SECURITIES 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, 2004

Commission File Number 333-105393

CAPE COASTAL TRADING CORPORATION

(Name of small business issuer in its charter)

New York                                          
  52-23722

> (State of organization)             
>     (I.R.S. Employer Identification Number)

301 West 53, 6C, New York, NY 10019

(Address of principal executive offices)

Registrants
 telephone number, including area code: 646-215-3583

Securities
 registered pursuant to Section 12(b) of the Securities Exchange Act of 1934:

None

Securities
 registered pursuant to Section 12(g) of the Securities Exchange Act of 1934:

None

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 periods that the registrant was required to file such reports), and (2) has been
 subject to such filing requirements for the past 90 days.

As of August 23, 2004, there were 2,300,375 shares
 of the Registrant's common stock outstanding.



TABLE OF CONTENTS

PART
 I

FINANCIAL INFORMATION

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

PART
 II

OTHER INFORMATION

|       | 
|------ | 
|ITEM 1 | 
|ITEM 2 | 
|ITEM 3 | 
|ITEM 4 | 
|ITEM 5 | 
|ITEM 6 | 

PART I

ITEM 1.  FINANCIAL
 STATEMENTS



CAPE COASTAL TRADING CORP.(A DEVELOPMENT STAGE
 COMPANY) BALANCE SHEETJUNE 30, 2004(UNAUDITED)ASSETS

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







LIABILITIES AND STOCKHOLDERS' DEFICIT

|                                          | 
|----------------------------------------- | 
|CURRENT LIABILITIES                       | 
|Accounts payable                          | 
|Payable to shareholder                    | 
|                                          | 
|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 accumulated in the       | 
|development stage                         | 
|                                          | 
|Total stockholders' deficit               | 
|                                          | 
|TOTAL LIABILITIES AND STOCKHOLDERS'       | 
|DEFICIT                                   | 



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



CAPE COASTAL TRADING CORP. (A DEVELOPMENT STAGE
 COMPANY)STATEMENTS OF OPERATIONSFOR
 THE THREE MONTHS ENDED JUNE 30, 2004 AND 2003

(UNAUDITED)

|                                      | 2004 | 2003 |  
|------------------------------------- | ---- | ---- | -
|REVENUE                               |      |      | $
|                                      |      |      |  
|COST OF GOODS SOLD                    |      |      |  
|                                      |      |      |  
|GROSS PROFIT                          |      |      |  
|                                      |      |      |  
|EXPENSES                              |      |     
|General and administrative            |      |      |  
|                                     
|Professional fees                     |      |      |  
|                                      |      |      |  
|Total operating costs and expenses    |      |      |  
|                                      |      |      |  
|OTHER EXPENSE                         |      |     
|State and local taxes                 |      |      |  
|                                      |      |      |  
|Loss from operations and before taxes |      |      |  
|                                      |      |      |  
|PROVISION FOR INCOME TAXES            |      |      |  
|                                      |      |      |  
|Net loss                              |      |      | $
|                                      |      |      |  
|                                      |      |      |  
|                                      |      |     
|LOSS PER SHAREBasic and diluted       |      | $    |  
|                                      |      |      |  
|                                     
|WEIGHTED AVERAGE SHARES               |      |     
|OUTSTANDING                           |      |     
|Basic and diluted                     |      |      |  
|                                     



























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





CAPE COASTAL TRADING CORP. (A DEVELOPMENT STAGE
 COMPANY)STATEMENTS OF OPERATIONSFOR
 THE PERIODS ENDED JUNE 30, 2004 AND 2003AND FOR THE PERIOD FROM INCEPTION (AUGUST 16, 2002)
 TO JUNE 30, 2004

(UNAUDITED)

