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 January 31, 2000
                                                ----------------

                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 February 29, 2000
------------------------------
Common stock, $0.01 par value                         4,326,929
                                                      ---------

(This document contains 23 pages)
<PAGE>
                           CANAL CAPITAL CORPORATION & SUBSIDIARIES
                                CONSOLIDATED BALANCE SHEETS
                            JANUARY 31, 2000 AND OCTOBER 31, 1999

<TABLE>
<CAPTION>

                                                          JANUARY 31,          OCTOBER 31,
                                                             2000                1999
                                                          (UNAUDITED)           (AUDITED)
                                                          -----------          ----------
<S>                                                           <C>                  <C>
ASSETS:

CURRENT ASSETS:

       CASH AND CASH EQUIVALENTS                        $   225,381        $    416,191
       NOTES AND ACCOUNTS RECEIVABLE, NET                   450,762             321,065
       ART INVENTORY, NET OF A VALUATION ALLOWANCE OF
                   $ 1,500,000 AT BOTH JANUARY 31,
                   2000 AND OCTOBER 31, 1999                500,000             500,000
       STOCKYARDS INVENTORY                                  28,704              13,189
       INVESTMENTS                                          203,393             191,833
       PREPAID EXPENSES                                     151,957             218,645
                                                        -----------         -----------

            TOTAL CURRENT ASSETS                          1,560,197           1,660,923
                                                        -----------         -----------




NON-CURRENT ASSETS:

       PROPERTY ON OPERATING LEASES, NET OF
             ACCUMULATED DEPRECIATION OF
             $1,336,279 AND $1,307,638 AT
             JANUARY 31, 2000 AND
             OCTOBER 31, 1999, RESPECTIVELY               3,096,553           3,088,550
                                                        -----------         -----------


          PROPERTY USED IN STOCKYARD OPERATIONS, NET OF
             ACCUMULATED DEPRECIATION OF $6,250 AND
             $2,500 AT JANUARY 31, 2000 AND OCTOBER
             31, 1999, RESPECTIVELY                       1,243,750           1,247,500
                                                        -----------         -----------


       ART INVENTORY NON-CURRENT, NET OF A
             VALUATION ALLOWANCE OF $ 1,227,950
             AND $1,278,700 AT JANUARY 31, 2000
             AND OCTOBER 31, 1999, RESPECTIVELY             713,157             734,907
                                                        -----------         -----------



OTHER ASSETS:

       PROPERTY HELD FOR DEVELOPMENT OR RESALE              977,695             977,695
       DEFERRED LEASING AND FINANCING COSTS                  14,564              16,337
       DEPOSITS AND OTHER                                   236,124             207,973
                                                        -----------         -----------

                                                          1,228,383           1,202,005
                                                        -----------         -----------

                                                        $ 7,842,040         $ 7,933,885
                                                        ===========         ===========
</TABLE>



                                        2
<PAGE>

                    CANAL CAPITAL CORPORATION & SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
                      JANUARY 31, 2000 AND OCTOBER 31, 1999
<TABLE>
<CAPTION>

                                                     JANUARY 31,       OCTOBER 31,
                                                         2000              1999
                                                     (UNAUDITED)         (AUDITED)
                                                     -----------        ----------
<S>                                                      <C>                <C>
LIABILITIES & STOCKHOLDERS' EQUITY:

CURRENT LIABILITIES:

       CURRENT PORTION OF LONG-TERM DEBT                      0             75,000
       ACCOUNTS PAYABLE AND ACCRUED EXPENSES          1,802,448          1,879,611
       INCOME TAXES PAYABLE                               2,636             10,108
                                                   ------------       ------------

         TOTAL CURRENT LIABILITIES                    1,805,084          1,964,719
                                                   ------------       ------------


LONG-TERM DEBT, LESS CURRENT PORTION                          0          1,778,710
LONG-TERM DEBT, RELATED PARTY                         2,540,000            833,000
                                                   ------------       ------------

                                                      2,540,000          2,611,710
                                                   ------------       ------------

COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS' EQUITY:

