SECURITIES AND EXCHANGE COMMISSION


WASHINGTON, D.C.  20549





REPORT ON FORM 10-K





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





For the fiscal year ended December 31, 2009.





o  Transition Report pursuant to Section 13 or 15(d) of t he 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)
  120 Rio Vista Drive, Norwood, New Jersey
07648(Address of Principal Executive Officers)
(Zip Code)
  Registrant's telephone number, including area code: (201) 679-6752





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)





Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes o   No x





Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes o   No x


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 o










Indicate by checkmark whether the registrant submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes o   No o





Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of the Regulation S-K 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-K or any amendment to this Form 10-K.    x





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


Large accelerated filer    o
Accelerated filer    oNon-accelerated filer    o
Smaller reporting company    x
  Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes x   No o





Issuer's revenues for its most recent fiscal year were $-0-.





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 June 30, 2009, was approximately $95,000.





Number of shares outstanding of the issuer's Common Stock as of April 13, 2010 was 3,792,045.








DOCUMENTS INCORPORATED BY REFERENCE: None


2
  Capital Beverage Corporation


2009 Form 10-K Annual Report


TABLE OF CONTENTS




PART IITEM 1.
BUSINESS
4ITEM 1A.
RISK FACTORS
7ITEM 1B.
UNRESOLVED STAFF COMMENTS
10ITEM 2.
PROPERTIES
11ITEM 3.
LEGAL PROCEEDINGS
11ITEM 4.
[REMOVED AND RESERVED]
12PART IIITEM 5.
MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
12ITEM 6.
SELECTED FINANCIAL DATA
14ITEM 7.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
14ITEM 7A.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
16ITEM 8.
FINANCIAL STATEMENTS
16ITEM 9.
CHANGES IN AND DISAGREEMENT WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
16ITEM 9A.[T]
CONTROLS AND PROCEDURES
16ITEM 9B.
OTHER INFORMATION
17PART IIIITEM 10.
DIRECTORS AND EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
18ITEM 11.
EXECUTIVE COMPENSATION
21ITEM 12.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
23ITEM 13.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE
24ITEM 14.
PRINCIPAL ACCOUNTANT FEES AND SERVICES
25PART IVITEM 15.
EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
26SIGNATURES
29CERTIFICATES
  3




SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS




Certain statements contained in this Annual Report on Form 10-K constitute "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934.  All statements included in this Annual Report, other than statements of historical facts, regarding our strategy, future operations, financial position, estimated revenues, projected costs, prospects, plans and objectives are forward-looking statements.  When used in this Annual Report, the words "believe," "anticipate," "intend," "estimate," "expect," "project" and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words.  We cannot guarantee future results, levels of activity, performance or achievements, and you should not place undue reliance on our forward-looking statements.  Our actual results could differ materially from those anticipated in these forward-looking statements as a result of various factors, including the risks described in Part I - Risk Factors, and elsewhere in this Annual Report.  Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, joint ventures or strategic investments.  In addition, any forward-looking statements represent our expectation only as of the day this Annual Report was first filed with the SEC and should not be relied on as representing our expectations as of any subsequent date.  While we may elect to update forward-looking statements at some point in the future, we specifically disclaim any obligation to do so, even if our expectations change.




PART I




ITEM 1.            BUSINESS





General





Capital Beverage Corporation ("Capital" and the "Company") was incorporated under the laws of the State of Delaware on December 5, 1995.  The Company’s plan of operation for the next twelve months shall be to locate a suitable acquisition or merger candidate.  The Company is not currently engaged in any business activities that provide cash flow.





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 was included in the monthly $10,000 payments.





4


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:





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 also an extensive list of various imports.





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





5


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




The Company and Oak also entered into a Sub-Distribution Agreement dated as of September 15, 2005 (the "Sub-Distribution Agreement"), pursuant to which Oak became a Company sub-distributor of certain Pabst beers and malt beverages (the "Products").  The Sub-Distribution Agreement became effective when the Company filed an Information Statement on Schedule 14C with the Securities and Exchange Commission.  Under the terms of the Sub-Distribution  Agreement,  Oak had the right to distribute the Products to customers located in Brooklyn, Queens, Staten Island, Manhattan and the Bronx (the "Territory"), and in exchange for such rights, Oak was required to pay Pabst directly for its Product purchases and, during the first 45 days following the effective date of the Agreement (the "45-Day  Period"), Oak was required to pay to Capital the following amounts for Products received by Oak: (x) $.50 for each case of Products and (y) $2.00 for each barrel of Products.  The purchase price paid by Oak to Capital in connection with the closing of the transactions contemplated by the Asset Purchase Agreement was reduced by an amount equal to the sum of: (i) $.25 for each case of Products purchased by Oak and sold by Oak to customers in the Territory, plus (ii) $.50 for each case of Products purchased by Oak but not sold to such customers, plus (iii) $1.00 for each barrel of Products purchased by Oak and sold by Oak to customers in the Territory, plus (iv) $2.00 for each barrel of Products purchased by Oak but not sold to such customers, all determined during the 45-Day Period.





Prior to the closing of the transaction, the Asset Purchase Agreement and sale of Assets to Oak were approved unanimously by the Company’s Board of Directors and the terms of the transaction were submitted for stockholder approval. As permitted by Delaware law and the Company’s Certificate of Incorporation, the Company received a written consent from the majority Approving Stockholders of the Company approving the Asset Purchase Agreement and the related Asset Sale. An Information Statement was furnished for the purposes of informing stockholders, in the manner required under the Securities Exchange Act of 1934, as amended, of the Asset Sale before it was consummated.





As of December 16, 2005, the Company closed the sale of the Assets to Oak, pursuant to the terms and conditions of the Asset Purchase Agreement. The purchase price paid by Oak for the Assets was Nine Million Three Hundred Thousand Dollars ($9,300,000.00), of which One Million Five Hundred Thousand Dollars ($1,500,000.00), was deposited with an escrow agent, pursuant to the terms of an escrow agreement, dated December 16, 2005 (the “Escrow Agreement”), for at least 18 months for post closing indemnification claims which may be asserted by Oak (the “Escrow”). A substantial amount of the proceeds from the transaction were used by the Company to repay outstanding indebtedness and for working capital purposes.  In addition, Oak has asserted a claim for indemnification against the remaining funds in the Escrow.  See Legal Proceedings in Item 3 of this Annual Report on Form 10-K.