|                                      | 2004 | 2003 | CUMULATIVEFROMINCEPTION TOJUNE 30,2004
|------------------------------------- | ---- | ---- | --------------------------------------
|REVENUE                               |      |      | $                                     
|                                      |      |      |                                       
|COST OF GOODS SOLD                    |      |      |                                       
|                                      |      |      |                                       
|GROSS PROFIT                          |      |      |                                       
|                                      |      |      |                                       
|EXPENSES                              |      |     
|General and administrative            |      |      |                                       
|                                     
|Consulting fees                       |      |      |                                       
|Professional fees                     |      |      |                                       
|                                      |      |      |                                       
|Total operating costs and expenses    |      |      |                                       
|                                      |      |      |                                       
|OTHER EXPENSE                         |      |     
|State and local taxes                 |      |      |                                       
|                                      |      |      |                                       
|Loss from operations and before taxes |      |      |                                       
|                                      |      |      |                                       
|PROVISION FOR INCOME TAXES            |      |      |                                       
|                                      |      |      |                                       
|Net loss                              |      |      | $                                     
|                                      |      |      |                                       
|                                      |      |      |                                       
|                                      |      |     
|LOSS PER SHAREBasic and diluted       |      | $    |                                       
|                                      |      |      |                                       
|                                     
|WEIGHTED AVERAGE SHARES               |      |     
|OUTSTANDING                           |      |     
|Basic and diluted                     |      |      |                                       
|                                     









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



CAPE COASTAL TRADING CORP. (A DEVELOPMENT STAGE
 COMPANY)STATEMENTS OF CASH FLOWS FOR THE PERIODS ENDEDJUNE 30, 2004 AND 2003 AND
 FOR THE PERIOD FROM INCEPTION(AUGUST 16, 2002) TO JUNE 30, 2004

(UNAUDITED)

|                                          | 2004 | 2003 | CUMULATIVEFROMINCEPTION TOJUNE 30,2004
|----------------------------------------- | ---- | ---- | --------------------------------------
|CASH FLOWS FROM OPERATING ACTIVITIES      |      |      |                                       
|Net Loss                                  |      |      | $                                     
|Adjustments to reconcile net loss to      |      |     
|net cash used in operating activities:    |      |     
|Depreciation and amortization             |      |      |                                       
|Stock Issued for consulting               |      |      |                                       
|Changes in assets and liabilities:        |      |     
|Inventories                               |      |      |                                       
|Accounts payable                          |      |      |                                       
|Payable to shareholder                    |      |      |                                       
|                                          |      |      |                                       
|Net cash used in operating activities     |      |      |                                       
|                                          |      |      |                                       
|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       |      |      |                                       
|                                          |      |      |                                       
|Net cash provided by financing activities |      |      |                                       
|                                          |      |      |                                       
|INCREASE IN CASH                          |      |      |                                       
|CASH AT BEGINNING OF PERIOD               |      |      |                                       
|                                          |      |      |                                       
|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 statement

CAPE COASTAL TRADING CORP.NOTES TO THE FINANCIAL
 STATEMENTSFOR THE PERIODS ENDED JUNE 30, 2004 AND 2003 AND FOR THE PERIOD FROM INCEPTION
 (AUGUST 16, 2002) TO JUNE 30, 2004



1.     ORGANIZATION AND SUMMARY
 OF SIGNIFICANT ACCOUNTING POLICIES

Nature of Operations and Organization

Cape Coastal Trading Corp. (The Company or "CCTC)
 is a development stage company that was incorporated in New York on August 16, 2002. The Company is
 focused on importing artworks and crafts from Ghana, Africa to sell to its vendors and customers in
 the U.S. The Company is engaged in the planning, selection, and procurement of these products.

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.

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, 2003.

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 2004 to meet its operating cash requirements. Accordingly,
 the Companys ability to continue operations through 2004 depends on its success in obtaining equity
 financing in an amount sufficient to support its operations. 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. The Company intends to raise additional capital through private
 or public securities offerings.

3.     RELATED PARTY TRANSACTION

At June 30, 2004 the Company owed $3,411 to a major shareholder for purchases he made and
 expenses he paid on behalf of the Company.

4.     SUBSEQUENT EVENTS

In August 2004, the Company received an aggregate of
 $5,450 in advances consisting of $4,548 from a director of the Company and $902 from a person owning
 more than 10% of the Company's common stock.Also in August 2004, the Company entered into a
 Purchase and Sale Agreement for the purchase of 500 bookbags in September, October and November for
 an aggregate purchase price of $6,000, and a Consulting Agreement pursuant to which the consultant will
 be responsible for accepting the bookbags purchased and the delivery of the bookbags to the Companys
 current United States address.

