SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                              REPORT ON FORM 10-KSB


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

                  For the fiscal year ended December 31, 2001.

              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)

700 Columbia Street, Erie Basin, Building # 302, Brooklyn, New York      11231
-------------------------------------------------------------------    --------
(Address of Principal Executive Officers)                             (Zip Code)

Registrant's telephone number, including area code: (718) 488-8500

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)


<PAGE>

     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 $21,337,676.

     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 19, 2002, was approximately $946,023.

     Number of shares  outstanding  of the issuer's  Common Stock as of April 3,
2002 was 3,178,409.


                    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  Beverage  now
contracts to purchase from the Miller Brewing Company on an exclusive basis.

     On December 31, 2001 Capital sold its Miller products at the request of the
Miller Brewing  Company in compliance  with their national  consolidation  plan.
Phoenix  Beverage paid Capital  Beverage Two Million Six Hundred Fifty  Thousand
Dollars ($2,650,000) for that acquisition.

     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:

                                       2
<PAGE>

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

     On June 29, 2001, pursuant to the Purchase Agreement, the Company purchased
all of the assets of Prospect's business which related to Prospect's business of
distributing beverages,  including among other things, beer distribution rights,
properties, rights, leases, interests, goods and customer lists of Prospect. The
purchase  price of the assets  consisted  of the  assumption  by the  Company of
certain liabilities of Prospect and the issuance of an aggregate of five hundred
thousand (500,000) shares of the common stock of the Company to the shareholders
of Prospect.  Inclusive with the acquisition came the following national brands:
Colt 45, Old Milwaukee,  Schaefer,  Schlitz,  Champale,  Schmidts, Stroh, Piels,
McSorleys and an extensive list of various imports.

     All of the  distributor  agreements  are  subject to  termination  on short
notice  by the  brewers.  However,  New  York  State  has  one of the  strongest
franchise  state  laws in the  country  which  provides  for fair  market  value
compensation in the event of termination.

     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 connection with the acquisition, the Company received financing from the
Connecticut   Bank  of  Commerce  in  the  principal   amount  of  approximately
$5,000,000.  The  proceeds  of the loan  were  used to  satisfy  certain  of the
liabilities of Prospect and for other working capital purposes.

     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 2001 these
brands accounted for over 548,099 case sales (12oz. equivalents)

                                       3
<PAGE>

     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.

     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.


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 its  driver-sell  sales
force 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.

                                       4
<PAGE>

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 actual sales during Fiscal 2002 will
enable the Company to allocate toward advertising.

Employees

     As of December 31, 2001, the Company  employed a staff of 124,  including 4
sales    supervisors,    6   sales   manager,    32   sales   people,   and   24
managerial/administrative  and 58  distribution  employees.  The  Company  has a
collective  bargaining agreement with Local 918 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, 2001,  the Company  competed  with  approximately  6 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 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 Pabst and Pittsburgh, the loss of any supplier will not adversely affect the
Company's business.  Termination of the Company's Distributorship Agreement with
Pabst 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.

                                       5
<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 main  offices and  warehouse  location for products are at 700 Columbia
Street,  Erie Basin,  Building  #302,  Brooklyn,  New York 11231.  There is over
200,000 sq. ft. of usage at this location at a cost of $28,173.91 per month. The
lease on this location is with Erie Basin Marine  Associates.  Management of the
Company believes that the rent paid by the Company under this lease is less than
the fair market value of similar premises within the area in which the Company's
administrative offices are located.

                                       6
<PAGE>

     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.

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.
        ----------------------------------------------------

None.















                                       7
<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 OTC Bulletin  Board.  The Company's  securities  were delisted by the NASDAQ
Stock Market on June 19, 2001.

     The  following  table  indicates  the high and low  closing  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 and
the OTC Bulletin  Board.  Prices  represent  quotations  between dealers without
adjustments for retail markups, markdowns or commissions,  and may not represent
actual transactions.

Common Stock

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


2001 Fiscal Year                                         Quoted Price
----------------                                         ------------
                                                     High             Low
                                                     ----             ---
First Quarter                                         .969             .25
Second Quarter                                       1.56              .35
Third Quarter                                         .60              .35
Fourth Quarter                                        .50              .25


                                       8
<PAGE>

Class A Warrants


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


2001 Fiscal Year                                         Quoted Price
----------------                                         ------------
                                                      High             Low
                                                      ----             ---
First Quarter                                         .125             .031
Second Quarter                                        .187             .031
Third Quarter                                         .09              .01
Fourth Quarter                                        .09              .01

     On March 19, 2002 the closing  price of the Common Stock as reported on The
OTC Bulletin  Board was $.50. On March 8, 2002 the closing price for the Class A
Warrant  reported on OTC Bulletin Board was $.01. On April 3, 2002 there were 23
holders of record of Common Stock.

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

     Net sales for the year ended December 31, 2001 were $21,337,676, reflecting
an increase of $4,165,555 or 24% from the  $17,172,121 of net sales for the year
ended  December  31,  2001.  The  increase in the year ended  December  31, 2001
resulted from the acquisition of Prospect Beverages Inc. in June 2001.

                                       9
<PAGE>

     Cost of sales  was  $15,965,943  or 75% of net  sales  for the  year  ended
December 31, 2001, as compared to $14,537,102 or 85% of net sales for year ended
December 31, 2000.  The decrease in cost of goods sold as a percentage  of sales
for the year ended  December 31, 2001,  was due primarily to the addition of the
Colt 45 brand which was added to our  portfolio in the  acquisition  of Prospect
Beverages Inc. in June of 2001.

