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, 2002

|_|   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. 2-96666

                   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, 2002
   Common stock, $0.01 par value                    4,326,929

(This document contains 29 pages)

<PAGE>

                  CANAL CAPITAL CORPORATION AND SUBSIDIARIES
                           FORM 10-Q APRIL 30, 2002

                                     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, 2002
       and October 31, 2001 ...............................................    5

      Statements of Consolidated Operations and
       Comprehensive Income for the Six and Three Month
       Periods ended April 30, 2002 and 2001 ..............................    7

      Statements of Consolidated Changes in
       Stockholders' Equity for the Six Month and
       One Year Periods ended April 30, 2002 and
       October 31, 2001 ...................................................   11

      Statements of Consolidated Cash Flows for the
       Six Month Periods ended April 30, 2002 and
       2001 ...............................................................   12

      Notes to Consolidated Financial Statements ..........................   13

Item II.  Management's Discussion and Analysis of
          Financial Condition .............................................   20

      Capital Resources and Liquidity .....................................   21

      Other Factors .......................................................   26

Item III.  Quantitative and Qualitative Disclosures
           About Market Risk ..............................................   26

Part II - Other Information ...............................................   27

      Items 1 through 6 ...................................................   28

      Signatures ..........................................................   29


                                       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, 2002, the related consolidated statements of
operations and comprehensive income for the six and three month periods ended
April 30, 2002 and the consolidated statements of changes in stockholders'
equity and cash flows for the six month period ended April 30, 2002. 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 nine of the last
ten years and is obligated to continue making substantial annual contributions
to its defined benefit pension plan. All of 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 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.


New York, N.Y.                               /S/ Todman & Co., CPA's,P.C.
June 4, 2002                                 -----------------------------------
                                             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, 2002 AND OCTOBER 31, 2001

<TABLE>
<CAPTION>
                                                          APRIL 30,      OCTOBER 31,
                                                            2002             2001
                                                         (UNAUDITED)       (AUDITED)
                                                         -----------       ---------
<S>                                                       <C>            <C>
ASSETS:

CURRENT ASSETS:

       CASH AND CASH EQUIVALENTS                          $   33,824     $   13,680
       NOTES AND ACCOUNTS RECEIVABLE, NET                    113,028        127,771
       ART INVENTORY, NET OF A VALUATION ALLOWANCE OF
             $1,750,000 AND $1,750,000 AT APRIL 30,
             2002 AND OCTOBER 31, 2001                       250,000        250,000
       STOCKYARDS INVENTORY                                   14,772         16,213
       INVESTMENTS                                            21,392         21,392
       PREPAID EXPENSES                                       91,027        172,625
                                                          ----------     ----------

            TOTAL CURRENT ASSETS                             524,043        601,681
                                                          ----------     ----------

NON-CURRENT ASSETS:

       PROPERTY ON OPERATING LEASES, NET OF
             ACCUMULATED DEPRECIATION OF $1,374,111
             AND $1,300,727 AT APRIL 30, 2002 AND
             OCTOBER 31, 2001, RESPECTIVELY                3,262,041      3,302,073
                                                          ----------     ----------
       PROPERTY USED IN STOCKYARD OPERATIONS, NET OF
             ACCUMULATED DEPRECIATION OF $38,645 AND
             $44,340 AT APRIL 30, 2002 AND OCTOBER
             31, 2001, RESPECTIVELY                        1,231,220      1,281,476
                                                          ----------     ----------

       ART INVENTORY NON-CURRENT, NET OF A
             VALUATION ALLOWANCE OF $834,150
             AND $942,150 AT APRIL 30, 2002
             AND OCTOBER 31, 2001, RESPECTIVELY              867,137        933,739
                                                          ----------     ----------

OTHER ASSETS:

       PROPERTY HELD FOR DEVELOPMENT OR RESALE               568,516        620,416
       DEFERRED LEASING AND FINANCING COSTS                   20,449         28,118
       DEPOSITS AND OTHER                                    210,902        210,902
                                                          ----------     ----------

                                                             799,867        859,436
                                                          ----------     ----------

                                                          $6,684,308     $6,978,405
                                                          ==========     ==========
</TABLE>


                                       5
<PAGE>

                    CANAL CAPITAL CORPORATION & SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
                       APRIL 30, 2002 AND OCTOBER 31, 2001

<TABLE>
<CAPTION>
                                                            APRIL 30,        OCTOBER 31,
                                                               2002             2001
                                                           (UNAUDITED)        (AUDITED)
                                                           -----------       -----------
<S>                                                       <C>               <C>
LIABILITIES & STOCKHOLDERS' EQUITY:

CURRENT LIABILITIES:

