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, 2008.

o 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 o   No x

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

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

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of the Regulation S-K is not contained in this form, and no disclosure will be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. x

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

Large accelerated filer  o                                                              Accelerated filer o

Non-accelerated filer  o                                                                 Smaller reporting company x

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

Yes x  No o

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

The aggregate market value of the voting stock held by non- affiliates of the Registrant, computed by reference to the closing price of such stock as of April 8, 2009, was approximately $132,000.

Number of shares outstanding of the issuer's Common Stock as of April 8, 2009 was 3,792,045.

DOCUMENTS INCORPORATED BY REFERENCE: None

2

Capital Beverage Corporation

2008 Form 10-K Annual Report

TABLE OF CONTENTS

PART I
		Page
ITEM 1.	BUSINESS	4
ITEM 1A.	RISK FACTORS	8
ITEM 2.	PROPERTIES	11
ITEM 3.	LEGAL PROCEEDINGS	11
ITEM 4.	SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS	12
PART II
ITEM 5.	MARKET FOR REGISTRANT'S COMMON	12
ITEM 6.	SELECTED FINANCIAL DATA	14
ITEM 7.	MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS	15
ITEM 7A.	QUANTITATIVE AND QUALITATIVE DISCLOSURES	17
ITEM 8.	FINANCIAL STATEMENTS	17
ITEM 9.	CHANGES IN AND DISAGREEMENT WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE	17
ITEM 9A.	CONTROLS AND PROCEDURES	17
ITEM 9B.	OTHER INFORMATION	18
PART III
ITEM 10.	DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT	19
ITEM 11.	EXECUTIVE COMPENSATION	22
ITEM 12.	SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS	30
ITEM 13.	CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS	31
ITEM 14.	PRINCIPAL ACCOUNTANT FEES AND SERVICES	32
PART IV
ITEM 15.	EXHIBITS AND FINANCIAL STATEMENT SCHEDULES	34
SIGNATURES
CERTIFICATES

3

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

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

PART I

ITEM 1.     BUSINESS

General

Capital Beverage Corporation ("Capital" and the "Company") was incorporated under the laws of the State of Delaware on December 5, 1995. 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.

4

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).

5

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

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

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

As of April 15, 2009, approximately $2,539,163 has been released from Escrow and has been used to pay outstanding liabilities of the Company.   As of the date of this filing there is no money remaining in Escrow.  The Escrow account was closed in January 2009.

6

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 and expenses in connection with the Asset Sale, the Company will only hold equipment not part of the Asset Sale.

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

7

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.

8

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

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 April 15, 2009, approximately $2,539,163 has been released from Escrow and has 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.  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.

9

Risks Related To Our Common Stock

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

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

-  Limited release of the market prices of our securities;

-  Limited news coverage of us;

-  Limited interest by investors in our securities;

-  Volatility of our stock price due to low trading volume;

- Increased difficulty in selling our securities in certain states due to "blue sky" restrictions; and

-  Limited ability to issue additional securities or to secure additional financing.

There is No Assurance That An Active Public Trading Market Will Develop.  There has been an extremely limited public trading market for the Company's Common Stock. There can be no assurances that a public trading market for the Common Stock will develop or that a public trading market, if developed, will be sustained. If for any reason a public trading market does not develop, purchasers of the shares of Common Stock may have difficulty in selling their securities should they desire to do so.

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

10

ITEM 2.           PROPERTIES

Currently, the Company neither rents nor owns any properties.

ITEM 3.           LEGAL PROCEEDINGS

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

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

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

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

11

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, 2008.

PART II

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

The Company's Common Stock commenced trading on The Nasdaq SmallCap Market on the effectiveness of the Company's Initial Public Offering on July 17, 1997 under the symbol "CBEV".  The Common Stock is regularly quoted and traded on the OTC Bulletin Board. The Company’s securities were delisted by The NASDAQ Stock Market on June 19, 2001.

The following table indicates the high and low closing prices for the Company's, Common Stock for the period from January 1, 2007 to December 31, 2008 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.