6


As of the date of this filing all Escrow funds have been release and the Escrow account has been closed.





Strategy





The Company’s plan of operation for the next twelve months shall be to locate a suitable acquisition or merger candidate.  The Company is not currently engaged in any business activities that provide cash flow.





Structure of the Company





The Company does not have any ongoing operations the payment of its liabilities. As of the date hereof, the Company, as defined in Rule 12b-2 under the Exchange Act, is a “shell company,” defined as a company with no or nominal assets (other than cash) and no or nominal operations.





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





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





Employees





As of December 31, 2009, the only remaining employee is Carmine Stella the Company's Chief Executive Officer.




ITEM 1A.          RISK FACTORS




In addition to other information in this Annual Report on Form 10-K, the following important factors should be carefully considered in evaluating the Company and its business because such factors currently have a significant impact on the Company's business, prospects, financial condition and results of operations.





7





Risks related to our business





Our Business Is Difficult To Evaluate Because We Have No Ongoing Operations and Minimal Assets.As the Company currently has no ongoing operations and only minimal assets, there is a risk that we will be unable to continue as a going concern and consummate a business combination. We have no significant assets or financial resources. We will, in all likelihood, sustain operating expenses without corresponding revenues, at least until the consummation of a business combination. This may result in our incurring a net operating loss that will increase continuously until we can consummate a business combination with a profitable business opportunity. We cannot assure you that we can identify a suitable business opportunity and consummate a business combination.





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





Our Business Will Have No Revenues Unless And Until We Merge With Or Acquire An Operating Business.  As of the date hereof, the Company, as defined in Rule 12b-2 under the Exchange Act, is a “shell company,” defined as a company with no or nominal assets (other than cash) and no or nominal operations. We currently have no revenues from operations. We may not realize any revenues unless and until we successfully merge with or acquire an operating business.





Future Success Is Highly Dependent On The Ability Of Management To Locate And Attract A Suitable Acquisition.The nature of our operations is highly speculative and there is a consequent risk of loss of your investment. The success of our plan of operation will depend to a great extent on the operations, financial condition and management of the identified business opportunity. While management intends to seek business combination(s) with entities having established operating histories, we cannot assure you that we will be successful in locating candidates meeting that criterion. In the event we complete a business combination, the success of our operations may be dependent upon management of the successor firm or venture partner firm, and numerous other factors beyond our control.





The Company Has No Existing Agreement For A Business Combination Or Other Transaction. We have no agreement with respect to engaging in a merger or joint venture with, or acquisition of, a private or public entity. No assurances can be given that we will successfully identify and evaluate suitable business opportunities or that we will conclude a business combination. We cannot guarantee we will be able to negotiate a business combination on favorable terms.





8





Our Financial Statements Include A Going Concern Opinion From Our Independent Auditors.  The Company received a going concern opinion on its financial statements.  Our auditors have stated that due to our lack of profitability and our negative working capital, there is "substantial doubt" about our ability to continue as a going concern. The going concern opinion from our auditors may limit our ability to access certain types of financing, or may prevent us from obtaining financing on acceptable terms.





Loss Of Key Personnel Could Adversely Affect Our Business. Our future success depends to a significant degree on the skills, experience and efforts of Carmine Stella, our President and Chief Executive Officer.  The loss of the services of Mr. Stella could have a material adverse effect on our business, results of operations and financial condition.





We May Not Be Able To Comply In A Timely Manner With All Of The Recently Enacted Or Proposed Corporate Governance Provisions.  Beginning with the enactment of the Sarbanes-Oxley Act of 2002 in July 2002, a significant number of new corporate governance requirements have been adopted or proposed. We believe that we currently comply with all of the requirements that have become effective thus far, and with many of the requirements that will become effective in the future. Although we currently expect to comply with all current and future requirements, we may not be successful in complying with these requirements at all times in the future.  In addition, certain of these requirements will require us to make changes to our corporate governance practices. For example, one recent Nasdaq rule approved by the Commission requires that a majority of our Board of Directors be composed of independent directors by our 2006 Annual Meeting of Stockholders.  Currently, two (2) of the members of our Board of Directors are considered to be independent. We may not be able to attract a sufficient number of directors in the future to satisfy this requirement.  Additionally, the Commission recently passed a final rule that requires companies to disclose whether a member of their Audit Committee satisfies certain criteria as a “financial expert.” We currently do not have an Audit Committee member that satisfies this requirement and, we may not be able to satisfy this, or other, corporate governance requirements at all times in the future, and our failure to do so could cause the Commission or Nasdaq to take disciplinary actions against us, including an action to delist our stock from the OTC Bulletin Board or any other exchange or electronic trading system where our shares of common stock trade.





Risks Related To Our Common Stock





Future Sales By Existing Security Holders Could Depress The Market Price Of Our Common Stock.If our existing stockholders sell a large number of shares of our Common Stock, the market price of the Common Stock could decline significantly.  Further, even the perception in the public market that our existing stockholders might sell shares of Common Stock could depress the market price of the Common Stock.





9





There Are Risks Associated With Our Stock Trading On The NASD OTC Bulletin Board Rather Than A National Exchange.There are significant consequences associated with our stock trading on the NASD OTC Bulletin Board rather than a national exchange. The effects of not being able to list our securities on a national exchange include:


·
Limited release of the market prices of our securities;
 ·
Limited news coverage of us;
 ·
Limited interest by investors in our securities;
 ·
Volatility of our stock price due to low trading volume;
 ·
Increased difficulty in selling our securities in certain states due to "blue sky" restrictions; and
 ·
Limited ability to issue additional securities or to secure additional financing.
 There is No Assurance That An Active Public Trading Market Will Develop.There has been an extremely limited public trading market for the Company's Common Stock. There can be no assurances that a public trading market for the Common Stock will develop or that a public trading market, if developed, will be sustained. If for any reason a public trading market does not develop, purchasers of the shares of Common Stock may have difficulty in selling their securities should they desire to do so.