       ACCOUNTS PAYABLE AND ACCRUED EXPENSES              $  1,905,268      $  2,538,229
       INCOME TAXES PAYABLE                                        732             9,857
                                                          ------------      ------------

         TOTAL CURRENT LIABILITIES                           1,906,000         2,548,086
                                                          ------------      ------------

LONG-TERM DEBT, RELATED PARTY                                2,667,000         2,667,000
                                                          ------------      ------------

COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS' EQUITY:

  PREFERRED STOCK, $0.01 PAR VALUE:
       5,000,000 SHARES AUTHORIZED; 4,998,446 AND
       4,998,446 SHARES ISSUED AND OUTSTANDING
       AT APRIL 30, 2002 AND OCTOBER 31, 2001,
       RESPECTIVELY AND AGGREGATE LIQUIDATION
       PREFERENCE OF $10 PER SHARE FOR $ 49,984,460
       AND $49,984,460 AT APRIL 30, 2002 AND
       OCTOBER 31, 2001, RESPECTIVELY                           49,984            49,984

  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, 2002 AND OCTOBER 31, 2001,
       RESPECTIVELY                                             53,138            53,138

  ADDITIONAL PAID-IN CAPITAL                                28,004,561        27,848,561

  ACCUMULATED DEFICIT                                      (12,827,385)      (13,019,374)

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

  COMPREHENSIVE INCOME:

    PENSION VALUATION RESERVE                               (2,165,445)       (2,165,445)

    UNREALIZED LOSS ON INVESTMENTS AVAILABLE
     FOR SALE                                                        0                 0
                                                          ------------      ------------

                                                             2,111,308         1,763,319
                                                          ------------      ------------

                                                          $  6,684,308      $  6,978,405
                                                          ============      ============
</TABLE>


                                       6
<PAGE>

                    CANAL CAPITAL CORPORATION & SUBSIDIARIES
          CONSOLIDATED STATEMENTS OF OPERATIONS & COMPREHENSIVE INCOME
                FOR THE SIX MONTHS ENDED APRIL 30, 2002 AND 2001

                                                        2002            2001
                                                     (UNAUDITED)     (UNAUDITED)
                                                     -----------     -----------
STOCKYARD OPERATIONS:
 STOCKYARD REVENUES:
    YARD HANDLING AND AUCTION                         1,906,154        2,079,881
    FEED AND BEDDING INCOME                             121,449          151,992
    RENTAL INCOME                                         3,624            2,630
    OTHER INCOME                                        110,886          121,163
                                                     ----------       ----------

                                                      2,142,113        2,355,666
                                                     ----------       ----------

STOCKYARD EXPENSES:
    LABOR AND RELATED COSTS                             798,620          879,012
    OTHER OPERATING AND MAINTENANCE                     488,564          513,133
    FEED AND BEDDING EXPENSE                             96,762          117,504
    DEPRECIATION AND AMORTIZATION                        11,807            9,382
    TAXES OTHER THAN INCOME TAXES                       127,949          133,264
    GENERAL AND ADMINISTRATIVE                          240,993          291,455
                                                     ----------       ----------

                                                      1,764,695        1,943,750
                                                     ----------       ----------

INCOME FROM STOCKYARD OPERATIONS                        377,418          411,916
                                                     ----------       ----------

REAL ESTATE OPERATIONS:
 REAL ESTATE REVENUES:
    SALE OF REAL ESTATE                              $  189,503       $        0
    EXCHANGE BUILDING RENTAL INCOME                     249,771          216,921
    OUTSIDE REAL ESTATE RENT                            271,296          272,433
    OTHER INCOME                                              0            1,000
                                                     ----------       ----------

                                                        710,570          490,354
                                                     ----------       ----------

 REAL ESTATE EXPENSES:
    COST OF REAL ESTATE SOLD                             97,836                0
    LABOR, OPERATING AND MAINTENANCE                    231,591          233,004
    DEPRECIATION AND AMORTIZATION                        66,743           57,469
    TAXES OTHER THAN INCOME TAXES                        60,600           74,900
    GENERAL AND ADMINISTRATIVE                           22,985           28,654
                                                     ----------       ----------

                                                        479,755          394,027
                                                     ----------       ----------

INCOME FROM REAL ESTATE OPERATIONS                      230,815           96,327
                                                     ----------       ----------


                                       7
<PAGE>

                    CANAL CAPITAL CORPORATION & SUBSIDIARIES
          CONSOLIDATED STATEMENTS OF OPERATIONS & COMPREHENSIVE INCOME
                FOR THE SIX MONTHS ENDED APRIL 30, 2002 AND 2001
                                  Continued ...