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

When used in this Form 10-QSB, the following discussion
 contains certain statements that may constitute forward-looking statements within the meaning of the
 Private Securities Litigation Reform Act of 1995. Any statements that refer to expectations, projections
 or other characterization of future events or circumstances, and especially those which include variations
 of the words "believes," "intends," "estimates," "anticipates," "expects," "plans," or similar words
 or variations thereof, are likely to be forward-looking statements, and as such, are likely to concern
 matters involving risk, uncertainty, unpredictability and other factors that could materially and adversely
 affect the outcome or results indicated by or inferred from the statements themselves. Therefore, the
 reader is advised that the following discussion should be considered in light of the discussion of risks
 and other factors contained in this Form 10QSB and in the Company's other filings with the Securities
 and Exchange Commission, and that no statements contained in the following discussion or in this Form
 10QSB should be construed as a guarantee or assurance of future performance or future results.

PLAN OF OPERATION

CCTC is in its developmental stages and has generated
 very little revenue since its inception, August 16, 2002. It is imperative that the Company raise $25,000
 to satisfy the cash requirements in the next 12 months or until it can sustain itself based on its own
 operations. Currently, the Company has commitments from officers, directors and affiliates for $10,000
 to implement its business plan during the next twelve months.  A significant portion of the $10,000
 will be used to build brand awareness and condition the market.  The Company does not expect
 significant revenue or cash flows from operations in Fall 2004.

Although there can be no assurance that CCTC will raise
 additional financing, or that financing opportunities, if any, which it may encounter will be on terms
 favorable to CCTC, the Companys officers and directors believe their backgrounds and experience combined
 with CCTCs status as a fully reporting public company puts CCTC in a better position than most of its
 competitors to raise such financing. If the Company does not raise additional financing, the Company
 may be forced to scale back, curtail or cease its business operations.

During the next twelve months there are no expected
 purchases or sales of plant and significant equipment.

Over the next 12 months, the operations of CCTC will
 be focused on:

A.       
 Fall 2004: HBCU Bookstore Sales (Phase I)

In the 1st and 2nd Quarter of 2004, CCTC contacted
 the bookstores of 91 of the 100 historically black colleges and universities (HBCUs or HBCU) for
 the purpose of offering its bookbags for sale on their campuses. CCTC sent advertising literature to
 each of the 91 colleges and university bookstores. Of the 91 HBCUs contacted, the Company has identified
 10 (the Fall HBCUs) to which it will market its book bags in the Fall of 2004. The Company will provide
 between 20 of the 500 bookbags to 20 individuals at eachof the 10 Fall HBCUs. Selected students will
 be either active fraternal and sorority presidents or campus student body (or other organization) leaders.

CCTC is in the process of contacting the fraternal
 and sorority student presidents and campus student body (or other organization) leaders at the Fall
 HBCUs. To increase the market and awareness for the book bags and other authentic apparel, the Company,
 on April 9, 2004, engaged Eworldwide Press Release Distribution (Eworldwide) to create and distribute
 a Company release to the College and University Press describing the Company and its products. The Company
 release was distributed to over 2,800 College and University publications in all 50 states in the U.S.
 In preparation for the Spring Semester, the Company plans to engage Eworldwire for a second Company
 release in late Fall of 2004 that will enlist the Black Media, Local and State Media and top 100 US
 Newspapers distribution services offered by Eworldwide.

On August 10, 2004, the Company entered into a three-month
 consultant agreement with Albert Ofori (Consultant). On August 12, 2004, the Company entered into
 an agreement with Adongos Leather Enterprise (Adongo) for the production of 500 bokbags due in September,
 October and November of 2004. Mr. Ofori, a citizen of Ghana, will be responsible for accepting the bookbags
 manufactured by Adongo and the delivery of the bookbags to the Companys current United States address.

In June, July and August of 2004, Management attended
 several trade shows in New York and was able to identify, as a secondary option, 2 U.S based local carriers
 for the manufacture of the bookbags in the event its Ghana based suppliers fail. The Company had been
 in negotiations with Lizmof Enterprise, a Ghana based independent foreign dealer and distributor in
 art, craft and general merchants, and Gye Nyame Handicraft Co., Producers and Exporters, for the manufacture,
 labeling and purchase of between 200  400 bookbags. The Company decided that neither of these manufacturers
 was capable of adhering to the bookbag design specifications and delivery schedules required by the
 Company.

It is estimated that the brand awareness achieved amongst
 this HBCU student-consumer base, preparing for entry into the economic marketplace, will aid the Company
 in gaining market share and sustained revenues in the Retail and & Department Store Market.

