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UNITED STATESSECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D. C. 20549





FORM 10-QSB

QUARTERLY REPORT UNDER SECTION 13 or 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
for the quarterly period Ended June 30, 2005

Commission File No. 000-50995




(Name of small business issuer in its charter)

Cape Coastal Trading Corporation

122 Ocean Park Blvd., Suite 307, Santa Monica, CA 90405




|                         |  |                                             
|------------------------ |  | --------------------------------------------
|Incorporated in New York |  | I.R.S. EmployerIdentification No. 52-2372260

Check whether the issuer (1)
filed all reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the past 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 [  ]

At July 28, 2005, there were
2,300,375 shares of the Issuers common stock outstanding.

Transition Small Business Disclosure Format (Check One).  Yes [ ]  No [X]

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TABLE OF CONTENTS

PART I

FINANCIAL INFORMATION

|       | 
|------ | 
|ITEM 1 | 
|ITEM 2 | 
|ITEM 3 | 

PART II

OTHER INFORMATION

|       | 
|------ | 
|ITEM 5 | 
|ITEM 6 | 

EXHIBITS

|           | 
|---------- | 
|EXHIBIT 31 | 
|EXHIBIT 32 | 

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SPECIAL NOTE OF CAUTION
REGARDING FORWARD-LOOKING STATEMENTS

This section and other parts of this
Form 10-QSB contain forward-looking statements that are, by their nature, subject to risks
and uncertainties. These forward-looking statements include, without limitation,
statements relating to our companys operations, economic performance, financial
condition, growth and acquisition strategies, investments, and operating plans. Any such
statements that are not statements of historical fact may be deemed to be forward-looking
statements. Without limiting the generality of the foregoing, words such as
believe, expect, intend, anticipate,
may, should, expects, plans,
anticipates, estimates, predicts,
potential, continue, projects or the negative or other
variations or comparable terminology or derivatives thereof denote forward-looking
statements. These statements are only predictions and by their nature involve substantial
risks and uncertainties, many of which are beyond our control. Thus, actual results may
differ materially from those expressed in or implied by such forward-looking statements.
Factors that could cause actual results to differ materially include, but are not limited
to, those discussed in Item. 6 of the Companys Form 10-KSB filed on February 8,
2005, Managements Discussion and Analysis or Plan of Operation, under the heading
Risk Factors.  Although we believe that the expectations reflected
in the forward-looking statements are reasonable, we cannot guarantee future results,
levels of activity, performance or achievements. We are under no obligation to publicly
update any of the forward-looking statements to reflect events or circumstances after the
date hereof or to reflect the occurrence of unanticipated events.

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PART I

FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS

CAPE COASTAL TRADING CORP.
(A DEVELOPMENT STAGE COMPANY) BALANCE SHEETJUNE 30, 2005(UNAUDITED)
ASSETS

|                     | 
|-------------------- | 
|CURRENT ASSETS       | 
|Inventory            | 
|                     | 
|Total current assets | 
|FIXED ASSETS, NET    | 
|                     | 
|TOTAL ASSETS         | 
|                     | 
|                     | 

LIABILITIES AND STOCKHOLDERS DEFICIT

|                                                 | 
|------------------------------------------------ | 
|CURRENT LIABILITIES                              | 
|Accounts payable                                 | 
|Payable to stockholders                          | 
|                                                 | 
|TOTAL CURRENT LIABILITIES                        | 
|                                                 | 
|STOCKHOLDERS' DEFICIT                            | 
|Common stock: $.001 par value; 50,000,000 shares | 
|authorized, 2,300,375 issued and outstanding     | 
|Paid-in capital                                  | 
|Retained deficit                                 | 
|                                                 | 
|TOTAL STOCKHOLDERS DEFICIT                      | 
|                                                 | 
|TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT      | 
|                                                 | 
|                                                 | 

The
accompanying notes are an integral part of these financial statements.

