FORM 10-Q

                       SECURITIES AND EXCHANGE COMMISSION

                             WASHINGTON, D.C. 20549

          [X]  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
               OF THE SECURITIES EXCHANGE ACT OF 1934 (Fee Required)
               For the quarterly period ended April 30, 2001

          [_]  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
               OF THE SECURITIES EXCHANGE ACT OF 1934 (No Fee Required)
               For the transition period from ________ to ________


                           Commission File No. 1-8709


                   Canal Capital Corporation and Subsidiaries
             (Exact name of registrant as specified in its charter)


               Delaware                                       51-0102492
    (State or other jurisdiction of                        (I.R.S. Employer
     incorporation or organization)                       Identification No.)

    717 Fifth Avenue, New York, NY                              10022
(Address of principal executive offices)                      (Zip Code)


Registrant's telephone number, including area code (212) 826-6040


                                      NONE
               Former name, former address and former fiscal year,
                         if changed since last report.


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

Indicate the number of shares  outstanding  for each of the issuer's  classes of
common stock, as of the latest practical date:


    Title of each class                    Shares outstanding at May 31, 2001
    -------------------                    ----------------------------------
Common stock, $0.01 par value                          4,326,929

(This document contains 31 pages)

<PAGE>


                   CANAL CAPITAL CORPORATION AND SUBSIDIARIES
                            FORM 10-Q APRIL 30, 2001

                                      INDEX

The following documents are filed as part of this report:

Accountants' Review Report ...........................................    3

Part I - Financial Information .......................................    4

Item I.  Condensed Financial Statements:

     Consolidated Balance Sheets - April 30, 2001
       and October 31, 2000 ..........................................    5

     Statements of Consolidated Operations and
       Comprehensive Income for the Six and Three
       Month Periods ended April 30, 2001 and 2000....................    7

     Statements of Consolidated Changes in
       Stockholders' Equity for the Six Month and
       One Year Periods ended April 30, 2001 and
       October 31, 2000 ..............................................    9

     Statements of Consolidated Cash Flows for the
       Six Month Periods ended April 30, 2001 and
       2000 ..........................................................   10

     Notes to Consolidated Financial Statements ......................   11

Item II.  Management's Discussion and Analysis of
          Financial Condition ........................................   19

     Capital Resources and Liquidity .................................   23

     Other Factors .................................. ................   24

Item III.  Quantitative and Qualitative Disclosures
           About Market Risk ........................ ................   24

Part II - Other Information ......................... ................   25

     Items 1 through 6 .............................. ................   26

     Signatures ..................................... ................   27


                                        2
<PAGE>


                           ACCOUNTANTS' REVIEW REPORT


To the Stockholders of Canal Capital Corporation:


We have reviewed the consolidated balance sheet of Canal Capital Corporation and
subsidiaries  as of April 30,  2001,  the  related  consolidated  statements  of
operations  and  comprehensive  income for the six and three month periods ended
April 30,  2001 and the  consolidated  statements  of changes  in  stockholders'
equity and cash  flows for the six month  period  ended  April 30,  2001.  These
consolidated  financial  statements  are  the  responsibility  of the  company's
management.

We conducted our review in accordance with standards established by the American
Institute  of  Certified  Public  Accountants.  A review  of  interim  financial
information consists principally of applying analytical  procedures to financial
data and making  inquiries of persons  responsible  for financial and accounting
matters. It is substantially less in scope than an audit conducted in accordance
with  generally  accepted  auditing  standards,  the  objective  of which is the
expression of an opinion regarding the consolidated  financial  statements taken
as a whole. Accordingly, we do not express such an opinion.

Based on our review, we are not aware of any material  modifications that should
be made to the  consolidated  financial  statements for them to be in conformity
with generally accepted accounting principles.

The  financial  statements  have been  prepared  assuming  that the Company will
continue as a going concern. As discussed in Note 1 to the financial statements,
the Company has suffered  recurring  losses from operations in eight of the last
ten years and has a working  capital  deficit.  These matters 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 1. The  financial
statements do not include any  adjustments  relating to the  recoverability  and
classification  of recorded asset amounts or the amounts and  classification  of
liabilities  that might be necessary should the Company be unable to continue as
a going concern.


New York, N.Y.                          /s/  Todman & Co., CPA's,P.C.
June 6, 2001                            ------------------------------
                                        TODMAN & CO., CPA's,P.C.
                                        Certified Public Accountants (N.Y.)


                                        3
<PAGE>


                                     PART I

                              FINANCIAL INFORMATION


                                        4
<PAGE>


                    CANAL CAPITAL CORPORATION & SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
                       APRIL 30, 2001 AND OCTOBER 31, 2000


                                                       APRIL 30,     OCTOBER 31,
                                                         2001           2000
                                                      (UNAUDITED)     (AUDITED)
                                                      ----------     ----------
ASSETS:

CURRENT ASSETS:

  CASH AND CASH EQUIVALENTS                           $    8,057     $   87,269
  NOTES AND ACCOUNTS RECEIVABLE, NET                     573,741        736,388
  ART INVENTORY, NET OF A VALUATION ALLOWANCE OF
    $ 1,500,000 AT BOTH APRIL 30, 2001 AND
    OCTOBER 31, 2000                                     500,000        500,000
  STOCKYARDS INVENTORY                                    38,771         21,361
  INVESTMENTS                                             24,333         68,461
  PREPAID EXPENSES                                        79,052        154,875
                                                      ----------     ----------
       TOTAL CURRENT ASSETS                            1,223,954      1,568,534
                                                      ----------     ----------

NON-CURRENT ASSETS:

  PROPERTY ON OPERATING LEASES, NET OF
    ACCUMULATED DEPRECIATION OF $1,483,717
    AND $ 1,420,681 AT APRIL 30, 2001 AND
    OCTOBER 31, 2000, RESPECTIVELY                     3,170,010      3,097,938
                                                      ----------     ----------
  PROPERTY USED IN STOCKYARD OPERATIONS, NET OF
    ACCUMULATED DEPRECIATION OF $26,868 AND
    $18,458 AT APRIL 30, 2001 AND OCTOBER
    31, 2000, RESPECTIVELY                             1,252,996      1,237,476
                                                      ----------     ----------
  ART INVENTORY NON-CURRENT, NET OF A
    VALUATION ALLOWANCE OF $ 1,227,950
    AND $1,227,950 AT APRIL 30, 2001
    AND OCTOBER 31, 2000, RESPECTIVELY                   696,657        696,657
                                                      ----------     ----------

OTHER ASSETS:

  PROPERTY HELD FOR DEVELOPMENT OR RESALE                647,669        647,669
  DEFERRED LEASING AND FINANCING COSTS                    29,141          8,202
  DEPOSITS AND OTHER                                     217,522        204,421
                                                      ----------     ----------
                                                         894,332        860,292
                                                      ----------     ----------
                                                      $7,237,949     $7,460,897
                                                      ==========     ==========


                                        5
<PAGE>


                    CANAL CAPITAL CORPORATION & SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
                       APRIL 30, 2001 AND OCTOBER 31, 2000


<TABLE>
<CAPTION>
                                                          APRIL 30,         OCTOBER 31,
                                                            2001               2000
                                                         (UNAUDITED)         (AUDITED)
                                                        ------------       ------------
<S>                                                     <C>                <C>
LIABILITIES & STOCKHOLDERS' EQUITY:

CURRENT LIABILITIES:

  ACCOUNTS PAYABLE AND ACCRUED EXPENSES                 $  2,057,838       $  2,209,724
  INCOME TAXES PAYABLE                                         3,503              5,379
                                                        ------------       ------------
      TOTAL CURRENT LIABILITIES                            2,061,341          2,215,103
                                                        ------------       ------------