  PREFERRED STOCK, $0.01 PAR VALUE:
     5,000,000 SHARES AUTHORIZED;  3,879,258 AND
     3,879,258  SHARES ISSUED AND  OUTSTANDING
     AT JANUARY 31, 2000 AND OCTOBER 31, 1999,
     RESPECTIVELY AND AGGREGATE  LIQUIDATION
     PREFERENCE OF $10 PER SHARE FOR $ 38,792,580
     AND $38,792,580 AT JANUARY 31, 2000 AND
     OCTOBER 31, 1999, RESPECTIVELY                      38,793             38,793

  COMMON STOCK, $0.01 PAR VALUE:
     10,000,000 SHARES AUTHORIZED; 5,313,794
     SHARES ISSUED AND 4,326,929 SHARES OUTSTANDING
     AT JANUARY 31, 2000 AND OCTOBER 31, 1999,
     RESPECTIVELY                                        53,138             53,138

  ADDITIONAL PAID-IN CAPITAL                         27,334,159         27,274,159

  ACCUMULATED DEFICIT                               (10,690,248)       (10,758,188)

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


  COMPREHENSIVE INCOME:

    PENSION VALUATION RESERVE                        (1,903,176)        (1,903,176)

    UNREALIZED LOSS ON INVESTMENTS AVAILABLE
     FOR SALE                                          (332,165)          (343,725)
                                                   ------------       ------------


                                                      3,496,956          3,357,456
                                                   ------------       ------------

                                                   $  7,842,040       $  7,933,885
                                                   ============       ============
</TABLE>

                                        3

<PAGE>

                    CANAL CAPITAL CORPORATION & SUBSIDIARIES
          CONSOLIDATED STATEMENTS OF OPERATIONS & COMPREHENSIVE INCOME
              FOR THE THREE MONTHS ENDED JANUARY 31, 2000 AND 1999



                                                2000            1999
                                            (UNAUDITED)     (UNAUDITED)
                                            -----------     -----------
REAL ESTATE OPERATIONS:
 REAL ESTATE REVENUES:
    SALE OF REAL ESTATE                    $         0     $    60,000
    RENTAL INCOME                              254,158         256,620
    GROUND LEASE INCOME                              0         231,000
    VOLUME BASED RENTAL INCOME                       0          21,645
    OTHER INCOME                                    75           1,924
                                           -----------     -----------

                                               254,233         571,189

 REAL ESTATE EXPENSES:
    COST OF REAL ESTATE SOLD                         0          40,897
    LABOR, OPERATING AND MAINTENANCE           117,782          98,759
    DEPRECIATION AND AMORTIZATION               25,819          52,291
    TAXES OTHER THAN INCOME TAXES               35,000          47,593
    GENERAL AND ADMINISTRATIVE                  18,328          17,709
                                           -----------     -----------

                                               196,929         257,249

INCOME FROM REAL ESTATE OPERATIONS              57,304         313,940
                                           -----------     -----------




STOCKYARD OPERATIONS:
 STOCKYARD REVENUES:
    YARD HANDLING AND AUCTION              $ 1,154,267     $         0
    FEED AND BEDDING INCOME                     85,862               0
    RENTAL INCOME                                1,396               0
    OTHER INCOME                                62,063               0
                                           -----------     -----------

                                             1,303,588               0
                                           -----------     -----------

STOCKYARD EXPENSES:
    LABOR AND RELATED COSTS                    462,943               0
    OTHER OPERATING AND MAINTENANCE            245,383               0
    FEED AND BEDDING EXPENSE                    64,462               0
    DEPRECIATION AND AMORTIZATION                3,750               0
    TAXES OTHER THAN INCOME TAXES               75,680               0
    GENERAL AND ADMINISTRATIVE                 179,527               0
                                           -----------     -----------

                                             1,031,745               0
                                           -----------     -----------


INCOME FROM STOCKYARD OPERATIONS               271,843               0
                                           -----------     -----------


                                        4
<PAGE>

                    CANAL CAPITAL CORPORATION & SUBSIDIARIES
          CONSOLIDATED STATEMENTS OF OPERATIONS & COMPREHENSIVE INCOME
              FOR THE THREE MONTHS ENDED JANUARY 31, 2000 AND 1999
                                  Continued ...


