's  independent  auditors,  the independence of
such auditors from management of the Company, the annual financial statements of
the Company and the Company's system of internal accounting controls.  The audit
committee  also  reviews  such other  matters  with  respect to the  accounting,
auditing and financial  reporting  practices and procedures of the Company as it
may find appropriate or as may be brought to its attention.

         The audit  committee has reviewed and  discussed the audited  financial
statements  included  in the  Company's  Form  10-KSB for the fiscal  year ended
December 31, 2000 with management.  The audit committee has received the written
disclosures  and  the  letter  from  the  independent  accountants  reviewed  by
Independence Standards Board Standard No. 1, as may be modified or supplemented,
and discussed with the auditors the auditors' independence.

         Based on the review and  discussions  noted above,  the audit committee
recommended to the Board of Directors that the audited  financial  statements be
included in the Company 2000 Form 10-KSB.

         The audit  committee  consists  of three  members  Robert  Vessa,  Dawn
Collins  and Joseph  Luzzi,  all of whom are  "independent"  (as  defined in the
listing standards maintained by the Nasdaq Stock Market).

Compliance with Section 16(a) of  The Securities Exchange Act of 1934

         Section  16(a) of the  Securities  Exchange  Act of 1934  requires  the
Company's  directors and executive  officers,  and persons who own more than ten
percent (10%) of a registered class of the Company's equity securities,  to file
with the Securities  and Exchange  Commission  initial  reports of ownership and
reports of changes in ownership of common stock and other equity  securities  of
the Company.  Officers,  directors and greater than ten percent shareholders are
required by SEC  regulation  to furnish  the Company  with copies of all Section
16(a) forms they file.

         Except as provided below, to the Company's  knowledge,  based solely on
its review of the copies of such  reports  furnished  to the Company  during the
year ended December 31, 2000, all Section 16(a) filing  requirements  applicable
to its officers,  directors and greater than ten percent  beneficial owners were
satisfied.


<PAGE>



ITEM 10. EXECUTIVE COMPENSATION.
         ----------------------

         The  following  table  sets  forth the  compensation  paid to the Named
Executive Officers for the fiscal years ending December 31, 1998, 1999 and 2000.

                           Summary Compensation Table

                                        Other Annual Restricted Stock Option
NAME AND PRINCIPAL POSITION  YEAR  SALARY   COMPENSATION    AWARD      GRANTS

Carmine N. Stella            2000 $301,982      -0-          -0-         -0-
President, Chief Executive
Officer,                     1999 $302,643      -0-          -0-         -0-
Chairman of the Board        1998 $307,799      -0-          -0-         -0-


Anthony Stella               2000 $171,146      -0-          -0-         -0-
Vice President of Sales      1999 $171,529      -0-          -0-         -0-
and Marketing Director       1998 $175,579      -0-          -0-         -0-


Carol Russell                2000 $ 82,500      -0-          -0-         -0-
                             1999 $ 88,000      -0-          -0-         -0-
                             1998 $112,116      -0-          -0-         -0-


         The  following  table sets forth  certain  information  with respect to
options  granted  during the last fiscal year to the Company's  Chief  Executive
Officer and the other executive officers named in the above Summary Compensation
Table.

                      Option/SAR Grants In Last Fiscal Year
<TABLE>
<CAPTION>

Name                             Number of Securities         Percent of Total          Exercise or
                                      Underlying           Options/SARS Granted to      Base Price
                                 Options/SARS Granted     Employees in Fiscal Year        ($/Sh)        Expiration Date
                                 ---------------------    ------------------------      -----------     ---------------
                                          (#)
<S>                                       <C>                       <C>                    <C>                <C>

Carmine Stella                          25,000                     14.3%                   $.50             12/29/09
Anthony Stella                          25,000                     14.3%                   $.50             12/29/09
Carol Russell                           25,000                     14.3%                   $.50             12/29/09

</TABLE>

----------------------------------
(1)      Options are exercisable for shares of Common Stock.