                                                     2002              2001
                                                  (UNAUDITED)       (UNAUDITED)
                                                  -----------       -----------

GENERAL AND ADMINISTRATIVE EXPENSE                   (461,998)         (535,380)
                                                  -----------       -----------

INCOME (LOSS) FROM OPERATIONS                         146,235           (27,137)
                                                  -----------       -----------

OTHER INCOME (EXPENSE):
  INTEREST & OTHER INCOME                             323,399           143,315
  INTEREST EXPENSE                                   (133,350)         (126,447)
  INCOME (LOSS)FROM ART SALES                          11,705           (14,609)
  REALIZED GAIN (LOSS) ON INVESTMENTS                       0                 0
  OTHER EXPENSE                                             0                 0
                                                  -----------       -----------

                                                      201,754             2,259
                                                  -----------       -----------

INCOME (LOSS) BEFORE PROVISION FOR
  INCOME TAXES                                        347,989           (24,878)

PROVISION FOR INCOME TAXES                                  0                 0
                                                  -----------       -----------

NET INCOME (LOSS)                                     347,989           (24,878)

OTHER COMPREHENSIVE (LOSS) INCOME:

  UNREALIZED (LOSS) ON INVESTMENTS
  AVAILABLE FOR SALE                                        0           (44,308)
                                                  -----------       -----------

COMPREHENSIVE INCOME (LOSS)                       $   347,989       $   (69,186)
                                                  ===========       ===========

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

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, 2002 AND 2001

                                                      2002               2001
                                                   (UNAUDITED)       (UNAUDITED)
                                                   -----------       -----------
STOCKYARD OPERATIONS:
 STOCKYARD REVENUES:
    YARD HANDLING AND AUCTION                          826,951           931,453
    FEED AND BEDDING INCOME                             52,527            70,411
    RENTAL INCOME                                          797             1,064
    OTHER INCOME                                        76,455            48,478
                                                   -----------        ----------

                                                       956,730         1,051,406
                                                   -----------        ----------

STOCKYARD EXPENSES:
    LABOR AND RELATED COSTS                            391,077           415,743
    OTHER OPERATING AND MAINTENANCE                    233,064           241,796
    FEED AND BEDDING EXPENSE                            41,236            54,889
    DEPRECIATION AND AMORTIZATION                        5,574             4,819
    TAXES OTHER THAN INCOME TAXES                       63,880            65,782
    GENERAL AND ADMINISTRATIVE                         107,881           135,641
                                                   -----------        ----------

                                                       842,712           918,670
                                                   -----------        ----------

INCOME FROM STOCKYARD OPERATIONS                       114,018           132,736
                                                   -----------        ----------

REAL ESTATE OPERATIONS:
 REAL ESTATE REVENUES:
    SALE OF REAL ESTATE                            $   189,503        $        0
    EXCHANGE BUILDING RENTAL INCOME                    124,014           108,038
    OUTSIDE REAL ESTATE RENT                           143,706           139,059
    OTHER INCOME                                          (118)            1,000
                                                   -----------        ----------

                                                       457,105           248,097
                                                   -----------        ----------

 REAL ESTATE EXPENSES:
    COST OF REAL ESTATE SOLD                            97,836                 0
    LABOR, OPERATING AND MAINTENANCE                   122,998           110,320
    DEPRECIATION AND AMORTIZATION                       31,458            29,121
    TAXES OTHER THAN INCOME TAXES                       30,300            38,400
    GENERAL AND ADMINISTRATIVE                          11,246            15,488
                                                   -----------        ----------

                                                       293,838           193,329
                                                   -----------        ----------

INCOME FROM REAL ESTATE OPERATIONS                     163,267            54,768
                                                   -----------        ----------


                                       9
<PAGE>

                    CANAL CAPITAL CORPORATION & SUBSIDIARIES
          CONSOLIDATED STATEMENTS OF OPERATIONS & COMPREHENSIVE INCOME
               FOR THE THREE MONTHS ENDED APRIL 30, 2002 AND 2001
                                  Continued ...

                                                    2002               2001
                                                 (UNAUDITED)        (UNAUDITED)
                                                 -----------        -----------

GENERAL AND ADMINISTRATIVE EXPENSE                  (234,333)          (269,804)
                                                 -----------        -----------

INCOME (LOSS) FROM OPERATIONS                         42,952            (82,300)
                                                 -----------        -----------

OTHER INCOME (EXPENSE):
  INTEREST & OTHER INCOME                                 46             13,197
  INTEREST EXPENSE                                   (66,675)           (63,050)
  (LOSS)FROM ART SALES                                (4,872)            (7,269)
  REALIZED GAIN (LOSS) ON INVESTMENTS                      0                  0
  OTHER EXPENSE                                            0                  0
                                                 -----------        -----------