LONG-TERM DEBT, RELATED PARTY                              2,522,000          2,522,000
                                                        ------------       ------------

COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS' EQUITY:

  PREFERRED STOCK, $0.01 PAR VALUE:
    5,000,000 SHARES AUTHORIZED; 4,407,614 AND
    4,407,614 SHARES ISSUED AND OUTSTANDING
    AT APRIL 30, 2001 AND OCTOBER 31, 2000,
    RESPECTIVELY AND AGGREGATE LIQUIDATION
    PREFERENCE OF $10 PER SHARE FOR $40,076,140
    AND $40,076,140 AT APRIL 30, 2001 AND
    OCTOBER 31, 2000, RESPECTIVELY                            44,076             44,076

  COMMON STOCK, $0.01 PAR VALUE:
    10,000,000 SHARES AUTHORIZED; 5,313,794
    SHARES ISSUED AND 4,326,929 SHARES OUTSTANDING
    AT APRIL 30, 2001 AND OCTOBER 31, 2000,
    RESPECTIVELY                                              53,138             53,138

  ADDITIONAL PAID-IN CAPITAL                              27,689,053         27,545,053

  ACCUMULATED DEFICIT                                    (12,114,185)       (11,945,307)

  986,865 SHARES OF COMMON STOCK
    HELD IN TREASURY, AT COST                            (11,003,545)       (11,003,545)

  COMPREHENSIVE INCOME:

    PENSION VALUATION RESERVE                             (1,969,621)        (1,969,621)

    UNREALIZED LOSS ON INVESTMENTS AVAILABLE
      FOR SALE                                               (44,308)                 0
                                                        ------------       ------------
                                                           2,654,608          2,723,794
                                                        ------------       ------------
                                                        $  7,237,949       $  7,460,897
                                                        ============       ============
</TABLE>


                                        6
<PAGE>


                    CANAL CAPITAL CORPORATION & SUBSIDIARIES
          CONSOLIDATED STATEMENTS OF OPERATIONS & COMPREHENSIVE INCOME
                FOR THE SIX MONTHS ENDED APRIL 30, 2001 AND 2000


                                                        2001            2000
                                                    (UNAUDITED)      (UNAUDITED)
                                                    ----------        ----------
REAL ESTATE OPERATIONS:
  REAL ESTATE REVENUES:
    SALE OF REAL ESTATE                             $        0        $        0
    EXCHANGE BUILDING RENTAL INCOME                    216,921           227,340
    OUTSIDE REAL ESTATE RENT                           272,433           269,674
    OTHER INCOME                                         1,000                75
                                                    ----------        ----------
                                                       490,354           497,089
                                                    ----------        ----------
  REAL ESTATE EXPENSES:
    COST OF REAL ESTATE SOLD                                 0                 0
    LABOR, OPERATING AND MAINTENANCE                   233,004           234,828
    DEPRECIATION AND AMORTIZATION                       57,469            52,226
    TAXES OTHER THAN INCOME TAXES                       74,900            69,200
    GENERAL AND ADMINISTRATIVE                          28,654            42,688
                                                    ----------        ----------
                                                       394,027           398,942
                                                    ----------        ----------

INCOME FROM REAL ESTATE OPERATIONS                      96,327            98,147
                                                    ----------        ----------

STOCKYARD OPERATIONS:
  STOCKYARD REVENUES:
    YARD HANDLING AND AUCTION                        2,079,881         2,180,474
    FEED AND BEDDING INCOME                            151,992           157,997
    RENTAL INCOME                                        2,630             1,756
    OTHER INCOME                                       121,163           122,917
                                                    ----------        ----------
                                                     2,355,666         2,463,144
                                                    ----------        ----------
STOCKYARD EXPENSES:
    LABOR AND RELATED COSTS                            879,012           907,979
    OTHER OPERATING AND MAINTENANCE                    513,133           460,015
    FEED AND BEDDING EXPENSE                           117,504           122,679
    DEPRECIATION AND AMORTIZATION                        9,382             7,576
    TAXES OTHER THAN INCOME TAXES                      133,264           138,542
    GENERAL AND ADMINISTRATIVE                         291,455           326,276
                                                    ----------        ----------
                                                     1,943,750         1,963,067
                                                    ----------        ----------

INCOME FROM STOCKYARD OPERATIONS                       411,916           500,077
                                                    ----------        ----------


                                        7
<PAGE>


                    CANAL CAPITAL CORPORATION & SUBSIDIARIES
          CONSOLIDATED STATEMENTS OF OPERATIONS & COMPREHENSIVE INCOME
                FOR THE SIX MONTHS ENDED APRIL 30, 2001 AND 2000
                                  Continued ...


                                                      2001             2000
                                                  (UNAUDITED)       (UNAUDITED)
                                                   ----------        ----------
ART OPERATIONS:
  ART REVENUES:
    SALES                                                   0            27,500
    OTHER REVENUES                                          0                 0
                                                   ----------        ----------
                                                            0            27,500
                                                   ----------        ----------

  ART EXPENSES:
    COST OF ART SOLD                                        0            72,500
    VALUATION RESERVE                                       0           (50,750)
    SELLING, GENERAL AND ADMINISTRATIVE                14,609            14,638
                                                   ----------        ----------
                                                       14,609            36,388
                                                   ----------        ----------

(LOSS) FROM ART OPERATIONS                            (14,609)           (8,888)
                                                   ----------        ----------

GENERAL AND ADMINISTRATIVE EXPENSE                   (535,380)         (541,916)
                                                   ----------        ----------

(LOSS) INCOME FROM OPERATIONS                         (41,746)           47,420
                                                   ----------        ----------

OTHER INCOME (EXPENSE):
  INTEREST & OTHER INCOME                             143,315           138,963
  INTEREST EXPENSE                                          0           (43,676)
  INTEREST EXPENSE-RELATED PARTY                     (126,447)          (85,840)
  OTHER EXPENSE                                             0                 0
                                                   ----------        ----------
                                                       16,868             9,447
                                                   ----------        ----------

(LOSS) INCOME BEFORE PROVISION FOR
  INCOME TAXES                                        (24,787)           56,867

PROVISION (BENEFIT) FOR INCOME TAXES                        0                 0
                                                   ----------        ----------
NET (LOSS) INCOME                                     (24,878)           56,867

OTHER COMPREHENSIVE (LOSS) INCOME:

  UNREALIZED (LOSS) INCOME ON
  INVESTMENTS AVAILABLE FOR SALE                      (44,308)           11,560
                                                   ----------        ----------

COMPREHENSIVE (LOSS)INCOME                         $  (69,186)       $   68,427
                                                   ==========        ==========

(LOSS) PER COMMON SHARE - BASIC
  AND DILUTED                                      $    (0.04)       $    (0.01)
                                                   ==========        ==========

AVERAGE SHARES OUTSTANDING - BASIC
  AND DILUTED                                       4,327,000         4,327,000
                                                   ==========        ==========


                                        8
<PAGE>


                    CANAL CAPITAL CORPORATION & SUBSIDIARIES
          CONSOLIDATED STATEMENTS OF OPERATIONS & COMPREHENSIVE INCOME
               FOR THE THREE MONTHS ENDED APRIL 30, 2001 AND 2000