         The  following  table sets forth  certain  information  with respect to
options  exercised  during the last fiscal year by the Company's Chief Executive
Officer and the executive officers named in the Summary  Compensation Table, and
with respect to unexercised  options held by such persons at the end of the last
fiscal year:


<PAGE>

<TABLE>
<CAPTION>

Aggregate   Option/SAR  Exercises  In  Last  Fiscal  Year  And  Fiscal  Year-End
Option/SAR Values

                      Shares                                Number of Securities           Value of Unexercised in the Money
                    Acquired on     Value Realized         Underlying Unexercised                   Options/SARs at
      Name        Exercise (#)(1)        $                Options/SARS at FY-End (#)                     FY-End ($) (2)
      ----        ---------------   --------------        --------------------------       ----------------------------------

                                                         Exercisable     Unexercisable        Exercisable       Unexercisable
                                                         -----------     -------------        -----------       -------------
<S>                     <C>              <C>                <C>               <C>                 <C>                <C>

                        -0-              -0-                -0-               -0-                 -0-                -0-
</TABLE>

         Each  director  of  the  Company  is  entitled  to  receive  reasonable
out-of-pocket  expenses incurred in attending meetings of the Board of Directors
of the Company.  The members of the Board of Directors  meet at least  quarterly
during the Company's fiscal year, and at such other times duly called.

Employment Agreements

      The  Company  entered  into an  employment  agreement  with Mr.  Stella on
October  1, 1996  which  provides  for a  three-year  term and  includes  annual
compensation of $300,000, plus certain fringe benefits including health and life
insurance.  The  contract  was renewed  for another  three years and will expire
October, 2003. There were no changes made to the original contract.

Stock Option Plans and Agreements

      The Company's 1996  Incentive  Stock Option Plan was approved by the Board
of  Directors  and  holders of Common  Stock of the  Company on June 19, 1996 to
provide for the grant of incentive  stock options  within the meaning of Section
422 of the  Internal  Revenue  Code of 1986 to  officers  and  employees  of the
Company.  A total of  350,000  shares of Common  Stock has been  authorized  and
reserved for issuance  under the 1996  Incentive  Stock Option Plan,  subject to
adjustment to reflect changes in the Company's  capitalization  in the case of a
stock split, stock dividend or similar event.  175,000 options have been granted
under the Company's 1996 Incentive  Stock Option Plan. The 1996 Incentive  Stock
Option Plan will be administered by the  Compensation  Committee,  which has the
sole authority to interpret the 1996  Incentive  Stock Option Plan, to determine
the persons to whom options will be granted,  to determine  the basis upon which
the options will be granted,  and to determine the exercise price,  duration and
other terms of options to be granted under the 1996 Incentive Stock Option Plan;
provided  that,  (i) the exercise  price of each option  granted  under the 1996
Incentive  Stock  Option Plan may not be less than the fair market  value of the
Common Stock on the day of the grant of the option, (ii) the exercise price must
be paid in cash and or stock upon exercise of the option, (iii) no option may be
exercisable  for more than 10 years after the date of grant,  and (iv) no option
is transferable  other than by will or the laws of descent and distribution.  No
option is exercisable  after an optionee ceases to be employed by the Company or
a subsidiary of the Company,  subject to the right of the Compensation Committee
to extend the exercise  period for not more than 90 days  following  the date of
termination  of  an  optionee's  employment.  If  an  optionee's  employment  is
terminated by reason of disability, the Compensation Committee has the authority
to extend the exercise  period for not more than one year  following the date of
termination of the optionee's  employment.  If an optionee dies holding  options
that were not fully exercised, such options may be exercised in whole or in part
within one year of the optionee's  death by the executors or  administrators  of
the optionee's  estate or by the optionee's  heirs. The vesting period,  if any,
specified for each option will be accelerated upon the occurrence of a change of
control or threatened change of control of the Company

<PAGE>



ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
              MANAGEMENT.

      The following table sets forth as of March 27, 2001,  certain  information
with  respect to the  beneficial  ownership  of Common  Stock by each  person or
entity  known by the  Company to be the  beneficial  owner of 5% or more of such
shares, each officer and director of the Company, and all officers and directors
of the Company as a group:


NAME AND ADDRESS OF
BENEFICIAL OWNER (1)      SHARES OF COMMON STOCK OWNED         Percentage (%) of
                                                                   COMMON STOCK
Carmine Stella(2)                  709,091                              26.5%
Anthony Stella(3)                   77,273                               3.3%
Carol Russell                         0                                   0
Dawn Collins                          0                                   0
Joseph Luzzi                          0                                   0
Robert Vessa                          0                                   0
All officers and
directors as a group
(six (6) persons)                  786,364                              29.8%

(1)    The address of each Stockholder shown above except as otherwise indicated
       is c/o Capital Beverage Corporation, 1111 East Tremont Avenue, Bronx, New
       York 10460.

(2)    Does not include  333,600  shares of Common Stock that may be acquired by
       Mr. Stella  beginning July 17, 1998 upon exercise of 333,600 additional
       Class A Warrants held by Mr. Stella.