                                               2000           1999
                                           (UNAUDITED)     (UNAUDITED)
                                           -----------     -----------
ART OPERATIONS:
 ART REVENUES:
    SALES                                       27,500         162,400
    OTHER REVENUES                                   0               0
                                           -----------     -----------
                                                27,500         162,400

 ART EXPENSES:
    COST OF ART SOLD                            72,500         713,652
    VALUATION RESERVE                          (50,750)       (533,300)
    SELLING, GENERAL AND ADMINISTRATIVE          7,681          11,139
                                           -----------     -----------

                                                29,431         191,491

LOSS FROM ART OPERATIONS                        (1,931)        (29,091)
                                           -----------     ------------




GENERAL AND ADMINISTRATIVE EXPENSE         $  (267,344)    $  (262,526)
                                           -----------     -----------


INCOME (LOSS) FROM OPERATIONS                   59,872          22,323
                                           -----------     -----------

OTHER INCOME (EXPENSE):
  INTEREST & OTHER INCOME                      134,084           5,974
  INTEREST EXPENSE                             (43,676)        (60,475)
  INTEREST EXPENSE-RELATED PARTY               (22,340)       (108,000)
  OTHER EXPENSE                                      0               0
                                           -----------     -----------

                                                68,068        (162,501)

INCOME (LOSS) BEFORE PROVISION FOR INCOME
  TAXES                                        127,940        (140,178)

PROVISION (BENEFIT) FOR INCOME TAXES                 0               0
                                           -----------     -----------

NET INCOME (LOSS)                              127,940        (140,178)


OTHER COMPREHENSIVE INCOME (LOSS):

  UNREALIZED LOSS ON INVESTMENTS
  AVAILABLE FOR SALE                            11,560         (57,802)
                                           -----------     -----------



COMPREHENSIVE INCOME (LOSS)                $   139,500     $  (197,980)
                                          ============     ===========


INCOME (LOSS) PER COMMON SHARE            $       0.02     $     (0.06)
                                          ============     ===========

                                        5
<PAGE>

                    CANAL CAPITAL CORPORATION & SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
              FOR THE THREE MONTHS ENDED JANUARY 31, 2000 AND 1999


                                                     2000              1999
                                                  (UNAUDITED)       (UNAUDITED)
                                                  -----------       -----------
CASH FLOWS FROM OPERATING ACTIVITIES:
  NET INCOME (LOSS)                               $   127,940      $  (140,178)

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

   PROVISION FOR LITIGATION SETTLEMENT                      0                0
   DEPRECIATION AND AMORTIZATION                       30,398           57,519
   GAIN  ON SALES OF REAL ESTATE                            0          (19,103)


CHANGES IN ASSETS AND LIABILITIES:

     NOTES AND ACCOUNTS RECEIVABLES, NET             (129,697)         (16,396)
     ART INVENTORY, NET                                21,750          177,104
     PREPAID EXPENSES AND OTHER, NET                   26,787           10,510
     PAYABLES AND ACCRUED EXPENSES, NET               (84,635)          19,017
                                                  -----------      -----------
NET CASH (USED) PROVIDED
    BY OPERATING ACTIVITIES                            (7,457)          88,473
                                                  -----------      -----------


CASH FLOWS FROM INVESTING ACTIVITIES:
  PROCEEDS FROM SALES OF REAL ESTATE                        0           60,000
  PROCEEDS FROM SALE OF INVESTMENTS                         0                0
  CAPITAL EXPENDITURES                                (36,643)               0
                                                  -----------      -----------
NET CASH PROVIDED BY INVESTING ACTIVITIES             (36,643)          60,000
                                                  -----------      -----------

CASH FLOWS FROM FINANCING ACTIVITIES:
  PROCEEDS FROM LONG-TERM DEBT-RELATED
    PARTIES                                         1,725,000                0
  REPAYMENT OF CURRENT PORTION OF LONG-TERM           (75,000)               0
  REPAYMENT OF LONG-TERM DEBT OBLIGATIONS          (1,796,710)        (164,620)
                                                  -----------      -----------
NET CASH USED BY FINANCING ACTIVITIES                (146,710)        (164,620)
                                                  -----------      -----------

NET (DECREASE) INCREASE IN CASH AND CASH
  EQUIVALENTS                                        (190,810)         (16,147)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR        416,191           33,358
                                                  -----------     ------------

CASH AND CASH EQUIVALENTS AT END OF YEAR          $   225,381     $     17,211
                                                  ===========     ============



NOTE:   Canal made  federal and state  income tax  payments of $6,000 and $7,000
        and interest  payments of $66,000 and $168,000 in the nine month periods
        ended January 31, 2000 and 1999, respectively.