         Selling, general and administrative expenses for the year ended
December 31, 2001 were $6,462,819 as compared to $3,632,677 for the respective
2000 period. The increase in the year ended December 31, 2001 was due primarily
to the costs incurred in the acquisition of Prospect Beverages Inc., as well as
the increase in costs to deliver the higher sales volume.

     Interest  expense for year ended December 31, 2001 was $342,115 as compared
to $55,872  for the  respective  2000  period.  The  increase  in the year ended
December 31, 2001 was due primarily to interest paid on the new CBC Bank line of
credit and additional leases acquired with the acquisition in June of 2001.

     Interest  income for the year ended  December 31, 2001 was $130 as compared
to $29,689 for the  respective  2000 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, 2001 was $307,815.
The increase in inventories of $239,904 was due to higher purchases of inventory
caused  by  the  additional  products  added  to  our  product  line  due to the
acquisition.

     Working   capital   decreased   from  $592,543  at  December  31,  2000  to
($1,037,327)  at December  31, 2001 due to the  incurrence  of bank debt for the
purchase of distribution franchise rights.

     At December  31,  2001 the  Company's  primary  sources of  liquidity  were
$2,272,786  in  cash,   $381,190  in  accounts   receivable  and  $1,914,892  in
inventories.

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

Item 7.  FINANCIAL STATEMENTS.

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

                                       10
<PAGE>

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

         None.
                                    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          49     President, Chief Executive Officer,
                                           Chairman of the Board of Directors

         Anthony Stella             51     Vice President of Sales and Marketing

         Carol Russell*             46     Secretary, Treasurer and Director

         Joseph M. Luzzi*           54     Director

         Michael Matrsciani*        46     Director

         Daniel Matrisciani         55     Director and Vice President
                                           of Operations

         Vito Cardinale*            42     Director
-----------------------
*  Member of the Compensation Committee and/or 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.

     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.

                                       11
<PAGE>

     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.

     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.

     Michael  Matrisciani - Mr.  Matriscinai  has been a Director of the Company
since June 2001.  Mr.  Matrisciani  has been in the beverages  distribution  his
entire career.  He managed a group of beverage centers for years before entering
into the wholesale  business.  Mr. Matrisciani  started with Prospect Beverages,
Inc.  as a sales  manager  and went on to  become a  principal  and CFO.  He has
certificates  in  finance  and real  estate  from NYU in NYC.  He is also a Dale
Carnegie graduate.  Mr. Matrisciani is a board member of the New York State Beer
Wholesalers  association and board member of SCI, an international  conservation
and humanitarian organization.

     Daniel Matrisciani - Mr. Matrisciani has been a Director and Vice President
of Operations  since June 2001.  Mr.  Matrisciani  has been involved in the beer
business for almost 40 years. He has successfully  owned and operated,  with his
partners  a chain of Thrifty  Beverage  Centers  in the NYC  market  place.  Mr.
Matrisciani  was a principal and director of wholesaler  relations with Prospect
Beverages,  Inc. a company he founded with his partners in 1981. Mr. Matrisciani
is a decorated veteran of the Vietnam conflict, having served as a crew chief on
a UH-1B helicopter gunship (huey).

     Vito  Cardinale - Mr.  Cardinale  has been a Director of the Company  since
June 2001.  Mr.  Cardinale  has held various  positions as President  and CEO of
Cardinale   Enterprises  Inc.,  a  real  estate  holding  and  business  venture
corporation.  With holdings in various  companies from 1981 to the present.  Mr.
Cardinale  is  currently  CEO of School  Time  Products,  Inc.,  an  educational
publisher and wholesaler distributor to the New York City Board of Education. He
is also  President,  and CEO, of  Unlimited  Office  Products,  Inc.,  an office
equipment  company,  PC and technology  company selling  throughout the New York
City  metropolitan  area. Mr.  Cardinale  holds a B.S.  degree in Industrial and
Mechanical  Engineering  from the City University of N.Y. Mr. Cardinale has held
positions  as   President,   Vice   President   and  Board  Member  for  various
organizations, such as Gateway Rotary, Chamber of Commerce, YMCA and Make A Wish
Foundation   (Rainbow's  Hope).  He  is  also  a  life  member  of  Safari  Club
International,  North American Hunting Club, Buck Masters, the Sheep Foundation,
Bass Masters and other various sporting organizations throughout the world.

                                       12
<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 of Carol Russell,
Michael Matrisciani 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, 2001 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 2001 Form 10-KSB.

     The audit committee consists of three members Carol Russell, Vito Cardinale
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, 2001, all Section 16(a) filing requirements applicable to its
officers,  directors  and  greater  than  ten  percent  beneficial  owners  were
satisfied.

                                       13
<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, 1999, 2000 and 2001.