(3)    Does not include  83,400  shares of Common  Stock that may be acquired by
       Mr.  Anthony  Stella   beginning  July 17, 1998  upon  exercise of 83,400
       Class A Warrants held by him.


ITEM 12.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
          ----------------------------------------------

         The  Company  leases two  locations  in the Bronx.  The main office and
picking  location  for  products  are  at  1111  E.  Tremont  Avenue.  There  is
approximately  10,000 sq. ft. of usage at this  location at a cost of $4,000 per
month.  The lease on this location is with East Tremont  Partners.  East Tremont
Partners  is a New  York  partnership  in which  Mr.  Stella  holds a  one-sixth
interest.  Management of the Company  believes that the rent paid by the Company
under  this  lease is less than  what it would be  required  to pay for  similar
premises  within  the area in which the  Company's  administrative  offices  are
located.

         In 2000 the  Company's  recycling  services  were provided by an entity
whose  principal  shareholder,  Joseph Luzzi, is also a director of the Company.
Such services amounted to $61,462.00.

         Although  the Company  has no present  intention  of entering  into any
affiliated   transactions,   the  Company  believes  that  material   affiliated
transactions  between  the  Company  and  its  directors,   officers,  principal
shareholders or any affiliates  thereof should be in the future on terms no less
favorable than could be obtained from unaffiliated third parties.

         With  respect  to  each  of the  foregoing  transactions,  the  Company
believes  that the terms of such  transactions  were as fair to the  Company  as
could be obtained  from an  unrelated  third  party.  Future  transactions  with
affiliates  will be on terms no less  favorable  than  could  be  obtained  from
unaffiliated  parties  and will be  approved  by a majority  of the  independent
and/or disinterested members of the board of directors.





<PAGE>




ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K

Item     a.                EXHIBITS AND REPORTS ON FORM 8-K

(a)(1)  Financial Statements.
                                      Index

         Independent Auditors' Report                                  F - 2

         Consolidated Financial Statement

                  Balance Sheet                                        F - 3
                  Statements of Operations                             F - 4
                  Statements of Stockholders' Equity                   F - 5
                  Statements of Cash flows                             F - 6
                  Notes to Financial Statements                        F - 7 -13




                                      F - 1


<PAGE>











                          INDEPENDENT AUDITORS' REPORT


Board of Directors and Stockholders
Capital Beverage Corporation and Subsidiary

         We have audited the accompanying  consolidated balance sheet of Capital
Beverage  Corporation  and  Subsidiary  as of December  31, 2000 and the related
consolidated  statements of operations,  stockholders' equity and cash flows for
the years ended December 31, 2000 and 1999.  These financial  statements are the
responsibility of the Company's management.  Our responsibility is to express an
opinion on these financial statements based on our audit.

         We conducted our audit in accordance with generally  accepted  auditing
standards.  Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement.  An audit includes examining on a test basis,  evidence supporting
the amounts and disclosures in the financial statements.  An audit also includes
assessing the  accounting  principles  used and  significant  estimates  made by
management,  as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.

         In our opinion,  the  financial  statements  referred to above  present
fairly, the consolidated  financial position of Capital Beverage Corporation and
Subsidiary  as of  December  31,  2000  and  the  consolidated  results  of  its
operations  and its cash flows for the years ended December 31, 2000 and 1999 in
conformity with generally accepted accounting principles.



                                             /s/Feldman Sherb & Co, P.C.
                                                Feldman Sherb & Co., P.C.
                                                Certified Public Accountants

New York, New York
March 1, 2001


                                      F - 2


<PAGE>
                   CAPITAL BEVERAGE CORPORATION AND SUBSIDIARY

                           CONSOLIDATED BALANCE SHEET

                                DECEMBER 31, 2000


                                     ASSETS

CURRENT ASSETS:
 Cash                                                            $      191,342
 Accounts receivable - net of allowance for doubtful
  accounts of $80,000                                                   404,738
 Inventories                                                          1,034,791
 Prepaid expenses and other current assets                               20,218
                                                                  --------------
  TOTAL CURRENT ASSETS                                                1,651,089

PROPERTY AND EQUIPMENT                                                  254,874

DISTRIBUTION LICENSE                                                    800,000

DEFERRED EXPENSES                                                       215,255

OTHER ASSETS                                                             32,310
                                                                  --------------

                                                                 $    2,953,528
                                                                  ==============

                      LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES:
 Accounts payable                                                $      539,313
 Accrued expenses and taxes                                             198,349
 Current portion of long-term debt                                       81,013
 Current portion of capital lease obligations                            39,871
 Accrued dividends on preferred stock                                   200,000
                                                                  --------------
         TOTAL CURRENT LIABILITIES                                    1,058,546
                                                                  --------------