"Penny Stock" Regulations May Impose Certain Restrictions On The Marketability of Our Securities.The Securities and Exchange Commission (the "Commission") has adopted regulations which generally define "penny stock" to be any equity security that has a market price (as defined) less than $5.00 per share, subject to certain exceptions. Our Common Stock is presently subject to these regulations which impose additional sales practice requirements on broker-dealers who sell such securities to persons other than established customers and accredited investors (generally those with assets in excess of $1,000,000 or annual income exceeding $200,000, or $300,000 together with their spouse). For transactions covered by these rules, the broker-dealer must make a special suitability determination for the purchase of such securities and have received the purchaser's written consent to the transaction prior to the purchase. Additionally, for any transaction involving a “penny stock”, unless exempt, the rules require the delivery, prior to the transaction, of a risk disclosure document mandated by the Commission relating to the “penny stock” market. The broker-dealer must also disclose the commission payable to both the broker-dealer and the registered representative, current quotations for the securities and, if the broker-dealer is the sole market maker, the broker-dealer must disclose this fact and the broker-dealer's presumed control over the market. Finally, monthly statements must be sent disclosing recent price information for the “penny stock” held in the account and information on the limited market in “penny stocks”. Consequently, the "penny stock" rules may restrict the ability of broker-dealers to sell our securities and may negatively affect the ability of purchasers of our shares of Common Stock to sell such securities.





ITEM 1B.          UNRESOLVED STAFF COMMENTS





None.





10





ITEM 2.             PROPERTIES





Currently, the Company neither rents nor owns any properties.





ITEM 3.             LEGAL PROCEEDINGS





On June 26, 2007, the Company filed a complaint against Oak Beverages, Inc. ("Oak"), Victoria Beverage, Inc. ("Victoria"), and Dealy & Silberstein, LLP, solely in its capacity as escrow agent, in the U.S. District Court for the Southern District of New York (the "Court"), seeking a declaratory judgment that, under the parties' Asset Purchase Agreement, dated September 15, 2005 and Escrow Agreement, dated December 16, 2005, the Company is not required to indemnify Oak and Victoria for unemployment insurance contributions based on the experience rating account held by Oak and maintained by the State of New York Department of Labor ("NYDOL").





On July 23, 2007, Oak and Victoria filed with the Court an answer, counterclaim, and cross-claim in response to the Company's complaint alleging that the Asset Purchase Agreement was "deliberately structured" such that any liability, which would include the disputed unemployment taxes, would be retained by the Company post-closing and would not be transferred to Oak.  On August 15, 2007, the Company filed a reply to Oak and Victoria's counterclaim.





On August 6, 2008, the parties reached a settlement agreement.  The settlement provided that the Company pay Oak the sum of $100,000.00 in full settlement of all claims.  The settlement also provided that the balance of the funds held in escrow, be released to the Company with the exception of the amount of $55,739.00 which will continue to be held in escrow in connection with a unrelated pending claim asserted by a third party.  The settlement agreement was executed as of August 28, 2008 and included a Joint Stipulation and Order of Dismissal with Prejudice (the "Joint Stipulation"), which was signed by all parties.  Judge Buchwald signed and entered the Joint Stipulation on September 8, 2008, which formally concluded the action.





In January 2009, the Company settled a claim made by the Pabst Brewing Company (Pabst Claim) for $27,869.50 which represents one half of the Pabst Claim.  At January 30, 2009 the total amount held in escrow was $55,875.50 including accrued interest of $136.50.  On January 30, 2009, the escrow agent issued the Company a check for $22,006 which represents the balance remaining in escrow after payment of the Pabst Claim settlement and $6,000 in fees owed to the escrow agent.





In March 2009, a plaintiff that originally commenced an action against the Company in September 2003 filed a Request for Judicial Intervention.  Thereafter, a preliminary conference was held on May 4, 2009.  During that conference, the Court heard argument regarding whether this case should be dismissed because of failure by the Plaintiff to prosecute the action.  The Court denied that request and directed that discovery proceed.  The plaintiff was deposed on October 22, 2009.  On December 4, 2009, Plaintiff served a Note of Issue to place this action on the trial calendar.  Thereafter, on February 2, 2010, the Company filed a Motion for Summary Judgment.  That Motion has now been fully briefed and argued before the Judge on Friday April 9, 2010.  Judge has reserved decision on the Motion.  Company is awaiting the decision by the Judge which may take several months.





11





ITEM 4.            [REMOVED AND RESERVED]








PART II





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




The Company's Common Stock commenced trading on The Nasdaq SmallCap Market on the effectiveness of the Company's Initial Public Offering on July 17, 1997 under the symbol "CBEV".  The Common Stock is 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 for the period from January 1, 2007 to December 31, 2009 based upon information supplied by the OTC Bulletin Board.  Prices represent quotations between dealers without adjustments for retail markups, markdowns or commissions, and may not represent actual transactions.


2008 Fiscal Year

Quoted Price ($)High


LowFirst Quarter


.13



.10Second Quarter


.13



.10Third Quarter


.11



.04Fourth Quarter


.04



.042009 Fiscal Year

Quoted Price ($)High


LowFirst Quarter


.07



.03Second Quarter


.08



.05Third Quarter


.07



.05Fourth Quarter


.07



.04First Quarter through April 13, 2010


.04



.03


On April 13, 2010, the closing price of the Common Stock as reported on the OTC Bulletin Board was $.03.  As of April 13, 2010, there were 165 holders of record of Common Stock.





12





Recent Sales of Unregistered Securities





We did not sell any unregistered securities during the fourth quarter of the fiscal year covered in this report.





Dividends





We have not paid any cash dividends on our Common Stock to date and do not anticipate declaring or paying any cash dividends in the foreseeable future. In addition, future-financing arrangements, if any, may preclude or otherwise restrict the payment of dividends.





Repurchases by the Company





During the fourth quarter of 2009, we did not repurchase any shares of our Common Stock on our behalf or for any affiliated purchase.


13
  ITEM 6.            SELECTED FINANCIAL DATA





Not Applicable.





ITEM 7.            MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS


The following discussion and analysis provides information which management believes is relevant to an assessment and understanding of the Company’s results of operations and financial operations and financial conditions.  This discussion should be read in conjunction with the financial statements and notes thereto appearing elsewhere herein.





As of December 16, 2005, the Company closed the sale of the Assets to Oak, pursuant to the terms and conditions of the Asset Purchase Agreement.





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





Results of Operations – December 31, 2009 and 2008





The Company had no revenue from operations for the twelve months ended December 31, 2009 and 2008.




General and administrative expenses for the twelve months ended December 31, 2009 and 2008 was $333,173 and $587,657, respectively, which consisted mostly of legal fees, accounting and auditing fees and the salary and expenses to our only remaining employee.