                           Summary Compensation Table
<TABLE>
<CAPTION>

                                        Annual Compensation Awards                   Long-Term Compensation
-------------------------------------------------------------------                  -----------------------
        (a)                         (b)       (c)                  (d)                     (e)          (f)

                                                               Other Annual           Restricted   Stock Option
Name and Principal Position         Year    Salary             Compensation              Award        Grants
--------------------------------------------------------------------------------------------------------------

<S>                                 <C>      <C>                    <C>                    <C>             <C>
Carmine N. Stella                   2001     $300,504.20           -0-                    -0-             -0-
President, Chief Executive
 Officer,                           2000     $301,982.00           -0-                    -0-             -0-
Chairman of the Board               1999     $302,642.96           -0-                    -0-             -0-



Anthony Stella                      2001     $181,977.18           -0-                    -0-             -0-
Vice President of Sales             2000     $171,146.00           -0-                    -0-             -0-
and Managing Director               1999     $171,528.96           -0-                    -0-             -0-



Carol Russell                       2001     $101,750.74           -0-                    -0-             -0-
Secretary Treasurer                 2000     $ 82,500.00           -0-                    -0-             -0-
and Director                        1999     $ 88,000.44           -0-                    -0-             -0-


Daniel Matrisciani                  2001     $100,297.69           -0-                    -0-             -0-
Vice President of
Operations and Director
</TABLE>

     There were no options  granted or exercised  during the last fiscal year to
the Company's Chief Executive Officer and the other executive  officers named in
the above Summary Compensation 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.

     As of June 2001, the Company entered into an employment agreement with Alex
Matrisciani  pursuant to which Mr.  Matrisciani agreed to serve as the Company's
director of supplier  relationships.  The term of Mr.  Matrisciani's  employment
under the agreement is three years with options in favor of Mr.  Matrisciani  to
extend the term for an  additional  two  years.  The  Company  agreed to pay Mr.
Matrisciani  an annual base salary of  $172,000.  Mr.  Matrisciani's  employment
agreement contains other customary  provisions  including  provisions  regarding
confidentiality and solicitation.

                                       14
<PAGE>

     As of June 2001,  the Company  entered into an  employment  agreement  with
Daniel  Martisciani  pursuant  to which Mr.  Matrisciani  agreed to serve as the
Company's vice president of operations. The term of Mr. Matrisciani's employment
under the agreement is three years with options in favor of Mr.  Matrisciani  to
extend the terms of an  additional  two  years.  The  Company  agreed to pay Mr.
Matrisciani  an annual base salary of $192,000.  In addition to the base salary,
Mr.  Matrisciani  is  entitled  to  receive  bonuses  based  upon the  Company's
performance.  Mr.  Matrisciani's  employment  agreement contains other customary
provisions including provisions regarding confidentiality and solicitation.

     As of June 2001,  the Company  entered into an  employment  agreement  with
Michael  Matrisciani  pursuant to which Mr.  Matrisciani  agreed to serve as the
Company's director of administration.  The term of Mr. Matrisciani's  employment
under the  agreement  is three years in favor of Mr.  Matrisciani  to extend the
term of an additional two years.  The Company  agreed to pay Mr.  Matrisciani an
annual base salary of $192,000.  In addition to the base salary, Mr. Matrisciani
is  entitled  to receive  bonuses  based  upon the  Company's  performance.  Mr.
Matrisciani's employment agreement contains other customary provisions including
provisions regarding confidentiality and solicitation.

     As of June 2001,  the Company  entered into an  employment  agreement  with
Monty  Martisciani  pursuant  to which  Mr.  Matrisciani  agreed to serve as the
Company's  director  of  sales  and  marketing.  The  term of Mr.  Matrisciani's
employment  under the  agreement  is three  years  with  options in favor of Mr.
Matrisciani to extend the terms of an additional  two years.  The Company agreed
to pay Mr.  Matrisciani  an annual base salary of  $192,000.  In addition to the
base  salary,  Mr.  Matrisciani  is entitled to receive  bonuses  based upon the
Company's  performance.  Mr.  Matrisciani's  employment agreement contains other
customary  provisions   including   provisions  regarding   confidentiality  and
solicitation.

     As of June 2001,  the Company  entered into an  employment  agreement  with
Anthony  Stella  pursuant to which Mr.  Stella  agreed to serve as the Company's
vice president of sales and marketing. The term of Mr. Stella's employment under
the  agreement is three years with options in favor of Mr.  Stella to extend the
terms of an additional two years. The Company agreed to pay Mr. Stella an annual
base salary of $190,000.  In addition to the base salary, Mr. Stella is entitled
to receive bonuses based upon the Company's performance. Mr. Stella's employment
agreement contains other customary  provisions  including  provisions  regarding
confidentiality and solicitation.

                                       15
<PAGE>

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


                                       16
<PAGE>

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

     The  following  table sets forth as of April 3, 2002,  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            Shares of                       Percentage (%) of
Beneficial Owner (1)       Common Stock Owned                     Common Stock
---------------------      ------------------                  -----------------
Carmine Stella(2)                709,091                              22.3%
Anthony Stella(3)                 77,273                               2.4%
Carol Russell                       0                                   0
Joseph Luzzi                        0                                   0
Alex Matrisciani(4)              166,666                               5.2%
Michael Matrisciani(4)              0                                   0
Daniel Matrisiciani(4)           166,667                               5.2%
Vito Cardinale                     ---                                 ---
Monty Matrisciani(4)             166,667                               5.2%
All officers and
directors as a group
(seven (7) persons)

(1) The address of each Stockholder shown above except as otherwise indicated is
c/o Capital Beverage  Corporation,  700 Columbia Street, Erie Basin,  Building #
302, Brooklyn, New York 11231.

(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.

(4)  Alex  Matrisciani,   Michael  Matrisciani,  Daniel  Matrisciani  and  Monty
Matrisciani are brothers. Daniel Matrisciani and Michael Mastrisciani are each a
director of the Company.

                                       17
<PAGE>

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

     In 2001 the Company's  recycling  services were provided by an entity whose
principal  shareholder,  Joseph  Luzzi,  is also a director of the Company.  The
services provided were compensated through the value of scrap material picked up
by Boro Recycling.