                                        6

<PAGE>

                   CANAL CAPITAL CORPORATION AND SUBSIDIARIES
           CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
                FOR THE YEAR ENDED OCTOBER 31, 1999 (AUDITED) AND
             FOR THE THREE MONTHS ENDED JANUARY 31, 2000 (UNAUDITED)

<TABLE>
<CAPTION>

                                    COMMON STOCK        PREFERRED STOCK
                                    NUMBER              NUMBER
                                      OF                  OF                    PAID-IN
                                    SHARES   AMOUNT     SHARES       AMOUNT     CAPITAL
                                    -----    ------     ------       ------     -------
<S>                                   <C>      <C>        <C>          <C>        <C>

BALANCE, OCTOBER 31, 1998        5,313,794   $53,138    3,411,681    $34,117  $27,033,046
 NET INCOME (LOSS)                       0         0            0          0            0
 PREFERRED STOCK DIVIDEND                0         0      467,577      4,676      241,113
 MINIMUM PEN. LIAB. ADJUSTMENT           0         0            0          0            0
 UNREALIZED GAIN ON INVESTMENTS          0         0            0          0            0
                                --------------------   ---------------------  -----------

BALANCE, OCTOBER 31, 1999        5,313,794    53,138    3,879,258     38,793   27,274,159
 NET INCOME (LOSS)                       0         0            0          0            0
 PREFERRED STOCK DIVIDEND                0         0            0          0       60,000
 MINIMUM PEN. LIAB. ADJUSTMENT           0         0            0          0            0
 UNREALIZED GAIN ON INVESTMENTS          0         0            0          0            0
                                --------------------   ---------------------   ----------


BALANCE, JANUARY 31, 2000        5,313,794   $53,138    3,879,258    $38,793  $27,334,159
                                ====================   ===================== ============
</TABLE>

<TABLE>
<CAPTION>

                              RETAINED    -COMPREHENSIVE (LOSS) INCOME-   TREASURY
                              EARNINGS       VALUATION    UNREALIZED       STOCK
                              DEFICIT         RESERVE     GAIN ON INV.    AT COST
                              -------         -------     ------------    -------
<S>                             <C>             <C>           <C>            <C>

BALANCE, OCTOBER 31, 1998  ($11,808,043)    ($1,896,838)   $  (257,383) ($11,003,545)
 NET INCOME (LOSS)            1,285,004               0              0             0
 PREFERRED STOCK DIVIDEND      (235,149)              0              0             0
 MINIMUM PEN. LIAB. ADJ.              0          (6,338)             0             0
 UNREALIZED GAIN ON INV.              0               0        (86,342)            0
                           -------------  -------------   ------------  ------------

BALANCE, OCTOBER 31, 1999   (10,758,188)    ($1,903,176)      (343,725)  (11,003,545)
 NET INCOME (LOSS)              127,940               0              0             0
 PREFERRED STOCK DIVIDEND       (60,000)              0              0             0
 MINIMUM PEN. LIAB. ADJ.              0               0              0             0
 UNREALIZED GAIN ON INV.              0               0         11,560             0
                           -------------  --------------   ------------ ------------

BALANCE, JANUARY 31, 2000  ($10,690,248)    ($1,903,176)   $  (332,165) ($11,003,545)
                           =============  ==============  ============= =============
</TABLE>




                                       7
<PAGE>

                   CANAL CAPITAL CORPORATION AND SUBSIDIARIES
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                       THREE MONTHS ENDED JANUARY 31, 2000
                                   (UNAUDITED)

1.   General

         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 seven 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 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.

2.       Reclassification

         Certain  prior year  amounts have been  reclassified  to conform to the
current year's presentation.

                                        8
<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 January 31, 2000 and the results of
its  operations  and its cash flows for the three month period ended January 31,
2000. 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,  1999 and the notes  thereto  which are  contained  in Canal's  1999
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 2000.

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 $57,000 and
$314,000,  while contributing  $254,000 and $571,000 to Canal's revenues for the
three month periods ended January 31, 2000 and 1999, respectively.

         As  of  January  31,  2000,  there  are   approximately  250  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.

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.