CAPITAL LEASE OBLIGATIONS                                               169,149

LONG-TERM DEBT                                                          404,239

STOCKHOLDERS' EQUITY:
 Common stock, $ .001 par value; authorized 20,000,000 shares;
  issued and outstanding 2,678,409 shares                                 2,679
 Additional paid-in capital                                           5,368,273
 Accumulated deficit                                                 (4,049,358)
                                                                  --------------
         TOTAL STOCKHOLDERS' EQUITY                                   1,321,594
                                                                  --------------

                                                                 $    2,953,528
                                                                  ==============




                 See notes to consolidated financial statements.

                                       F-3

<PAGE>
                   CAPITAL BEVERAGE CORPORATION AND SUBSIDIARY

                      CONSOLIDATED STATEMENTS OF OPERATIONS



                                                  Year Ended December 31,
                                           -----------------------------------
                                                  2000               1999
                                           ---------------    ----------------


NET SALES                                $     17,172,121   $      12,903,154
COST OF SALES                                  14,537,102          10,428,057
                                           ---------------    ----------------
GROSS PROFIT                                    2,635,019           2,475,097
                                           ---------------    ----------------

COSTS AND EXPENSES:
     Selling and delivery                       1,214,583           1,025,068
     General and administrative                 2,418,094           2,140,674
                                           ---------------    ----------------
                                                3,632,677           3,165,742
                                           ---------------    ----------------

LOSS FROM OPERATIONS                             (997,658)           (690,645)

INTEREST EXPENSE                                  (55,872)            (53,385)

INTEREST INCOME                                    29,689              71,966
                                           ---------------    ----------------

NET LOSS                                       (1,023,841)           (672,064)

PREFERRED STOCK DIVIDENDS                         (45,500)            (84,000)
                                           ---------------    ----------------

NET LOSS APPLICABLE TO COMMON
 SHAREHOLDERS                            $     (1,069,341)  $        (756,064)
                                           ===============    ================

LOSS PER SHARE - BASIC AND DILUTED       $          (0.42)  $           (0.32)
                                           ===============    ================

WEIGHTED AVERAGE NUMBER OF SHARES
     USED IN CALCULATION OF BASIC AND
     DILUTED LOSS PER SHARE                     2,528,409           2,378,409
                                           ===============    ================











                 See notes to consolidated financial statements.

                                       F-4
<PAGE>

                   CAPITAL BEVERAGE CORPORATION AND SUBSIDIARY

                 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY


<TABLE>
<CAPTION>


                                        Preferred Stock     Common Stock      Additional                      Total
                                        ---------------  ------------------     Paid-In   Accumulated     Stockholders'
                                         Shares   Amount    Shares    Amount     Capital     Deficit          Equity
                                        -------  -------  ---------- -------  ----------- -------------- ---------------

<S>                                     <C>     <C>       <C>       <C>     <C>          <C>            <C>
Balance December 31, 1998                300,000 $ 3,000   2,378,409 $ 2,379 $ 5,365,573  $ (2,223,953)    $ 3,146,999

Net loss                                    -       -           -       -           -         (672,064)       (672,064)

Dividends payable to preferred
 shareholders                               -       -           -       -           -          (84,000)        (84,000)
                                        -------  -------  ---------- -------  ----------- -------------- ---------------
Balance December 31, 1999                300,000   3,000   2,378,409   2,379   5,365,573    (2,980,017)      2,390,935

Conversion of preferred to common       (300,000) (3,000)    300,000     300       2,700          -               -

Net loss                                    -       -           -       -           -        (1,023,841)    (1,023,841)

Dividends payable to preferred
 shareholders                               -       -           -       -           -          (45,500)        (45,500)
                                        -------  -------  ---------- -------  ----------- -------------- ---------------
Balance December 31, 2000                   -   $   -     2,678,409  $ 2,679 $ 5,368,273  $ (4,049,358)    $ 1,321,594
                                        =======  =======  ========== =======  =========== ============== ===============

</TABLE>











                See notes to consolidated financial statements.