     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.




                                       18
<PAGE>


ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K

Item     a.                EXHIBITS AND REPORTS ON FORM 8-K
                           ---------------------------------

(a)(1)  Financial Statements.
                   CAPITAL BEVERAGE CORPORATION AND SUBSIDIARY
                    (d/b/a Diversified Distributors Network)

                              FINANCIAL STATEMENTS



                                      INDEX
                                                                 Page Number
                                                             -------------------
INDEPENDENT AUDITORS' REPORT                                         F - 2
CONSOLIDATED FINANCIAL STATEMENTS:

       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 to F - 17





<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, 2001 and the related
consolidated  statements of operations,  stockholders' equity and cash flows for
the years ended December 31, 2001 and 2000.  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  auditing  standards  generally
accepted in the United States of America.  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,  2001  and  the  consolidated  results  of  its
operations  and its cash flows for the years ended December 31, 2001 and 2000 in
conformity with accounting principles generally accepted in the United States of
America.



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

New York, New York
March 21, 2002

                                      F-2
<PAGE>

                   CAPITAL BEVERAGE CORPORATION AND SUBSIDIARY

                     d/b/a DIVERSIFIED DISTRIBUTORS NETWORK

                           CONSOLIDATED BALANCE SHEET

                                DECEMBER 31, 2001


                                     ASSETS

CURRENT ASSETS:
     Cash                                                   $         2,272,786
     Accounts receivable - net of allowance for doubtful
         accounts of $346,106                                           381,190
     Inventories                                                      1,914,892
     Prepaid expenses and other current assets                            9,251
                                                              ------------------
      TOTAL CURRENT ASSETS                                            4,578,119

PROPERTY AND EQUIPMENT                                                  286,825

DISTRIBUTION LICENSE                                                  5,218,462

OTHER ASSETS                                                            145,047
                                                              ------------------

                                                            $        10,228,453
                                                              ==================

                      LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES:
     Accounts payable                                       $         2,344,790
     Accrued expenses and taxes                                          93,180
     Due to officer                                                      19,148
     Revolving loans                                                  1,684,683
     Notes payable                                                      136,361
     Current portion of long-term debt                                1,150,840
     Current portion of capital lease obligations                        61,444
     Accrued dividends on preferred stock                               125,000
                                                              ------------------
         TOTAL CURRENT LIABILITIES                                    5,615,446
                                                              ------------------

CAPITAL LEASE OBLIGATIONS                                               147,966

LONG-TERM DEBT                                                        2,190,901

STOCKHOLDERS' EQUITY:
     Preferred stock, no shares issued
      and outstanding                                                      -
     Common stock, $ .001 par value;
      authorized 20,000,000 shares;
      issued and outstanding 3,178,409 shares                             3,179
     Additional paid-in capital                                       5,747,773
     Accumulated deficit                                             (3,476,812)
                                                              ------------------
         TOTAL STOCKHOLDERS' EQUITY                                   2,274,140
                                                              ------------------

                                                            $        10,228,453
                                                              ==================




                 See notes to consolidated financial statements.

                                       F-3

<PAGE>

                   CAPITAL BEVERAGE CORPORATION AND SUBSIDIARY

                     d/b/a DIVERSIFIED DISTRIBUTORS NETWORK

                      CONSOLIDATED STATEMENTS OF OPERATIONS



                                                    Year Ended December 31,
                                              ----------------------------------
                                                   2001                2000
                                              ---------------   ----------------


NET SALES                                  $      21,337,676  $      17,172,121
COST OF SALES                                     15,965,943         14,537,102
                                              ----------------  ----------------
GROSS PROFIT                                       5,371,733          2,635,019
                                              ----------------  ----------------

COSTS AND EXPENSES:
     Selling and delivery                          1,127,041          1,214,583
     General and administrative                    5,335,778          2,418,094
                                              ----------------  ----------------
                                                   6,462,819          3,632,677
                                              ----------------  ----------------

LOSS FROM OPERATIONS                              (1,091,086)          (997,658)

INTEREST EXPENSE                                    (342,115)           (55,872)

INTEREST INCOME                                          130             29,689
                                              ----------------  ----------------

NET LOSS BEFORE GAIN ON
 SALE OF DISTRIBUTION RIGHTS                      (1,433,071)        (1,023,841)

GAIN ON SALE OF DISTRIBUTION RIGHTS                2,005,617               -
                                              ----------------  ----------------

NET INCOME (LOSS)                                    572,546         (1,023,841)

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

NET INCOME (LOSS) APPLICABLE
 TO COMMON SHAREHOLDERS                    $         572,546  $      (1,069,341)
                                             =================  ================

INCOMES (LOSS) PER SHARE
  - BASIC AND DILUTED                      $            0.22  $           (0.42)
                                             =================  ================

WEIGHTED AVERAGE NUMBER OF SHARES
 USED IN CALCULATION OF BASIC AND
 DILUTED LOSS PER SHARE                            2,628,409          2,528,409
                                             =================  ================




                 See notes to consolidated financial statements.

                                       F-4


<PAGE>
                   CAPITAL BEVERAGE CORPORATION AND SUBSIDIARY

                     d/b/a DIVERSIFIED DISTRIBUTORS NETWORK

                 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, 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

 Acquisition of assets            -            -          500,000          500          379,500             -               380,000

 Net income                       -            -             -           -                 -             572,546            572,546

                             ----------    ------------ -----------  -----------   -------------    ----------------  --------------
Balance December 31, 2001         -      $     -        3,178,409   $    3,179   $    5,747,773    $ (3,476,812)     $    2,274,140
                             ==========    ============ ===========  ===========   =============    ================  ==============


</TABLE>









                See notes to consolidated financial statements.

