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, 2006.

         [X]      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)

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 [] 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 [] 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 []



<PAGE>

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

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

         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 March 26, 2007, was approximately $473,011.25.

         Number of shares outstanding of the issuer's Common Stock as of March
26, 2007 was 3,792,045.


                    DOCUMENTS INCORPORATED BY REFERENCE: None

<PAGE>

                          Capital Beverage Corporation
                          2006 Form 10-K Annual Report
                                TABLE OF CONTENTS


                                     PART I

 ITEM 1.      BUSINESS.........................................................3
 ITEM 2.      PROPERTIES......................................................10
 ITEM 3.      LEGAL PROCEEDINGS...............................................10
 ITEM 4.      SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.............11

                                     PART II

 ITEM 5.      MARKET FOR REGISTRANT'S COMMON..................................11
 ITEM 6.      SELECTED FINANCIAL DATA. .......................................12
 ITEM 7.      MANAGEMENT'S DISCUSSION ........................................13
 ITEM 7A.     QUANTITATIVE AND QUALITATIVE DISCLOSURES........................14
 ITEM 8.      FINANCIAL STATEMENTS............................................14
 ITEM 9.      CHANGES IN AND DISAGREEMENT WITH ACCOUNTANTS ON ACCOUNTING AND
              FINANCIAL DISCLOSURE............................................15
 ITEM 9A.     CONTROLS AND PROCEDURES.........................................15

                                    PART III

 ITEM 10.     DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT..............15
 ITEM 11.     EXECUTIVE COMPENSATION..........................................19
 ITEM 12.     SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND.............25
 ITEM 13.     CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS..................26
 ITEM 14.     PRINCIPAL ACCOUNTANT FEES AND SERVICES..........................27

                                     PART IV

 ITEM 15.     EXHIBITS AND FINANCIAL STATEMENT SCHEDULES......................29

SIGNATURES

CERTIFICATES

                                       2
<PAGE>


         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. 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.

         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.

                                       3
<PAGE>


         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.

         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).

                                       4

<PAGE>

         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, 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.

         As of March 26, 2007, approximately $1,794,806.22 has been released
from Escrow and has been used to pay outstanding liabilities of the Company.

                                       5

<PAGE>

         Strategy

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

         Structure of the Company

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

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

         The Company does not have any ongoing operations subsequent to the
Asset Sale, except for the collection of accounts receivable and 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

                                       6

<PAGE>

Employees

         As of December 31, 2005, all employees were terminated, except for
Carmine Stella who continues to serve as 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.

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.

                                       7

<PAGE>

The Company Has No Existing Agreement For A Business Combination Or Other
Transaction. We have no arrangement, agreement or understanding 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.

We Cannot Guarantee That The Final Distributions To the Company Will Be Made
From Escrow. On the closing date of the Asset Sale, the Company, Oak and Dealy
and Silberstein LLP, as escrow agent, entered into an Escrow Agreement, pursuant
to which at the closing, Oak deposited $1.5 million of the purchase price in an
escrow account with the escrow agent (the "Escrow"). This amount is being held
to satisfy potential purchase price adjustments and any claims for
indemnification that Oak may have for breaches of the Company's representations,
warranties, covenants or other obligations in the Asset Purchase Agreement. Upon
each of the 6 month, 12 month and 18 month anniversaries of the closing date,
one third of this amount (less any outstanding claims for indemnification) shall
be delivered by the escrow agent to Capital. The final distribution of these
funds shall be delivered by the escrow agent to Capital upon the later of the 18
month anniversary of the closing date, or the date upon which all pending claims
are resolved. We cannot guarantee that the final distributions to Capital from
the escrow agent will be made. As of March 26, 2007, approximately $1,794,806.22
have been released from Escrow and have been used to pay outstanding liabilities
of the Company.

Our Financial Statements Include A Going Concern Opinion From Our Independent
Auditors. The Company received a going concern opinion on its financial
statements for fiscal 2006. 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.

                                       8

<PAGE>

Risks Related To Our Common Stock

Disappointing Quarterly Revenue Or Operating Results Could Cause The Price Of
Our Common Stock To Fall. Our quarterly revenue and operating results are
difficult to predict and may fluctuate significantly from quarter to quarter. If
our quarterly revenue or operating results fall below the expectations of
investors or securities analysts, the price of our Common Stock could fall
substantially.

Our Common Stock Is Particularly Subject To Volatility Because Of The Industry
That We Are In. The stock market in general has recently experienced extreme
price and volume fluctuations. In addition, the market prices of securities of
network marketing companies, have been extremely volatile, and have experienced
fluctuations that have often been unrelated or disproportionate to the operating
performance of such companies. These broad market fluctuations could adversely
affect the market price of 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.

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.

                                       9

<PAGE>

"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 2.  PROPERTIES.

         Currently, the Company neither rents nor owns any properties.

ITEM 3.  LEGAL PROCEEDINGS.
         The Company was named as a defendant in an action commenced in Supreme
Court, Kings County captioned F&V Distribution Company LLC v. Capital Beverage
Corp. and GE Capital Corp. The complaint alleges that the Company and GE Capital
Corp. ("GE Capital"), have constructively abandoned certain equipment leased by
the Company from GE Capital and seeks a declaratory judgment stating that
neither the Company nor GE Capital have any further ownership interest in the
equipment and that F&V Distribution Company LLC may remove and dispose of the
equipment. GE Capital has filed cross-claims in this case against the Company
for breach of the subject lease. Settlement negotiations are underway in this
matter and it is anticipated that this matter will be amicably resolved in the
near future.

                                       10

<PAGE>

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

         No matters were submitted to a vote of the holders of the Company's
Common Stock during the last quarter of its fiscal year ended December 31, 2006.

                                     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, 2004 to December 31, 2006
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.


2004 Fiscal Year            Quoted Price  ($)
----------------            -----------------
                            High          Low
                            ----         ----
First Quarter               .41           .25
Second Quarter              .35           .28
Third Quarter               .30           .16
Fourth Quarter              .25           .17


2005 Fiscal Year            Quoted Price  ($)
----------------            -----------------
                            High          Low
                            ----         ----
First Quarter               .35           .15
Second Quarter              .34           .17
Third Quarter               .25           .13
Fourth Quarter              .17           .09


2006 Fiscal Year            Quoted Price  ($)
----------------            -----------------
                            High          Low
                            ----         ----
First Quarter               .20           .09
Second Quarter              .15           .06
Third Quarter               .12           .08
Fourth Quarter              .20           .07


         On March 26, 2007, the closing price of the Common Stock as reported on
the OTC Bulletin Board was $.25. As of March 26, 2007, there were 171 holders of
record of Common Stock.

