form_10-q1.htm -- Converted by SEC Publisher, created by BCL Technologies Inc., for SEC Filing

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from______to________

Commission File Number: 0-13181

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

(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ]

Indicate by check mark whether the registrant is 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):

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).

The number of shares of common stock, $.001 par value, outstanding as of June 10, 2008 was 3,792,045.

		Page
PART I - FINANCIAL INFORMATION
Item 1.	Financial Statements (Unaudited)
	Balance Sheets	3
	Statements of Operations	4
	Statements of Cash Flows	5
	Notes to Financial Statements	6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	9
Item 3.	Quantitative and Qualitative Disclosures About Market Risks	10
Item 4.	Controls and Procedures	10

PART II - OTHER INFORMATION		11
Item 1.	Legal Proceedings	11
Item 1A.	Risk Factors	11
Item 2	Unregistered Sales of Equity Securities and Use of Proceeds	11
Item 3	Defaults Upon Senior Securities	11
Item 4	Submission of Matters to Vote of Securities Holders	11
Item 5	Other Information	11
Item 6	Exhibits	11
Signatures		12

CAPITAL BEVERAGE CORPORATION

BALANCE SHEETS

ASSETS
		March 31,			December 31,
		2008			2007
		(Unaudited)
CURRENT ASSETS:
Cash	$	2,232		$	188
Restricted cash		569,983			742,977
Other Receivable-Current Portion		-			5,000
TOTAL CURRENT ASSETS		572,215			748,165

OTHER ASSETS		1,929			1,929

	$	574,144		$	750,094

LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)

CURRENT LIABILITIES:
Accounts payable	$	1,134,533		$	1,171,190
Officer loans		4,000			-
Accrued expenses and taxes		-			42,544
TOTAL CURRENT LIABILITIES		1,138,533			1,213,734

STOCKHOLDERS' EQUITY (DEFICIT):
Preferred stock, no shares issued and outstanding		-			-
Common stock, $.001 par value; authorized 20,000,000 shares;
issued and outstanding 3,792,045 shares		3,793			3,793
Additional paid-in capital		5,986,249			5,986,249
Accumulated deficit		(6,554,431	)		(6,453,682	)
TOTAL STOCKHOLDERS' EQUITY (DEFICIT)		(564,389	)		(463,640	)

	$	574,144		$	750,094

		Three Months Ended March 31,
		2008			2007
		(Unaudited)			(Unaudited)

REVENUES	$	-		$	-

COSTS AND EXPENSES:
General and administrative		100,750			113,689
		100,750			113,689

LOSS FROM CONTINUING OPERATIONS		(100,750	)		(113,689	)

NET LOSS	$	(100,750	)	$	(113,689	)

NET LOSS PER SHARE:
Basic and diluted	$	(0.03	)	$	(0.03	)

WEIGHTED AVERAGE NUMBER OF SHARES:
Basic and Diluted		3,792,045			3,792,045

CAPITAL BEVERAGE CORPORATION

STATEMENTS OF CASH FLOWS


		Three Months Ended March 31,
		2008			2007
		(Unaudited)			(Unaudited)

CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$	(100,750	)	$	(113,689	)
Changes in assets and liabilities:
Other assets		-			2,351
Accounts payable		(36,657	)		78,989
Accrued expenses and taxes		(42,543	)		(28,094	)
Other Receivable-Current Portion		5,000			-
Total adjustments		(74,200	)		53,246

NET CASH USED IN OPERATING ACTIVITIES		(174,950	)		(60,443	)

CASH FLOWS FROM FINANCING ACTIVITIES:
Officer loans		4,000
NET CASH PROVIDED BY FINANCING ACTIVITIES		4,000			-

DECREASE IN CASH		(170,950	)		(60,443	)

CASH - BEGINNING OF PERIOD		743,165			803,955

CASH - END OF PERIOD	$	572,215		$	743,512

SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
Cash paid for interest	$	-		$	-
Cash paid for taxes	$	-		$	-



See notes to consolidated financial statements.

The accompanying unaudited financial statements of Capital Beverage Corporation (the "Company") have been prepared in accordance with generally accepted accounting principles for interim financial information. Accordingly, they do not include all the information and notes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments necessary to present fairly the information set forth therein have been included. Operating results for the three months ended March 31, 2008 are not necessarily indicative of the results that may be experienced for the fiscal year ending December 31, 2008.

The accompanying financial statements should be read in conjunction with the Company's Form 10-K/A for the fiscal year ended December 31, 2007, which was filed on May 9, 2008.

Capital Beverage Corporation (the “Company” or “Capital”) was formed in December 1995 to operate as a wholesale distributor of beer and other beverages in New York City. On December 16, 2005, the Company sold substantially all of its assets to Oak Beverages, Inc. 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. In December 2006, the Company dissolved Cap Com.

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 at 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 its liabilities, including personnel termination and related costs, sale transaction expenses and final liquidation costs. In the 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.

The accompanying financial statements have been prepared on a going-concern basis, which presumes that the Company will be able to continue to meet its obligations and realize its assets in the normal course of business.