To leverage the HBCU brand loyalty created in Phase
 I and implement the Retail & Department Store Strategy (Phase II), the Company will have to expend
 a majority of the capital made available to the Company to inform and condition this market. Given this,
 the Company does not expect significant revenue or cash flow from operations in Fall 2004.

B.       
 1st Quarter 2005: Retail & Department Store Sales (Phase II)

Management believes that the Retail and Department
 store market offer the greatest source of revenue for the Companys stools, wood-works, and other home
 and office furnishing.

Management has observed Ghanaian and other African
 artworks and crafts in stores such as Pier 1 Imports, Kmart, Wal-Mart, etc. The Company has decided
 to approach this market towards the end of the 2nd Quarter of 2005. The Companys officers and directors
 believe that its Fall 2004 HBCU campaign will increase the Companys brand and likelihood for success
 in the Retail & Department Store sector.

With this purpose in mind, the Company is currently
 in the process of designing a catalogue of its custom hand-made wood-works and crafts. In the 1st quarter
 of 2005, the Company will obtain the services of a professional photographer, catalogue designer and
 an advertising agency to produce a professional catalogue that Management believes will aid the Company
 in generating sales in this market.

The Company obtained its current inventory selection
 on a visit to Lizmof Enterprises and Gye Nyame Handicraft Co., both located in Ghana, Africa, in December
 of 2002 by an officer of the Company.  The retail price of the Companys artworks, crafts, and
 leather products range from $15.00 to $500.00.

CCTC anticipates that within the next 12 months it
 will be in a better position to determine exactly how much should be expended with regard to the actual
 marketing costs involved in the advertising and promotion of the products. CCTC anticipates expending
 up to $15,000.00 in marketing costs including advertising in journals and print publications reviewed
 by consumers, specifically, African American students. These marketing efforts will commence upon the
 development and distribution of a Company catalogue to selected targets. CCTC contemplates that the
 $15,000.00 presently allocated for marketing will be sufficient to permit continued marketing of the
 products until such time as CCTC can fund further marketing efforts through revenues earned by it.The
 Company does not plan to hire a full-time employee until after the Company raises the additional $25,000,
 as discussed below, and begins to genrate slaes, which may or may not occur within the next twelve months. 
 This employee would be responsible for the sales and marketing of the artworks and crafts. It is contemplated
 that this employee would be employed under terms that will provide for an hourly salary of $15 per hour
 plus a commission incentive arrangement based upon units sold. At such time as sales for the artworks
 and crafts reach a level of 500 to 1,000 units per month, CCTC will have to add a full-time executive
 employee to perform day-to-day operations. Additionally, a part-time hourly wage employee would be required
 for storage and shipping purposes.

RESULTS OF OPERATIONS

SIX MONTHS ENDED JUNE 30, 2004 COMPARED TO SIX
 MONTHS ENDED JUNE 30, 2003

The Company is considered a development stage company
 and has generated very little revenue since its inception, August 16, 2002. The Company did not generate
 any revenue for the six months ended June 30, 2004, as compared to $125 of revenue for the six months
 ended June 30, 2003. The decrease in revenue was due to the Company focusing its resources on the development
 of the Companys public corporate structure and acclimating itself with its new obligations now that
 it is a public company. As discussed above under the heading Plan of Operation, the Company will begin
 to focus its resources on marketing its products in Fall 2004.

Cost of goods sold was $0 for the six months ended
 June 30, 2004, as compared to $75 for the six months ended June 30, 2003. The decrease in cost of goods
 sold was due to the decrease in revenue.

General and administrative (G&A) expense for
 the six months ended June 30, 2004 increased $2,032 (or 179%) to $3,167 as compared to $1,135 for the
 six months ended June 30, 2003. The increase in G&A expense was due to an increase in costs that
 the Company realized after becoming a public company.

Professional fees for the six months ended June 30,
 2004 were $2,850 as compared to $0 for six months ended June 30 2003. The increase in professional fees
 was due to the Company becoming a public company.

Total operating costs and expenses for the six months
 ended June 30, 2004 increased $4,882 (or 430%) to $6,017 as compared to $1,135 for the six months ended
 June 30, 2003. The increase in total operating costs and expenses was due to the increase in G&A
 expense and the increase in professional fees.

State and local taxes for the six months ended June
 30, 2004 were $0 as compared to $455 for the six months ended June 30, 2003.

Net loss for the six months ended June 30, 2004 increased
 $4,477 (or 291%) to $6,017 as compared to $1,540 for the six months ended June 30, 2003.