                                       11

<PAGE>

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 2006, we did not repurchase any shares of
our Common Stock on our behalf or for any affiliated purchase.

ITEM 6.  SELECTED FINANCIAL DATA.

         The following data has been derived from the audited consolidated
financial statements of the Company and should be read in conjunction with those
statements. Historical results are not necessarily indicative of future results.

<TABLE>
<CAPTION>
                                                                                December 31,
                                                                                ------------
                                             2006              2005              2004                2003                2002
                                             ----              ----              ----                ----                ----
Consolidated Statement of Operations
Data:
<S>     <C>                                     <C>                <C>             <C>                <C>                 <C>
    Revenues
                                       $                 $                 $                  $                    $
                                               -                 -                 -                  -                    -
                                       ----------------- ----------------- ------------------ -------------------- -----------------

    General and administrative
    expenses                           $    295,167      $    817,248      $    387,306       $    437,872         $    485,625
    Bad debt reserve                   $    108,426
    Non-cash compensation
                                       $                 $                 $                  $                    $
                                               -                 -               91,724             98,276                 -
                                       ----------------- ----------------- ------------------ -------------------- -----------------
    Loss from continuing operations    $    403,563      $   (817,248)     $   (479,030)      $   (536,148)        $   (485,625)

    Discontinued operations:
    Interest expense, net
                                       $       -         $   (702,848)     $   (738,812)      $   (543,136)        $   (473,275)
    Gain on sale of distribution
    rights                             $                 $                 $                  $                    $
                                               -            8,235,907              -                  -                    -
    Cumulative effect of change in
    accounting principle               $                 $                 $                  $                    $
                                               -                 -                 -                  -            $   (860,000)
    Income taxes
                                       $                 $                 $                  $                    $
                                               -              (85,000)             -                  -                    -
    (Loss) gain from discontinued
    operations                         $    (74,353)     $ (2,781,110)     $ (3,059,071)      $  1,103,455         $     49,146
                                       ----------------- ----------------- ------------------ ------------------- ------------------
    Income (loss)                      $   (329,210)     $  3,849,701      $ (4,276,913)      $     24,171         $ (1,769,754)


                                       12

<PAGE>

   Diluted income (loss) from
    continuing operations per share:   $     (0.11)      $     (0.22)      $     (0.13)       $     (0.14)         $     (0.15)
   Diluted income (loss) from
    discontinued operations per share: $      0.02       $      1.23       $     (1.00)       $      0.15          $     (0.40)
   Diluted income (loss) per share:    $     (0.09)      $      1.02       $     (1.13)       $      0.01          $     (0.55)
   Diluted weighted-average number
    of shares outstanding:                3,792,045         3,792,045         3,792,045          3,792,045            3,229,545

Consolidated Balance Sheet Data
(at end of period):
Cash and cash equivalents
                                       $     67,910      $    131,738      $     96,220       $    189,276         $    120,242

Restricted cash                        $    736,045      $  2,513,600      $       -          $       -            $       -

Working capital                        $      7,695      $   (225,549)     $ (3,247,703)      $ (4,028,322)        $ (2,418,137)

Total assets                           $    807,485      $  2,765,535      $  4,521,860       $  8,153,142         $  7,697,358

Total debt                             $       -         $       -         $  4,630,999       $  4,601,761         $  4,472,282

Total stockholders' equity (deficit)   $     11,225      $    340,435      $ (3,509,266)      $    675,923         $    553,476

</TABLE>

ITEM 7.  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.

MANAGEMENTS DISCUSSION AND ANALYSIS


As of  December  16,  2005,  the  Company  closed the sale of the Assets to Oak,
pursuant  to the  terms and  conditions  of the Asset  Purchase  Agreement.  The
purchase  price  paid by Oak for the  Assets  was  Nine  Million  Three  Hundred
Thousand  Dollars  ($9,300,000),  of which One  Million  Five  Hundred  Thousand
Dollars ($1,500,000),  was deposited with an escrow agent, pursuant to the terms
of an escrow agreement,  for at least 18 months for post closing indemnification
claims which may be asserted by Oak (the "Escrow").  A substantial amount of the
proceeds  from the  transaction  were used by the  Company to repay  outstanding
indebtedness and for working capital purposes.

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

         After application of the net proceeds in the manner contemplated, and
assuming ultimate release to us of the entire escrowed amount, and after
deduction of transaction costs in connection with the Asset Sale, the Company
will not have any assets remaining. There will be no monies left over for
distribution, and we may have to reduce or eliminate the severance pay
provision.

                                        13
<PAGE>

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

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

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


RESULTS OF OPERATIONS:

         We had no revenue from operations for the twelve months ended December
31, 2006. Our revenues for the same period in 2005 have been reclassified to
discontinued operations.

         General and administrative expenses for the twelve months ended
December 31, 2006 were $295,167, which consisted mostly of legal fees,
accounting fees, payroll taxes, and salary and expenses paid to our only
remaining employee. General and administrative expenses for the twelve months
ended December 31, 2005 were $817,248. The large decrease in general and
administrative expenses was mainly due to the company not operating in 2006,
since it ceased its operation in December of 2005. The reduction amount is
highlighted in the areas of professional fees incurred to execute the asset
sale.

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

At December  31, 2006 and  December  31,  2005,  respectively,  we had a working
capital of $7,695 and a working capital deficit of ($225,549), respectively.


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.

                                       14

<PAGE>

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

         There were no changes in or disagreements with our accountants on
accounting or financial disclosure during the period covered by this report.

ITEM 9A. CONTROLS AND PROCEDURES.

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

         As required by SEC Rule 13a-15(b), we carried out an evaluation as of
December 31, 2006, under the supervision and with the participation of our
management, including our Chief Executive Officer and Treasurer, of the
effectiveness of the design and operation of our disclosure controls and
procedures, as of the end of the quarter covered by this report. Based upon that
evaluation, our Chief Executive Officer and Treasurer concluded that our
disclosure controls and procedures were effective in enabling us to record,
process, summarize and report information required to be included in our
periodic SEC filings within the required time period.