2007 Fiscal Year		Quoted Price ($)
		High				Low
First Quarter			.32				.10
Second Quarter			.25				.18
Third Quarter			.24				.17
Fourth Quarter			.17				.13

2008 Fiscal Year		Quoted Price ($)
		High				Low
First Quarter			.13				.10
Second Quarter			.13				.10
Third Quarter			.11				.04
Fourth Quarter			.04				.04

On April 8, 2009, the closing price of the Common Stock as reported on the OTC Bulletin Board was $.07.  As of April 8, 2009, there were 165 holders of record of Common Stock.

12

Recent Sales of Unregistered Securities

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

Dividends

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

Repurchases by the Company

During the fourth quarter of 2008, we did not repurchase any shares of our Common Stock on our behalf or for any affiliated purchase.

13

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.

		December 31,
		2008				2007				2006				2005				2004
Consolidated Statement of Operations Data:
Revenues		$	-			$	-			$	-			$	-			$	-
General and administrative expenses		$	587,657			$	474,864			$	312,398			$	817,248			$	387,306
Bad debt reserve		$	-			$	-			$	108,426			$	-			$	-
Non-cash compensation		$	-			$	-			$	-			$	-			$	91,724
Loss from continuing operations		$	(587,657	)		$	(474,864	)		$	(420,824	)		$	(817,248	)		$	(479,030	)
Discontinued operations:
Interest expense, net		$	-			$	-			$	17,261			$	(702,848	)		$	(738,812	)
Gain on sale of distribution rights		$	-			$	-			$	-			$	8,235,907			$	-
Income taxes		$	-			$	-			$	-			$	(85,000	)		$	-
(Loss) gain from discontinued operations		$	-			$	-			$	(74,353	)		$	(2,781,110	)		$	(3,059,071	)
Income (loss)		$	(587,657	)		$	(474,864	)		$	(477,916	)		$	3,849,701			$	(4,276,913	)
Diluted income (loss) from continuing operations per share:		$	(0.15	)		$	(0.13	)		$	(0.11	)		$	(0.22	)		$	(0.13	)
Diluted income (loss) from discontinued operations per share:		$	-			$	-			$	(0.02	)		$	1.23			$	(1.00	)
Diluted income (loss) per share:		$	-			$	-			$	(0.13	)		$	1.02			$	(1.13	)
Diluted weighted-average number of shares outstanding:			3,792,045				3,792,045				3,792,045				3,792,045				3,792,045
Consolidated Balance Sheet Data (at end of period):
Cash and cash equivalents		$	8,326			$	188			$	67,910			$	131,738			$	96,220
Restricted cash		$	55,876			$	742,977			$	736,045			$	2,513,600			$	-
Working capital (deficit)		$	(1,028,614	)		$	(465,568	)		$	7,695			$	(225,549	)		$	(3,247,703	)
Total assets		$	66,521			$	750,094			$	807,485			$	2,765,535			$	4,521,860
Total debt		$	-			$	-			$	-			$	-			$	4,630,999
Total stockholders’ equity (deficit)		$	(1,026,296	)		$	(463,640	)		$	11,225			$	340,435			$	(3,509,266	)

14

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

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

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

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 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 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.

15

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 – December 31, 2008 and 2007

The Company had no revenue from operations for the twelve months ended December 31, 2008 and 2007.

General and administrative expenses for the twelve months ended December 31, 2008 and 2007 was $587,657 and $474,864, respectively, which consisted mostly of legal fees, professional fees, tax accruals and the salary and expenses to our only remaining employee.

At December 31, 2008 and December 31, 2007, respectively, we had working capital deficits of $1,028,614 and $465,568, respectively.

Liquidity and Capital Resources

The report of our auditors on our audited financial statements for the fiscal year ended December 31, 2008 contains a going concern qualification as we have suffered losses for the years ended December 31, 2008 and 2007.  We have minimal assets and have had no operative revenues since the sale of our assets to Oak. We have the cash from the Oak Sale to conduct operations.  As of December 31, 2008 and 2007, we had cash of $64,202 and $743,165, current assets of $64,202 and $748,165 and current liabilities of $1,092,816 and $1,213,733, respectively.

16

ITEM 7A.          QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

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

ITEM 8.             FINANCIAL STATEMENTS

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

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

Not applicable.