                                                       2001             2000
                                                    (UNAUDITED)      (UNAUDITED)
                                                    ----------        ----------
REAL ESTATE OPERATIONS:
  REAL ESTATE REVENUES:
    SALE OF REAL ESTATE                             $        0        $        0
    EXCHANGE BUILDING RENTAL INCOME                    108,038           101,287
    OUTSIDE REAL ESTATE RENT                           139,059           141,569
    OTHER INCOME                                         1,000                 0
                                                    ----------        ----------
                                                       248,097           242,856
                                                    ----------        ----------
 REAL ESTATE EXPENSES:
    COST OF REAL ESTATE SOLD                                 0                 0
    LABOR, OPERATING AND MAINTENANCE                   110,320           117,046
    DEPRECIATION AND AMORTIZATION                       29,121            26,407
    TAXES OTHER THAN INCOME TAXES                       38,400            34,200
    GENERAL AND ADMINISTRATIVE                          15,488            24,360
                                                    ----------        ----------
                                                       193,329           202,013
                                                    ----------        ----------

INCOME FROM REAL ESTATE OPERATIONS                      54,768            40,843
                                                    ----------        ----------

STOCKYARD OPERATIONS:
 STOCKYARD REVENUES:
    YARD HANDLING AND AUCTION                          931,453         1,026,207
    FEED AND BEDDING INCOME                             70,411            72,135
    RENTAL INCOME                                        1,064               360
    OTHER INCOME                                        48,478            60,854
                                                    ----------        ----------
                                                     1,051,406         1,159,556
                                                    ----------        ----------

STOCKYARD EXPENSES:
    LABOR AND RELATED COSTS                            415,743           445,036
    OTHER OPERATING AND MAINTENANCE                    241,796           214,632
    FEED AND BEDDING EXPENSE                            54,889            58,217
    DEPRECIATION AND AMORTIZATION                        4,819             3,826
    TAXES OTHER THAN INCOME TAXES                       65,782            62,862
    GENERAL AND ADMINISTRATIVE                         135,641           146,749
                                                    ----------        ----------
                                                       918,670           931,322
                                                    ----------        ----------

INCOME FROM STOCKYARD OPERATIONS                       132,736           228,234
                                                    ----------        ----------


                                        9
<PAGE>


                    CANAL CAPITAL CORPORATION & SUBSIDIARIES
          CONSOLIDATED STATEMENTS OF OPERATIONS & COMPREHENSIVE INCOME
               FOR THE THREE MONTHS ENDED APRIL 30, 2001 AND 2000
                                  Continued ...


                                                      2001             2000
                                                  (UNAUDITED)       (UNAUDITED)
                                                  -----------       -----------
ART OPERATIONS:
  ART REVENUES:
    SALES                                                   0                 0
    OTHER REVENUES                                          0                 0
                                                  -----------       -----------
                                                            0                 0
                                                  -----------       -----------

  ART EXPENSES:
    COST OF ART SOLD                                        0                 0
    VALUATION RESERVE                                       0                 0
    SELLING, GENERAL AND ADMINISTRATIVE                 7,269             6,957
                                                  -----------       -----------
                                                        7,269             6,957
                                                  -----------       -----------
(LOSS) FROM ART OPERATIONS                             (7,269)           (6,957)
                                                  -----------       -----------

GENERAL AND ADMINISTRATIVE EXPENSE                   (269,804)         (274,572)
                                                  -----------       -----------

(LOSS) FROM OPERATIONS                                (89,569)          (12,452)
                                                  -----------       -----------

OTHER INCOME (EXPENSE):
  INTEREST & OTHER INCOME                              13,197             4,879
  INTEREST EXPENSE                                          0                 0
  INTEREST EXPENSE-RELATED PARTY                      (63,050)          (63,500)
  OTHER EXPENSE                                             0                 0
                                                  -----------       -----------
                                                      (49,853)          (58,621)
                                                  -----------       -----------
(LOSS) BEFORE PROVISION FOR INCOME
  TAXES                                              (139,422)          (71,073)

PROVISION (BENEFIT) FOR INCOME TAXES                        0                 0
                                                  -----------       -----------
NET (LOSS)                                           (139,422)          (71,073)

OTHER COMPREHENSIVE (LOSS) INCOME:

  UNREALIZED (LOSS) INCOME ON
  INVESTMENTS AVAILABLE FOR SALE                      (12,692)                0
                                                  -----------       -----------

COMPREHENSIVE (LOSS)                              $  (152,114)      $   (71,073)
                                                  ===========       ===========

(LOSS) PER COMMON SHARE - BASIC
  AND DILUTED                                     $     (0.05)      $     (0.03)
                                                  ===========       ===========

AVERAGE SHARES OUTSTANDING - BASIC
  AND DILUTED                                       4,327,000         4,327,000
                                                  ===========       ===========


                                       10
<PAGE>


                   CANAL CAPITAL CORPORATION AND SUBSIDIARIES
           CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
                FOR THE YEAR ENDED OCTOBER 31, 2000 (AUDITED) AND
               FOR THE SIX MONTHS ENDED APRIL 30, 2001 (UNAUDITED)


<TABLE>
<CAPTION>
                                                COMMON STOCK                 PREFERRED STOCK
                                         -----------------------         -----------------------
                                         NUMBER                          NUMBER                         ADDITIONAL
                                           OF                              OF                            PAID-IN
                                         SHARES           AMOUNT         SHARES          AMOUNT          CAPITAL
                                        ---------        -------        ---------        -------        -----------

<S>                                     <C>              <C>            <C>              <C>            <C>
BALANCE, OCTOBER 31, 1999               5,313,794        $53,138        3,879,258        $38,793        $27,274,159

  NET (LOSS)                                    0              0                0              0                  0
  PREFERRED STOCK DIVIDEND                      0              0          528,356          5,283            270,894
  MINIMUM PEN. LIAB. ADJUSTMENT                 0              0                0              0                  0
  UNREALIZED LOSS ON INVESTMENTS                0              0                0              0                  0
                                        ---------        -------        ---------        -------        -----------

BALANCE, OCTOBER 31, 2000               5,313,794         53,138        4,407,614         44,076         27,545,053
  NET INCOME                                    0              0                0              0                  0
  PREFERRED STOCK DIVIDEND                      0              0                0              0            144,000
  MINIMUM PEN. LIAB. ADJUSTMENT                 0              0                0              0                  0
  UNREALIZED LOSS ON INVESTMENTS                0              0                0              0                  0
                                        ---------        -------        ---------        -------        -----------


BALANCE, APRIL 30, 2001                 5,313,794        $53,138        4,407,614        $44,076        $27,689,053
                                        =========        =======        =========        =======        ===========
</TABLE>


<TABLE>
<CAPTION>
                                                     -COMPREHENSIVE     (LOSS) INCOME-        TREASURY
                                   ACCUMULATED          VALUATION         UNREALIZED            STOCK
                                    DEFICIT              RESERVE          GAIN ON INV.         AT COST
                                  ------------         -----------         ---------         ------------
<S>                               <C>                  <C>                 <C>               <C>
BALANCE, OCTOBER 31, 1999         ($10,758,188)        ($1,903,176)        ($343,725)        ($11,003,545)
  NET (LOSS)                          (921,582)                  0                 0                    0
  PREFERRED STOCK DIVIDEND            (265,537)                  0                 0                    0
  MINIMUM PEN. LIAB. ADJ                     0             (66,445)                0                    0
  UNREALIZED LOSS ON INV                     0                   0           343,725                    0
                                  ------------         -----------         ---------         ------------

BALANCE, OCTOBER 31, 2000          (11,945,307)        ($1,969,621)                0          (11,003,545)
  NET LOSS                             (24,878)                  0                 0                    0
  PREFERRED STOCK DIVIDEND            (144,000)                  0                 0                    0
  MINIMUM PEN. LIAB. ADJ                     0                   0                 0                    0
  UNREALIZED LOSS ON INV                     0                   0           (44,308)                   0
                                  ------------         -----------         ---------         ------------

BALANCE, APRIL 30, 2001           ($12,114,185)        ($1,969,621)        ($ 44,308)        ($11,003,545)
                                  ============         ===========         =========         ============
</TABLE>