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

         Carmine N. Stella       54    President, Chief Executive Officer,
                                       Chairman of the Board of Directors

         Anthony Stella(1)       55    Vice President of Sales and Marketing

         Carol Russell           51    Secretary, Treasurer and Director

                                       15

<PAGE>

         Joseph M. Luzzi*        59    Director

         Michael Matrsciani      51    Director

         Daniel Matrisciani(3)   60    Director and Vice President of Operations

         Vito Cardinale*         47    Director
--------------------------------------------------------------------------------
(1) Anthony Stella resigned in his capacity as Vice President of Marketing of
the Company as of December 2, 2005. (2) Daniel Matrisciani resigned in his
capacity as Vice President of Operations of the Company as of December 2, 2005.
* 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 served as Vice President - Sales and
Marketing and an employee of the Company from inception to December 2, 2005. Mr.
Stella has acted as executive sales manager for Vito Santoro,  Inc., Gotham
Wholesale Beer, Inc., Miller Home Service,  Inc. and College Point Beer
Distributors over the past 15 years. Anthony Stella is the brother of
Carmine Stella.

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

        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.

                                       16

<PAGE>

        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.

        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
Vito Cardinale 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.

                                       17

<PAGE>

         The audit committee has reviewed and discussed the audited financial
statements included in the Company's Form 10-K for the fiscal year ended
December 31, 2006 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 2006 Form 10-K.

         The audit committee consists of two members Vito Cardinale and Joseph
Luzzi, both of whom are "independent" for purposes of stock exchange listing
standards. The audit committee does not currently have an individual who
qualifies as an "audit committee financial expert" as defined by the rules of
the Securities and Exchange Commission.

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, 2006,
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

                                       18

<PAGE>

ITEM 11. EXECUTIVE COMPENSATION.

Compensation Discussion And Analysis

Objectives

There is currently one employee of the Company. Our compensation program is
intended to provide a link between increasing the long-term value of shareholder
investment in the Company and the compensation earned by our executive officer.
The objective of our compensation program is to:

        o Attract and retain executives capable of leading us to meet our
          business objectives;
        o Adequately compensate our senior executive for achieving important
          near-term objectives;
        o Align the interests of our executive officer and shareholders through
          the use of equity and other long-term incentives; and
        o Reward executive for achieving sustainable increases in the value of
          shareholders' investments.

Elements Of  Executive Compensation

        Certain members of management have not received their salaries and
expenses since May 1, 2005. See Executive Compensation- Payment of Accrued
Unpaid Salaries and Severance. Our compensation structure consists of base
salary for executive officers and discretionary bonus, which is linked to
individual and Company performance on a year by year basis. Compensation also
consists of the 1996 Incentive Stock Option Plan, which allows for grants of
incentive stock options. This plan is designed to reward executive officers for
increasing the value of shareholders' investment.

Reasons For Paying Each Element Of Compensation

The reasons for paying each element of compensation are as follows:

        o Salary is paid for ongoing performance throughout the year.
        o The annual bonus component of executive compensation is in place to
          encourage and reward the achievement of the various components of the
          Company's business strategy.
        o The stock option grants are designed to reward executives if they are
          successful in increasing the value of shareholder investment. It also
          helps encourage executives to avoid behavior which results in
          short-term benefit at the expense of long-term share value.

Determination  Of  The  Amount  And  Formula  For  Each  Element  Of  Pay

        Generally, we choose to pay various elements of compensation based
on market norms and individual performance. Specific factors considered for each
element of compensation are as follows:

        o Base pay is paid around the midpoint of the market range, and better
          performers are paid slightly higher than the midpoint.
        o The bonus amount takes into account corporate performance, divisional
          performance, and quantifiable individual goals.

                                       19

<PAGE>

Specific Forms Of Compensation And The Role Of Discretion

        In the past, the Compensation Committee has retained the authority
to review executive officer base compensation and to make increases based on
general performance and market norms. Also, the Compensation Committee has
retained the authority to make long-term incentive grants (historically stock
options) based on executive performance and market norms. The Compensation
Committee intends to retain the discretion to make decisions about executive
officer base compensation and certain levels of stock option grants, with or
without predetermined performance goals.

        The Compensation Committee may make future grants of options,
restricted stock, or other equity compensation, subject to objective performance
goals. At this time, it has not determined whether it would exercise discretion
and reduce the size of an award or payout even if performance goals are met.
However, the Committee has no current intention to increase the size of any
objectively determined equity compensation award, especially if performance
goals are not met.

        With respect to bonus payment, the Compensation Committee uses an
objective formula to determine payouts to executive officers. The objective
measures relate to corporate earnings, performance and divisional earnings
performance, as compared to budgeted objectives. The formula also includes
objectively measured individual goals.

How Individual Forms Of Compensation Are Structured And Implemented To Reflect
The  Executive  Officers'  Individual  Performance And  Contribution

            The Compensation Committee considers a variety of factors, both
qualitative and quantitative, in evaluating our executive officers and making
compensation decisions. Market factors and the individual contribution of each
officer of the Company impact decisions regarding each executive officer's base
pay, the size of each executive officer's annual bonus opportunity, and the size
of each executive officer's long-term incentive opportunity.

Factors  Considered In Decisions To Increase Or Decrease Compensation Materially

            The Compensation Committee would consider clear, sustained market
trends in approving a material increase or decrease in executive compensation.

Impact  Amounts  Received  By  Previously  Earned  Compensation  Have  On  Other
Compensation

            We maintain no supplemental pension plans or other programs in which
gains from prior compensation could influence amounts earned currently. The
Compensation Committee may consider gains from prior awards when determining the
appropriate size of long-term incentive grants.

                                       20

<PAGE>

Impact  Of  Accounting  And  Tax  Treatment  On  Various  Forms  Of Compensation

            The accounting and tax treatments of each particular form of
compensation are taken into account when determining amounts and awards. Our
incentive payments are designed so that they are deductible under Section 162(m)
of the Internal Revenue Code, and we intend that all compensation payments be
deductible.

            We monitor the treatment of options under FAS 123R in determining
the form and size of option grants.

            Nonqualified options are deductible by the Company when they are
exercised, to the extent that the optionee recognizes ordinary income rather
than capital gain on exercise.

Ownership  Requirements  And Policies Regarding Hedging Risk On Company's Equity
Securities

            We currently have no security ownership requirements for executives,
and no policies regarding hedging economic risk and ownership.

Role  Of  Executive  Officers  In  Determining  Compensation

            The Compensation Committee makes all base, bonus, and equity
compensation decisions regarding executive officers.

         The following table sets forth the compensation paid to the Named
Executive Officers for the fiscal years ending December 31, 2004, 2005 and 2006.