                                       F-5
<PAGE>
                   CAPITAL BEVERAGE CORPORATION AND SUBSIDIARY

                            STATEMENTS OF CASH FLOWS


                                                        Year Ended December 31,
                                                    ----------------------------
                                                       2000              1999
                                                    -------------   ------------

CASH FLOWS FROM OPERATING ACTIVITIES:
 Net loss                                          $  (1,023,841) $    (672,064)
                                                    -------------   ------------
 Adjustments to reconcile net loss to
  net cash used in operating activities:
   Depreciation and amortization                        193,217         171,032

 Changes in assets and liabilities:
  (Increase) decrease in accounts receivable            298,859        (361,828)
  Increase in inventories                               (78,137)       (377,555)
  Decrease in prepaid expenses                            7,505          21,501
  Increase in deferred expenses                        (107,880)           -
  Decrease in other assets                                7,547          35,805
  Increase in accounts payable and accrued expenses     291,190          75,530
                                                    --------------  ------------
                                                        612,301        (435,515)
                                                    --------------  ------------

NET CASH USED IN OPERATING ACTIVITIES                  (411,540)     (1,107,579)
                                                    --------------  ------------

CASH FLOWS FROM INVESTING ACTIVITIES
 Purchase of equipment                                   (1,008)        (10,203)
                                                    --------------  ------------

CASH FLOWS FROM FINANCING ACTIVITIES:
 Principal payments of capital lease obligations        (20,139)         (4,894)
 Payment of accrued dividends on preferred stock       (199,613)           -
 Payments of long-term debt                             (74,292)        (68,131)
                                                    --------------  ------------
NET CASH USED IN FINANCING ACTIVITIES                  (294,044)        (73,025)
                                                    --------------  ------------

DECREASE IN CASH                                       (706,592)     (1,190,807)

CASH - BEGINNING OF YEAR                                897,934       2,088,741
                                                    --------------  ------------

CASH - END OF YEAR                                 $    191,342   $     897,934
                                                    ==============  ============

SUPPLEMENTAL DISCLOSURE OF CASH FLOW
     INFORMATION:

     Cash paid for interest                        $     55,713   $      53,299
                                                    ==============  ============

SUPPLEMENTAL NON-CASH FINANCING ACTIVITIES:

     Capital lease obligations                     $    180,942   $      38,388
                                                    ==============  ============


                 See notes to consolidated financial statements.

                                       F-6
<PAGE>

                   CAPITAL BEVERAGE CORPORATION AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                     YEARS ENDED DECEMBER 31, 2000 AND 1999




1.       DESCRIPTION OF BUSINESS

         Capital  Beverage  Corporation  (the  "Company") 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
         Comm"), a wholly-owned subsidiary, was organized to market domestic and
         long distance  prepaid  telephone  calling cards to distributors and to
         the general public.

2.       SIGNIFICANT ACCOUNTING POLICIES

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

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

         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.

         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.

                                      F - 7

<PAGE>





         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.  Amortization
         is provided on a straight-line basis over ten years.

         Revenue  Recognition - Wholesale sales are recognized at the time goods
         are shipped.  Revenue on prepaid phone cards is recognized when the end
         user utilizes calling time and upon expiration of such card.

         Loss  per  Common  Share - Net 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.

         New  Accounting  Pronouncements  - In June 1998 and June 2000, the FASB
         issued SFAS No. 133, "Accounting for Derivative Instruments and Hedging
         Activities"  and SFAS  No.  138,  "Accounting  for  Certain  Derivative
         Instruments and Certain Hedging Activities." These statements establish
         accounting  and reporting  standards  requiring  that every  derivative
         instrument  be  recorded  on the  balance  sheet as  either an asset or
         liability  measured  at its  fair  value.  SFAS  Nos.  133 and 138 also
         require  that  changes in the  derivative's  fair  value be  recognized
         currently in earnings  unless  specific hedge  accounting  criteria are
         met.  SFAS Nos. 133 and 138 are  effective  for fiscal years  beginning
         after June 15,  2000.  The Company does not expect that the adoption of
         these new  standards  will  have a  material  impact  on the  Company's
         earnings or financial position.

         In December 1999, the Securities and Exchange Commission ("SEC") issued
         Staff Accounting  Bulletin No. 101,  "Revenue  Recognition in Financial
         Statements" ("SAT 101"),  which clarifies  certain existing  accounting
         principles for the timing of revenue recognition and its classification
         in the financial statements. In June 2000, the SEC delayed the required
         implementation  date of SAT  101.  As a  result,  SAT 101  will  not be
         effective for the Company  until the quarter ended  September 30, 2001.
         In October 2000, the SEC issued further guidance on the interpretations
         included in SAT 101. The Company is currently  analyzing  the impact of
         this Staff Accounting Bulletin.