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CAPE COASTAL TRADING CORP.
(A DEVELOPMENT STAGE COMPANY)STATEMENTS OF OPERATIONS FOR THE THREE AND SIX MONTHS PERIODS
 ENDED JUNE 30, 2005 AND 2004
AND FOR THE PERIOD FROM INCEPTION (AUGUST 16, 2002) TO JUNE 30, 2005(UNAUDITED)

|                                          |  |           |   |           | CUMULATIVE
|----------------------------------------- |  | --------- | - | --------- | ----------
|
|
|
|
|REVENUE                                   |  |           |   |           |           
|Sales                                     |  | $  --     |   | $  --     |           
|Less:  Cost of goods sold                 |  | --        |   | --        |           
|                                          |  |           |   |           |           
|Net sales revenue                         |  | --        |   | --        |           
|                                          |  |           |   |           |           
|GENERAL AND ADMINISTRATIVE EXPENSES       | 
|General and administrative                |  | 278       |   | 1,473     |           
|Consulting                                |  | --        |   | --        |           
|Depreciation                              |  | 208       |   | --        |           
|Franchise taxes                           |  | --        |   | --        |           
|Professional Fees                         |  | 25,851    |   | 1,450     |           
|                                          |  |           |   |           |           
|Total general and administrative expenses |  | 26,337    |   | 2,923     |           
|                                          |  |           |   |           |           
|Loss from operations and before taxes     |  | $(26,337  | ) | $(2,923   | )         
|                                          |  |           |   |           |           
|PROVISION FOR INCOME TAXES                |  | --        |   | --        |           
|                                          |  |           |   |           |           
|Net loss                                  |  | $(26,337  | ) | $(2,923   | )         
|                                          |  |           |   |           |           
|                                          |  |           |   |           |           
|LOSS PER SHARE                            | 
|Basic and diluted                         |  | $(0.01)   |   | $(0.00)   |           
|                                          |  |           |   |           |           
|WEIGHTED AVERAGE SHARES OUTSTANDING       | 
|Basic and diluted                         |  | 2,300,375 |   | 2,283,765 |           

The
accompanying notes are an integral part of these financial statements

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CAPE COASTAL TRADING CORP.(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CASH FLOWS FOR THE SIX MONTHS ENDED JUNE 30, 2005 AND 2004 AND FOR THE PERIOD FROM INCEPTION
 (AUGUST 16, 2002) TO JUNE 30, 2005(UNAUDITED)



|                                              | 2005 | 2004         | CUMULATIVEFROM INCEPTIONTOJUNE 31,2005
|--------------------------------------------- | ---- | ------------ | --------------------------------------
|CASH FLOWS FROM OPERATING ACTIVITIES          |      |              |                                       
|Net loss                                      |      | $    (55,706 | )                                     
|Adjustments to reconcile net loss to net cash |     
|used in operating activities:                 |     
|Depreciation and Amortization                 |      | 416          |                                       
|Stock issued for consulting                   |      | --           |                                       
|Change in inventory                           |      | --           |                                       
|Change in accounts payable                    |      | 659          |                                       
|                                              |      |              |                                       
|Net cash used in operating activities         |      | (54,631      | )                                     
|                                              |      |              |                                       
|CASH FLOWS FROM INVESTING ACTIVITIES          |     
|Purchase of fixed assets                      |      | --           |                                       
|                                              |      |              |                                       
|Net cash used in investing activities         |      | --           |                                       
|                                              |      |              |                                       
|CASH FLOWS FROM FINANCING ACTIVITIES          |     
|Proceeds from issuance of common stock        |      | --           |                                       
|Proceeds from capital contributions           |      | --           |                                       
|Change in payable to shareholder              |      | 54,512       |                                       
|                                              |      |              |                                       
|Net cash provided by financing activities     |      | 54,512       |                                       
|                                              |      |              |                                       
|INCREASE (DECREASE) IN CASH                   |      | (119         | )                                     
|CASH AT BEGINNING OF PERIOD                   |      | 119          |                                       
|                                              |      |              |                                       
|CASH AT END OF PERIOD                         |      | $            |                                       
|                                              |      |              |                                       
|                                              |      |              |                                       
|SUPPLEMENTAL INFORMATION                      |     
|Interest paid                                 |      | $        --  |                                       
|Income taxes paid                             |      | --           |                                       
|Stock issued for accounts payable             |      | --           |                                       

The
accompanying notes are an integral part of these financial statements.

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CAPE COASTAL TRADING CORP.