                                       11
<PAGE>


                    CANAL CAPITAL CORPORATION & SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                FOR THE SIX MONTHS ENDED APRIL 30, 2001 AND 2000


<TABLE>
<CAPTION>
                                                                2001              2000
                                                            (UNAUDITED)        (UNAUDITED)
                                                             ---------         -----------
<S>                                                          <C>               <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
  NET (LOSS) INCOME                                          $ (24,878)        $    56,867

  ADJUSTMENTS TO RECONCILE NET (LOSS) INCOME TO
    NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES:

    DEPRECIATION AND AMORTIZATION                               72,790              65,254

CHANGES IN ASSETS AND LIABILITIES:

  NOTES AND ACCOUNTS RECEIVABLES, NET                          162,647              93,919
  ART INVENTORY, NET                                                 0              21,750
  PREPAID EXPENSES AND OTHER, NET                               23,030              81,411
  PAYABLES AND ACCRUED EXPENSES, NET                          (153,762)           (399,333)
                                                             ---------         -----------
NET CASH PROVIDED (USED) BY OPERATING
  ACTIVITIES                                                    79,827             (80,132)
                                                             ---------         -----------

CASH FLOWS FROM INVESTING ACTIVITIES:

  CAPITAL EXPENDITURES                                        (159,039)            (82,032)
                                                             ---------         -----------
NET CASH (USED) BY INVESTING ACTIVITIES                       (159,039)            (82,032)
                                                             ---------         -----------

CASH FLOWS FROM FINANCING ACTIVITIES:
  PROCEEDS FROM LONG-TERM DEBT-RELATED
    PARTIES                                                          0           1,725,000
  REPAYMENT OF CURRENT PORTION OF LONG-TERM                          0             (75,000)
  REPAYMENT OF LONG-TERM DEBT OBLIGATIONS                            0          (1,796,710)
                                                             ---------         -----------
NET CASH (USED) BY FINANCING ACTIVITIES                              0            (146,710)
                                                             ---------         -----------

NET (DECREASE) IN CASH AND CASH
  EQUIVALENTS                                                  (79,212)           (308,874)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD                87,269             416,191
                                                             ---------         -----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD                   $   8,057         $   107,317
                                                             =========         ===========
</TABLE>


NOTE:     Canal made federal and state income tax payments of $7,000 and $11,000
          and interest payments of 126,000 and $130,000 in the six month periods
          ended April 30, 2001 and 2000, respectively.


                                       12
<PAGE>


                   CANAL CAPITAL CORPORATION AND SUBSIDIARIES
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                         SIX MONTHS ENDED APRIL 30, 2001
                                   (UNAUDITED)


1.   NATURE OF BUSINESS

     Canal Capital Corporation ("Canal"),  incorporated in the state of Delaware
in 1964,  commenced business operations through a predecessor in 1936. Canal was
a wholly owned subsidiary of Canal-Randolph Corporation until June 1, 1984, when
Canal-Randolph   Corporation   distributed  to  its   stockholders  all  of  the
outstanding   shares  of  Canal's  common  stock,   under  a  plan  of  complete
liquidation.

     Canal is engaged in three distinct  businesses - the management and further
development of its agribusiness  related real estate  properties  located in the
Midwest,  stockyard operations which are also located in the Midwest and its art
operations, consisting mainly of the acquisition of art for resale.

     While the  Company  is  currently  operating  as a going  concern,  certain
significant  factors  raise  substantial  doubt about the  Company's  ability to
continue as a going  concern.  The Company has  suffered  recurring  losses from
operations in eight of the last ten years and is involved in  litigation  with a
meat packer located in South St. Paul,  Minnesota.  The financial  statements do
not include any  adjustments  that might  result  from the  resolution  of these
uncertainties.  Additionally,  the  accompanying  financial  statements  do  not
include any adjustments  relating to the  recoverability  and  classification of
recorded asset amounts or the amounts and  classification  of  liabilities  that
might be necessary should the Company be unable to continue as a going concern.

     Canal  continues to closely  monitor and reduce where possible its overhead
expenses  and plans to  continue to reduce the level of its art  inventories  to
enhance current cash flows.  Management believes that its income from operations
combined  with  its  cost  cutting  program,  development  and/or  sale  of  its
non-income  producing properties and planned reduction of its art inventory will
enable it to finance its current business activities.  There can, however, be no
assurance  that Canal  will be able to  effectuate  its  planned  art  inventory
reductions  or that its income from  operations  combined  with its cost cutting
program in itself will be sufficient to fund operating cash requirements.


                                       13
<PAGE>


2.   Summary of Significant Accounting Policies

     A) Principles of  Consolidation  - The  consolidated  financial  statements
include the  accounts of Canal  Capital  Corporation  ("Canal")  and its wholly-
owned subsidiaries (the "Company").  All significant  intercompany  balances and
transactions have been eliminated in consolidation.

     B) Investments Available for Sale - Canal has an investment in a company in
which it, together with other  affiliated  entities,  comprise a reporting group
for  regulatory  purposes.  It is  important  to note  that it is the  group (as
defined) that can exercise influence over this company, not Canal.  Accordingly,
this  investment  does not qualify for  consolidation  as a method of reporting.
Certain  of  Canal's  officers  and  directors  also  serve as  officers  and/or
directors of this company.  This investment (in which Canal's ownership interest
is  approximately  2%) is  carried  at market  value and the  realized  gains or
losses,  if any, are recognized in operating  results.  Any unrealized  gains or
losses are reflected in Stockholders' Equity (Note 9).

     Investments  in Joint Ventures - Investments  in which  ownership  interest
range from 20% to 50% or less owned joint  ventures are  accounted for under the
equity  method.  These joint  ventures  are not, in the  aggregate,  material in
relation  to the  financial  position  or results of  operations  of Canal.  The
carrying  amount of such  investments  was  $101,000  at both April 30, 2001 and
October 31, 2000,  and is included in other  assets.  The  operating  results of
joint ventures accounted for on the equity method were not material to financial
statement  presentation  and were  therefore  included in other income from real
estate operations.

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

     D)  Comprehensive  Income --  Effective  for fiscal years  beginning  after
December  15, 1997,  Statement of  Accounting  Standards  No. 130 requires  that
comprehensive  income  and its  components,  as  defined  in the  statement,  be
reported in a financial statement.  The only adjustments for each classification
of the  comprehensive  income was for minimum  pension  liability and unrealized
(loss) gain on investments available for sale.

     E) Reclassification -- Certain prior year amounts have been reclassified to
conform to the current year's presentation.


                                       14
<PAGE>


3.   Interim Financial Statements

     The interim  consolidated  financial  statements  included herein have been
prepared by Canal without audit. In the opinion of Management,  the accompanying
unaudited  financial  statements of Canal contain all  adjustments  necessary to
present  fairly its  financial  position as of April 30, 2001 and the results of
its operations and its cash flows for the six month period ended April 30, 2001.
All of the  above  referenced  adjustments  were of a normal  recurring  nature.
Certain  information  and footnote  disclosures  normally  included in financial
statements prepared in accordance with generally accepted accounting  principles
have been condensed or omitted.  These  financial  statements  should be read in
conjunction with the consolidated financial statements for the three years ended
October 31,  2000 and the notes  thereto  which are  contained  in Canal's  2000
Annual Report on Form 10-K. The results of operations  for the period  presented
is not necessarily indicative of the results to be expected for the remainder of
fiscal 2001.