                                      F - 8

<PAGE>



         In  September  2000,  the FASB  issued  SFAS No.  140  "Accounting  for
         Transfers  and  Servicing of  Financial  Assets and  Extinguishment  of
         Liabilities-a replacement of FASB Statement No. 125" ("SFAS 140"). SFAS
         140 revises the standards for accounting for  securitization  and other
         transfers  of financial  assets and  collateral  and  requires  certain
         disclosures,  but it carries over most of SFAS 125's provisions without
         reconsideration.   This   Statement  is  effective  for  transfers  and
         servicing  of  financial  assets  and   extinguishment  of  liabilities
         occurring  after  March 31,  2001.  This  Statement  is  effective  for
         recognition  and  reclassification  of collateral  and for  disclosures
         relating to securitization transactions and collateral for fiscal years
         ending after December 15, 2000. The Company is currently analyzing this
         new standard.

3.       DISTRIBUTION LICENSE

         The  Company has  acquired an  exclusive  license to  distribute  Pabst
         Products within the "territory", as defined in the licensing agreement.
         The Company paid $1,600,000,  of which $800,000 was paid at the closing
         and the  balance  in a note  payable  in 120  monthly  installments  of
         $10,000 each, inclusive of interest at 9% per annum.

         Principal  payments  of the notes over the next five years are:  2001 -
         $81,013;  2002 - $88,338;  2003 - $96,327;  2004 -  $105,038;  - 2005 -
         $114,536.

4.       WARRANTS

         In July 1997,  the Company  sold  800,000  units for  $3,803,000  after
         expenses.  The units consisted of one share of Common Stock and Class A
         Redeemable Common Stock Purchase Warrants. Two Class A warrants entitle
         the holder to  purchase  one share of Common  Stock at $6.25 per share.
         The warrants  are  exercisable  commencing  July 17, 1998 and expire on
         July 16, 2002.  The warrants are redeemable by the Company at $.001 per
         warrant  under terms as defined in the warrant  agreement.  At December
         31, 2000, 1,659,000 Class A warrants were issued and outstanding.

         The Company issued a unit purchase warrant to the underwriter for $100,
         enabling the  underwriter to purchase up to 80,000 units at an exercise
         price of at least 120  percent  of the  initial  offering  price of the
         units. The Company has reserved 120,000 shares of Common Stock to cover
         the exercise of such warrant.

5.       INCOME TAXES

         At December 31, 2000, the Company had a net operating loss carryover of
         $3,500,000  available as offsets against future taxable income, if any,
         which expire at various dates through 2015.  The Company has a deferred
         tax asset of $1,200,000 arising from such net operating loss deductions
         and has  recorded a  valuation  allowance  for the full  amount of such
         deferred tax asset.


                                      F - 9

<PAGE>



         The  difference  between  the  recorded  income  tax  benefits  and the
         computed tax benefits using a 40 percent effective rate are as follows:


                                            Year Ended December 31,
                                         -----------------------------
                                               2000            1999
                                         ---------------  ------------
Computed expected
 income tax (benefit)                 $       (400,000)  $   (270,000)
Non-deductible items                              -            20,000
Temporary differences                             -            (2,000)
Benefits not recorded                          400,000        252,000
                                         ---------------  ------------
                                      $           -      $       -
                                         ===============  ============

6.       PROPERTY AND EQUIPMENT

         Property  and  equipment,  at  cost,  consist  of the  following  as of
December 31, 2000:


Leasehold improvements                     $                  60,000
Computer equipment                                            16,418
Machinery and equipment                                      244,002
                                                --------------------
                                                             320,420
Less accumulated depreciation                               (65,546)
                                                --------------------
                                           $                 254,874
                                                ====================

         The  Company  has  machinery  and  equipment  under  capital  leases of
$234,921.

7.       CAPITAL LEASE OBLIGATIONS

         The  Company  has  various   capital   lease   obligations   which  are
         collateralized  by equipment.  Interest  rates under the agreements are
         7.6% to 9.9%, with monthly principal and interest payments of $4,758.







                                     F - 10

<PAGE>



         Future  minimum  lease  payments  and the present  value of the minimum
         lease payments under the noncancellable capital lease obligations as of
         December 31, 2000 are as follows:


2001                                   $      59,064
2002                                          59,064
2003                                          59,064
2004                                          51,136
2005                                          26,508
                                        -------------
Total future minimum
 lease payments                              254,836
Less amounts representing interest            45,816
                                        -------------
Present value of minimum
 lease payments                              209,020
Less current maturities                       39,871
                                        -------------
Total long - term obligations          $     169,149
                                        =============

8.       LEASE COMMITMENTS

         The Company  renegotiated the lease of its warehouse and administrative
         facilities in April 1998 thereby  reducing its monthly rental  payments
         from  $10,000  to $4,000 for the  remainder  of its lease  term,  which
         expires in 2001.  A  principal  shareholder  in the  company has a one-
         sixth interest in the lessor.  Additional  warehouse space was acquired
         from a customer on a  month-to-month  basis  commencing  October  1998.
         Rental payments of $7,000 per month are offsettable against amounts due
         from the customer until the balance is liquidated. In November 1999 the
         Company agreed to pay $4,000 per month,  and the remaining  $3,000 will
         be offsettable against amounts due from the customer.  Rent expense for
         2000 and 1999 was $131,500 and $107,258, respectively.