<TABLE>
<CAPTION>
                           Summary Compensation Table
                           --------------------------

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

<S><C>                              <C>        <C>                   <C>                    <C>                       <C>
                                                                Other Annual              Restricted                Stock Option
Name and Principal Position         Year      Salary            Compensation              Award                     Grants
------------------------------------------------------------------------------------------------------------------------------------

Carmine N. Stella                   2006    $ 210,027.96             -0-                    -0-                       -0-
President, Chief Executive Officer, 2005    $  71,247.96             -0-                    -0-                       -0-
Chairman of the Board               2004    $ 208,796.88             -0-                    -0-                       -0-



Anthony Stella                      2006           -0-               -0-                    -0-                       -0-
Vice President of Sales             2005    $ 44,662.68              -0-                    -0-                       -0-
and Managing Director               2004    $133,272.52              -0-                    -0-                       -0-


Carol Russell                       2006           -0-               -0-                    -0-                       -0-
Secretary Treasurer                 2005    $64,192.37               -0-                    -0-                       -0-
and Director                        2004    $64,670.38               -0-                    -0-                       -0-


Daniel Matrisciani                  2006           -0-               -0-                    -0-                       -0-
Vice President of                   2005    $ 44,668.80              -0-                    -0-                       -0-
Operations and Director             2004    $131,797.02              -0-                    -0-                       -0-
</TABLE>

                                       21

<PAGE>

         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 expired in
October, 2003. In June 2004, Mr. Stella's employment agreement was extended for
an additional two years in accordance with the terms of his expired 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. In June 2004, Mr.
Matrisciani's employment agreement was extended 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 December 31, 2005,
Mr. Matrisciani's employment agreement was terminated.

         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. In June 2004, Mr. Matrisciani's
employment agreement was extended for 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 December 31, 2005, Mr. Matrisciani's employment agreement
was terminated.

         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 for an additional two years. In June 2004, Mr. Matrisciani's employment
agreement was extended for 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 December 31, 2005, Mr. Matrisciani's employment agreement was terminated.

         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. In June 2004, Mr.
Matrisciani's employment agreement was extended for 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 December 31, 2005, Mr. Matrisciani's
employment agreement was terminated.

                                       22

<PAGE>

         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. In June 2004, Mr. Stella's employment
agreement was extended for 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. As of December 31, 2005,
Mr. Stella's employment agreement was terminated.

         All financial consideration in each of the aforementioned employment
agreements were reduced by thirty percent (30%) for an undetermined period of
time.

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, 2006): Carmine Stella ($80,106.83);
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, 2006, of a total of approximately $44,328.08.

         In addition, under the terms of employment agreements between the
Company and such members of management, such employees are, upon the termination
of their employment with the Company, entitled to severance payments equal to
four (4) weeks of a base salary for each year of service provided to the
Company. The proceeds from the Asset Sale were used to pay severance to
following employees each of whom were terminated as of the closing date of the
Asset Sale in the amounts set forth adjacent to their names: Anthony Stella
($102,000); Michael Mastrisciani ($47,000); Daniel Mastrisciani ($47,000); Monty
Mastrisciani ($47,000); and Alex Mastrisciani ($41,000). Carmine Stella was not
terminated as of the closing date, and therefore, he is not be entitled to any
severance payment. He will, however, continue to serve as the Company's Chief
Executive Officer, and will be paid $210,000 per annum.

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.

                                       23

<PAGE>

         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.

Compensation Committee Interlocks and Insider Participation

            The Compensation Committee currently consists of Vito Cardinale and
Joseph Luzzi. The Compensation Committee is responsible for making
recommendations to the Board of Directors regarding executive compensation
matters. The Board of Directors has determined that all members of the
Compensation Committee are "independent" in accordance with applicable the
Securities and Exchange Commission rules. There are no relationships or
transactions relating to the members of the Compensation Committee that require
disclosure under Item 407(e)(4) of Regulation S-K.

Compensation Committee Report

            The information contained in this report shall not be deemed to be
"soliciting material" or to be "filed" with the Securities and Exchange
Commission or subject to Regulation 14A or 14C other than as set forth in Item
407 of Regulation S-K, or subject to the liabilities of Section 18 of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), except to the
extent that we specifically request that the information contained in this
report be treated as soliciting material, nor shall such information be
incorporated by reference into any past or future filing under the Securities
Act of 1933, as amended (the "Securities Act"), or the Exchange Act, except to
the extent that we specifically incorporate it by reference in such filing.

            The Compensation Committee has reviewed and discussed the
Compensation Discussion and Analysis required by Item 402(b) of Regulation S-K
with management and, based on such review and discussions, the Compensation
Committee recommended to the Board that the Compensation Discussion and Analysis
be included in this annual report.

                                             By the Compensation Committee:

                                             Vito Cardinale
                                             Joseph Luzzi

                                       24

<PAGE>

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

         The following table sets forth as of March 26, 2007, 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 Common        Percentage (%) of
 Beneficial Owner (1)         Stock Owned (3)    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%

Casimir Capital L.P.       1,000,000(4               20.9%
100 Broadway, 11th Floor
New York, NY 10005
All officers and
directors as a group       1,900,000                 50%
(nine (9) persons)

(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.

The following  table  presents  information  as of March 26, 2007 with respect
to compensation  plans under which equity securities were authorized for
issuance by the Company.

                                       25

<PAGE>

<TABLE>
<CAPTION>
                      Equity Compensation Plan Information

------------------------------- ---------------------------- --------------------------- ----------------------------
<S>           <C>                        <C>                              <C>                           <C>
                                                                                             Number of securities
                                                                                           remaining available for
                                                                                            future issuance under
                                 Number of Securities to be   Weighted-average exercise    equity compensation plans
                                   issued upon exercise of      price of outstanding        (excluding securities
                                    outstanding options,        options, warrants and         reflected in column
        Plan category               warrants and rights                rights                         (a)
------------------------------- ---------------------------- --------------------------- ----------------------------
                                            (a)                          (b)                          (c)
------------------------------- ---------------------------- --------------------------- ----------------------------
  Equity compensation plans
approved by security holders
                                             0                           --                           --
------------------------------- ---------------------------- --------------------------- ----------------------------
Equity compensation plans not
     approved by security
          holders                        1,850,000                      $.62                          0
------------------------------- ---------------------------- --------------------------- ----------------------------
          Total                          1,850,000                      $.62                          0
------------------------------- ---------------------------- --------------------------- ----------------------------
</TABLE>


ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

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

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

         As of December 16, 2005, the closing date of the Asset Sale, the
above-referenced loans were paid in full.

                                       26

<PAGE>

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. In addition, the Board has determined that
each member of our Audit Committee and Compensation Committee is independent
under applicable SEC rules.

Termination of Personal Guaranties and Release of Pledged Collateral

         In connection with a loan in the aggregate principal amount of $2.5
million provided to the Company by Seaway, each of Alex Mastrisciani, Daniel
Mastrisciani, Michael Mastrisciani and Monty Mastrisciani pledged real property
owned by them located in Brooklyn, New York as collateral for such loan. The
security interest held by Seaway in such collateral was released on the closing
date of the Asset Sale upon the repayment of the loan by the Company.