Basic and diluted loss per share was $0.00 for both
 the six months ended June 30, 2004 and June 30, 2003.

LIQUIDITY AND CAPITAL RESOURCES

At June 30, 2004, the Company had total current assets
 of $1,826, which consisted of $1,401 in cash and $425 in inventory.  At June 30, 2004, total
 current liabilities were $6,751, which consisted of $3,340 in accounts payable and $3,411 in shareholder
 payables.  At June 30, 2004, the Company had negative working capital of $4,925 and with a current
 ratio of 0.27%.  As of June 30, 2004, we had a deficit of $3,887.

Net cash used in operating activities was $5,445 during
 the six months ended June 30, 2004, consisting of net loss of $6,017 and a decrease in accounts payable
 of $760 that was offset by an adjustment for depreciation of $417 and an increase in payable to shareholder
 of $915.

The Company did not have any cash flows from investing
 activities during the six months ended June 30, 2004.

Net cash provided by financing activities was $6,775
 for the six months ended June 30, 2004, which consisted of proceeds from the issuance of the Companys
 common stock in connection with its IPO.

It
 is imperative that the Company raise $25,000 to satisfy the cash requirements in the next 12 months
 or until it can sustain itself based on its own operations. Currently, the Company has commitments from
 officers, directors and affiliates for $10,000 to implement its business plan during the next twelve
 months. A significant portion of the $10,000 will be used to build brand awareness and condition the
 market. The Company does not expect significant revenue or cash flows from operations in Fall 2004.
 As of the filing of this Report, the Company has received an aggregate of $5,450 from affiliates. The
 Company is attempting to raise additional funds through private debt and/or equity offerings. The Company
 intends to use any funds raised for working capital. There can be no assurance that any new capital
 would be available to the Company or that adequate funds for the Company's operations, whether from
 the Company's revenues, financial markets, or other arrangements will be available when needed or on
 terms satisfactory to the Company. Any additional financing may involve dilution to the Company's then-existing
 shareholders. At this time, no additional financing has been secured or identified. If the Company is
 unable to obtain debt and/or equity financing upon terms that the Companys management deems sufficiently
 favorable, or at all, it would have a materially adverse impact upon the Companys ability to pursue
 its business strategy and maintain its current operations. As a result, it may require the Company to
 delay, curtail or scale back some or all of its operations.





RISK FACTORS

Management lacks operational experience in the artworks
 and crafts retail industry.

CCTC is a start-up company that markets and sells products
 that it imports and exports. Messrs. Sarfoh and High, the current officers of CCTC, have effective control
 over all decisions regarding both policy and operations of CCTC with no oversight from other management.
 Messrs. Sarfoh and High do not have any experience in the area of starting-up and properly staffing
 a company, operating an import and export business, or operating an Internet business. The success of
 CCTC is contingent upon these individuals ability to make appropriate business decisions in these areas.
 It is possible that this lack of relevant operational experience could prevent CCTC from becoming a
 profitable business and an investor from obtaining a return on his investment in CCTC.

Additional capital investment in CCTC may not result
 in future profit.

CCTC is operating at a loss which may continue in the
 future. It cannot be determined if an additional capital investment in CCTC will permit CCTC to recognize
 a profit in the future. For the period ended June 30, 2004, CCTC has sustained operating losses of $17,677.
 The amount of this loss should not be indicative of future losses sustainable by CCTC. As of June 30,
 2004, CCTC had expended only a small amount of office expenses and had not yet begun accruing any expenses
 with regard to the actual anticipated operating costs. CCTC intends to utilize future revenues to market
 and procure the delivery of its products and operate its business.

Management may have underestimated the size of the
 consumer market for their products, which may negatively impact future sales and profit.

At the present time, CCTC has only evaluated the marketability
 of its products, based upon the managements perception of the potential value of African artworks and
 crafts in the marketplace. Once CCTC obtains the necessary capitalization, it will immediately commence
 direct and targeted marketing of its products, other than on its website at www.ghanacrafts.com and
 to the 100 HBCUs. CCTCs website was launched in mid-2003 and it is too premature to anticipate how
 the website will, if at all, aid CCTC in its marketing and sales efforts. In the event marketing efforts
 reveal that the product is not marketable, CCTC will not have a potential source of income and it will
 be necessary for CCTC to seek another means of obtaining income or the business will fail.