4.   Real Estate Operations

     Canal's real estate properties  located in six Midwest states are primarily
associated with its current and former  agribusiness  related  operations.  Each
property is adjacent to a stockyards  operation  (three of which are operated by
the company) and consist, for the most part, of an Exchange Building (commercial
office  space),  land and  structures  leased  to third  parties  (meat  packing
facilities,  rail car repair shops, truck stops,  lumber yards and various other
commercial  and  retail  businesses)  as  well  as  vacant  land  available  for
development or resale.  Its principal real estate operating revenues are derived
from  rental  income from its  Exchange  Buildings,  lease  income from land and
structures leased to various commercial and retail enterprises and proceeds from
the sale of real estate properties.

     Real estate operations  resulted in operating income of $96,000 and $55,000
for the six and three month  periods  ended  April 30,  2001,  respectively,  as
compared  to  $98,000  and  $41,000  for  the  same   periods  in  fiscal  2000.
Additionally,  real  estate  operations  contributed  $490,000  and  $248,000 to
Canal's  revenues  for the six and three month  periods  ended  April 30,  2001,
respectively,  as compared to revenues  of $497,000  and  $243,000  for the same
periods in fiscal 2000.

     As of April 30, 2001, there are approximately 184 acres of undeveloped land
owned by Canal  adjacent to its stockyard  properties.  Canal is continuing  the
program, which it started several years ago, to develop or sell this property.


                                       15
<PAGE>


5.   Stockyard Operations

     On August 1, 1999,  Canal  purchased the  operating  assets of three public
stockyards  (formerly subject to the Master Lease between the Company and United
Market  Services)  located in Sioux City,  Iowa, St. Joseph,  Missouri and Sioux
Falls, South Dakota.

     Public  stockyards act much like a securities  exchange,  providing markets
for all  categories  of  livestock  and  fulfilling  the  economic  functions of
assembly,  grading, and price discovery.  The livestock handled by the Company's
stockyards include cattle,  hogs and sheep. Cattle and hogs may come through the
stockyard  facilities  at  different  stages,  either  as  feeder  livestock  or
slaughter   livestock.   The  Company's  stockyards  provide  all  services  and
facilities  required to operate an independent market for the sale of livestock,
including veterinary facilities,  auction arenas, auctioneer,  weigh masters and
scales,  feed and bedding,  and security personnel.  In addition,  the stockyard
provide  other  services  including  pure  bred and  other  specialty  sales for
producer  organizations.  The Company  promotes its stockyard  business  through
public relations efforts, advertising and personal solicitation or producers.

     Stockyard  operations resulted in operating income of $412,000 and $133,000
for the six and three month  periods  ended  April 30,  2001,  respectively,  as
compared  to  $500,000  and  $228,000  for the  same  periods  in  fiscal  2000.
Additionally,  stockyard  operations  contributed  $2,356,000  and $1,051,000 to
Canal's  revenues  for the six and three month  periods  ended  April 30,  2001,
respectively,  as compared to revenues of $2,463,000 and $1,160,000 for the same
periods in fiscal 2000.

6.   ART OPERATIONS

     Canal  established  its art  operations  in  October  1988 by  acquiring  a
significant  inventory  for resale of  antiquities  primarily  from the  ancient
Mediterranean  cultures.  In November 1989, Canal expanded its art operations by
entering into a cost and revenue sharing  agreement with a New York City gallery
for the exclusive  representation  of Jules Olitski,  a world renowned artist of
contemporary  paintings.  As part of this agreement  Canal purchased a number of
Olitski  paintings which it holds for resale with a book value of  approximately
$624,000 at April 30, 2001. The  representation  agreement  expired  December 1,
1994 and Canal now operates  independently  in the marketing of its contemporary
art inventory.

     Due to general  economic  conditions  and the  softness of the art markets,
Canal has not purchased inventory in several years. However, Canal continues its
marketing efforts to sell its existing art inventory through various consignment
agreements and at public auctions.  Antiquities and contemporary art represented
45% ($542,758) and 55% ($653,899) and 45% ($542,758) and 55% ($653,899) of total
art   inventory  at  April  30,  2001  and  October  31,   2000,   respectively.
Substantially all of the contemporary art inventory held for resale is comprised
of the work of Jules Olitski.


                                       16
<PAGE>


     Management estimates it may take approximately five years to dispose of its
current art inventory.  The Company's ability to dispose of its art inventory is
dependent at least in part, on general economic  conditions,  including  supply,
demand, international monetary conditions and inflation.  Additionally,  the art
market itself is very competitive.  Accordingly,  there can be no assurance that
Canal will be successful in disposing of its art inventory within the time frame
discussed above.

     Canal has its art inventory appraised by an independent appraiser annually.
The  2000  appraisal  covered  approximately  57% of the  inventory  value.  The
appraised  values  estimate  the  current  market  value  of each  piece  giving
consideration  to Canal's  practices  of  engaging in  consignment,  private and
public  auction  sales.  The net  realizable  value of the  remaining 43% of the
inventory was estimated by management based in part on operating  history and in
part on the results of the  independent  appraisals  done.  In fiscal 2000 Canal
applied  against  sales  $50,750  of the  valuation  allowance  against  its art
inventory, thereby, decreasing the total valuation allowance to $2,727,950 as of
October 31, 2000, as compared to  $2,778,700 at October 31, 1999.  There were no
sales of art in the first six months of 2001.

     The  Company's  plan to sell  inventory at auction is  contemplated  in the
normal course of business.  Auction in this context is one of the usual channels
used for disposal of its art  inventory.  The proceeds  from these sales will be
used to reduce the Company's  outstanding debt. If these sales are not made, the
Company has alternate means of raising cash such as sale of real estate, raising
of  new  capital  and   rescheduling  of  debt.  Some  of  these  measures  were
successfully implemented in fiscal 2000.

     Canal's  art  operations  have  generated  operating  losses of $15,000 and
$7,000 for the six and three month periods  ended April 30, 2001,  respectively,
as compared to  operating  losses of $9,000 and $7,000 (net of a decrease in the
valuation   allowance   of  $50,750)  for  the  same  periods  in  fiscal  2000.
Additionally, art operations contributed $ zero to Canal's revenues for both the
six and three month  periods  ended April 30,  2001,  as compared to revenues of
$28,000  and $ zero for the same  periods  in fiscal  2000.  Canal's  management
believes  that through its  consignment  agreements  as well as other  potential
distribution outlets Canal will continue to deal in antiquities and contemporary
art.

     Inventory on  Consignment - The Company had  approximately  $1,273,000  and
$1,273,000 of art inventory on consignment with third party dealers at April 30,
2001 and October 31, 2000, respectively.

7.   Property and Equipment

     Included  in  property  and  equipment   were  the  cost  of  buildings  of
approximately $2.5 million at April 30, 2001 and October 31, 2000.


                                       17
<PAGE>


8.   Notes Receivable

     Included in the notes and accounts  receivable  were the current portion of
notes from real estate sales in the amount of $290,000 and $578,000 at April 30,
2001 and October 31, 2000, respectively.

9.   INVESTMENTS AVAILABLE FOR SALE

     At April 30,  2001 the  investments  available  for sale  consisted  of the
following:

                                                      April 30,     October 31,
         ($ 000's Omitted)                              2001           2000
                                                        ----           ----

         Aggregate market value                          $24            $69
                                                         ---            ---
         Aggregate carrying value                        $24            $69
                                                         ---            ---

     Canal has an  investment  in a company  in which it,  together  with  other
affiliated entities,  comprises a reporting group for regulatory purposes. It is
important to note that it is the group (as defined) that can exercise  influence
over this company, not Canal. Accordingly,  this investment does not qualify for
consolidation  as a  method  of  reporting.  Certain  of  Canal's  officers  and
directors  also  serve  as  officers  and/or  directors  of this  company.  This
investment (in which Canal's ownership  interest is approximately 2%) is carried
at market value and the realized  gains or losses,  if any,  are  recognized  in
operating results.  Any unrealized gains or losses are reflected in Stockholders
Equity.  The  realized  gains or losses,  if any,  are  recognized  in operating
results.