         In connection with a revolving line of credit provided by EGC to the
Company, the Company pledged all of its assets as collateral for such loan. In
addition, Carmine Stella, the Company's President, and Chief Executive Officer
personally guaranteed the
 Company's obligations to Entrepreneur Capital. The guaranty provided by Mr.
Stella terminated on the closing date of the Asset Sale upon repayment of the
line of credit by the Company.

         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 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.


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, 2006 and 2005 fees for
services provided by Sherb & Co., LLP were as follows (rounded to the nearest
$1,000):

                                       27

<PAGE>

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, 2006
and for the review of our quarterly reports on Form 10-Q for the same year
totaled $35,500.00. 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,
2005 and for the review of our quarterly reports on Form 10-Q for the same year
totaled $34,000.00.

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, 2006 and 2005.

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, 2006 and
2005.

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, 2006 and 2005.

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, 2006
and 2005.


                                       28

<PAGE>

                                     PART IV

ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.

(a)(1)   Financial Statements.
                                      INDEX

REPORT OF INDEPENDENT REGISTERED PUBLIC
     ACCOUNTING FIRM                                                  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

(a)(2)   Financial Statement Schedules.

(b)      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.*


                                       29

<PAGE>

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)


                                       30

<PAGE>

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 2002

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

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

* 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.







                                       31

<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 30 day of March, 2007.

                                     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,      March 30, 2007
   Carmine N. Stella                President and Chairman of
                                    the Board of Directors


/s/Carol Russell                    Secretary, Treasurer          March 30, 2007
   Carol Russell                    and Director


/s/Joseph Luzzi                     Director                      March 30, 2007
   Joseph Luzzi


/s/Michael Matrisciani              Director                      March 30, 2007
   Michael Matrisciani


/s/Daniel Matrisciani               Director                      March 30, 2007
   Daniel Matrisciani


/s/Vito Cardinale                   Director                      March 30, 2007
   Vito Cardinale





<PAGE>






                   CAPITAL BEVERAGE CORPORATION AND SUBSIDIARY

                              FINANCIAL STATEMENTS



                                      INDEX
                                                                     Page Number
                                                                     -----------

REPORT OF INDEPENDENT REGISTERED PUBLIC
     ACCOUNTING FIRM                                                       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>




             REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Board of Directors and Stockholders
Capital Beverage Corporation and Subsidiary

We have audited the accompanying consolidated balance sheets of Capital Beverage
Corporation  and  Subsidiary  as of  December  31, 2006 and 2005 and the related
consolidated  statements of operations,  stockholders' equity and cash flows for
the years ended December 31, 2006, 2005 and 2004. 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 consolidated  financial statements referred to above present
fairly,  in all material  respects,  the financial  position of Capital Beverage
Corporation  and  Subsidiary as of December 31, 2006 and 2005 and the results of
their  operations  and their cash flows for the years ended  December  31, 2006,
2005 and 2004, in conformity with accounting  principles  generally  accepted in
the United States of America.

The accompanying  consolidated  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., LLP
                                           -------------------------------------
                                                 Certified Public Accountants

New York, New York
March 30, 2007

                                     F - 2

<PAGE>

                   CAPITAL BEVERAGE CORPORATION AND SUBSIDIARY

                           CONSOLIDATED BALANCE SHEETS

                                     ASSETS

                                                        December 31,
                                                ------------------------------
                                                    2006             2005
                                                --------------   -------------
CURRENT ASSETS:
    Cash                                      $        67,910  $      131,738
    Restricted cash                                   736,045       2,013,600
    Other receivable - current portion                      -          54,213
                                                --------------   -------------
        TOTAL CURRENT ASSETS                          803,955       2,199,551

RESTRICTED CASH                                             -         500,000

OTHER ASSETS                                            3,530          65,984
                                                --------------   -------------

                                              $       807,485  $    2,765,535
                                                ==============   =============


                 LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES:
    Cash overdraft                            $             -  $          681
    Accounts payable                                  768,166       1,531,794
    Accrued expenses and taxes                         28,094         839,221
    Current portion of capital
    lease obligations                                       -          53,404
                                                --------------   -------------
        TOTAL CURRENT LIABILITIES                     796,260       2,425,100
                                                --------------   -------------

STOCKHOLDERS' EQUITY
    Preferred stock, no shares issued and
    outstanding                                             -               -
    Common stock, $.001 par value; authorized
    20,000,000 shares;
    issued and outstanding 3,792,045 shares             3,793           3,793
    Additional paid-in capital                      5,986,249       5,986,249
    Accumulated deficit                            (5,978,817)     (5,649,607)
                                                --------------   -------------
        TOTAL STOCKHOLDERS' EQUITY                     11,225         340,435
                                                --------------   -------------

                                              $       807,485  $    2,765,535
                                                ==============   =============




                 See notes to consolidated financial statements.

                                       F-3

<PAGE>

<TABLE>
<CAPTION>

                   CAPITAL BEVERAGE CORPORATION AND SUBSIDIARY

                     CONSOLIDATED STATEMENTS OF OPERATIONS



                                                     Year Ended December 31,
                                    ------------------------------------------------------------
                                          2006                  2005                 2004
                                    -----------------     -----------------      ---------------
<S>                                     <C>                       <C>                  <C>
REVENUES                            $      -              $       -              $      -
                                    -----------------     -----------------      ---------------

COSTS AND EXPENSES:
General and administrative               295,137               817,248               387,306
Bad debt reserve                         108,426                  -                     -
Non-cash compensation                       -                     -                   91,724
                                    -----------------     -----------------      ---------------

                                         403,563               817,248               479,030
                                    -----------------     -----------------      ---------------

LOSS FROM CONTINUING OPERATIONS         (403,563)             (817,248)             (479,030)

DISCONTINUED OPERATIONS:
Interest income (expense)                   -                 (702,848)             (738,812)
Gain on sale of distribution rights         -                8,235,907                  -
(Loss) gain from discontinued
operations, net of tax                    74,353            (2,866,110)           (3,059,071)
                                     -----------------     -----------------     ---------------
NET INCOME (LOSS)                    $  (329,210)          $ 3,849,701           $(4,276,913)
                                     =================     =================     ===============

NET INCOME (LOSS) PER SHARE - CONTINUING OPERATIONS

 Basic                               $    (0.11)           $    (0.22)           $    (0.13)
                                     =================     =================     ===============
 Diluted                             $                     $                     $
                                          (0.11)                (0.22)                (0.13)
                                     =================     =================     ===============

NET INCOME (LOSS) PER SHARE - DISCONTINUED OPERATIONS

Basic                                 $    0.02             $    1.23            $   (1.00)
                                      =================     =================    ===============
Diluted
                                      $    0.02             $    1.23            $   (1.00)
                                      =================     =================    ===============

NET INCOME (LOSS) PER SHARE

Basic                                 $   (0.09)            $    1.02            $   (1.13)
                                      =================     =================    ===============
Diluted
                                      $   (0.09)            $    1.02            $   (1.13)
                                      =================     =================    ===============

WEIGHTED AVERAGE NUMBER OF SHARES:

Basic                                  3,792,045             3,792,045             3,792,045
                                     =================     =================     ===============
Diluted
                                       3,792,045             3,792,045             3,792,045
                                     =================     =================     ===============

</TABLE>

                 See notes to consolidated financial statements.