                                        9
<PAGE>

         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 $272,000  while
contributing  $1,304,000  to Canal's  revenues  for the three month period ended
January 31, 2000. As discussed  above Canal had no similar  operations in fiscal
1999.

7.       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
$670,000 at January 31, 2000. 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% ($670,399) and 44% ($542,758) and 56% ($692,149) of total
art  inventory  at  January  31,  2000  and  October  31,  1999,   respectively.
Substantially all of the contemporary art inventory held for resale is comprised
of the work of Jules Olitski.

        Management  estimates  it may take two to 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.

                                       10
<PAGE>

        Canal  has its  art  inventory  appraised  by an  independent  appraiser
annually.  The 1999 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 the first  three
months of fiscal  2000 Canal  applied  against  sales  $51,000 of the  valuation
allowance  against its art inventory,  thereby,  decreasing the total  valuation
allowance to  $2,728,000  as of January 31, 2000.  Additionally,  in fiscal 1999
Canal applied against sales $621,000 of the valuation  allowance against its art
inventory, thereby, decreasing the total valuation allowance to $2,779,000 as of
October 31, 1999.

         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 sales of  investments,  sale
of real estate,  raising of new capital and  rescheduling of debt. Some of these
measures were successfully implemented in fiscal 1999.

         Canal's art operations  have generated  operating  losses of $2,000 and
$29,000 (net of decreases in the valuation allowance of $51,000 and $533,000 for
the three  month  periods  ended  January 31,  2000 and 1999,  respectively)  on
revenues of $28,000 and $162,000 for the three months ended January 31, 2000 and
1999,  respectively.  Art sales have resulted  primarily  through  activities in
conjunction with sales of antiquities.  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  $1,358,000 of
art  inventory on  consignment  with third party dealers at January 31, 2000 and
October 31, 1999, respectively.

8.       Property and Equipment

         Included  in  property  and  equipment  were the cost of  buildings  of
approximately $2.5 million at January 31, 2000 and October 31, 1999.

                                       11
<PAGE>

9.       Notes Receivable

         Included in the notes and accounts  receivable were the current portion
of notes from real  estate  sales in the amount of  $158,000 at January 31, 2000
and October 31, 1999.

10.      Investments Available For Sale

         At January 31, 2000 the investments available for sale consisted of the
following:

                                               January 31,       October 31,
        ($ 000's Omitted)                         2000               1999
                                               -----------         -------


         Aggregate market value.................   $  203           $  192
                                                   ------           ------


         Aggregate carrying value...............   $  203           $  192
                                                   ------           ------



         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.

         For the three  months  ended  January  31,  2000  Canal  recognized  an
unrealized gain on investments available for sale of $12,000.  Additionally,  in
fiscal 1999 Canal  recognized an unrealized  loss on  investments  available for
sale of $7,000,  both of which are shown in a separate component of Stockholders
Equity.

                                       12
<PAGE>

11. Borrowings

         At January 31, 2000, 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:

                                          January 31,       October 31,
                                              2000            1999
                                          (Unaudited)        (Audited)

(Thousands of Dollars)

Variable rate mortgage notes due
 May 15, 2003 - related party............    $ 2,540         $   833


11% mortgage note; original principal
 amount $1,697; due April 1, 2011;
 payable in monthly installments
 (including interest) of $14..............         0           1,153


9.5% mortgage note; original principal
 amount $472; due November 1, 2012,
 payable in monthly installments
 (including interest) of $5...............         0             381


10 1/2% mortgage note  (adjusted
 periodically  to prime plus 1 3/4%);
 original principal amount $556 due
 January 15, 2013; payable in monthly
 installments (including interest) of $6..         0               0


Other Note................................         0             320
                                             -------         -------



Total ....................................     2,540           2,687

Less -- current maturities ...............         0              75
                                             -------         -------

Long-term debt ...........................   $ 2,540         $ 2,612
                                             -------         -------


                                       13
<PAGE>

         On January 8, 1998,  the Company  issued  $3,700,000  of variable  rate
mortgage  notes due May 15,  2001,  the  proceeds of which were used to repay in
full the Company's  variable rate mortgage notes due May 15, 1998  ($2,605,000),
its variable rate mortgage notes due September 15, 1998 ($700,000) and two notes
which were due December 31, 1997 ($320,000) plus accrued interest  thereon.  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.
The variable  rate  mortgage  notes issued have  essentially  the same terms and
conditions as the variable rate  mortgage  notes which were repaid.  These notes
carry 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 requires 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 January 31, 2000, the balance due under these notes
was $2,540,000 all of which is classified as long-term debt-related party.