     On May 3, 2000 this company  filed for  reorganization  under Chapter 11 of
the Bankruptcy  Code. At October 31, 2000,  Canal determined that the decline in
market value of its  investment in this company was  permanent and  accordingly,
recognized  a  realized  loss  on  investments   in  marketable   securities  of
approximately  $467,000.  Management  will  continue to monitor  this  situation
closely and take appropriate action if it determines that future fluctuations in
the market value of this investment are other than temporary.

     For the six months ended April 30, 2001 Canal recognized an unrealized loss
on investments available for sale of $44,000.  Additionally,  for the six months
ended  April  30,  2000  Canal  recognized  an  unrealized  gain on  investments
available for sale of $12,000,  both of which are shown in a separate  component
of Stockholders' Equity and Comprehensive Income.


                                       18
<PAGE>


10.  BORROWINGS

     At April 30, 2001, substantially all of Canal's real properties,  the stock
of certain  subsidiaries,  the investments and a substantial  portion of its art
inventories are pledged as collateral to secure the following obligations:

                                             April 30,       October 31,
                                               2001             2000
                                            -----------      -----------
                                            (Unaudited)       (Audited)
(Thousands of Dollars)

Variable rate mortgage notes due
  May 15, 2003 - related party............    $ 2,522         $ 2,522
                                              -------         -------

     On January 8, 1998, the Company issued $3,700,000 of variable rate mortgage
notes due May 15, 2001. The purchasers of these notes included  certain entities
controlled by the Company's Chairman,  the Company's Chief Executive Officer and
members of their families.  These notes carried  interest at the highest of four
variable  rates,  determined  on a quarterly  basis.  These  notes,  among other
things,  prohibits  Canal from becoming an investment  company as defined by the
Investment  Company Act of 1940;  requires Canal to maintain  minimum net worth;
restricts  Canal's ability to pay cash dividends or repurchase  stock;  requires
principal  prepayments  to be made  only  out of the  proceeds  from the sale of
certain assets,  and required the accrual of additional  interest (to be paid at
maturity) of approximately three percent per annum.

     On July 29, 1999 the above Notes were amended to extend the  maturity  date
to May 15, 2003;  to fix the interest  rate at 10% per annum;  to agree that the
additional  interest due to the holders of the notes shall become current and be
treated as  principal  due under the notes;  and to have  certain of the holders
loan the Company  $525,000 in  additional  financing,  the proceeds of which was
used to repay in full  certain of the other  holders of the notes.  As a result,
the notes are now held in total by the  Company's  Chief  Executive  Officer and
members of his family.

     On January 10, 2000,  the above Notes were further  amended to have holders
loan the Company $1,725,000 in additional  financing,  the proceeds of which was
used to  repay  in full  all of the  Company's  outstanding  non  related  party
long-term  debt.  As of April 30,  2001,  the  balance due under these notes was
$2,522,000 all of which is classified as long-term debt-related party.


                                       19
<PAGE>


11.  PENSION VALUATION RESERVE

     The  valuation  reserve  represents  the excess of the  additional  minimum
pension  liability  required  under  the  provisions  of SFAS  No.  87 over  the
unrecognized  prior service  costs of former  stockyard  employees.  Such excess
arose due to the decline in the market value of pension assets available for the
pension benefits of the former employees, which benefits were frozen at the time
the  stockyard  operations  were sold in 1989.  The excess will  effectively  be
expensed  over time as actuarial  computations  of annual  pension cost (made in
accordance with SFAS No. 87) recognize the deficiency that exists.


                                       20
<PAGE>


                 Item II - Management's Discussion and Analysis
                Of Results of Operations and Financial Condition
                     For the Six Months Ended April 30, 2001


Results of Operations - General

     While the  Company  is  currently  operating  as a going  concern,  certain
significant  factors  raise  substantial  doubt about the  Company's  ability to
continue as a going  concern.  The Company has  suffered  recurring  losses from
operations in eight of the last ten years and is involved in  litigation  with a
meat packer located in South St. Paul,  Minnesota.  The financial  statements do
not include any  adjustments  that might  result  from the  resolution  of these
uncertainties.  Additionally,  the  accompanying  financial  statements  do  not
include any adjustments  relating to the  recoverability  and  classification of
recorded asset amounts or the amounts and  classification  of  liabilities  that
might be necessary should the Company be unable to continue as a going concern.

2001 Compared to 2000

     Canal recognized a net loss of $25,000 for the six month period ended April
30,  2001 as  compared  to net income of $57,000  for the same  period in fiscal
2000.  After  recognition of an unrealized loss on investments  held for sale of
$44,000 for the six month period ended April 30, 2001 and an unrealized  gain on
investments  held for sale of $12,000 for the six month  period  ended April 30,
2000 the Company  recognized a  comprehensive  loss of $69,000 for the six month
period ended April 30, 2001 as compared to  comprehensive  income of $68,000 for
the same period in fiscal 2000.  Further,  after  recognition of preferred stock
dividend payments of $144,000 for the six month period ended April 30, 2001, the
Company  recognized a net loss  applicable  to common  stockholders  of $169,000
($0.04  per common  share)  for the six month  period  ended  April 30,  2001 as
compared to a net loss  applicable to common  stockholders of $63,000 ($0.01 per
common  share) for the same period in fiscal 2000.  Included in the 2001 results
is other income of approximately  $143,000 comprised primarily of a damage award
Canal received in connection  with its lawsuit against a meat packing company in
South St.  Paul,  Minnesota.  Canal is appealing  this award to gain  additional
compensation.  Included  in the 2000  results is other  income of  approximately
$134,000 comprised primarily of a discount earned on the early retirement of the
Company's non related party debt.

     Canal's  revenues from continuing  operations  consist of revenues from its
real estate,  stockyards and art operations.  Due to general economic conditions
and more  specifically  a  depressed  national  art  market,  Canal's  aggregate
revenues  from  art  sales  and  the  prices  at  which  sales  were  made  have
significantly  declined in recent years. Total revenues decreased by $142,000 or
4.7% to $2,846,000 for the six month period ended April 30, 2001, as compared to
the revenues of $2,988,000  for the same period in fiscal 2000.  The fiscal 2001
decrease in revenues is due primarily to softer than anticipated volume from our
stockyard operations due to the severe winter conditions  experienced throughout
the Midwest, as well as a decrease in sales of art of approximately $28,000.


                                       21
<PAGE>


Real Estate Revenues

     Real estate  revenues  for the six months  ended April 30, 2001 of $490,000
accounted  for 17.2% of the fiscal  2001  revenues  as  compared  to real estate
revenues of $497,000  or 16.6% for the same period in fiscal  2000.  Real estate
revenues are comprised of the sale of real estate (0.0% and 0.0%), rental income
from commercial  office space in Canal's  Exchange  Buildings (44.2% and 45.7%),
outside  real estate rent  consisting  of rental and other lease income from the
rental of vacant land and certain  structures (55.6% and 54.3%) and other income
(0.2% and 0.0%) for the six months ended April 30, 2001 and 2000,  respectively.
There were no significant percentage variations in the year to year comparisons.

     Real estate  revenues for the three months ended April 30, 2001 of $248,000
accounted  for 19.1% of the fiscal  2001  revenues  as  compared  to real estate
revenues of $243,000  or 17.3% for the same period in fiscal  2000.  Real estate
revenues are comprised of the sale of real estate (0.0% and 0.0%), rental income
from commercial  office space in Canal's  Exchange  Buildings (43.6% and 41.7%),
outside  real estate rent  consisting  of rental and other lease income from the
rental of vacant land and certain  structures (56.1% and 58.3%) and other income
(0.3%  and  0.0%)  for  the  three   months  ended  April  30,  2001  and  2000,
respectively.  There were no  significant  percentage  variations in the year to
year comparisons.