ITEM 9A.[T]     CONTROLS AND PROCEDURES

Evaluation of Our Disclosure Controls and Internal Controls

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

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

17

Based upon our assessment and the COSO criteria, management concluded that our internal control over financial reporting was not effective as of December 31, 2008 due to a material weakness.  A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis.

More specifically, the material weakness relates to a lack of sufficient personnel with appropriate knowledge, experience and training in U.S. GAAP resulting in a lack of sufficient analysis and documentation of the application of U.S. GAAP to transactions.

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

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

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

Officers’ Certifications

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

Changes in Internal Control Over Financial Reporting

There have been no changes in our internal control over financial reporting that occurred during the quarter ended December 31, 2008 that have materially affected or are reasonably likely to materially affect our internal control over financial reporting.

ITEM 9B.           OTHER INFORMATION

Not applicable.

18

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	57	President, Chief Executive Officer,
		Chairman of the Board of Directors
Carol Russell	53	Secretary, Treasurer and Director
Joseph M. Luzzi*	61	Director
Michael Matrsciani	53	Director
Daniel Matrisciani(1)	62	Director and Vice President of Operations
Vito Cardinale*	49	Director

 (1) 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.

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.

19

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

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

Daniel Matrisciani – Mr. Matrisciani has been a Director 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.

20

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

The audit committee has reviewed and discussed the audited financial statements included in the Company's Form 10-K for the fiscal year ended December 31, 2008 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 2008 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.

21

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, 2008, 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

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:

· Attract and retain executives capable of leading us to meet our business objectives;

· Adequately compensate our senior executive for achieving important near-term objectives;

· Align the interests of our executive officer and shareholders through the use of equity and other long-term incentives; and

· 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:

· Salary is paid for ongoing performance throughout the year.

· 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.

· 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.

22

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:

· Base pay is paid around the midpoint of the market range, and better performers are  paid slightly higher than the midpoint.

· The bonus amount takes into account corporate performance, divisional performance, and quantifiable individual goals.

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.

23

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.

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.

24

The following table sets forth the compensation paid to the Named Executive Officers for the fiscal years ending December 31, 2007 and 2008.

Summary Compensation Table
			Annual Compensation Awards								Long-Term Compensation
(a)	(b)		(c)				(d)				(e)				(f)
							Other Annual				Restricted				Stock Option
Name and Principal Position	Year		Salary				Compensation				Award				Grants
Carmine N. Stella	2008		$	210,027.96				-0-				-0-				-0-
President, Chief Executive Officer,	2007		$	210,027.96				-0-				-0-				-0-
Chairman of the Board
Anthony Stella	2008			-0-				-0-				-0-				-0-
Vice President of Sales	2007			-0-				-0-				-0-				-0-
and Managing Director
Carol Russell	2008			-0-				-0-				-0-				-0-
Secretary Treasurer	2007			-0-				-0-				-0-				-0-
and Director
Daniel Matrisciani	2008			-0-				-0-				-0-				-0-
Vice President of	2007			-0-				-0-				-0-				-0-
Operations and Director

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.

25

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.

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.

26

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, 2008): Carmine Stella ($482,660.42); Anthony Stella ($39,654); Michael Mastrisciani ($40,067.51); Daniel Mastrisciani ($40,067.50); Monty Mastrisciani ($40,067.50); and Alex Mastrisciani ($35,479.50).  The Company has reimbursed such employees for out-of-pocket expenses incurred by them in connection with the performance of their duties which, as of December 31, 2008, total approximately $20,000.00.  As of December 31, 2008, out-of-pocket expenses of $41,000.00 incurred by such employees have accrued but have not been paid to such employees.

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.

27

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.