                                       F-4

<PAGE>

                   CAPITAL BEVERAGE CORPORATION AND SUBSIDIARY

            CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)



<TABLE>
<CAPTION>

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

<S>                             <C>         <C>        <C>        <C>       <C>          <C>          <C>         <C>
Balance January 1, 2004               -   $      -   3,792,045  $ 3,793   $ 5,986,249  $(91,724)    $(5,222,395)  $   675,923

   Amortization of deferered
   compensaion                        -          -        -        -           -         91,724            -           91,724

    Net loss                          -          -        -        -           -           -         (4,276,913)   (4,276,913)

                                --------  ---------  ---------  -------- -----------   ----------    ----------  --------------
Balance December 31, 2004             -          -   3,792,045    3,793     5,986,249      -         (9,499,308)   (3,509,266)

    Net income                        -          -        -        -           -           -          3,849,701     3,849,701
                                --------  ---------  ---------  -------- -----------   ----------    ----------  --------------
Balance December 31, 2005             -          -   3,792,045    3,793     5,986,249      -         (5,649,607)      340,435

    Net loss                          -          -        -        -           -           -           (329,210)     (329,210)
                                --------  ---------  ---------  -------- -----------   ----------   ----------   --------------
Balance December 31, 2006             -   $      -   3,792,045  $ 3,793  $  5,986,249  $   -       $ (5,978,817) $     11,225
                                ========  =========  =========  ======== ============  ==========  ============= ==============
</TABLE>






                 See notes to consolidated financial statements.

                                       F-5





<PAGE>
<TABLE>
                                                                      CAPITAL BEVERAGE CORPORATION AND SUBSIDIARY

                                                                                STATEMENTS OF CASH FLOWS


<CAPTION>

                                                                                 Year Ended December 31,
                                                        ----------------------------------------------------------------------------
                                                                  2006                     2005                       2004
<S>     <C>                                                      <C>                     <C>                             <C>
                                                        ------------------------  ------------------------  ------------------------
CASH FLOWS FROM OPERATING ACTIVITIES:

     Net loss from continuing operations                $      (403,563)          $     (817,248)           $      (479,030)
                                                        ------------------------  ------------------------  ------------------------
     Adjustments to reconcile net loss from
     continuing operations
        to net cash provided by (used in)
        operating activities:
        Non-cash compensation                                      -                        -                        91,724
     Changes in discontinued operations:
        Depreciation and amortization                              -                        -                       151,851
        Impairment of distribution license                         -                        -                     3,336,744
        Interest expense                                           -                    (702,848)                  (738,812)
        Gain on sale of distribution rights                        -                   8,235,907                       -
        (Loss) gain from discontinued operations                 74,353               (2,866,110)                (3,059,071)
     Changes in discontinued assets and liabilities:
        Assets from discontinued operations                        -                   4,413,869                       -
        Liabilities from discontinued operations                   -                  (4,630,999)                      -
        Accounts receivable                                        -                        -                      (148,650)
        Inventories                                                -                        -                       269,650
        Prepaid expenses                                           -                        -                        20,798
        Other assets                                               -                        -                       (76,835)
        Capital expenditures                                       -                        -                       (15,332)
        Revolving loans                                            -                        -                       125,171
        Payments of notes payable                                  -                        -                       (95,933)
     Changes in assets and liabilities:
        Other receivable                                        116,667                 (108,426)                      -
        Accounts payable and accrued expenses                (1,574,755)                (592,768)                   179,151
                                                        ------------------------  ------------------------  ------------------------
Total adjustments                                            (1,458,089)               3,748,625                     40,456
                                                        ------------------------  ------------------------  ------------------------
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES          (1,787,299)               2,931,377                   (438,574)
                                                        ------------------------  ------------------------  ------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
     Cash overdraft                                                (681)                (366,743)                   367,424
     Principal payments of capital lease obligations            (53,404)                 (15,515)                   (21,906)
                                                        ------------------------  ------------------------  ------------------------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES             (54,085)                (382,258)                   345,518
                                                        ------------------------  ------------------------  ------------------------
INCREASE (DECREASE) IN CASH                                  (1,841,384)               2,549,119                    (93,056)

CASH - BEGINNING OF YEAR                                      2,645,339                   96,220                    189,276
                                                        ------------------------  ------------------------  ------------------------
CASH - END OF YEAR                                      $       803,955           $    2,645,339            $        96,220
                                                        ========================  ========================  ========================
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
     INFORMATION:

        Cash paid for interest                          $          -              $      703,488            $       688,812
                                                        ========================  ========================  ========================
        Cash paid for taxes                             $          -              $       25,000            $          -
                                                        ========================  ========================  ========================


</TABLE>




                 See notes to consolidated financial statements.

                                       F-6


<PAGE>



                   CAPITAL BEVERAGE CORPORATION AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                  YEARS ENDED DECEMBER 31, 2006, 2005 and 2004

1.       DESCRIPTION OF BUSINESS

         Capital Beverage Corporation (the "Company" or "Capital") was formed in
         December 1995 to operate as a wholesale distributor of beer and other
         beverages in New York City. In December 1998, CAP Communications, Ltd.
         ("Cap Com"), a wholly-owned subsidiary, was organized to market
         domestic and long distance prepaid telephone calling cards to
         distributors and to the general public. Cap Com was dissolved in
         December 2006.

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

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

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

                                       F-7

<PAGE>


2.       GOING CONCERN

         The accompanying financial statements have been prepared on a going
         concern basis, which contemplates the realization of assets and
         satisfaction of liabilities in the normal course of business. As
         reflected in the accompanying financial statements, the Company has
         incurred net losses and negative cash flows from operations, which
         raises substantial doubt about the Company's ability to continue as a
         going concern. As more fully discussed in the notes that follow, the
         Company has discontinued or sold all of its operations with only
         certain cash, accounts payable and accrued expenses remaining on the
         December 31, 2006 and 2005 balance sheets. The financial statements do
         not include any adjustments that might result from the Company not
         continuing as a going concern.