                                       F-5
<PAGE>
                   CAPITAL BEVERAGE CORPORATION AND SUBSIDIARY

                     d/b/a DIVERSIFIED DISTRIBUTORS NETWORK

                            STATEMENTS OF CASH FLOWS


                                                   Year Ended December 31,
                                             -----------------------------------
                                                    2001              2000
                                             ------------------  ---------------

CASH FLOWS FROM OPERATING ACTIVITIES:
 Net income (loss)                     $           572,546      $    (1,023,841)
                                             ------------------  ---------------
 Adjustments to reconcile net
  income (loss) to net cash used
  in operating activities:
   Depreciation and amortization                   373,581              193,217
   Gain on sale of distribution license         (2,005,617)                -

 Changes in assets and liabilities:
  Accounts receivable                              231,271              298,859
  Inventories                                      239,904              (78,137)
  Prepaid expenses                                  11,007                7,505
  Deferred expenses                                (10,284)            (107,880)
  Other assets                                      (9,737)               7,547
  Accounts payable and accrued expenses            289,514              291,190
                                             ------------------  ---------------
   Total adjustments                              (880,361)             612,301
                                             ------------------  ---------------

NET CASH USED IN OPERATING ACTIVITIES             (307,815)            (411,540)
                                             ------------------  ---------------

CASH FLOWS FROM INVESTING ACTIVITIES
 Proceeds from sale of distribution license       2,650,000                -
 Purchase of equipment                                 -                 (1,008)
                                             ------------------  ---------------
NET CASH (USED IN) PROVIDED BY
 INVESTING ACTIVITIES                            2,650,000               (1,008)
                                             ------------------  ---------------

CASH FLOWS FROM FINANCING ACTIVITIES:
 Revolving loans                                   (91,454)                -
 Proceeds from officer                              19,148                 -
 Principal payments of
  capital lease obligations                        (32,424)             (20,139)
 Payment of accrued dividends
  on preferred stock                               (75,000)            (199,613)
 Payments of long-term debt                        (81,011)             (74,292)
                                             ------------------  ---------------
NET CASH USED IN FINANCING ACTIVITIES             (260,741)            (294,044)
                                             ------------------  ---------------

INCREASE (DECREASE) IN CASH                      2,081,444             (706,592)

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

CASH - END OF YEAR                     $         2,272,786      $       191,342
                                             ==================  ===============

SUPPLEMENTAL DISCLOSURE OF CASH FLOW
 INFORMATION:
  Cash paid for interest               $           497,054      $        55,713
                                              ================== ===============

SUPPLEMENTAL NON-CASH INVESTING
 AND FINANCING ACTIVITIES:
 Capital lease obligations             $            14,647      $       180,942
                                              ================== ===============
 Acquisition of assets for stock       $           380,000      $          -
                                              ================== ===============


                 See notes to consolidated financial statements.

                                       F-6
<PAGE>




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

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                     YEARS ENDED DECEMBER 31, 2001 AND 2000

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.

     The Company  entered into an Asset  Purchase  Agreement,  dated May 4, 2001
     (the  "Agreement"),  to acquire  certain assets and liabilities of Prospect
     Beverages Inc., a New York corporation ("Prospect"). Prospect is a Brooklyn
     based Pabst  Distributor  of Colt-45 Malt Liquor and other  beverages.  The
     Company is presently doing business as Diversified Distributors Network.

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.
     Depreciation  expense  for the year ended  December  31,  2001 and 2000 was
     $88,603 and $33,217, 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.

                                      F-7

<PAGE>

     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. Amortization is provided on
     a straight-line basis over twenty 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.

     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.

     New  Accounting  Pronouncements  - In July 2001,  the Financial  Accounting
     Standards Board ("FASB") issued Statement of Financial Accounting Standards
     No. 141 ("SFAS 141"), "Business  Combinations," which supercedes Accounting
     Principles Board ("APB") Opinion No. 16, "Business  Combinations." SFAS No.
     141 requires the purchase  method of accounting  for business  combinations
     initiated  after  June 30,  2001 and  eliminates  the  pooling-of-interests
     method.  The  provisions  of SFAS 141 have been adopted as of July 1, 2001.
     The adoption of SFAS 141 has not changed the method of  accounting  used in
     previous business combinations initiated prior to July 1, 2001.

                                      F-8
<PAGE>


     In July 2001, the Financial Accounting Standards Board issued Statements of
     Financial Accounting Standards No. 141, Business Combinations, and No. 142,
     Goodwill and Other Intangible Assets,  effective for fiscal years beginning
     after  December 15,  2001.  Under the new rules,  goodwill  and  intangible
     assets deemed to have indefinite lives will no longer be amortized but will
     be subject to annual  impairment  tests in accordance  with the Statements.
     Other  intangible  assets will  continue to be amortized  over their useful
     lives.  The Company will apply the new rules on accounting for goodwill and
     other intangible assets beginning in the first quarter of 2002. Application
     of the  non-amortization  provisions  of the  Statement are not expected to
     have a material effect on the Company's financial position or operations.