At December 31, 2009 and December 31, 2008, respectively, we had working capital deficits of $1,359,468 and $1,028,614, respectively.





Liquidity and Capital Resources




The report of our auditors on our audited financial statements for the fiscal year ended December 31, 2009 contains a going concern qualification as we have suffered losses for the years ended December 31, 2009 and 2008.  We have minimal assets and have had no operative revenues since the sale of our assets to Oak. We have the cash from the Oak Sale to conduct operations.  As of December 31, 2009 and 2008, we had cash of $269 and $64,203, current assets of $269 and $64,202 and current liabilities of $1,359,737 and $1,092,816, respectively.




14





Critical Accounting Policies




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





Restricted Cash – All funds held in escrow were released on January 30, 2009.





Income Taxes - The Company follows ASC 740 - 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 basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse.





New Accounting Pronouncements – On June 5, 2003, the United States Securities and Exchange Commission (“SEC”) adopted final rules under Section 404 of the Sarbanes-Oxley Act of 2002 (“Section 404”), as amended by SEC Release No. 33-9072 on October 13, 2009. Commencing with its annual report for the year ending March 31, 2011, the Company will be required to include a report of management on its internal control over financial reporting. The internal control report must include a statement of:




·
Management’s responsibility for establishing and maintaining adequate internal control over its financial reporting;


·
Management’s assessment of the effectiveness of its internal control over financial reporting as of year- end; and


·
The framework used by management to evaluate the effectiveness of the Company’s internal control over financial reporting.





Furthermore, it is required to file the auditor’s attestation report separately on the Company’s internal control over financial reporting on whether it believes that the Company has maintained, in all material respects, effective internal control over financial reporting.





15




ITEM 7A.          QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK





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


ITEM 8.             FINANCIAL STATEMENTS





See financial statements following Item 15 of this Annual Report on Form 10-K.





ITEM 9.             CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE





Not applicable.




ITEM 9A.[T]    CONTROLS AND PROCEDURES





Evaluation of Our Disclosure Controls and Internal Controls




Under the supervision and with the participation of our senior management, including our chief executive and financial officer, Carmine N. Stella, we conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), as of the end of the period covered by this annual report (the “Evaluation Date”).  The disclosure controls and procedures are intended to insure that the information relating to us, including our consolidated subsidiaries, required to be disclosed in our Securities and Exchange Commission (“SEC”) reports (i) is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms, and (ii) is accumulated and communicated to our management, including our chief executive officer and chief financial officer, as appropriate to allow timely decisions regarding required disclosure.




Our internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes of accounting principles generally accepted in the United States.  Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.  Therefore, even those systems determined to be effective can provide only reasonable assurance of achieving their control objectives.  In evaluating the effectiveness of our internal control over financial reporting, our management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) in Internal Control – Integrated Framework.




16





Based upon our assessment and the COSO criteria, management concluded that our internal control over financial reporting was not effective as of December 31, 2009 due to a material weakness.  A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis.




More specifically, the material weakness relates to a lack of sufficient personnel with appropriate knowledge, experience and training in U.S. GAAP resulting in a lack of sufficient analysis and documentation of the application of U.S. GAAP to transactions, including but not limited to accounting by producers and distributors of films.




Due to our small size and limited financial resources, our part-time outside accountant has been the only individual involved in our accounting and financial reporting.  As a result, there has been no segregation of duties within the accounting function.  This lack of segregation of duties represents a material weakness.




In efforts to address this material weakness, we are planning to add additional personnel to the internal accounting operation.




This annual report does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting.  Management’s report was not subject to attestation by our registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permit us to provide only management’s report in this annual report.




Officer Certifications




Appearing as exhibits to this Annual Report are “Certifications” of our President and Chief Executive Officer and Chief Accounting Officer.  The Certifications are required pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (the “Section 302 Certifications”).  This section of the Annual Report contains information concerning the Controls Evaluation referred to in the Section 302 Certification.  This information should be read in conjunction with the Section 302 Certifications for a more complete understanding of the topics presented.




Changes in Internal Control Over Financial Reporting




There have been no changes in our internal control over financial reporting that occurred during the quarter ended December 31, 2009 that have materially affected or are reasonably likely to materially affect our internal control over financial reporting.




ITEM 9B.          OTHER INFORMATION





Not applicable.




17





PART III





ITEM 10.           DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT





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 HeldCarmine N. Stella

58

President, Chief Executive Officer,Chairman of the Board of DirectorsCarol Russell

54

DirectorJoseph M. Luzzi

62

DirectorMichael Matrsciani

54

DirectorDaniel Matrisciani(1)

63

DirectorVito Cardinale

50

Director


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.




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.





18


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 since June 2001.  Mr. Matrisciani was Vice President of Operations from June 2001 to December 2, 2005.  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).  Daniel Matrisciani is the brother of Michael Matrisciani.





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.







19





Code of Ethics





We have adopted a Code of Business Conduct and Ethics that applies to our employees, officers (including our principal executive officer, principal financial officer and controller) and directors.  The Code of Business Conduct and Ethics is not currently posted on our website but can be obtained free of charge by sending a request to our Corporate Secretary at our address.  Any changes to or waivers under the Code of Business Conduct and Ethics as it relates to our principal executive officer, principal financial officer, controller or persons performing similar functions will be disclosed on our website.





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.




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, 2009, all Section 16(a) filing requirements applicable to its officers, directors and greater than ten percent beneficial owners were satisfied, except as provided below:





None





20





ITEM 11.          EXECUTIVE COMPENSATION





The following table sets forth the compensation paid to the Named Executive Officers for the fiscal years ending December 31, 2008 and 2009.




Summary Compensation Table


Annual Compensation Awards

Long-Term Compensation(a)

(b)

(c)

(d)

(e)

(f)Other Annual

Restricted

Stock OptionName and Principal Position

Year

Salary

Compensation

Award

GrantsCarmine N. Stella

2009

$210,027.96

-0-

-0-

-0-President, Chief Executive Officer,

Chairman of the Board

2008

$210,027.96

-0-

-0-

-0-


There were no options granted or exercised during the last fiscal year to the Company's Chief Executive Officer.





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.


Employment Agreements





There are no employment agreements in effect as of December 31, 2009 and 2008.