3.       SIGNIFICANT ACCOUNTING POLICIES

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

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

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

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

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

         Income (loss) per Common Share - Net income (loss) per common share is
         based on the weighted average number of shares outstanding. Potential
         common shares includable in the computation of fully diluted per share
         results are not presented in the financial statements as their effect
         would be anti-dilutive. The outstanding options and warrants excluded
         in the computation amounted to 2,850,000 at December 31, 2006, 2005 and
         2004.

                                       F-8

<PAGE>


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

         New Accounting Pronouncements - In June 2006, the FASB issued FASB
         Interpretation No. 48, "Accounting for Uncertainty in Income Taxes, an
         Interpretation of FASB Statement No. 109" (FIN 48). FIN 48 clarifies
         the accounting for uncertainty in income taxes recognized in an
         enterprise's financial statements in accordance with FAS No. 109,
         "Accounting for Income Taxes." FIN 48 prescribes a two-step process to
         determine the amount of tax benefit to be recognized. First, the tax
         position must be evaluated to determine the likelihood that it will be
         sustained upon external examination. If the tax position is deemed
         "more-likely-than-not" to be sustained, the tax position is then
         assessed to determine the amount of benefit to recognize in the
         financial statements. The amount of the benefit that may be recognized
         is the largest amount that has a greater than 50% likelihood of being
         realized upon ultimate settlement. We were required to adopt FIN 48
         effective as of January 1, 2007. We are currently evaluating the effect
         FIN 48 will have on our financial statements. We do not expect the
         impact will be material.

         In September 2006, the FASB issued SFAS No. 157, "Fair Value
         Measurements" (Statement 157), which addresses how companies should
         measure fair value when they are required to use a fair value measure
         for recognition or disclosure purposes under generally accepted
         accounting principles. Statement 157 defines fair value, establishes a
         framework for measuring fair value in generally accepted accounting
         principles and expands disclosures about fair value measurements.
         Statement 157 is effective for financial statements issued for fiscal
         years beginning after November 15, 2007 and should be applied
         prospectively, except in the case of a limited number of financial
         instruments that require retrospective application. We are currently
         evaluating the potential impact of Statement 157 on our financial
         statements. We do not expect the impact will be material.


                                       F-9

<PAGE>


         In February 2007, the FASB issued SFAS No. 159, "The Fair Value Option
         for Financial Assets and Financial Liabilities-including an amendment
         of FAS 115" (Statement 159). Statement 159 allows entities to choose,
         at specified election dates, to measure eligible financial assets and
         liabilities at fair value that are not otherwise required to be
         measured at fair value. If a company elects the fair value option for
         an eligible item, changes in that item's fair value in subsequent
         reporting periods must be recognized in current earnings. Statement 159
         is effective for fiscal years beginning after November 15, 2007. We are
         currently evaluating the potential impact of Statement 159 on our
         financial statements. We do not expect the impact will be material.



4.       SALE OF DISTRIBUTION RIGHTS

         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.

         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.

                                      F-10

<PAGE>


         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, 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.

         Summary of closing of sale:

         Purchase price                      $                      9,300,000
                                                     -------------------------
         Sub-Distribution credit                                    42,374.91
         Payments to primary creditors                           5,944,402.25
         Primary creditor escrow                                   321,964.93
         Secondary creditor escrow (1)                           1,012,960.29
         General escrow deposit (2)                              1,500,000.00
         Deposit to Capital                                        478,297.62
                                                     -------------------------
         Total                               $                      9,300,000
                                                     =========================

(1)               As of April 11, 2006, approximately Seven Hundred Eight
                  Thousand Sixty Dollars ($708,060) has been released from
                  Escrow and has been used to pay outstanding liabilities of the
                  Company. The balance will be held in the escrow account for
                  two years at which point any remaining funds will be kept by
                  Capital.



(2)      Will be released in three traunches of $500,000, on  July 16, 2006,
          December 16, 2006 and June 16, 2007.

         Gain on the sale:

         Purchase price less sub-distribution
         credit                              $                      9,257,625
         Carrying value                                             1,021,718
                                                     -------------------------
         Gain on sale                        $                      8,235,907
                                                     =========================


                                      F-11

<PAGE>


5.       DISCONTINUED OPERATIONS

         The Company's sale of its Distribution License has been accounted of
         under the requirements of paragraph 30 of Statements of Financial
         Accounting Standards ("SFAS") 144 "Accounting for the Impairment or
         Disposal of Long-Lived Assets", the assets and liabilities associated
         with the discontinued operations of the Company have been classified as
         Assets or Liabilities from discontinued operations on the accompanying
         2004 balance sheet, while the results of operations have been presented
         as discontinued operations for all periods presented.

         The carrying amounts of the major classes of assets and liabilities
         included as part of the assets and liabilities held for sale at
         December 31, 2004, are as follows:


         Accounts receivable                 $                        698,792
         Inventories                                                2,097,338
         Other current assets                                         147,905
         Property and equipment                                       127,765
         Distribution license                                       1,065,718
         Other assets                                                 276,351
                                                     -------------------------
         Assets from discontinued
         operations                          $                      4,413,869
                                                     =========================


         Revolving loans                     $                      2,007,356
         Loan payable                                               2,500,000
         Long-term debt                                               123,643
                                                     -------------------------
         Liabilities from discontinued
         operations                          $                      4,630,999
                                                     =========================


                                      F-12

<PAGE>


6.       OTHER RECEIVABLE

         On October 21, 2005 the Company signed a Stipulation of Settlement with
         Blue Ox Distributors, LLC (Blue Ox), where as Blue Ox has agreed to pay
         the Company as further consideration for the termination of the
         Exclusive United States Distribution Agreement in the amount of
         $100,000 plus interest of $8,425.93. Blue Ox will pay Capital $6,023.66
         per month beginning April 1, 2006 until the balance is paid in full. As
         of December 31, 2006, the Company hasn't received any payments and has
         decided to reserve 100% of the receivable during the period ended
         December 31, 2006.



     7.  INCOME TAXES

         At December 31, 2006 the Company had a net operating loss carryover of
         $682,000 available as offsets against future taxable income, if any,
         which expire at various dates through 2026. The Company has a deferred
         tax asset of $219,000 arising from net operating loss deductions and an
         alternative minimum tax credit and has recorded a valuation allowance
         for the full amount of such deferred tax asset. At December 31, 2005
         the Company recorded an income tax provision of $85,000.00 resulting
         from the alternative minimum taxes. The Company paid $25,000.00 as full
         settlement of this liability, therefore, decreasing the liability to $0
         as of December 31, 2006.