28

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

29

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

The following table sets forth as of April 14, 2009, certain information with respect to the beneficial ownership of Common Stock by each person or entity known by the Company to be the beneficial owner of 5% or more of such shares, each officer and director of the Company, and all officers and directors of the Company as a group:

Name and Address of Beneficial Owner (1)	Shares of Common Stock Owned (3)	Percentage (%) of Common Stock (3)
Carmine Stella	712,500	18.8%
Anthony Stella	237,500	6.3%
Carol Russell	0	0%
Joseph Luzzi	0	0%
Alex Matrisciani(2)	237,500	6.3%
Michael Matrisciani(2)	237,500	6.3%
Daniel Matrisiciani(2)	237,500	6.3%
Vito Cardinale	0	0%
Monty Matrisciani(2)	237,500	6.3%
Wachovia Corporation One Wachovia Center Charlotte, NC  28288-0137	264,500	6.98%
Casimir Capital L.P. 100 Broadway, 11th Floor New York, NY 10005	1,000,000(4)	20.9%
All officers and  directors as a group (nine (9) persons)	1,900,000	50%

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

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

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

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

30

The following table presents information as of April 14, 2009 with respect to compensation plans under which equity securities were authorized for issuance by the Company.

Equity Compensation Plan Information

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

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

There were no transactions during the fiscal year ended December 31, 2008, or any currently proposed transactions, to which the Company was or is to be a party, in which the amount involved exceeds $120,000, and in which any director or executive officer, or any security holder who is known by the Company to own of record or beneficially more than 5% of any class of Company’s common stock, or any member of the immediate family of any of the foregoing persons, has or will have a direct or indirect material interest.

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.

31

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.

32

During the fiscal years ended December 31, 2008 and 2007 fees for services provided by Sherb & Co., LLP were as follows (rounded to the nearest $1,000):

Audit Fees

The aggregate fees billed to the Company by Sherb & Co., LLP for the audit of our annual financial statements for the years ended December 31, 2008 and for the review of our quarterly reports on Form 10-Q for the same year totaled $37,000.  The aggregate fees billed to the Company by Sherb & Co., LLP for the audit of our annual financial statements for the year ended December 31, 2007 and for the review of our quarterly reports on Form 10-Q for the same year totaled $37,000.

Audit Related Fees

There was a fee of $1,550 and $875 paid to Sherb & Co., LLP for services rendered in connection with SEC EDGARization filings during the year ended December 31, 2008 and 2007, respectively and $1,500 paid to Sherb & Co., LLP for assistance with an SEC comment letter.  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, 2008 and 2007.

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, 2008 and 2007.

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, 2008 and 2007.

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, 2008 and 2007.

33

PART IV

ITEM 15.             EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(a)(1)  Financial Statements.

Index

Report of Independent Registered Public

Accounting Firm F - 2

Financial Statements

Balance Sheets F - 3

Statements of Operations     F - 4

Statements of Stockholders' Deficit    F - 5

Statements of Cash flows    F - 6

Notes to Financial Statements    F - 7 -12

(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.*

34

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)

35

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.

36

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 15th day of April, 2009.

CAPITAL BEVERAGE CORPORATION

By: /s/ Carmine N. Stella                                                      

      Carmine N. Stella

      President, Chief Executive Officer

      and Chairman of the Board of Directors

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

Signature		Title	Date
/s/ Carmine N. Stella		Chief Executive Officer,	April 15, 2009
Carmine N. Stella		President and Chairman of
		the Board of Directors
/s/ Carol Russell		Secretary, Treasurer	April 15, 2009
Carol Russell		and Director
/s/ Joseph Luzzi		Director	April 15, 2009
Joseph Luzzi
/s/ Michael Matrisciani		Director	April 15, 2009
Michael Matrisciani
/s/ Daniel Matrisciani		Director	April 15, 2009
Daniel Matrisciani
/s/ Vito Cardinale		Director	April 15, 2009
Vito Cardinale

37

CAPITAL BEVERAGE CORPORATION

FINANCIAL STATEMENTS

INDEX

	Page Number
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM	F - 2
FINANCIAL STATEMENTS:
Balance Sheets	F - 3
Statements of Operations	F - 4
Statements of Stockholders' Deficit	F - 5
Statements of Cash Flows	F - 6
Notes to Financial Statements	F - 7 to F - 12

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Board of Directors and Stockholders

Capital Beverage Corporation

We have audited the accompanying balance sheets of Capital Beverage Corporation as of December 31, 2008 and 2007 and the related statements of operations, stockholders' deficit and cash flows for the years ended December 31, 2008 and 2007.  These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Capital Beverage Corporation as of December 31, 2008 and 2007 and the results of their operations and their cash flows for the years ended December 31, 2008 and 2007, in conformity with accounting principles generally accepted in the United States of America.