NOTES TO THE FINANCIAL STATEMENTS

FOR THE THREE MONTHS AND SIX MONTHS ENDEDJUNE 30, 2005 AND 2004



|1. | ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
|-- | -----------------------------------------------------------

Nature of Operations and Organization

Cape Coastal Trading Corp. (The Company) is a development stage company that was incorporated in New York on August 16, 2002. Prior to January 13, 2005, the Company was focused on importing artworks and crafts from Ghana, Africa to sell to its vendors and customers in the U.S.  From and after January 13, 2005, the Company no longer operates said business and the Companys business plan now consists of exploring potential targets for a business combination with the Company through a purchase of assets, share purchase or exchange, merger or similar type of transaction. The Company does not have any specific plans or proposals at this time which relate to or would result in: (a) the acquisition by any person of additional securities of the Company; (b) an extraordinary corporate transaction, such as a merger, reorganization or liquidation, involving the Company or any of its subsidiaries; (c) a
sale or transfer of a material amount of assets of the Company or of any of its subsidiaries; (d) any change in the present board of directors or management of the Company, including any plans or proposals to change the number or term of directors or to fill any existing vacancies on the board; (e) any material change in the present capitalization or dividend policy of the Company; (f) any other material change in the Company's business or corporate structure; (g) changes in the Company's charter, bylaws or instruments corresponding thereto or other actions which may impede the acquisition of control of the issuer by any other person; (h) causing a class of securities of the Company to be delisted from a national securities exchange or to cease to be authorized to be quoted in an inter-dealer quotation system of a registered national securities association; (i) a class of equity securities of the Company becoming eligible for termination of registration pursuant to Section 12(g)(4) of
the Securities Act; or (j) any similar action to those enumerated above.

Basis of Presentation

The accompanying unaudited financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and with the instructions to Form 10-QSB and Item 310(b) of Regulation S-B. They do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements. In the opinion of management, all adjustments, consisting only of normal recurring adjustments, considered necessary for a fair presentation, have been included in the accompanying unaudited financial statements. Operating results for the periods presented are not necessarily indicative of the results that may be expected for the full year.  The accompanying financial statements for prior years contain certain reclassifications to conform to current year presentation.

These financial statements should be read in conjunction with the financial statements and footnotes of the Company on Form 10-KSB for the fiscal year ended December 31, 2004.

|2. | GOING CONCERN
|-- | -------------

Since inception, the Company has been considered a development stage company and has generated minimal operating revenues. There is substantial doubt that the Company will generate sufficient revenues during 2005 to meet its operating cash requirements. Accordingly, the Companys ability to continue operations through 2005 depends on its success in obtaining additional capital in an amount sufficient to meet its cash needs. This raises substantial doubt about its ability to continue as a going concern. The
financial statements do not include any adjustments that might result from this uncertainty.  At this time, the Company is dependent upon advances from its principal shareholders to satisfy all of its financial requirements.  No shareholder has made any commitment to provide such financing.







ITEM 2.MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

PLAN OF OPERATION

Overview

The Company is a development stage company and has generated very little revenue since its inception, August 16, 2002.  We are a shell company that has no specific business plan or purpose other than to engage in a merger or acquisition.  We will attempt to locate and negotiate with an operating business entity for the combination of that target with us.  The combination will most likely take for form of a merger, stock-for-stock exchange or stock-for-assets exchange.  In most instances, the target will want to structure the business combination to be within the definition of a tax-free reorganization under Section 351 or 368 of the Internal Revenue Code of 1986, as amended.

During the period from inception through January 13, 2005, the Company was focused on importing artworks and crafts from Ghana, Africa to sell to customers in the United States.  From and after January 13, 2005, the Company no longer operates said business and the Companys business plan now consists of exploring potential targets for a business combination with the Company through a purchase of assets, share purchase or exchange, merger or similar type of transaction. The Company does not have any specific plans or proposals at this time which relate to or would result in: (a) the acquisition by any person of additional securities of the Company; (b) an extraordinary corporate transaction, such as a merger, reorganization or liquidation, involving the Company or any of its subsidiaries; (c) a sale or transfer of a material amount of assets of the Company or of any of its subsidiaries; (d) any change in
the present board of directors or management of the Company, including any plans or proposals to change the number or term of directors or to fill any existing vacancies on the board; (e) any material change in the present capitalization or dividend policy of the Company; (f) any other material change in the Company's business or corporate structure; (g) changes in the Company's charter, bylaws or instruments corresponding thereto or other actions which may impede the acquisition of control of the issuer by any other person; (h) causing a class of securities of the Company to be delisted from a national securities exchange or to cease to be authorized to be quoted in an inter-dealer quotation system of a registered national securities association; (i) a class of equity securities of the Company becoming eligible for termination of registration pursuant to Section 12(g)(4) of the Securities Act; or (j) any similar action to those enumerated above.