         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):

<TABLE>
<CAPTION>
                                                                                   Year Ended December 31,
                                                              ----------------------------------------------------------------
                                                                     2006                   2005                   2004
                                                              -------------------     ------------------     -----------------
<S>      <C>                                                  <C>                     <C>                    <C>
         Expected income tax (benefit)                   $         (115,000)      $           1,389,000  $        (1,497,000)
         State tax expense (benefit),
          net of Federal effect                                     (16,000)                    198,000             (214,000)
         Impairment of distribution license                            -                           -               1,335,000
         Deferred compensation                                         -                           -                  37,000
         Utilization if net operating
          loss carryforward                                          (8,000)                 (1,656,000)                -
         Other permanent differences                                   -                        100,000                36,000
         Alternative minimum tax                                       -                         85,000                  -
         Other                                                         -                        (31,000)                 -
         Increase in valuation allowance                            139,000                        -                  303,000
                                                              -------------------     ------------------     -----------------
                                                         $            -           $              85,000   $              -
                                                              ===================     ==================     =================
</TABLE>


                                      F-13

<PAGE>


         The following is a schedule of the Company's net deferred tax assets as
of:

                                                   December 31,
                                       ---------------------------------------
                                             2006               2005
                                       ---------------     ---------------
 Net operating loss carryforward       $   273,000         $      134,000
 Alternative minimum tax                    85,000                 85,000
 Valuation allowance                      (358,000)              (219,000)
                                       ---------------     ---------------
 Net deferred tax asset                $           -       $        -
                                       ===============     ===============





8.       CONCENTRATION OF CREDIT RISK

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


9.       STOCK OPTIONS AND WARRANTS

       A summary of the Company's stock option activity and related information
for the years ended December 31, 2006, 2005 and 2004 is as follows (in
thousands, except per share amounts):


                                      F-14
<PAGE>


                                                                      Weighted
                                                                       Average
                                                          Shares  Exercise Price
--------------------------------------------------------------------------------
 Outstanding at January 1, 2004                            1,850       $0.62
 -------------------------------------------------------------------------------
      Granted                                                  -          -
      Exercised                                                -          -
      Cancelled                                                -          -
--------------------------------------------------------------------------------
 Outstanding as December 31, 2006                          1,850       $0.62
================================================================================


       A summary of options outstanding and exercisable at December 31, 2006 is
as follows (in thousands, except per share amounts):



                               Options Outstanding        Options Exercisable
                           --------------------------- -------------------------
                                    Weighted
                                     Average  Weighted
                                    Remaining  Average
          Range of                    Life    Exercise    Range of
      Exercise Prices      Options  (in years) Price   Exercise Prices   Options
--------------------------------------------------------------------------------
     December 31, 2006
         $0.23 - $3.50      1,850      7       $0.62   $0.23 - $3.50       1,850


         Warrants

         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 were to expire on July 16,
         2002 were extended one year to July 16, 2003 and then on more year to
         July 16, 2004. These warrants expired on July 16, 2004.


         A summary of the Company's stock warrant activity and related
         information for the years ended December 31, 2006, 2005 and 2004 is as
         follows (in thousands, except per share amounts):



                                      F-15

<PAGE>


                                                             Weighted Average
                                      Warrants                Exercise Price
                                   ---------------           ----------------
 Outstanding at January 1, 2004              2,659                      $4.28
      Granted                                    -                          -
      Exercised                                  -                          -
      Cancelled                              1,659                       6.25
                                   ---------------           ----------------
 Outstanding at December 31, 2004            1,000                       1.00
      Granted                                    -                          -
      Exercised                                  -                          -
      Cancelled                                  -                          -
                                   ---------------           ----------------
 Outstanding as December 31, 2005            1,000                       1.00
      Granted                                    -                          -
      Exercised                                  -                          -
      Expired                                    -                          -
                                   ---------------           ----------------
 Outstanding as December 31, 2006            1,000                      $1.00
                                   ===============           ================




                                      F-16

<PAGE>


10.     Selected Quarterly Financial Data - (UNAUDITED)

<TABLE>
<CAPTION>

Year Ended December 31, 2006:                          December 31       September 30         June 30            March 31
-----------------------------                          ------------      ------------        ------------    ---------------
<S> <C>                                                      <C>                 <C>              <C>              <C>
Continuing operations:
     Net revenues                                                $ -                $ -              $ -               $ -
     Gross profit                                                $ -                $ -              $ -               $ -
     Loss from continuing operations                       $ (85,430)         $ (86,183)       $(165,027)        $ (66,923)
Discontinued operations:
     Net revenues                                                $ -                $ -              $ -               $ -
     Gross profit                                                $ -                $ -              $ -               $ -
     Income (loss) from discontinued operations            $  74,353                $ -              $ -               $ -
Net Income (loss)                                          $ (11,077)         $ (86,183)       $(165,027)        $ (66,923)

Year Ended December 31, 2005:                          December 31       September 30         June 30         March 31

Continuing operations:
     Net revenues                                                $ -                $ -              $ -               $ -
     Gross profit                                                $ -                $ -              $ -               $ -
     Loss from continuing operations                     $  (150,042)       $  (210,069)      $ (240,102)      $  (217,035)
Discontinued operations:
     Net revenues                                        $ 1,045,645        $ 4,378,898       $4,979,838       $ 5,084,278
     Gross profit                                        $   470,942        $   950,342       $1,157,067       $ 1,345,676
     Income (loss) from discontinued operations          $ 6,005,110        $  (518,452)      $ (486,634)      $  (333,075)
Net Income (loss)                                        $ 5,855,068        $  (728,521)      $ (726,736)      $  (550,110)

Year Ended December 31, 2004:                          December 31       September 30         June 30         March 31

Continuing operations:
     Net revenues                                                $ -                $ -              $ -               $ -
     Gross profit                                                $ -                $ -              $ -               $ -
     Loss from continuing operations                     $  (129,338)       $  (110,177)      $ (124,548)      $  (114,967)
Discontinued operations:
     Net revenues                                        $ 6,337,999        $ 7,043,376       $6,483,836       $ 7,749,854
     Gross profit                                        $ 1,368,575        $ 1,959,491       $1,966,489       $ 1,904,174
     Income (loss) from discontinued operations          $(3,986,084)       $   132,788       $   85,689       $   (30,276)
Net Income (loss)                                        $(4,115,422)       $    22,611       $  (38,859)      $  (145,243)

</TABLE>


                                      F-17