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern.  The Company has incurred significant losses as more fully described in Note 2.  These issues raise substantial doubt about the Company’s ability to continue as a going concern.  Management’s plans in regard to these matters are also described in Note 2.  The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

/s/ Sherb & Co., LLP

Certified Public Accountants

New York, New York

April 6, 2009

F-2

CAPITAL BEVERAGE CORPORATION

BALANCE SHEETS

ASSETS

		December 31,
		2008				2007
CURRENT ASSETS:
Cash		$	8,326			$	188
Restricted cash			55,876				742,977
Other receivable - current portion			-				5,000
TOTAL CURRENT ASSETS			64,202				748,165
OTHER ASSETS			2,319				1,929
		$	66,521			$	750,094
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES:
Accounts payable		$	1,092,816			$	1,213,733
TOTAL CURRENT LIABILITIES			1,092,816				1,213,733
STOCKHOLDERS' DEFICIT:
Preferred stock, $.01 par value; authorized 1,000,000 shares;			-				-
No shares issued and outstanding
Common stock, $.001 par value; authorized 20,000,000 shares;
issued and outstanding 3,792,045 shares			3,793				3,793
Additional paid-in capital			6,011,249				5,986,249
Accumulated deficit			(7,041,338	)			(6,453,681	)
TOTAL STOCKHOLDERS' DEFICIT			(1,026,296	)			(463,639	)
		$	66,521			$	750,094

See notes to financial statements.

F-3

CAPITAL BEVERAGE CORPORATION

STATEMENTS OF OPERATIONS

		Year Ended December 31,
		2008				2007
REVENUES		$	-			$	-
COSTS AND EXPENSES:
General and administrative			587,657				474,864
			587,657				474,864
NET LOSS		$	(587,657	)		$	(474,864	)
NET LOSS PER SHARE
Basic		$	(0.15	)		$	(0.13	)
Diluted		$	(0.15	)		$	(0.13	)
WEIGHTED AVERAGE NUMBER OF SHARES:
Basic			3,792,045				3,792,045
Diluted			3,792,045				3,792,045

See notes to financial statements.

F-4

CAPITAL BEVERAGE CORPORATION

STATEMENTS OF STOCKHOLDERS' DEFICIT

																		Additional								Total
		Preferred Stock								Common Stock								Paid-In				Accumulated				Stockholders'
		Shares				Amount				Shares				Amount				Capital				Deficit				Deficit
Balance December 31, 2006			-			$	-			$	3,792,045			$	3,793			$	5,986,249			$	(5,978,817	)		$	11,225
Net loss			-				-				-				-				-				(474,864	)			(474,864	)
Balance December 31, 2007			-				-				3,792,045				3,793				5,986,249				(6,453,681	)			(463,639	)
Capital contributed			-				-				-				-				25,000				-				25,000
Net loss			-				-				-				-				-				(587,657	)			(587,657	)
Balance December 31, 2008			-			$	-			$	3,792,045			$	3,793			$	6,011,249			$	(7,041,338	)		$	(1,026,296	)

See notes to financial statements.

F-5

CAPITAL BEVERAGE CORPORATION

STATEMENTS OF CASH FLOWS

		Year Ended December 31,
		2008				2007
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss		$	(587,657	)		$	(474,864	)
Adjustments to reconcile net loss from operations
to net cash used in operating activities:
Changes in assets and liabilities:
Other receivable			4,610				(3,399	)
Accounts payable and accrued expenses			(120,915	)			417,472
Total adjustments			(116,306	)			414,073
NET CASH USED IN OPERATING ACTIVITIES			(703,963	)			(60,791	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Capital contributed			25,000				-
NET CASH PROVIDED BY FINANCING ACTIVITIES			25,000				-
NET DECREASE IN CASH			(678,963	)			(60,791	)
CASH - BEGINNING OF YEAR			743,165				803,956
CASH - END OF YEAR		$	64,202			$	743,165
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
Cash paid for interest		$	-			$	-
Cash paid for taxes		$	-			$	-

See notes to financial statements.