RESULTS OF OPERATIONS

THREE MONTHS ENDED JUNE 30, 2005 COMPARED TO THREE MONTHS ENDED JUNE 30, 2004

The Company did not generate any revenues from sales for the three months ended June 30, 2005, or the three months ended June 30, 2004.

Expenses for the three months ended June 30, 2005 were $26,337, comprising general and administrative expenses (G&A) of $278, professional fees of $25,851 and depreciation expense of $208 compared to $2,923 for the three months ended June 30, 2004, comprising G&A of $1,473 and professional fees of $1,450. The increase in professional fees was related to the Companys efforts to identify a merger partner.

Basic and diluted loss per share was $0.01 for the three months ended June 30, 2005 compared to $0.00 for the three months ended and June 30, 2004.

SIX MONTHS ENDED JUNE 30, 2005 COMPARED TO SIX MONTHS ENDED JUNE 30, 2004

The Company did not generate any revenues from sales for the six months ended June 30, 2005, or the six months ended June 30, 2004.

Expenses for the six months ended June 30, 2005 were $55,706, comprising general and administrative expenses (G&A) of $2,057, professional fees of $53,233 and depreciation expense of $416 compared to $6,017 for the six months ended June 30, 2004, comprising G&A of $3,167 and professional fees of $2,850. The increase in professional fees was related to the Companys efforts to identify a merger partner and the audit for the period ended December 31, 2004 and transaction-related professional fees and expenses.

Basic and diluted loss per share was $0.02 for the six months ended June 30, 2005 compared to $0.00 for the six months ended and June 30, 2004.

LIQUIDITY AND CAPITAL RESOURCES

At June 30, 2005, the Company had total current assets of $545.  At June 30, 2005, total current liabilities were $70,202, which consisted of accounts payable and loans from shareholders.  At June 30, 2005, the Company had negative working capital of $69,657.  As of June 30, 2005, we had an accumulated deficit of $86,165.

Net cash used in operating activities was $54,631 during the six months ended June 30, 2005, consisting of net operating loss of $55,706, an increase in accounts payable of $659 and a depreciation expense of $416.

The Company did not have any cash flows from investing activities during the six months ended June 30, 2005.

Net cash provided by financing activities was $54,512 for the six months ended June 30, 2005, which consisted entirely of additional loans by shareholders.

It is imperative that the Company raise sufficient capital to satisfy its cash requirements until it can complete a business combination with a target company which may result in the Company becoming a going concern.  There is no guarantee that the Company will be able to complete such a transaction within the next 12 months, if at all or that such a transaction will result in the Company becoming a going concern.  In the meantime, the Company is dependent upon advances from its principal shareholders to satisfy all of its financial requirements.  No shareholder has made any commitment to provide such financing.  There can be no assurance that the Company will be able to raise any additional financing, or that financing opportunities, if any, which it may encounter will be on terms favorable to the Company.  During the period ended June 30, 2005 and for future periods, the Company will, at a minimum, incur
expenses related to compliance with applicable regulatory and financial reporting requirements, which will include but not be limited to professional fees and financial printing fees.  The Company will also incur costs in connection with the review, analysis and completion of any potential transactions.  The Company does not expect significant revenue or cash flows from operations until a potential transaction is completed, if at all.

There is no assurance whatsoever that we will be able at need to raise necessary funds from outside sources.  Such a lack of funds could result in severe consequences to us, including among others:

|1. | failure to make timely filings with the SEC as required by the Exchange Act, which also probably would result in suspension of trading or quotation in our stock and could result in fines and penalties to us under the Exchange Act
|-- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|2. | curtailing or eliminating our ability to locate and perform suitable investigations of potential acquisitions; or                                                                                                                    
|3. | inability to complete a desirable acquisition due to lack of funds to pay legal and accounting fees and acquisition-related expenses.                                                                                                



Off-Balance Sheet Arrangements.