Payment of Accrued Unpaid Salaries and Severance





Certain members of management have not received their salaries and expenses since May 1, 2005. Accordingly, the following individuals are entitled to be paid accrued and unpaid salaries from the proceeds from the Asset Sale received by the Company in the amounts set forth adjacent to their names (such amounts calculated as of December 31, 2009): Carmine Stella ($692,688.38); Anthony Stella ($39,654); Michael Mastrisciani ($40,067.51); Daniel Mastrisciani ($40,067.50); Monty Mastrisciani ($40,067.50); and Alex Mastrisciani ($35,479.50).  The Company has reimbursed such employees for out-of-pocket expenses incurred by them in connection with the performance of their duties which, as of December 31, 2008, total approximately $20,000.00.As of December 31, 2009, out-of-pocket expenses of $58,000.00 incurred by such employees have accrued but have not been paid to such employees.





21





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.




The Company's 2003 Stock Option Plan, which was subject to shareholder approval, was approved by the Compensation Committee and ratified by the Board of Directors on December 30, 2003 and February 20, 2004, respectively. A total of 1,500,000 shares of Common Stock were authorized and reserved for issuance under the 2003 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.  In December 2003, the Company granted 1,500,000 non-qualified options to employees and officers of the Company pursuant to the 2003 Stock Option Plan exercisable for 10 years at $.23 per share.  Subsequently, the Compensation Committee and Board of Directors elected not to submit the 2003 Stock Option Plan to the shareholders for approval in order to avoid the expense of seeking shareholder approval. Since the 2003 Stock Option Plan was not approved by the shareholders of the Company within twelve months and in accordance with the terms of the plan, it automatically terminated.  In accordance with the terms of the plan, any options issued and outstanding prior to termination, remain outstanding and continue to have full force and effect.





22


ITEM 12.           SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS




The following table sets forth as of April 13, 2010, certain information with respect to the beneficial ownership of Common Stock by each person or entity known by the Company to be the beneficial owner of 5% or more of such shares, each officer and director of the Company, and all officers and directors of the Company as a group:





Name and Address of

Beneficial Owner (1)

Shares of Common

Stock Owned (3)

Percentage (%) of

Common Stock (3)Carmine Stella

712,500

18.8%Anthony Stella

237,500

6.3%Carol Russell

0

0%Joseph Luzzi

0

0%Alex Matrisciani(2)

237,500

6.3%Michael Matrisciani(2)

237,500

6.3%Daniel Matrisiciani(2)

237,500

6.3%Vito Cardinale

0

0%Monty Matrisciani(2)

237,500

6.3%Wachovia Corporation

One Wachovia Center

Charlotte, NC  28288-0137

264,500

6.98%Casimir Capital L.P.

100 Broadway, 11th Floor

New York, NY 10005

1,000,000(4)

20.9%All officers and  directors as a group (nine (9) persons)

1,900,000

50%




(1)
The address of each Stockholder shown above except as otherwise indicated is c/o Capital Beverage Corporation, 120 Rio Vista Drive, Norwood, New Jersey 07648.


(2)
Alex Matrisciani, Michael Matrisciani, Daniel Matrisciani and Monty Matrisciani are brothers.  Daniel Matrisciani and Michael Mastrisciani are each a director of the Company.


(3)
Beneficial ownership as reported in the table above has been determined in accordance with Item 403 of Regulation S-K of the Securities Act of 1933 and Rule 13(d)–3 of the Securities Exchange Act, and based upon 3,792,045 shares of Common Stock outstanding.


(4)
Includes warrants to purchase an aggregate of 1,000,000 shares of Common Stock, exercisable at $1.00 per share.




23


The following table presents information as of April 13, 2010 with respect to compensation plans under which equity securities were authorized for issuance by the Company.





Equity Compensation Plan Information





Plan category

Numberof

Securitiesto

be issued

upon exercise

ofoutstanding

options,

warrants

and rights

Weighted-average

exercise price

of outstanding

options, warrants

and rights

Numberof

securities

remaining

available for

future issuance

under equity

compensation plans

(excluding securities

reflected in

column (a)(a)

(b)

(c)Equity compensation plans approved by security holders

0

--

--Equity compensation plans not approved by security holders

1,850,000

$.62

0Total

1,850,000

$.62

0





ITEM 13.           CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE





During the year ended December 31, 2009 an officer of the Company advanced monies to the Company in order to cover various operating expenses.  The amount due to officer at December 31, 2009 is $11,700.  This loan is non-interest bearing and is payable on demand.





Director  Independence





We have adopted standards for director independence pursuant to the rules of the Securities and Exchange Commission. The Board considered relationships, transactions and/or arrangements with each of the directors and concluded that all of the directors, except Messrs. Joseph Luzzi and Vito Cardinale meet the applicable criteria for independence.





24





ITEM 14.           PRINCIPAL ACCOUNTANT FEES AND SERVICES





Audit and Other Professional Fees





Consistent with the Audit Committee’s responsibility for engaging our independent auditors, subsequent to January 1, 2005, all audit and permitted non-audit services require pre-approval by the Audit Committee. Subsequent to January 1, 2005, all services performed by the auditors will be pre-approved.





During the fiscal years ended December 31, 2009 and 2008 fees for services provided by Sherb & Co., LLP were as follows (rounded to the nearest $1,000):





Audit Fees





The aggregate fees billed to the Company by Sherb & Co., LLP for the audit of our annual financial statements for the years ended December 31, 2009 and for the review of our quarterly reports on Form 10-Q for the same year totaled $37,000.  The aggregate fees billed to the Company by Sherb & Co., LLP for the audit of our annual financial statements for the year ended December 31, 2008 and for the review of our quarterly reports on Form 10-Q for the same year totaled $37,000.





Audit Related Fees





There were no fees paid to Sherb & Co., LLP for services rendered in connection with employee benefit plan audits, SEC registration statements, due diligence, assistance and consultation on financial accounting and reporting standards during the years ended December 31, 2009 and 2008.





Financial Information Systems Design and Implementation Fees





There were no fees paid to Sherb & Co., LLP for financial information systems design or implementation during the years ended December 31, 2009 and 2008.





Tax Fees





There were no fees paid to Sherb & Co., LLP for services rendered in connection with tax audits and appeals, advise on mergers and acquisition and technical assistance during the years ended December 31, 2009 and 2008.





All Other Fees





There were no additional fees paid to Sherb & Co., LLP for professional fees related to all other services during fiscal years ended December 31, 2009 and 2008.