9.       CONCENTRATION OF CREDIT RISK

         The Company is subject to credit risk  through  trade  receivables  and
         short-term  cash  investments.   Credit  risk  with  respect  to  trade
         receivables is mitigated to a degree because of management's  knowledge
         of the  local  marketplace  and the  relative  creditworthiness  of the
         customers to which it extends credit.  Short-term cash  investments are
         placed  with  high  credit  quality  financial  institutions,   thereby
         limiting the amount of credit exposure.





                                     F - 11

<PAGE>



         The Company's  operations,  and therefore its revenues are concentrated
         in the New York City Metropolitan area.  Additionally,  the majority of
         the  Company's   revenues  are  derived  from  the  sale  of  alcoholic
         beverages.  Downturns  in New York City's  economic  activities  and/or
         negative  changes  in the  publics  perception  of the  consumption  of
         alcoholic beverages may adversely affect the Company's operations.

10.      MAJOR CUSTOMER AND SUPPLIER INFORMATION

         Sales to a single  customer  in 1999  accounted  for 14% of net  sales.
         Purchases  from  major  suppliers  were  approximately  $6,700,000  and
         $3,000,000 in 2000 and 1999, respectively.

9.       RELATED PARTY TRANSACTION

         The Company's carting and recycling  services are provided by an entity
         whose  principle  shareholder  is also a director of the Company.  Such
         services approximated $61,462 in 2000 and $63,000 in 1999.

10.      EMPLOYMENT AGREEMENT

         The  Company  has an  agreement  for the  services of an officer of the
         Company as President and Chief Executive Officer ("CEO"). The agreement
         expires on October 2003 and provides for base  compensation of $300,000
         per year payable in equal weekly payments.  The agreement also provides
         for  participation  in whatever  executive  stock option plan is agreed
         upon by the board of  directors,  the use of a luxury  car,  health and
         welfare  coverage for the officer and his family,  coverage and benefit
         of pension  plan in the event that a plan is  approved  by the board of
         directors,  reimbursement  of all expenses  reasonably  incurred in the
         performance  of duties under the  agreement,  four weeks paid  vacation
         annually,  six paid  personal  days and sick days in  keeping  with the
         Company's policy regarding executives, four weeks paid leave of absence
         and if the Company ceases  employment for any reason,  the officer will
         receive four weeks pay for each year of service with the Company.  Such
         payment will be pro-rated for the portion of the final year of service.

11.      STOCK OPTIONS

         The  Company's  1996  Incentive  Stock  Option  Plan (the  "Plan")  was
         approved by the Board of  Directors  and holders of Common Stock of the
         Company on June 19,  1996 to provide for the grant of  incentive  stock
         options within the meaning of Section 422 of the Internal  Revenue Code
         of 1986 to officers and  employees  of the Company.  A total of 350,000
         shares of Common Stock has been  authorized  and reserved for issuance,
         subject   to   adjustment   to  reflect   changes   in  the   Company's
         capitalization in the case of a stock split,  stock dividend or similar
         event.  The Plan will be  administered by the  Compensation  Committee,
         which has the sole  authority to determine  the persons to whom options
         will be granted,  to determine the basis upon which the options will be
         granted, and to determine the exercise price, duration

                                     F - 12

<PAGE>



         and  other  terms of  options  to be  granted  provided  that,  (i) the
         exercise  price of each option  granted  under the Plan may not be less
         than the fair market  value of the Common Stock on the day of the grant
         of the  option,  (ii) the  exercise  price  must be paid in cash and or
         stock upon exercise of the option,  (iii) no option may be  exercisable
         for more than 10 years  after the date of grant,  and (iv) no option is
         transferable other than by will or laws of descent and distribution.