12.      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.

                                       14
<PAGE>

                      Management's Discussion and Analysis
                Of Results of Operations and Financial Condition
                   For the Three Months Ended January 31, 2000

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 seven 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  recognized  net income of $127,000  for the three  month  period
ended January 31, 2000 as compared to a net loss of $140,000 for the same period
in fiscal 1999. After  recognition of an unrealized gain on investments held for
sale of $12,000 for the three month  period  ended  January 31, 2000 the Company
recognized  comprehensive  income of $140,000  for the three month  period ended
January 31, 2000 as compared to a  comprehensive  loss of $198,000  for the same
period in fiscal 1999.  Further,  after  recognition of preferred stock dividend
payments of $60,000 for the three  month  period  ended  January 31,  2000,  the
Company  recognized income  applicable to common  stockholders of $80,000 ($0.02
per common  share) for the three month period ended January 31, 2000 as compared
to a loss applicable to common stockholders of $246,000 ($0.06 per common share)
for the same period in fiscal 1999. 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  (fiscal  2000  only) 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.  Revenues  increased by
$852,000 or 116.1% to  $1,585,000  for the three month period ended  January 31,
2000, as compared to the revenues for the same period in fiscal 1999. The fiscal
2000  increase is due  primarily to the inclusion of the Company's new stockyard
operations which contributed $1,304,000 (82.3%) to first quarter revenues.  This
new  contribution  to revenues  was offset to a certain  extent by a decrease in
ground lease income  ($231,000)  which the Company had received  from the former
stockyard  operator  and a  decrease  in sales of real  estate of $60,000 in the
current quarter as compared to the first quarter of 1999.

                                       15
<PAGE>

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 seven 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  proceeds of which were used to repay in
full the Company's  variable rate mortgage notes due May 15, 1998  ($2,605,000),
its variable rate mortgage notes due September 15, 1998 ($700,000) and two notes
which were due December 31, 1997 ($320,000) plus accrued interest  thereon.  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.
The variable  rate  mortgage  notes issued have  essentially  the same terms and
conditions as the variable rate  mortgage  notes which were repaid.  These notes
carry 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 requires 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 January 31, 2000, the balance due under these notes
was $2,540,000 all of which is classified as long-term debt related party.

         Cash and cash  equivalents  of $225,000  at January 31, 2000  decreased
$191,000 from  $416,000 at October 31, 1999.  Net cash used by operations so far
in fiscal 2000 was $7,000. Substantially all of the fiscal 2000 net

                                       16
<PAGE>

proceeds from related party loans and the proceeds from the sale of art was used
to reduce  outstanding  debt and  accrued  expenses.  During  fiscal  2000 Canal
reduced its long-term debt by $147,000.

         At January 31, 2000 the Company's current liabilities  exceeded current
assets by $0.2 million,  as compared to current  liabilities  exceeding  current
assets  by $0.3  million  at  October  31,  1999.  The only  required  principal
repayments  under  Canal's  debt  agreements  for  fiscal  2000 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.

2000 Compared to 1999
---------------------

Real Estate Revenues
--------------------

        Real estate  revenues  for the three  months  ended  January 31, 2000 of
$254,000  accounted for 16.0% of the first quarter  revenues as compared to real
estate  revenues of  $571,000 or 77.9% for the same period in 1999.  Real estate
revenues  are  comprised of rental  income from  Exchange  Building  (commercial
office space)  rentals and other lease income from the rental of vacant land and
certain  structures  (99.9% and 44.9%),  ground  lease  income (0.0% and 40.4%),
volume  based  rental  income  (0.0% and 3.8%) and sale of real estate and other
income (0.1% and 10.9%) for the three  months  ended  January 31, 2000 and 1999,
respectively.  The percentage variations in the year to year comparisons are due
primarily to the Company's re-entry into the stockyard business which eliminated
the  ground  lease  income   received  from  the  former   stockyard   operator.
Additionally, the January 1999 permanent closing of the Fargo meat packing plant
eliminated the volume based rental income which the Company had been receiving.