We do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in our financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors.



Critical Accounting Policies



The Company prepared the financial statements in accordance with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires the use of estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amount of revenues and expenses during the reporting period. Management periodically evaluates the estimates and judgments made. Management bases its estimates and judgments on historical experience and on various factors that are believed to be reasonable under the circumstances. Actual results may differ from these estimates as a result of different assumptions or conditions.

|ITEM3 | CONTROLS AND PROCEDURES.
|----- | ------------------------

Evaluation of Disclosure Controls and Procedures



Our management (consisting solely of our President) conducted an evaluation of our "disclosure controls and procedures" (as defined in the General Rules and Regulations under the Securities Exchange Act of 1934 at Rules 13a-15 and 15d-15) within the 90-day period prior to the filing of this Form 10-QSB. Disclosure controls and procedures that are designed with the objective of ensuring that information required to be disclosed in our reports filed under the Securities Exchange Act of 1934, such as this Form 10-QSB, is recorded, processed, summarized and reported within the time period specified by the Securities and Exchange Commissions guidelines.  Based on management's evaluation, it was concluded that as of June 30, 2005 and as of the date that the evaluation of our disclosure controls and procedures was completed, our disclosure controls and procedures are effective to ensure that all material
information required to be filed in this Quarterly Report on Form 10-QSB has been made known to him in a timely fashion.



There have been no changes (including corrective actions with regard to significant deficiencies or material weaknesses) in our internal control over financial reporting identified in connection with the evaluation performed that occurred during the fiscal quarter covered
by this report that has materially affected, or is reasonably likely to materially affect, our internal
control over financial reporting.

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PART II



OTHER INFORMATION

ITEM 5.OTHER INFORMATION

|1. | Extension of Stock Purchase Agreement.
|-- | --------------------------------------

On January 13, 2005, the Company entered into an Asset Purchase Agreement (the Asset Purchase Agreement) with Kwajo Sarfoh, the Companys then President and Treasurer and a member of the Companys board of directors. Pursuant to the Asset Purchase Agreement, the Company will sell to Mr. Sarfoh, on an AS IS WHERE IS basis all of the Companys interest in the Companys name Cape Coastal Trading Corporation, its Website (www.ghanacrafts.com), and all of the other agreements, contracts, leases, licenses and other arrangements and other tangible and intangible property of the
Company (the Purchased Assets) to the extent that the same relate to the business (the Business) of importing artworks and crafts from Ghana, Africa to sell to vendors and customers in the U.S.

The terms of the Agreement require Mr. Sarfoh to assume all of the existing and future liabilities and obligations of the Business. The purchase price for the Purchased Assets will be paid at the closing of the transactions contemplated by the Asset Purchase Agreement (the APA Closing) by Mr. Sarfohs delivery to the Company of a release of all amounts owed by the Company to Mr. Sarfoh, including any shareholder loans by Mr. Sarfoh to the Company. No fairness opinion was obtained in connection with the transactions contemplated by the Asset Purchase Agreement. The then board of directors, consisting of Kwajo Sarfoh and Trae ONeil High, approved this transaction and indicated that such transaction was in the best interests of the Company and its stockholders. The Asset Purchase Agreement was filed as Exhibit 10.3 the Companys Form 8-K filed on January 14, 2005.

The APA Closing was originally to take place on the earlier of (a) the soonest practicable date following the date that the Company acquires or commences an operating business, (b) the last day of the sixth month following the date that the Asset Purchase Agreement was entered into, or (c) such other date as the parties may mutually agree. If the APA Closing occurs under clause (b) above then the Company would have the right to continue to use the name Cape Coastal Trading Corporation for an additional six months following such APA Closing.

On July 20, 2005, the APA was amended to extend the latest date for closing from July 31, 2005 to December 31, 2005.



ITEM 6.EXHIBITS

31*  Certification pursuant to Rule 13a-14(a) or 15d-14(a) under the Securities Exchange Act of 1934, as amended.

32*  Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

*Filed herein











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 authorized.

| |  | CAPE COASTAL TRADING CORPORATION

/S/ Geoffrey AlisonGeoffrey Alison, Chief Executive Officer and
Principal Financial OfficerDate: August 12, 2005
| |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------