     In  October  2001,  the  FASB  issued  Statement  of  Financial  Accounting
     Standards No. 144 ("SFAS 144"),  "Accounting for the Impairment or Disposal
     of Long-Lived Assets," which supercedes  Statement of Financial  Accounting
     Standards  No.  121  ("SFAS  121"),   "Accounting  for  the  Impairment  of
     Long-Lived  Assets and for Long-Lived Assets to be Disposed Of" and certain
     provisions  of APB  Opinion  No. 30,  "Reporting  Results of  Operations  -
     Reporting  the  Effects  of  Disposal  of  a  Segment  of  a  Business  and
     Extraordinary, Unusual and Infrequently Occurring Events and Transactions."
     SFAS  144  requires  that  long-lived  assets  to be  disposed  of by sale,
     including  discontinued  operations,  be  measured at the lower of carrying
     amount or fair value,  less cost to sell,  whether  reported in  continuing
     operations  or in  discontinued  operations.  SFAS  144 also  broadens  the
     reporting requirements of discontinued operations to include all components
     of an entity  that  have  operations  and cash  flows  that can be  clearly
     distinguished, operationally and for financial reporting purposes, from the
     rest of the entity.  The  provisions  of SFAS 144 are  effective for fiscal
     years  beginning  after  December 15, 2001.  Management  believes  that the
     implementation  of this  standard  will  have no  impact  on the  Company's
     results of operations and financial position.

3.   DISTRIBUTION LICENSE

     In December 2001 the Company sold an exclusive  license to distribute Pabst
     Products within the "territory",  as defined in the licensing  agreement to
     Phoenix Beverages,  Inc.  ("Phoenix") for $2,650,000.  The gain on the sale
     was $2,005,617.

     The Company  acquired  distribution  rights as part of the  agreement  with
     Prospect. The carrying value of the distribution rights is $5,603,479 which
     is amortized over twenty years. Accumulated amortization for the year ended
     December 31, 2001 was $385,017.


4.   DUE TO OFFICER

     An officer of the Company made advances  during the year. The advances bear
     no interest and are due on demand.  The balance as of December 31, 2001 was
     $19,148.

                                      F-9


<PAGE>



5.   REVOLVING LOANS

     In connection with the acquisition,  the Company received  financing in the
     principal  amount  of  $5,000,000.  The  proceeds  of the loan were used to
     satisfy  certain  of the  liabilities  of  Prospect  and for other  working
     capital purposes. The loan carries an interest rate of prime plus 2% and is
     collateralized by the Company's  accounts  receivable,  inventory,  pledged
     property and distribution rights. In July 2001 the Company agreed to a term
     loan for  $3,000,000 of the  outstanding  balance (see Note 5). At December
     31,  2001 the  outstanding  balance  was  $1,322,315.  The Company has also
     received  over  advance  loans during the year.  The interest  rate on over
     advance  loans is prime plus 4% the  outstanding  balance  was  $362,368 at
     December 31, 2001.

6.   LONG-TERM DEBT

                  Long-term debt consists of the following:

                  Promissory note payable to State of New York,
                  due in monthly installments of $10,000 including
                  interest at 10%                                   $   404,241
                  Term loan with the Connecticut Bank of Commerce
                  in the amount of $3,000,000 payable in monthly
                  principal installments of $62,500, the loan is
                  collateralized by the Company's accounts
                  receivable, inventory, pledged property and
                  distribution rights                                 2,937,500
                  Promissory note payable to Pabst Brewing Company
                  in weekly installments of $50,000 including an
                  interest rate of prime plus 2% collateralized by
                  the distribution rights                               136,361
                                                                     -----------
                                                                      3,478,102
                  Less current portion                               (1,287,201)
                                                                     -----------
                                                                    $ 2,190,901
                                                                     ===========

                                      F-10
<PAGE>




6.   INCOME TAXES

     At December  31, 2001 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 2016.  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.

     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,
                                                  -----------------------
                                                     2001        2000
                                                  ----------  -----------
         Computed expected income tax (benefit)  $  215,000  $  (400,000)
         Utilization of net operating loss
          carryforward                             (215,000)        -
         Benefits not recorded                         -         400,000
                                                  ----------  ------------
                                                 $     -     $      -
                                                  ==========  ============


7.   PROPERTY AND EQUIPMENT

     Property and  equipment,  at cost,  consist of the following as of December
     31, 2001:

                           Leasehold improvements           $       60,000
                           Computer equipment                       16,418
                           Machinery and equipment                 307,561
                                                             --------------
                                                                   383,979
                           Less accumulated depreciation           (97,154)
                                                             --------------
                                                            $      286,825
                                                             ==============

     The Company has machinery and equipment under capital leases of $209,410.

                                      F-11
<PAGE>


8.   CAPITAL LEASE OBLIGATIONS

     The Company has various capital lease obligations which are  collateralized
     by equipment.  Interest  rates under the  agreements  are 0% to 9.9%,  with
     monthly principal and interest payments of $7,584.

     Future  minimum  lease  payments and the present value of the minimum lease
     payments under the noncancellable  capital lease obligations as of December
     31, 2001 are as follows:


              2002                                     $     61,444
              2003                                           61,444
              2004                                           61,444
              2005                                           42,964
              2006                                           12,502
                                                        ------------
              Total future minimum lease payments           239,798
              Less amounts representing interest             30,388
                                                        ------------
              Present value of minimum lease payments       209,410
              Less current maturities                        61,444
                                                        ------------
              Total long - term obligations            $    147,966
                                                        ============


9.   LEASE COMMITMENTS

     In June 2001 the Company moved to the offices and  warehouse  facilities of
     Prospect.  This  space  is under a  noncancellable  operating  lease  which
     requires minimum monthly payments of $23,750 through 2012. Rent expense for
     2001 and 2000 was $202,059 and $131,500, respectively.