25
  PART IV





ITEM 15.           EXHIBITS AND FINANCIAL STATEMENT SCHEDULES





(a)(1)
Financial Statements.IndexReport of Independent Registered Public Accounting Firm
F - 2Financial StatementsBalance Sheets
F - 3Statements of Operations
F - 4Statements of Stockholders' Deficit
F - 5Statements of Cash flows
F - 6Notes to Financial Statements
F - 7 - 11





(a)(2)
Financial Statement Schedules.(b)
Exhibits1.1
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.*





26





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. (Incorporated by reference to Registrant’s Annual Report on Form 10-KSB for the annual period ending December 31, 2001.)10.13
Employment Agreement, dated as of June 29, 2001 between Registrant and Daniel Matrisiciani. (Incorporated by reference to Registrant’s Annual Report on Form 10-KSB for the annual period ending December 31, 2001.)10.14
Employment Agreement, dated as of June 29, 2001, between Registrant and Michael Matrisiciani. (Incorporated by reference to Registrant’s Annual Report on Form 10-KSB for the annual period ending December 31, 2001)





27


10.15
Employment Agreement, dated as of June 29, 2001, between Registrant and Monty Matrisiciani. (Incorporated by reference to Registrant’s Annual Report on Form 10-KSB for the annual period ending December 31, 2001)10.16
2003 Stock Option Plan (Incorporated by reference to Registrant’s Annual Report on Form 10-KSB for the annual period ending December 31, 2003)10.17
Asset Purchase Agreement, dated as of September 15, 2005, between Registrant and Oak Beverages Inc. (Incorporated by reference to Registrant’s Current Report on Form 8-K  dated September 15, 2005)10.18
Sub-Distribution Agreement dated as of September 15, 2005 between the Registrant and Oak Beverages Inc. (Incorporated by reference to Registrant’s Current Report on Form 8-K dated September 15, 2005)10.19
Escrow Agreement, dated as of December 16, 2005, between Registrant, Oak Beverages Inc. and escrow agent. (Incorporated by reference to Registrant’s Annual Report on Form 10-KSB for the annual period ending December 31, 2005.)10.20
Amendment to Escrow Agreement, dated as of December 16, 2005, between Registrant, Oak Beverages Inc. and escrow agent. (Incorporated by reference to Registrant’s Annual Report on Form 10-KSB for the annual period ending December 31, 2005.)31.1
Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes Oxley Act of 200231.2
Certification of Treasurer pursuant to Section 302 of the Sarbanes Oxley Act of 200232.1
Certification of Chief Executive Officer and Treasurer pursuant to Section 906 of the Sarbanes Oxley Act of 2002


*           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.


28
  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 13th day of April, 2010.




CAPITAL BEVERAGE CORPORATIONBy:
/s/ Carmine N. StellaCarmine N. StellaPresident, Chief Executive Officerand 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 13, 2010Carmine N. Stella

President and Chairman ofthe Board of Directors/s/ Carol Russell

Director

April 13, 2010Carol Russell/s/ Joseph Luzzi

Director

April 13, 2010Joseph Luzzi/s/ Michael Matrisciani

Director

April 13, 2010Michael Matrisciani/s/ Daniel Matrisciani

Director

April 13, 2010Daniel Matrisciani/s/ Vito Cardinale

Director

April 13, 2010Vito Cardinale




29




CAPITAL BEVERAGE CORPORATION
 
 FINANCIAL STATEMENTS
 
 
 INDEX
 
 Page NumberREPORT OF INDEPENDENT REGISTERED PUBLIC

ACCOUNTING FIRM
F - 2FINANCIAL STATEMENTS:Balance Sheets
F - 3Statements of Operations
F - 4Statements of Stockholders' Deficit
F - 5Statements of Cash Flows
F - 6Notes to Financial Statements
F - 7 to F - 11
 
 F-1
 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
 Board of Directors and Stockholders
 Capital Beverage Corporation
 
 We have audited the accompanying balance sheets of Capital Beverage Corporation as of December 31, 2009 and 2008 and the related statements of operations, stockholders' deficit and cash flows for the years ended December 31, 2009 and 2008.  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 the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly we express no such opinion. 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 audits provide a reasonable basis for our opinion.
 
 In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Capital Beverage Corporation as of December 31, 2009 and 2008 and the results of their operations and their cash flows for the years ended December 31, 2009 and 2008, in conformity with accounting principles generally accepted in the United States of America.
 
 The accompanying financial statements have been prepared assuming that the Company will continue as a going concern.  The Company has incurred significant losses as more fully described in Note 2.  These issues raise substantial doubt about the Company’s ability to continue as a going concern.  Management’s plans in regard to these matters are also described in Note 2.  The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
  /s/ Sherb & Co., LLPCertified Public Accountants

New York, New York

April 13, 2010
 F-2
 CAPITAL BEVERAGE CORPORATIONBALANCE SHEETSASSETSDecember 31,2009


2008CURRENT ASSETS:Cash

$
269


$
8,326Restricted cash


-



55,876TOTAL CURRENT ASSETS


269



64,202OTHER ASSETS


-



2,319$
269


$
66,521LIABILITIES AND STOCKHOLDERS' DEFICITCURRENT LIABILITIES:Accounts payable

$
1,348,037


$
1,092,817Officer loans


11,700



-TOTAL CURRENT LIABILITIES


1,359,737



1,092,817STOCKHOLDERS' DEFICIT:Preferred stock, $.01 par value; authorized 1,000,000 shares;No shares issued and outstanding


-



-Common stock, $.001 par value; authorized 20,000,000 shares;issued and outstanding 3,792,045 shares


3,793



3,793Additional paid-in capital


6,011,249



6,011,249Accumulated deficit


(7,374,510
)


(7,041,338
)TOTAL STOCKHOLDERS' DEFICIT


(1,359,468
)


(1,026,296
)$
269


$
66,521
 
 See notes to financial statements.
  F-3
 CAPITAL BEVERAGE CORPORATIONSTATEMENTS OF OPERATIONSYear Ended December 31,2009


2008REVENUES

$
-


$
-COSTS AND EXPENSES:General and administrative


333,172



587,657333,172



587,657NET LOSS

$
(333,172
)

$
(587,657
)NET LOSS PER SHAREBasic

$
(0.09
)

$
(0.15
)Diluted

$
(0.09
)