F-6

CAPITAL BEVERAGE CORPORATION

NOTES TO FINANCIAL STATEMENTS

YEARS ENDED DECEMBER 31, 2008 AND 2007

1. ORGANIZATION AND DESCRIPTION OF BUSINESS

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

2. GOING CONCERN

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

The Company has not generated revenue since the sale of assets in December 2005. As a result, current operations are not an adequate source of cash to fund future operations. The report of the independent registered public accounting firm for the year ended December 31, 2008 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.

F-7

3. SIGNIFICANT ACCOUNTING POLICIES

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

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

Income Taxes - The Company follows 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.

4. 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 $250,000.  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.

F-8

5. LITIGATION

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

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

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

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

6.      INCOME TAXES

At December 31, 2008 the Company had a net operating loss carryover of $1,745,000 available as offsets against future taxable income, if any, which expire at various dates through 2028.  The Company has a deferred tax asset of $698,000 arising from net operating loss deductions and an alternative minimum tax credit and has recorded a valuation allowance for the full amount of such deferred tax asset.

F-9

The following is a reconciliation between the expected income tax expense (benefit), assuming a statutory Federal tax rate of 35%, and the actual income tax expense (benefit):

		Year Ended December 31,
		2008				2007
Expected income tax (benefit)		$	(205,000	)		$	(166,000	)
State tax expense (benefit), net of Federal effect			(29,000	)			(24,000	)
Utilization of net operating loss carryforward			-				-
Increase in valuation allowance			234,000				190,000
		$	-			$	-

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

		December 31,
		2008				2007
Net operating loss carryforward		$	698,000			$	463,000
Alternative minimum tax credit			25,000				25,000
Valuation allowance			(723,000	)			(488,000	)
Net deferred tax asset		$	-			$	-

7. STOCKHOLDERS’ DEFICIT, STOCK OPTIONS AND WARRANTS

During the year ended December 31, 2008 and in the first quarter of 2009, an unrelated third party advanced the Company $25,000 and $14,000, respectively in order for the Company to pay professional expenses.  The Company does not have to repay the unrelated third party for monies received and therefore credited additional paid-capital for receiving said funds.

Stock Options

The Company’s outstanding stock options were issued in 2003 pursuant to the Company’s 2003 Incentive Stock Option Plan (2003 Plan) and in 1999 and 2000 pursuant to the Company’s 1996 Incentive Stock Option Plan (1996 Plan).

Under the 2003 Plan, the Company issued 1,500,000 options exercisable at $.23 per share which expire in December 2013.

F-10

Under the 1996 Plan, the Company issued 175,000 options in December 1999 exercisable at $3.55 per share which expire in 2009 and another 175,000 options in December 2000 exercisable at $.05 per share which expire in 2010.

A summary of the Company’s stock option activity and related information for the years ended December 31, 2008, 2007 and 2006 is as follows (in thousands, except per share amounts):

		Shares				Weighted Average Exercise Price
Outstanding at January 1, 2006			1,850				$0.53
Granted			-				-
Exercised			-				-
Cancelled			-				-
Outstanding as December 31, 2008			1,850				$0.53

A summary of options outstanding and exercisable at December 31, 2008 is as follows (in thousands, except per share amounts):

		Options Outstanding												Options Exercisable
Range of Exercise Prices		Options				Weighted Average Remaining Life (in years)				Weighted Average Exercise Price				Range of Exercise Prices				Options
December 31, 2008
$0.23  -  $3.50			1,850				5				$0.53				$0.05 - $3.50				1,850

Warrants

In October 2003, the Company issued 1,000,000 warrants to Casimir Capital L.P. in accordance with the terms of a consulting agreement.  The warrants expire in October 2013.

A summary of the Company’s stock warrant activity and related information for the years ended December 31, 2008, 2007 and 2006 is as follows (in thousands, except per share amounts):

F-11

		Warrants				Weighted Average Exercise Price
Outstanding at December 31, 2005			1,000				$1.00
Granted			-				-
Exercised			-				-
Cancelled			-				-
Outstanding as December 31, 2008			1,000				$1.00

F-12