Consumers may not adopt the Internet as a way of
 buying African artworks and crafts, which would prevent us from becoming profitable.

We may not be able to convert a large number of consumers
 who purchase African artworks and crafts, both while visiting Africa, and from traditional shopping
 methods, to online shopping for African artworks and crafts. As a result CCTC may never achieve widespread
 customer acceptance of shopping for African artworks and crafts online. Specifically, consumers may
 not wish to change the way they purchase art and may feel it is necessary to view the actual works of
 arts and crafts rather than pictures before purchasing them. In addition, consumers may not be willing
 to make orders online due to the perceived difficulty of placing complex orders online or pricing that
 does not meet customer expectations of finding competitive prices on the Internet. As a result, we may
 never derive sufficient revenues from our online retail operations division in order to become a profitable
 enterprise, which could have a materially adverse impact on our business, results of operations and
 financial condition.

CCTC may not be able to differentiate its artworks
 and crafts from competitors which may adversely impact the companys ability to recognize a profit.

CCTC will be competing with importers of artworks and
 crafts who sell similar products to the companys target population and have already established a market
 for their products. An investors ability to realize a return on their purchase of shares will be dependent
 upon managements ability to differentiate their artworks and crafts from competitive artworks and crafts
 currently in the marketplace. CCTC will focus its marketing on the authentic designs of its products
 and target the segments of the market that will best appreciate this design.

CCTC does not have formalized agreements with its
 suppliers which could result in increased acquisition costs.

CCTCs agreement with Lizmof Enterprise and Gye Nyame
 Handicraft Co. Producers and Exporters are oral in nature. No formalized contract has been entered into
 thus exposing the company to market price fluctuations which could result in increased product acquisition
 costs. CCTC expects to formalize an agreement with the above named suppliers upon depletion of its current
 inventory on hand or upon receiving a specialized customer order from its website. In order to compete,
 CCTC will have to be assured that it can continually procure a quality product at a competitive price.
 The lack of a written contract could expose CCTC to increased prices per unit.

Our principal stockholder controls the business
 affairs of CCTC and thus investors will have limited or no participation in our business affairs.

Currently, our principal stockholder and President,
 Kwajo Sarfoh, owns approximately 78.2% of our common stock. As a result, he will have significant influence
 over all matters requiring approval by our stockholders without the approval of minority stockholders.
 In addition, he will be able to elect all of the members of our Board of Directors, which will allow
 him to significantly control our affairs and management. He will also be able to affect most corporate
 matters requiring stockholder approval by written consent, without the need for a duly noticed and duly-held
 meeting of stockholders. Accordingly, you will be limited in your ability to affect change in how we
 conduct our business.

CCTC may not have sufficient capital to procure
 its products, which could cause investors to lose all or a part of their investment in us.

In its Initial Public Offering, CCTC received less
 than 15% of the maximum offering price of $50,000, or $6,775, and sold 33,875 of the 250,000 shares
 offered for sale. CCTC will be able to operate, however, it may need to seek additional sources of financing.
 If additional financing is sought however, the financing to be sought may not be forthcoming and even
 if additional financing becomes available, it may not be available on terms that are favorable to CCTC.
 In the event that it cannot sell all of the shares being offered or obtain adequate financing, CCTC
 will concentrate its efforts on the purchase of debt. However, it may become necessary for CCTC to sell
 additional stock in one or more private placements or subsequent public offerings. If CCTC cannot obtain
 additional financing and revenue from operations are insufficient, it will have to cease operations
 and investors value will be lost.

CCTC may not recognize an operating profit in the
 future unless it can employ experienced management to operate the business on a full-time basis.

CCTC is currently dependent upon the efforts of Messrs.
 Sarfoh and High. Specifically, the companys performance is substantially dependent on the performance
 of Mr. Sarfoh, its president. The loss of the services of Mr. Sarfoh could have a materially adverse
 impact on our business, results of operations or financial condition. In addition, the absence of Mr.
 Sarfoh will force us to seek a replacement who may have less experience, limited direct access to the
 markets and artisans in Ghana or who may not understand our business as well, or we may not be able
 to find a suitable replacement.

A conflict of interest may arise regarding the amount
 of time that CCTCs current officers can devote to CCTC business activities.