Real Estate Expenses

     Real estate  expenses  for the six months  ended April 30, 2001 of $394,000
decreased  by $5,000  (1.2%) from real estate  expenses of $399,000 for the same
period in fiscal 2000.  Real estate  expenses were comprised of the cost of real
estate sold (0.0% and 0.0%),  labor,  operating and maintenance  expenses (59.1%
and 58.8%),  depreciation and amortization  (14.6% and 13.1%),  taxes other than
income taxes (19.0% and 17.4%) and general and administrative expenses (7.3% and
10.7%) for the six  months  ended  April 30,  2001 and 2000,  respectively.  The
percentage  variations in the year to year  comparisons are due primarily to the
decrease in general and administrative expenses.

     Real estate  expenses for the three months ended April 30, 2001 of $193,000
decreased  by $9,000  (4.3%) from real estate  expenses of $202,000 for the same
period in fiscal 2000.  Real estate  expenses were comprised of the cost of real
estate sold (0.0% and 0.0%),  labor,  operating and maintenance  expenses (57.1%
and 57.9%),  depreciation and amortization  (15.1% and 13.1%),  taxes other than
income taxes (19.8% and 16.9%) and general and administrative expenses (8.0% and
12.1%) for the three  months  ended April 30, 2001 and 2000,  respectively.  The
percentage  variations in the year to year  comparisons are due primarily to the
decrease in general and administrative expenses.


                                       22
<PAGE>


Stockyard Revenues

     Stockyard  revenues for the six months  ended April 30, 2001 of  $2,356,000
accounted  for 82.8% of the  fiscal  2001  revenues  as  compared  to  stockyard
revenues of  $2,463,000  or 82.4% for the same period in fiscal 2000.  Stockyard
revenues are comprised of yard handling and auction (88.3% and 88.5%),  feed and
bedding  income (6.5% and 6.4%),  rental income (0.1% and 0.1%) and other income
(5.1%  and  5.0%)  for the six month  periods  ended  April  30,  2001 and 2000,
respectively.  There were no  significant  percentage  variations in the year to
year comparisons.

     Stockyard  revenues for the three months ended April 30, 2001 of $1,051,000
accounted  for 80.9% of the  fiscal  2001  revenues  as  compared  to  stockyard
revenues of  $1,160,000  or 82.7% for the same period in fiscal 2000.  Stockyard
revenues are comprised of yard handling and auction (88.6% and 88.5%),  feed and
bedding  income (6.7% and 6.2%),  rental income (0.1% and 0.1%) and other income
(4.6% and  5.2%) for the three  month  periods  ended  April 30,  2001 and 2000,
respectively.  There were no  significant  percentage  variations in the year to
year comparisons.

Stockyard Expenses

     Stockyard  expenses for the six months  ended April 30, 2001 of  $1,944,000
decreased by $19,000 (9.8%) from  stockyard  expenses of $1,963,000 for the same
period in fiscal 2000.  Stockyard  expenses  are  comprised of labor and related
costs (45.2% and 46.3%), other operating and maintenance (26.4% and 23.4%), feed
and bedding expense (6.1% and 6.2%),  depreciation  and  amortization  (0.4% and
0.4%),   taxes  other  than  income  taxes  (6.9%  and  7.1%)  and  general  and
administrative  (15.0% and 19.6%) for the six month periods ended April 30, 2001
and 2000,  respectively.  There were no significant percentage variations in the
year to year comparisons.

     Stockyard  expenses  for the three  months ended April 30, 2001 of $919,000
decreased  by $12,000  (1.4%) from  stockyard  expenses of $931,000 for the same
period in fiscal 2000.  Stockyard  expenses  are  comprised of labor and related
costs (45.3% and 47.8%), other operating and maintenance (26.3% and 23.1%), feed
and bedding expense (6.0% and 6.3%),  depreciation  and  amortization  (0.4% and
0.3%),   taxes  other  than  income  taxes  (7.2%  and  6.8%)  and  general  and
administrative  (14.8% and 15.7%) for the three  month  periods  ended April 30,
2001 and 2000, respectively.  There were no significant percentage variations in
the year to year comparisons.


                                       23
<PAGE>


Art Operations - General

     Management estimates it may take approximately five years to dispose of its
current art inventory.  The Company's ability to dispose of its art inventory is
dependent at least in part, on general economic  conditions,  including  supply,
demand, international monetary conditions and inflation.  Additionally,  the art
market  itself  is a  very  competitive  market.  Accordingly,  there  can be no
assurance that Canal will be successful in disposing of its art inventory within
the time frame discussed above.

     Canal has its art inventory appraised by an independent appraiser annually.
The fiscal 2000 appraisal covered  approximately 57% of the inventory value. The
appraised  values  estimate  the  current  market  value  of each  piece  giving
consideration  to Canal's  practices  of  engaging in  consignment,  private and
public  auction  sales.  The net  realizable  value of the  remaining 43% of the
inventory was estimated by management based in part on operating  history and in
part on the results of the  independent  appraisals  done.  In fiscal 2000 Canal
applied  against  sales  $50,750  of the  valuation  allowance  against  its art
inventory, thereby, decreasing the total valuation allowance to $2,727,950 as of
October 31, 2000, as compared to  $2,778,700 at October 31, 1999.  There were no
sales of art in the first six months of 2001.

     The  Company's  plan to sell  inventory at auction is  contemplated  in the
normal course of business.  Auction in this context is one of the usual channels
used by the Company for disposal of its art  inventory.  The proceeds from these
sales are used to reduce the  Company's  outstanding  debt and  finance  current
operations.  If these  sales are not made the  Company  has  alternate  means of
raising  cash such as sale of real  estate,  raising of new  capital and further
rescheduling  of debt. Some of these measures were  successfully  implemented in
fiscal 2000.

Art Revenues

     Art revenues for the six months ended April 30, 2001 of $zero accounted for
0.0% of the fiscal 2001  revenues as compared to art revenues of $28,000 or 1.0%
for the same period in fiscal 2000.  Art revenues are comprised of proceeds from
the sale of antiquities  and  contemporary  art (0.0% and 100.0%) and commission
income on sale of art owned by third  parties  (0.0% and 0.0%) for the six month
periods ended April 30, 2001 and 2000, respectively. The Company's art inventory
was reduced through sales by $zero in the first six months of fiscal 2001.

     There were no sales of art for the three  months  periods  ended  April 30,
2001 and 2000.


                                       24
<PAGE>


Art Expenses

     Art expenses  for the six months ended April 30, 2001 of $15,000  decreased
by $21,000 from art expenses of $36,000 for the same period in fiscal 2000.  Art
expenses (net of a valuation  allowance of $51,000 in fiscal 2000)  consisted of
the cost of art sold (0.0% and 59.8%) and  selling,  general and  administrative
expenses  (100.0% and 40.2%) for the six month  periods ended April 30, 2001 and
2000,  respectively.  It is the  Company's  policy to use the adjusted  carrying
value for sales,  thereby reducing the valuation reserve  proportionately as the
inventory is sold.

     Art  expenses  for the three  months  ended  April 30,  2001 of $7,000 were
unchanged  from art expenses of $7,000 for the same period in fiscal  2000.  Art
expenses consisted of the cost of art sold (0.0% and 0.0%) and selling,  general
and  administrative  expenses  (100.0% and  100.0%) for the three month  periods
ended April 30, 2001 and 2000,  respectively.  It is the Company's policy to use
the adjusted  carrying value for sales,  thereby reducing the valuation  reserve
proportionately as the inventory is sold.