                                      F-12
<PAGE>

10.  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.  The Company  maintains  its cash  balances at various  financial
     institutions.  These balances are insured by the Federal Deposit  Insurance
     Corporation  up to  $100,000.  At December  31, 2001,  the  Company's  cash
     balances  exceeded the insured limits.  The Company has not experienced any
     losses in such  accounts and believes it is not exposed to any  significant
     credit risk on cash on deposit.

     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.

11.  MAJOR CUSTOMER AND SUPPLIER INFORMATION

     Sales  to a  single  customer  in  2001  accounted  for  10% of net  sales.
     Purchases  from  major   suppliers  were   approximately   $11,100,000  and
     $6,700,000 in 2001 and 2000, respectively.

12.  ACQUISITION

     In May 2001  pursuant to the  Agreement,  the Company  purchased all of the
     assets of  Prospect's  business  which  relate to  Prospect's  business  of
     distributing  beverages,  including among other things,  beer  distribution
     rights, properties,  rights, leases, interests, goods and customer lists of
     Prospect.  The purchase  price of the assets  consists of the assumption by
     the Company of certain liabilities of Prospect and the issuance to Prospect
     shareholders of five hundred thousand  (500,000) shares of the common stock
     of the Company.

     Pabst  Brewing  Company,  the key  supplier  approved  the  transfer of the
     distribution  rights for the Pabst Brewing  Company brands from Prospect to
     the Company.

     On June 15, 2001,  the Company  closed on the  acquisition of the assets of
     Prospect.  The common stock issued to Prospect shareholders was recorded at
     $.76 ($.84 closing price on May 4, 2001 less a 10% discount) per share.

     The  acquisition  was recorded  using the purchase  method of accounting by
     which  the  assets  are  valued  at  fair  market  value  at  the  date  of
     acquisition. The following table summarizes the acquisition.


                                  F-13
<PAGE>



                  Purchase price                            $        380,000
                  Liabilities assumed                              6,267,358
                  Fair value of assets acquired                   (6,897,010)
                                                             ----------------
                  Reduction of long-term assets             $       (249,652)
                                                             ================


     The following unaudited pro-forma condensed statement of operations for the
     year ended  December 31, 2001 and 2000  reflects  the  combined  results of
     Capital Beverage and Prospect as if the acquisition had occurred on January
     1, 2000.

<TABLE>
<CAPTION>

                                                       December 31, 2001               December 31, 2000
                                                    -------------------------       -------------------------
<S>                                            <C>                            <C>
                  Revenues                     $                  30,244,014  $                   36,042,594
                                                    -------------------------       -------------------------
                  Gross Profit                                     6,998,909                       5,261,501
                                                    -------------------------       -------------------------
                  Operating Expenses                               8,605,396                       7,679,726
                                                    -------------------------       -------------------------
                  Net Loss                     $                 (1,948,472)  $                  (2,939,143)
                                                    -------------------------       -------------------------
                  Net Loss Per Share           $                      (0.61)  $                       (0.97)
                                                    -------------------------       -------------------------
</TABLE>

13.  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. In 2001 the
     services  provided  were  compensated  through the value of scrap  material
     picked up. The Company paid $61,462 for these services in 2000.

14.  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.

                                      F-14
<PAGE>

     As of June 2001, the Company entered into an employment agreement with Alex
     Matrisciani  pursuant  to  which  Mr.  Matrisciani  agreed  to serve as the
     Company's director of supplier relationships. The term of Mr. Matrisciani's
     employment  under the agreement is three years with options in favor of Mr.
     Matrisciani  to extend the term for an  additional  two years.  The Company
     agreed to pay Mr.  Matrisciani  an annual  base  salary  of  $172,000.  Mr.
     Matrisciani's  employment  agreement  contains other  customary  provisions
     including provisions regarding confidentiality and solicitation.

     As of June 2001,  the Company  entered into an  employment  agreement  with
     Daniel Martisciani pursuant to which Mr. Matrisciani agreed to serve as the
     Company's  vice  president  of  operations.  The term of Mr.  Matrisciani's
     employment  under the agreement is three years with options in favor of Mr.
     Matrisciani  to extend the terms of an  additional  two years.  The Company
     agreed  to pay Mr.  Matrisciani  an annual  base  salary  of  $192,000.  In
     addition to the base salary, Mr. Matrisciani is entitled to receive bonuses
     based  upon  the  Company's  performance.   Mr.  Matrisciani's   employment
     agreement  contains  other  customary   provisions   including   provisions
     regarding confidentiality and solicitation.

     As of June 2001,  the Company  entered into an  employment  agreement  with
     Michael  Matrisciani  pursuant to which Mr.  Matrisciani agreed to serve as
     the Company's  director or  administration.  The term of Mr.  Matrisciani's
     employment  under the agreement is three years in favor of Mr.  Matrisciani
     to extend the term of an additional  two years.  The Company  agreed to pay
     Mr. Matrisciani an annual base salary of $192,000.  In addition to the base
     salary,  Mr.  Matrisciani  is  entitled to receive  bonuses  based upon the
     Company's  performance.  Mr.  Matrisciani's  employment  agreement contains
     other customary provisions  including provisions regarding  confidentiality
     and solicitation.