CCTCs officers are only engaged in the business activities
 of CCTC on a part-time basis. This could cause the officers a conflict of interest between the amount
 of time they devote to CCTCs business activities and the amount of time required to be devoted to such
 other activities. Messrs. Sarfoh and High, CCTCs current officers, are engaged in the practice of public
 accountancy on a full-time basis. They devote 20 hours per week to CCTCs business activities. This
 amount of time historically has been sufficient to satisfy the business needs of CCTC. Subsequently
 to this offering, CCTC will increase its business activities in terms of marketing, product procurement,
 sales, and administration. This increase in business activities will require that CCTCs officers engage
 in the business activities of CCTC on a full-time basis, thereby causing Messrs. Sarfoh and High a conflict
 of interest.

CCTC has not entered into binding employment contracts
 with Messrs. Sarfoh and High requiring them to devote sufficient time to CCTC business activities, thereby
 potentially inhibiting CCTCs ability to grow its business.

In the event that there is a conflict of interest and
 Messrs. Sarfoh and High are not willing to devote more time to CCTCs business activities, they may
 either employ full-time employees who have the experience and expertise necessary to bring the artworks
 and crafts to market, resign after finding suitable successors or cease operations, causing investors
 to lose their investment in us. While it is expected that other management will be added over time,
 there are no assurances that such will occur. If management does not devote adequate time or find experienced
 employees, investors will lose their investment in us.

CCTC does not expect to pay cash dividends, which
 may lower expected returns for investors.

When making an investment in CCTC, an investor should
 not expect to receive cash dividends from CCTC. An investor must evaluate the potential for his return
 on his investment, based upon the investors future ability to sell the shares purchased through this
 offering for a greater amount in the future. The holders of CCTC common stock are entitled to receive
 dividends when and if declared by the Board of Directors. CCTC does not intend to pay cash dividends
 in the foreseeable future, but instead intends to retain any and all earnings to finance the growth
 of the business. To date, CCTC has not paid cash dividends on its common stock.

There is not an established market for shares of
 CCTC common stock, which could make markets for these shares highly illiquid.

Investors may not be able to sell shares acquired in
 this offering because CCTC common stock is not currently publicly traded. It is unlikely that any active
 public trading market can be established or sustained in the foreseeable future. CCTC intends to have
 its common stock quoted on the OTC electronic bulletin board as soon as practicable, however, there
 can be no assurance that CCTC shares will be quoted on the over the counter bulletin board. Until there
 is an established trading market, holders of CCTC common stock will find it difficult to sell or to
 obtain accurate quotations for the price of the common stock. CCTC does not currently meet the requirement
 to have shares listed on the American Stock Exchange (AMEX) or the NASDAQ stock market, therefore,
 any market for securities that does develop will be highly illiquid. It is unknown whether CCTC common
 shares will achieve sufficient distribution or that it will be able to obtain the number of market makers
 necessary to obtain listing on the NASDAQ stock market in the foreseeable future.

CCTC shares are considered penny stock, which may
 impact an investors ability to re-sell their shares in the public market.

Federal law imposes additional disclosure requirements
 for this stock, which may have a materially adverse impact on the investors ability to resell their
 shares in the public market. CCTCs common stock is currently considered a Penny Stock, as defined
 under Rule 3a51-1 promulgated under the Securities Exchange Act of 1934, under federal securities laws
 since its market price is below $5.00 per share. Federal rules and regulations under the Securities
 Exchange Act of 1934, generally impose additional sale practice and disclosure requirements on broker/dealers
 who sell or recommend CCTCs shares to certain investors. Broker/dealers who sell Penny Stock to certain
 types of investors may be required to comply with the Securities and Exchange Commissions regulations
 concerning the transfer of Penny Stock. If an exemption is not available, these regulations require
 broker/dealers to make a suitability determination prior to selling Penny Stock to the purchaser, receive
 the purchasers written consent to the transaction, and provide certain written disclosures to the purchaser.
 These rules may affect the ability of broker/dealers to make a market in or to trade CCTC shares. In
 turn, this may impact the investors ability to re-sell those shares in the public market.

Our auditor has expressed substantial doubt about
 the continuing operation of our business

The capital placed into CCTC through this offering
 may not be sufficient to permit CCTC to continue operations as an ongoing business. An investor should
 be aware that his investment will be lost if the Company cannot continue to operate. The projected need
 for additional capital in our business may not be sufficient to sustain CCTCs operation over the next
 12 months. Therefore, even if all of the shares offered pursuant to this offering are purchased, the
 investors investment may be of little or no value should future events not occur as projected.