General and Administrative

     General and administrative expenses for the six months ended April 30, 2001
of $535,000  decreased by $7,000  (1.2%) from  expenses of $542,000 for the same
period in fiscal  2000.  The major  components  of  general  and  administrative
expenses are officers  salaries (42.8% and 41.5%),  rent (8.5% and 8.3%),  legal
and  professional  fees (5.7% and 6.8%),  insurance (10.1% and 10.0%) and office
salaries  (11.5% and 11.0%) for the six month  periods  ended April 30, 2001 and
2000, respectively.  There were no significant percentage variations in the year
to year comparisons.

     General and  administrative  expenses  for the three months ended April 30,
2001 of $270,000  decreased by $5,000  (1.7%) from  expenses of $275,000 for the
same period in fiscal 2000. The major  components of general and  administrative
expenses are officers  salaries (42.5% and 41.8%),  rent (8.6% and 8.3%),  legal
and  professional  fees (5.7% and 6.7%),  insurance  (10.0% and 9.8%) and office
salaries  (11.4% and 11.3%) for the three month periods ended April 30, 2001 and
2000, respectively.  There were no significant percentage variations in the year
to year comparisons.


                                       25
<PAGE>


Interest and Other Income

     Interest  and other  income  for the six  months  ended  April 30,  2001 of
$143,000  increased by $4,000  (3.1%) from interest and other income of $139,000
for the same period in fiscal 2000. Included in the 2001 results is other income
of approximately  $130,000 comprised  primarily of a damage award Canal received
in connection with its lawsuit against a meat packing company in South St. Paul,
Minnesota.  Canal  is  appealing  this  award to gain  additional  compensation.
Included in the fiscal 2000 results is a $125,000  discount  earned on the early
retirement of the Company's non related party debt.

Interest Expense

     Interest  expense for the six months  ended April 30, 2001 of $126,000  was
unchanged from interest  expense of $126,000 for the same period in fiscal 2000.
For the most part interest rates on Canal's debt have remained unchanged for the
past 12 months.

Capital Resources and Liquidity

     While the  Company  is  currently  operating  as a going  concern,  certain
significant  factors  raise  substantial  doubt about the  Company's  ability to
continue as a going  concern.  The Company has  suffered  recurring  losses from
operations in eight of the last ten years and is involved in  litigation  with a
meat packer located in South St. Paul,  Minnesota.  The financial  statements do
not include any  adjustments  that might  result  from the  resolution  of these
uncertainties.  Additionally,  the  accompanying  financial  statements  do  not
include any adjustments  relating to the  recoverability  and  classification of
recorded asset amounts or the amounts and  classification  of  liabilities  that
might be necessary should the Company be unable to continue as a going concern.

     On January 8, 1998, the Company issued $3,700,000 of variable rate mortgage
notes due May 15, 2001. The purchasers of these notes included  certain entities
controlled by the Company's Chairman,  the Company's Chief Executive Officer and
members of their families.  These notes carried  interest at the highest of four
variable  rates,  determined  on a quarterly  basis.  These  notes,  among other
things,  prohibits  Canal from becoming an investment  company as defined by the
Investment  Company Act of 1940;  requires Canal to maintain  minimum net worth;
restricts  Canal's ability to pay cash dividends or repurchase  stock;  requires
principal  prepayments  to be made  only  out of the  proceeds  from the sale of
certain  assets and required the accrual of  additional  interest (to be paid at
maturity) of approximately three percent per annum.


                                       26
<PAGE>


     On July 29, 1999 the above Notes were amended to extend the  maturity  date
to May 15, 2003;  to fix the interest  rate at 10% per annum;  to agree that the
additional  interest due to the holders of the notes shall become current and be
treated as  principal  due under the notes;  and to have  certain of the holders
loan the Company  $525,000 in  additional  financing,  the proceeds of which was
used to repay in full  certain of the other  holders of the notes.  As a result,
the notes are now held in total by the  Company's  Chief  Executive  Officer and
members of his family.

     On January 10, 2000,  the above Notes were further  amended to have holders
loan the Company $1,725,000 in additional  financing,  the proceeds of which was
used to  repay  in full  all of the  Company's  outstanding  non  related  party
long-term  debt.  As of April 30,  2001,  the  balance due under these notes was
$2,522,000 all of which is classified as long-term debt related party.

     Cash and cash  equivalents of $8,000 at April 30, 2001 decreased by $79,000
from cash and cash equivalents of $87,000 at October 31, 2000. Net cash provided
by operations so far in fiscal 2001 was $80,000.

     At April 30, 2001 and October 31, 2000, the Company's  current  liabilities
exceeded current assets by $0.8 million and $0.6 million, respectively. The only
required principal repayments under Canal's debt agreements for fiscal 2001 will
be from the proceeds (if any) of the sale of certain assets.

     Canal  continues to closely  monitor and reduce where possible its overhead
expenses  and plans to  continue to reduce the level of its art  inventories  to
enhance current cash flows.  Management believes that its income from operations
combined  with  its  cost  cutting  program  and  planned  reduction  of its art
inventory will enable it to finance its current business activities.  There can,
however,  be no assurance  that Canal will be able to effectuate its planned art
inventory  reductions or that its income from operations  combined with its cost
cutting   program  in  itself  will  be  sufficient  to  fund   operating   cash
requirements.

Other Factors

     Some of the  statements  in this Form 10-Q,  as well as  statements  by the
Company in  periodic  press  releases,  oral  statements  made by the  Company's
officials to analysts and stockholders in the course of presentations  about the
Company  and   conference   calls   following   earning   releases,   constitute
"forward-looking  statements"  within  the  meaning  of the  Private  Securities
Litigation Reform Act of 1995. Such forward-looking statements involve known and
unknown  risks,  uncertainties  and other  factors  that may  cause  the  actual
results,  performance or achievements of the Company to be materially  different
from any future results, performance or achievements expressed or implied by the
forward-looking statements.


                                       27
<PAGE>


Item III - Quantitative and Qualitative Disclosures About Market Risk

     We do not have  any  derivative  financial  instruments  in our  marketable
securities  portfolio as of April 30, 2001. We employ  established  policies and
procedures  to  manage  our  exposure  to  changes  in the  market  risk  of our
marketable securities which are classified as available-for-sale as of April 30,
2001.  Canal's related party mortgage notes have fixed interest rates therefore,
the fair  value of these  instruments  is not  affected  by  changes  in  market
interest  rates.  Canal  believes  that the market risk arising from holding its
financial instruments is not material.

     Information  relating to  quantitative  and  qualitative  disclosure  about
market risk is set forth in  "Management's  Discussion and Analysis of Financial
Condition and Results of Operations-Liquidity and Capital Resources".


                                       28
<PAGE>


                                     PART II

                                OTHER INFORMATION


                                       29
<PAGE>


Item 1:        Legal Proceedings:

               See Item 3 of Canal's October 31, 2000 Form 10-K.

Item 2 and 3:  Not applicable.

Item 4:        Submission of Matters to a Vote of Security Holders:

               None.

Item 5:        Other Information:

               None.

Item 6:        Exhibits and Reports on Form 8-K:

               (A)  Not applicable.

               (b)  No reports on Form 8-K have been  filed  during the  quarter
                    for which the report is filed.


                                       30
<PAGE>


                                   SIGNATURES

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


                                        Canal Capital Corporation
                                             Registrant


                                        /s/  Reginald Schauder
                                        --------------------------------------
                                        Reginald Schauder
                                        Vice President-Finance &
                                        Chief Financial Officer

Date: June 12, 2001


                                       31