$
(0.15
)WEIGHTED AVERAGE NUMBER OF SHARES:Basic


3,792,045



3,792,045Diluted


3,792,045



3,792,045
 
 See notes to financial statements.
  F-4
  CAPITAL BEVERAGE CORPORATIONSTATEMENTS OF STOCKHOLDERS' DEFICITAdditional





TotalPreferred Stock


Common Stock


Paid-In


Accumulated


Stockholders'Shares


Amount


Shares


Amount


Capital


Deficit


DeficitBalance December 31, 2007


-


$
-


$
3,792,045


$
3,793


$
5,986,249


$
(6,453,681
)

$
(463,639
)Capital contributed


-



-



-



-



25,000



-



25,000Net loss


-



-



-



-



-



(587,657
)


(587,657
)Balance December 31, 2008


-



-



3,792,045



3,793



6,011,249



(7,041,338
)


(1,026,296
)Net loss


-



-



-



-



-



(333,172
)


(333,172
)Balance December 31, 2009


-


$
-



3,792,045


$
3,793


$
6,011,249


$
(7,374,510
)

$
(1,359,468
)
  See notes to financial statements.
  F-5
 CAPITAL BEVERAGE CORPORATIONSTATEMENTS OF CASH FLOWSYear Ended December 31,2009


2008CASH FLOWS FROM OPERATING ACTIVITIES:Net loss

$
(333,172
)

$
(587,657
)Adjustments to reconcile net loss from operationsto net cash used in operating activities:Changes in assets and liabilities:Other receivable


2,319



4,610Accounts payable and accrued expenses


255,220



(120,916
)Total adjustments


257,539



(116,306
)NET CASH USED IN OPERATING ACTIVITIES


(75,633
)


(703,963
)CASH FLOWS FROM FINANCING ACTIVITIES:Proceeds from officer loans


11,700



-Capital contributed


-



25,000NET CASH PROVIDED BY FINANCING ACTIVITIES


11,700



25,000NET DECREASE IN CASH


(63,933
)


(678,963
)CASH - BEGINNING OF YEAR


64,202



743,165CASH - END OF YEAR

$
269


$
64,202SUPPLEMENTAL DISCLOSURE OF CASH FLOWINFORMATION:Cash paid for interest

$
-


$
-Cash paid for taxes

$
-


$
-
 See notes to financial statements.
  F-6
  CAPITAL BEVERAGE CORPORATION
 NOTES TO FINANCIAL STATEMENTS
 YEARS ENDED DECEMBER 31, 2009 AND 2008
 
 
 1.
ORGANIZATION AND DESCRIPTION OF BUSINESS
 
 Capital Beverage Corporation (the “Company” or “Capital”) was formed in December 1995 to operate as a wholesale distributor of beer and other beverages in New York City. On December 16, 2005, the Company sold substantially all of its assets to Oak Beverages, Inc.
 
 The Company’s plan of operation for the next twelve months shall be to locate a suitable acquisition or merger candidate.  The Company is not currently engaged in any business activities that provide cash flow.
 
 2.
GOING CONCERN
 
 The accompanying financial statements have been prepared on a going-concern basis, which presumes that the Company will be able to continue to meet its obligations and realize its assets in the normal course of business.
 
 The Company has not generated revenue since the sale of assets in December 2005. As a result, current operations are not an adequate source of cash to fund future operations. The report of the independent registered public accounting firm for the year ended December 31, 2009 contains an explanatory paragraph regarding the Company’s ability to continue as a going concern. The Company’s ability to continue as a going concern is dependent on its ability to obtain necessary financing to meet obligations and repay its liabilities when they become due or be acquired by an operating company. There are no assurances that the Company will have sufficient funds to pay its obligations as they become due or be acquired by an operating company.
 
 3.
SIGNIFICANT ACCOUNTING POLICIES
 
 Cash and Cash Equivalents - Cash and cash equivalents include cash on hand and cash in banks in demand and time deposit accounts with maturities of 90 days or less.
 
 Restricted Cash – All funds held in escrow were released on January 30, 2009.
 
 Income Taxes - The Company follows ASC 740 - 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 basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse.
  F-7
 CAPITAL BEVERAGE CORPORATION
 NOTES TO FINANCIAL STATEMENTS
 YEARS ENDED DECEMBER 31, 2009 AND 2008
 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.
 
 Income (loss) per Common Share - Net loss per common share is based on the weighted average number of shares outstanding. Potential common shares includable in the computation of fully diluted per share results are not presented in the financial statements as their effect would be anti-dilutive.
 
 New Accounting Pronouncements – On June 5, 2003, the United States Securities and Exchange Commission (“SEC”) adopted final rules under Section 404 of the Sarbanes-Oxley Act of 2002 (“Section 404”), as amended by SEC Release No. 33-9072 on October 13, 2009. Commencing with its annual report for the year ending December 31, 2010, the Company will be required to include a report of management on its internal control over financial reporting. The internal control report must include a statement of:
 
 ·
Management’s responsibility for establishing and maintaining adequate internal control over its financial reporting;
 ·
Management’s assessment of the effectiveness of its internal control over financial reporting as of year- end; and
 ·
The framework used by management to evaluate the effectiveness of the Company’s internal control over financial reporting.
 
 Furthermore, it is required to file the auditor’s attestation report separately on the Company’s internal control over financial reporting on whether it believes that the Company has maintained, in all material respects, effective internal control over financial reporting.
 
 Management does not believe that any other recently issued, but not yet effective, accounting standards, if currently adopted, could have a material effect on the accompanying financial statements.
 
 5.
RELATED PARTY TRANSACTIONS
 
 During the year ended December 31, 2009 an officer of the Company advanced monies to the Company in order to cover various operating expenses.  The amount due to officer at December 31, 2009 is $11,700.  This loan is non-interest bearing and is payable on demand.
 
 6.
LITIGATION
 
 On June 26, 2007, the Company filed a complaint against Oak Beverages, Inc. ("Oak"), Victoria Beverage, Inc. ("Victoria"), and Dealy & Silberstein, LLP, solely in its capacity as escrow agent, in the U.S. District Court for the Southern District of New York (the "Court"), seeking a declaratory judgment that, under the parties' Asset Purchase Agreement, dated September 15, 2005 and Escrow Agreement, dated December 16, 2005, the Company is not required to indemnify Oak and Victoria for unemployment insurance contributions based on the experience rating account held by Oak and maintained by the State of New York Department of Labor ("NYDOL").
  F-8
 CAPITAL BEVERAGE CORPORATION
 NOTES TO FINANCIAL STATEMENTS
 YEARS ENDED DECEMBER 31, 2009 AND 2008
 On July 23, 2007, Oak and Victoria filed with the Court an answer, counterclaim, and cross-claim in response to the Company's complaint alleging that the Asset Purchase Agreement was "deliberately structured" such that any liability, which would include the disputed unemployment taxes, would be retained by the Company post-closing and would not be transferred to Oak.  On August 15, 2007, the Company filed a reply to Oak and Victoria's counterclaim.
 