     As of June 2001,  the Company  entered into an  employment  agreement  with
     Monty Martisciani  pursuant to which Mr. Matrisciani agreed to serve as the
     Company's  director and sales of marketing.  The term of Mr.  Matrisciani's
     employment  under the agreement is three years with options in favor of Mr.
     Matrisciani  to extend the terms of an  additional  two years.  The Company
     agreed  to pay Mr.  Matrisciani  an annual  base  salary  of  $192,000.  In
     addition to the base salary, Mr. Matrisciani is entitled to receive bonuses
     based  upon  the  Company's  performance.   Mr.  Matrisciani's   employment
     agreement  contains  other  customary   provisions   including   provisions
     regarding confidentiality and solicitation.

     As of June 2001,  the Company  entered into an  employment  agreement  with
     Anthony  Stella  pursuant  to  which  Mr.  Stella  agreed  to  serve as the
     Company's vice president of sales and marketing.  The term of Mr.  Stella's
     employment  under the agreement is three years with options in favor of Mr.
     Stella to extend the terms of an additional  two years.  The Company agreed
     to pay Mr.  Stella an annual  base salary of  $190,000.  In addition to the
     base  salary,  Mr.  Stella is  entitled to receive  bonuses  based upon the
     Company's  performance.  Mr. Stella's  employment  agreement contains other
     customary provisions  including  provisions  regarding  confidentiality and
     solicitation.

                                      F-15
<PAGE>

15.  STOCK OPTIONS AND WARRANTS

     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.

     1996 Stock Option Plan

     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
     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.

     175,000  options were granted,  on December 30, 1999,  and another  175,000
     options were granted,  on December 29, 2000. 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:

                                      F-16
<PAGE>

                                                                2000
                                                         --------------------
         Net loss as reported                                   ($1,023,841)
         Pro forma net loss as reported                         ($1,083,241)
         Net loss per share as reported                              ($0.42)
         Pro forma net loss                                          ($0.43)

     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 and 2000;  dividend yield 0%, expected
     volatility  50%, risk free interest rate 7%,  expected  lives in years is 5
     for the options granted in 1999, and 10 for the options granted in 2000.

     Stock warrant  activity for the year ended  December 31, 2001 is summarized
     as follows:

                                                               Weighted average
                                          Number of Shares      exercise price
                                          -----------------  -------------------
         Outstanding at December 31, 2000      350,000      $       1.52
            Granted                               -                  -
            Exercised                             -                  -
                                          -----------------  -------------------
         Outstanding at December 31, 2001       350,000     $       1.52
                                          ================== ===================

     The following  table  summarizes  the Company's  stock options and warrants
     outstanding at December 31, 2001:

<TABLE>
<CAPTION>
                                                      Options and warrants outstanding and exercisable
                                          --------------------------------------------------------------------------
                      Range of exercise        Number          Weighted average         Weighted average exercise
                            price                               remaining life                    price
                     -------------------- ------------------ ---------------------     -----------------------------
<S>            <C>              <C>                 <C>               <C>          <C>
               $         3.50 - 3.85                175,000           8            $               3.55
               $            0.05                    175,000           9            $               0.50
                                          ------------------
                                                    350,000
                                          ==================
</TABLE>

                                      F-17

<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.

Item 27. Exhibits.

 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.*
10.10    Asset Purchase  Agreement,  dated as of May 4, 2001 between
         Registrant and Prospect Beverage  Corporation
         (Incorporated by reference to Registrant's Current Report on
          Form 8-K filed on May 14, 2001.)
10.11    Voting Agreement,  dated as of June 29, 2001, among Carmine Stella and
         Anthony Stella,  Monty Matrisciani, Michael Matrisciani,
         Daniel Matrisciani and Alex Matrisciani, Registrant and Prospect
         Beverage Corporation (Incorporated by reference to Registrant's Current
         Report on Form 8-K/A filed on December 31, 2001.)
10.12    Employment Agreement, dated as of June 29, 2001, between Registrant and
         Alex Matrisciani.
10.13    Employment Agreement, dated as of June 29, 2001 between
         Registrant and Daniel Matrisiciani.
10.14    Employment Agreement, dated as of June
         29, 2001, between Registrant and Michael Matrisiciani.

10.15    Employment Agreement, dated as of June 29, 2001, between Registrant and
         Monty Matrisiciani. * 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.

(1) Current  Repot on Form 8-K/A filed on October 19, 2001 with respect to Items
    1, 2, 5, 7 and 9.

(2) Current  Report on Form 8-K/A filed on  November  19, 2001 with  respect to
    Items 1, 2, 5, 7 and 9.

(3) Current  Report on Form 8-K/A filed on  December  13, 2001 with  respect to
    Items 1, 2, 5, 7 and 9.





<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 8 day of April, 2002.

                                   CAPITAL BEVERAGE CORPORATION


                                   By:/s/ Carmine N. Stella
                                   -----------------------------
                                          Carmine N. 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 N. Stella      Chief Executive Officer,            April 8, 2002
---------------------      President and Chairman of
Carmine N. Stella          the Board of Directors



/s/Carol Russell           Secretary and Treasurer             April 8, 2002
------------------         and Director
Carol Russell

/s/ Joseph Luzzi           Director                            April 8, 2002
------------------
Joseph Luzzi

/s/ Anthony Stella         Vice President of Sales             April 8, 2002
-------------------        and Managing Director
Anthony Stella

/s/ Michael Matrisciani    Director                            April 8, 2002
------------------------
Michael Matrisciani

/s/ Daniel Matrisciani     Director and Vice                   April 8, 2002
------------------------   President of Operations
Daniel Matrisciani

/s/ Vito Cardinale          Director                           April 8, 2002
-------------------
Vito Cardinale