The Company has not generated revenue since the sale of assets in December 2005. As a result, current operations are not an adequate source of cash to fund future operations. The report of the independent registered public accounting firm for the year ended December 31, 2007 contains an explanatory paragraph regarding the Company’s ability to continue as a going concern. The Company’s ability to continue as a going concern is dependent on its ability to obtain necessary financing to meet obligations and repay its liabilities when they become due or be acquired by an operating company. The Company plans to continue to provide for capital requirements from the cash from the sale of its assets. There are no assurances that the Company will have sufficient funds to pay its obligations as they become due or be acquired by an operating company.

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

Restricted Cash – As per the terms of the asset sale the final portion of cash held in escrow was to be released on June 16, 2007. This release has been delayed pending ongoing litigation between the Company, escrow agent and Oak Beverages, Inc. (see Note 5) 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 basis 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 loss per common share is based on the weighted average number of shares outstanding. Potential common shares includable in the computation of fully diluted per share results are not presented in the financial statements as their effect would be anti-dilutive.

New Accounting Pronouncements – Management does not believe that any other recently issued, but not yet effective, accounting standards, if currently adopted, could have a material effect on the accompanying financial statements.

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.

On June 26, 2007, the Company filed a complaint against Oak Beverages, Inc. ("Oak"), Victoria Beverage, Inc. ("Victoria"), and Dealy & Silberstein, LLP, solely in its capacity as escrow agent, in the U.S. District Court for the Southern District of New York (the "Court"), seeking a declaratory judgment that, under the parties' Asset Purchase Agreement, dated September 15, 2005 and Escrow Agreement, dated December 16, 2005, the Company is not required to indemnify Oak and Victoria for unemployment insurance contributions based on the experience rating account held by Oak and maintained by the State of New York Department of Labor. The Company disputes Oak and Victoria's claim for the additional unemployment taxes on the grounds that the Company is not liable for contributions that were assessed to Oak post-closing (1) as a result of Oak's voluntary decision to employ Company personnel, and (2) as a natural consequence of Oak's increase in assets following its purchase of the Company's assets in 2005. On July 23, 2007, Oak and Victoria filed with the Court an answer, counterclaim, and cross-claim in response to the Company's complaint alleging that the Asset Purchase Agreement was deliberately structured such that any liability would be retained by the Company post-closing and would not be transferred to Oak and that, under the terms of the Asset Purchase Agreement, the Company agreed to indemnify Oak for all damages arising out of the liabilities and obligations the Company agreed to undertake. Further action in the matter is currently pending.

This Quarterly Report on Form 10-Q contains “forward-looking” statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. For this purpose any statements contained herein that are not statements of historical fact may be deemed to be forward-looking statements. Without limiting the foregoing, the words “believes,” “anticipates,” “plans,” “expects” and similar expressions are intended to identify forward-looking statements. These statements involve unknown risks, uncertainties and other factors, which may cause our actual results to differ materially from those implied by the forward looking statements. Among the important factors that could cause actual results to differ materially from those indicated by such forward-looking statements include those risks identified in “Item 7 – Management’s Discussion and Analysis of Financial Condition and Results of Operations” and other risks identified in our Form 10-K for the year ended December 31, 2007 and presented elsewhere by management from time to time. Such forward-looking statements represent management’s current expectations and are inherently uncertain. Investors are warned that actual results may differ from management’s expectations.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

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.

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 remaining assets. There will be no monies left over for distribution, and we may have to reduce or eliminate the severance pay provision.

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.

The Company had no revenue from operations for the three months ended March 31, 2008.

General and administrative expenses for the three months ended March 31, 2008 were $100,750.00, which consisted mostly of legal fees, tax accruals and the salary and expenses to our only remaining employee. General and administrative expenses for the three months ended March 31, 2007 were $113,689.00.

At March 31, 2008 and December 31, 2007, respectively, we had a working capital (deficit) of ($566,317) and ($465,568), respectively.

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.

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 March 31, 2008, 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 II—OTHER INFORMATION

Item 1. Legal Proceedings - There have been no material developments in our legal proceedings from those disclosed in our 2007 Annual Report on Form 10-K.

Item 1A- Risk Factors- - There have been no material changes in our risk factors from those disclosed in our 2007 Annual Report on Form 10-K.

Item 2 – Unregistered Sales of Equity Securities and Use of Proceeds - None

Item 3 - Defaults Upon Senior Securities - None

Item 4 - Submission of Matters to Vote of Securities Holders - None

Item 5 - Other Information – None

Item 6. Exhibits

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Delaware		13-3878747
(State or other jurisdiction of		(I.R.S. Employer)
incorporation or organization)		Identification No.)

120 Rio Vista Drive, Norwood, New Jersey		07648
(Address of principal executive offices)		(Zip Code)

(a)	Exhibits
	31.1	Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes Oxley Act of 2002
	31.2	Certification of Treasurer pursuant to Section 302 of the Sarbanes Oxley Act of 2002
	32.1	Certification of Chief Executive Officer and Treasurer pursuant to Section 906 of the Sarbanes Oxley Act of 2002

Date:	June 9, 2008		CAPITAL BEVERAGE CORPORATION
			(Registrant)



		By:	/s/ Carmine N. Stella

			Carmine N. Stella
			President and Chief Executive Officer
			(Principal Executive Officer)




		By:	/s/ Carol Russell

			Carol Russell
			Secretary and Treasurer (Principal
			Financial Officer and Accounting Officer)