         On December  30,  1999,  175,000  options were  granted.  In 1999,  had
         compensation  cost for the Plan been determined based on the fair value
         at the grant dates for awards under the Plan,  the  Company's  net loss
         and loss per  share  would  have  increased  to the pro  forma  amounts
         indicated below:


                                           As Reported          Pro Forma
                                        ---------------       --------------
Net loss                                   ($672,064)           ($993,662)
Basic and diluted net loss per share          ($0.32)              ($0.42)

         The fair value of each option  grant is  estimated on the date of grant
         using  the  Black  Scholes  option-pricing  method  with the  following
         weighted average  assumptions  used for grants in 1999;  dividend yield
         0%, expected volatility 50%, risk free interest rate 7%, expected lives
         in years 5.

         The weighted  average fair value of stock  options  granted  during the
         year ended December 31, 2000 was $3.50.  No employee stock options were
         granted in 2000.

12.      DEFERRED EXPENSES

         Deferred  expenses   represent  costs  associated  with  the  Company's
         proposed purchase of Prospect Beverages, Inc.

13.      SUBSEQUENT EVENTS

         On January  9, 2001,  the  Company  entered  into a letter of intent to
         purchase  certain assets and  liabilities of Prospect  Beverages,  Inc.
         ("Prospect"),  a  Brooklyn-based  distributor.  Prospect  will  receive
         500,000  shares of the  Company's  common  stock as well as  employment
         contracts for certain of its officers.

                                     F - 13

<PAGE>



(a) (2)  Exhibits

         A list and description of exhibits filed as part of this Form 10-KSB is
provided in the attached Exhibit Index.

 1.1     Form of Underwriting Agreement.*
 1.2     Form of Agreement Among Underwriters.*
 1.3     Form of Selected Dealer Agreement.*
 3.1     Certificate of Incorporation.*
 3.2     Certificate of Designations, As Amended, Relating to Series A Preferred
         Stock.*
 3.3     Form of Certificate of Designations Relating to Series B Preferred
         Stock.*
 3.4     ByLaws.*
 4.1     Specimen Common Stock Certificate.*
 4.2     Specimen Series A Preferred Stock Certificate.*
 4.3     Specimen Series B Preferred Stock Certificate.*
 4.4     Specimen Class A Warrant Certificate.*
 4.5     Form of Convertible Bridge Note.*
 4.6     Form of Class A Warrants Issued to Certain Members of Management.*
 4.7     Form of Class A Warrants Issued in 1996 Private Placement Financing.*
 4.8     Form of Representative's Unit Purchase Option Agreement.*
 4.9     Form of Warrant Agreement.*
10.1     Agreement with Consolidated Beverage Corp. relating to Pabst
         Distribution Rights *
10.2     Form of Series of Promissory Notes to Consolidated Beverage
         Corporation *
10.3     Bill of Sale from Consolidated Beverage Corp. to Registrant.*
10.4     Distributorship Agreement with Pabst Brewing Company *
10.5     Agency Agreement with Vito Santoro, Inc.*
10.6     Employment Agreement between Registrant and Carmine N. Stella.*
10.7     1996 Incentive Stock Option Plan.*
10.8     Agreement with Carmine N. Stella relating to Option to acquire Vito
         Santoro, Inc.*
10.9     Merger Agreement relating to Vito Santoro, Inc.*

* Incorporated by reference to Registrant's Registration Statement on Form SB-2,
and amendments thereto, Registration No. 333-9995 declared effective on July 17,
1997.

(b)      Reports on Form 8-K.

                  None.



<PAGE>



                                   SIGNATURES

         In  accordance  with  Section  13 or 15(d)  of the  Exchange  Act,  the
Registrant  caused  this  report to be signed on its behalf by the  undersigned,
thereunto duly executed on this 29th day of March, 2001.

                                         CAPITAL BEVERAGE CORPORATION


                                         By:/s/ Carmine Stella
                                         Carmine Stella
                                         President, Chief Executive Officer
                                         and Chairman of the Board of Directors


         In accordance with the Exchange Act, this report has been signed by the
following persons on behalf of the registrant in the capacities and on the dates
indicated

Signature                            Title                        Date

/s/ Carmine Stella             Chief Executive Officer,       April 2, 2001
------------------             President and Chairman of
Carmine Stella                 the Board of Directors



/s/ Robert Vessa               Director                       April 2, 2001
----------------
Robert Vessa


 /s/Carol Russell              Secretary and Treasurer        April 2, 2001
-----------------              and Director
Carol Russell


/s/ Dawn Collins               Director                       April 2, 2001
-----------------
Dawn Collins


 /s/ Joseph Luzzi              Director                       April 2, 2001
-----------------
Joseph Luzzi


/s/ Anthony Stella             Vice President of Sales        April 2, 2001
------------------             and Managing Director
Anthony Stella