 On August 6, 2008, the parties reached a settlement agreement.  The settlement provided that the Company pay Oak the sum of $100,000.00 in full settlement of all claims.  The settlement also provided that the balance of the funds held in escrow, be released to the Company with the exception of the amount of $55,739.00 which will continue to be held in escrow in connection with a unrelated pending claim asserted by a third party.  The settlement agreement was executed as of August 28, 2008 and included a Joint Stipulation and Order of Dismissal with Prejudice (the "Joint Stipulation"), which was signed by all parties.  Judge Buchwald signed and entered the Joint Stipulation on September 8, 2008, which formally concluded the action.
 
 In January 2009, the Company settled a claim made by the Pabst Brewing Company (Pabst Claim) for $27,869.50 which represents one half of the Pabst Claim.  At January 30, 2009 the total amount held in escrow was $55,875.50 including accrued interest of $136.50.  On January 30, 2009, the escrow agent issued the Company a check for $22,006 which represents the balance remaining in escrow after payment of the Pabst Claim settlement and $6,000 in fees owed to the escrow agent.
 
 In March 2009, a plaintiff that originally commenced an action against the Company in September 2003 filed a Request for Judicial Intervention.  Thereafter, a preliminary conference was held on May 4, 2009.  During that conference, the Court heard argument regarding whether this case should be dismissed because of failure by the Plaintiff to prosecute the action.  The Court denied that request and directed that discovery proceed.  The plaintiff was deposed on October 22, 2009.  On December 4, 2009, Plaintiff served a Note of Issue to place this action on the trial calendar.  Thereafter, on February 2, 2010, the Company filed a Motion for Summary Judgment.  That Motion has now been fully briefed and argued before the Judge on Friday April 9, 2010.  Judge has reserved decision on the Motion.  Company is awaiting the decision by the Judge which may take several months.  The Company cannot predict the outcome of this matter at this time.
 
 7.             INCOME TAXES
 
 At December 31, 2009 the Company had a net operating loss carryover of $2,078,000 available as offsets against future taxable income, if any, which expire at various dates through 2029.  The Company has a deferred tax asset of $698,000 arising from net operating loss deductions and an alternative minimum tax credit and has recorded a valuation allowance for the full amount of such deferred tax asset.
  F-9
 CAPITAL BEVERAGE CORPORATION
 NOTES TO FINANCIAL STATEMENTS
 YEARS ENDED DECEMBER 31, 2009 AND 2008
 The following is a reconciliation between the expected income tax expense (benefit), assuming a statutory Federal tax rate of 35%, and the actual income tax expense (benefit):
 
 Year Ended December 31,2009


2008Expected income tax (benefit)

$
(116,550
)

$
(205,000
)State tax expense (benefit), net of Federal effect


(16,650
)


(29,000
)Utilization of net operating loss carryforward


-



-Increase in valuation allowance


133,200



234,000$
-


$
-
 
 The following is a schedule of the Company’s net deferred tax assets as of:
 
 December 31,2009


2008Net operating loss carryforward

$
831,200


$
698,000Alternative minimum tax credit


-



25,000Valuation allowance


(831,200
)


(723,000
)Net deferred tax asset

$
-


$
-
  8.
STOCKHOLDERS’ DEFICIT, STOCK OPTIONS AND WARRANTS
 
 During the year ended December 31, 2008 an unrelated third party advanced the Company $25,000 in order for the Company to pay professional expenses.  The Company does not have to repay the unrelated third party for monies received and therefore credited additional paid-capital for receiving said funds.
 
 Stock Options
 
 The Company’s outstanding stock options were issued in 2003 pursuant to the Company’s 2003 Incentive Stock Option Plan (2003 Plan) and in 1999 and 2000 pursuant to the Company’s 1996 Incentive Stock Option Plan (1996 Plan).
 
 Under the 2003 Plan, the Company issued 1,500,000 options exercisable at $.23 per share which expire in December 2013.
  F-10
 CAPITAL BEVERAGE CORPORATION
 NOTES TO FINANCIAL STATEMENTS
 YEARS ENDED DECEMBER 31, 2009 AND 2008
 Under the 1996 Plan, the Company issued 175,000 options in December 1999 exercisable at $3.55 per share which expire in 2009 and another 175,000 options in December 2000 exercisable at $.05 per share which expire in 2010.
 
 A summary of the Company’s stock option activity and related information for the years ended December 31, 2009 and 2008 is as follows (in thousands, except per share amounts):
  Shares


Weighted

Average

Exercise

PriceOutstanding at January 1, 2008


1,850


$
0.53Granted


-



-Exercised


-



-Cancelled


-



-Outstanding as December 31, 2009


1,850


$
0.53
  A summary of options outstanding and exercisable at December 31, 2009 is as follows (in thousands, except per share amounts):
  Options Outstanding


Options ExercisableRange of

Exercise Prices


Options


WeightedAverage

RemainingLife

(in years)


Weighted Average

Exercise Price


Range of

Exercise Prices


OptionsDecember 31, 2009$
0.23 - $3.50



1,850



5


$
0.53


$
0.05 - $3.50



1,850
 
 Warrants
 
 In October 2003, the Company issued 1,000,000 warrants to Casimir Capital L.P. in accordance with the terms of a consulting agreement.  The warrants expire in October 2013.
 
 A summary of the Company’s stock warrant activity and related information for the years ended December 31, 2009 and 2008 is as follows (in thousands, except per share amounts):
 
 Warrants


Weighted

Average

Exercise

PriceOutstanding at December 31, 2007


1,000


$
1.00Granted


-



-Exercised


-



-Cancelled


-



-Outstanding as December 31, 2009


1,000


$
1.00
  9.
SUBSEQUENT EVENTS
 
 In accordance with ASC 855, “Subsequent Events” the Company evaluated subsequent events after the balance sheet date of December 31, 2009 through April 13, 2010, which is the date the financial statements were issued.
  F-11