Real Estate Expenses
--------------------

        Real estate  expenses  for the three  months  ended  January 31, 2000 of
$197,000 decreased by $60,000 (23.5%) from $257,000 for the same period in 1999.
Real estate expenses were comprised of labor,  operating and maintenance  (59.8%
and 38.4%),  depreciation and amortization  (13.1% and 20.3%),  taxes other than
income taxes (17.8% and 18.5%), cost of real estate

                                       17
<PAGE>

sold (0.0% and 15.9%) and general and  administrative  expenses  (9.3% and 6.9%)
for the  three  months  ended  January  31,  2000 and  1999,  respectively.  The
percentage variations in year to year comparisons are also due to the changes in
the nature of the Company's operations as discussed above.

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.

         Stockyard  operations  resulted in operating  income of $272,000  while
contributing  $1,304,000  to Canal's  revenues  for the three month period ended
January 31, 2000. As discussed  above Canal had no similar  operations in fiscal
1999 for comparison purposes.

Art Operations - General
------------------------

        Management  estimates  it may take two to 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 1999 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 the first  three
months of fiscal  2000 Canal  applied  against  sales  $51,000 of the  valuation
allowance  against its art inventory,  thereby,  decreasing the total  valuation
allowance to  $2,728,000  as of January 31, 2000.  Additionally,  in fiscal 1999
Canal applied against sales $621,000 of the valuation  allowance against its art
inventory, thereby, decreasing the total valuation allowance to $2,779,000 as of
October 31, 1999.

        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

                                       18
<PAGE>

finance  current  operations.  If  these  sales  are not made  the  Company  has
alternate  means of  raising  cash  such as sales of  investments,  sale of real
estate,  raising of new capital and further  rescheduling of debt. Some of these
measures were successfully implemented in fiscal 1999.

Art Revenues
------------

         Art revenues  for the three  months  ended  January 31, 2000 of $28,000
decreased  $134,000 from $162,000 for the same period in 1999.  Art revenues are
comprised of proceeds from the sale of antiquities and  contemporary art (100.0%
and 100.0%) and  commission  income on sale of art owned by third  parties (0.0%
and  0.0%)  for the  three  month  period  ended  January  31,  2000  and  1999,
respectively.  The Company's art inventory was reduced  through sales by $22,000
in the first quarter of fiscal 2000.

Art Expenses
------------

         Art expenses  for the three  months  ended  January 31, 2000 of $29,000
decreased by $162,000  from  $191,000 for the same period in 1999.  Art expenses
(net of a valuation  allowance  of $51,000 in fiscal 2000 and $533,000 in fiscal
1999)  consisted of the cost of art sold (73.9% and 94.2%) and selling,  general
and  administrative  expenses  (26.1% and 5.8%) for the three month period ended
January 31, 2000 and 1999,  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 three months ended January
31, 2000 of $267,000  increased  $5,000 (1.8%) from $262,000 for the same period
in 1999.  The major  components  of  general  and  administrative  expenses  are
officers  salaries  (41.2%  and  41.1%),   rent  (8.3%  and  9.3%),   legal  and
professional  fees  (6.9% and  6.9%),  insurance  (10.1%  and  11.4%) and office
salaries (10.8% and 10.6%) for the three month period ended January 31, 2000 and
1999, respectively.

Interest and Other Income
-------------------------

         Interest and other  income for the three months ended  January 31, 2000
increased  to  $134,000  from  $6,000 for the same  period in 1999.  Included in
fiscal 2000 results is a $125,000 discount earned on the early retirement of the
Company's non related party debt.

                                       19
<PAGE>

Interest Expense
----------------

         Interest  expense for the three months ended January 31, 2000 decreased
60.7% to $66,000 as compared to $168,000 for the same period in 1999. The fiscal
2000 decrease is due primarily to a reduction in aggregate  debt  outstanding at
January  31,  2000 as  compared  to the same  period in 1999.  For the most part
interest rates on Canal's debt have remained unchanged for the past 12 months.






                                       20
<PAGE>

                                     PART II
                                     -------


                                OTHER INFORMATION
                                -----------------






                                       21
<PAGE>

Item 1:        Legal Proceedings:
------
               See Item 3 of Canal's October 31, 1999 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.

                                       22
<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: March 9, 2000












                                       23