ITEM 3    
 CONTROLS AND PROCEDURES.

(a)     
 Evaluation of disclosure controls and procedures. The Companys chief executive officer and principal
 financial officer, after evaluating the effectiveness of the Companys "disclosure controls and procedures"
 (as defined in the Securities Exchange Act of 1934 Rules 13a-15(e) and 15d-15(e)) as of the end of the
 period covered by this quarterly report (the "Evaluation Date"), has concluded that as of the Evaluation
 Date, the Companys disclosure controls and procedures were adequate and designed to ensure that material
 information relating to the Company and its consolidated subsidiaries would be made known to him by
 others within those entities.

(b)     Changes in internal control over financial reporting. There were no
 significant changes in the Company's internal control over financial reporting during our most
 recent fourth fiscal quarter that materially affected, or is reasonably likely to materially affect,
 the Companys internal control over financial reporting.



PART IIOTHER INFORMATION

ITEM 1.  LEGAL
 PROCEEDINGS

CCTC is not currently a party to any legal proceedings.

ITEM
 2.  CHANGES IN SECURITIES

None

ITEM 3.  DEFAULTS UPON SENIOR SECURITIES

None

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

None

ITEM 5.  OTHER INFORMATION

Subsequent Events

In August 2004, the Company received an advance of $4,548 from a director and an advance
 of $902 from a person who owns more than 5% of the Company's common stock.  The advances are due
 upon demand and bear no interest.

In August 2004, the Company entered into an agreement with Consultant.  Pursuant to
 this agreement, Consultant will be responsible for accepting the bookbags manufactured by Adongo and
 the delivery of the bookbags to the Company's current United States address.

Also in August 2004, the Company entered into a Purchase and Sale Agreement with Adongo
 for the production of 500 bookbags due in Septmebr, October, and November of 2004.  The Company
 will pay Adongo an aggregate $6,000 for the bookbags.

ITEM 6.  EXHIBITS AND REPORTS ON FORM
 8-K

(a) Exhibits

|      |                                                                                                                                                                                                            
|----- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|3.1   | Articles of Incorporation (incorporated by reference from Registration Statement on Form 10-SB filed with the Securities and Exchange Commission on May 20, 2003.                                          
|3.2   | Bylaws (incorporated by reference from Registration Statement on Form 10-SB  filed with the Securities and Exchange Commission on May 20, 2003.                                                            
|3.3   | Share Certificate (incorporated by reference to Registration Statement on Form SB-2 filed with the  Securities and Exchange Commission, Registration Statement No. 333-105393, on May 20, 2003.            
|10.1  | Website Designer Contract (incorporated by reference to Registration Statement on Form SB-2 filed with the Securities and Exchange Commission, Registration Statement No. 333-105393, on August 12, 2003). 
|10.2  | HostPC Contract (incorporated by reference to Registration Statement on Form SB-2 filed with the Securities and Exchange Commission,Registration Statement No. 333-105393, on August 12, 2003.             
|10.3  | Subscription Agreement (incorporated by reference to Registration Statement on Form SB-2 filed with the Securities and Exchange Commission, Registration Statement No. 333-105393, on August 12, 2003).    
|10.4  | Registration Rights Agreement (incorporated by reference to Registration Statement on Form SB-2 filed with the Securities and Exchange Commission, Registration Statement No. 333-105393, on May 20, 2003).
|10.5  | Subscription Agreement (incorporated by reference to Registration Statement on Form SB-2 filed with the Securities and Exchange Commission, Registration Statement No. 333-105393, on August 12,2003).     
|10.6* | Cape Coastal News Release, dated, May 4, 2004.                                                                                                                                                             
|10.7* | Purchase and Sale Agreement between Adongos Leather Enterprise and Cape Coastal Trading Corporation, dated August 12, 2004.                                                                               
|10.8* | Consulting Services Agreement dated, August 10, 2004 (Agreement) by and between Cape Coastal Trading Corporation and Albert Ofori.                                                                       
|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

(b) Reports of Form 8K

None.

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/ Kwajo M. Sarfoh Kwajo M. Sarfoh, Chief Executive Officer and Principal Financial OfficerDate: August 24, 2004
| |  | -------------------------------------------------------------------------------------------------------------------------------



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