                                                     (71,501)           (57,122)
                                                 -----------        -----------

(LOSS) BEFORE PROVISION FOR
  INCOME TAXES                                       (28,549)          (139,422)

PROVISION FOR INCOME TAXES                                 0                  0
                                                 -----------        -----------

NET (LOSS)                                           (28,549)          (139,422)

OTHER COMPREHENSIVE INCOME (LOSS):

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

COMPREHENSIVE (LOSS)                             $   (28,549)       $  (152,114)
                                                 ===========        ===========

(LOSS) PER COMMON SHARE - BASIC
  AND DILUTED                                    $     (0.02)       $     (0.05)
                                                 ===========        ===========

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 SIX MONTHS ENDED APRIL 30, 2002 (UNAUDITED)

<TABLE>
<CAPTION>
                                      COMMON STOCK                    PREFERRED STOCK
                                 NUMBER                            NUMBER
                                   OF                                OF
                                 SHARES          AMOUNT            SHARES           AMOUNT
<S>                             <C>           <C>                 <C>            <C>
BALANCE, OCTOBER 31, 2000       5,313,794     $     53,138        4,407,614      $     44,076
 NET (LOSS)                             0                0                0                 0
 PREFERRED STOCK DIVIDEND               0                0          590,832             5,908
 MINIMUM PEN. LIAB. ADJ                 0                0                0                 0
                              ----------------------------      -----------------------------

BALANCE, OCTOBER 31, 2001       5,313,794     $     53,138        4,998,446      $     49,984
 NET INCOME                             0                0                0                 0
 PREFERRED STOCK DIVIDEND               0                0                0                 0
 MINIMUM PEN. LIAB. ADJ                 0                0                0                 0
                              ----------------------------      -----------------------------

BALANCE, APRIL 30, 2002         5,313,794     $     53,138        4,998,446      $     49,984
                              ============================      =============================

<CAPTION>
                               ADDITIONAL                                          TREASURY
                                PAID-IN        ACCUMULATED     COMPREHENSIVE        STOCK,
                                CAPITAL          DEFICIT       (LOSS)INCOME         AT COST
<S>                           <C>             <C>               <C>              <C>
BALANCE, OCTOBER 31, 2000     $27,545,053     ($11,945,307)     ($1,969,621)     ($11,003,545)
 NET (LOSS)                             0         (772,547)               0                 0
 PREFERRED STOCK DIVIDEND         303,508         (301,520)               0                 0
 MINIMUM PEN. LIAB. ADJ                 0                0         (195,824)                0
                              ----------------------------      -----------------------------

BALANCE, OCTOBER 31, 2001     $27,848,561     ($13,019,374)     ($2,165,445)     ($11,003,545)
 NET INCOME                             0          347,989                0                 0
 PREFERRED STOCK DIVIDEND         156,000         (156,000)               0                 0
 MINIMUM PEN. LIAB. ADJ                 0                0                0                 0
                              ----------------------------      -----------------------------
BALANCE, APRIL 30, 2002       $28,004,561     ($12,827,385)     ($2,165,445)     ($11,003,545)
                              ============================      =============================
</TABLE>


                                       11
<PAGE>

                    CANAL CAPITAL CORPORATION & SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
          FOR THE SIX MONTHS ENDED APRIL 30, 2002 AND 2001 (UNAUDITED)

                                                        2002             2001
                                                        ----             ----
CASH FLOWS FROM OPERATING ACTIVITIES:
  NET INCOME (LOSS)                                  $ 347,989        $ (24,878)

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

   DEPRECIATION AND AMORTIZATION                        82,902           72,790
   GAIN  ON SALES OF REAL ESTATE                       (91,667)               0

CHANGES IN ASSETS AND LIABILITIES:

   NOTES AND ACCOUNTS RECEIVABLES, NET                  14,743          162,647
   ART INVENTORY, NET                                   66,602                0
   PREPAID EXPENSES AND OTHER, NET                      97,342           23,030
   PAYABLES AND ACCRUED EXPENSES, NET                 (642,086)        (153,762)
                                                     ---------        ---------

NET CASH (USED) PROVIDED BY OPERATING
   ACTIVITIES                                         (124,175)          79,827
                                                     ---------        ---------

CASH FLOWS FROM INVESTING ACTIVITIES:

  PROCEEDS FROM SALES OF REAL ESTATE                   189,503                0
  CAPITAL EXPENDITURES                                 (45,184)        (159,039)
                                                     ---------        ---------

NET CASH PROVIDED (USED) BY INVESTING
  ACTIVITIES                                           144,319         (159,039)
                                                     ---------        ---------

CASH FLOWS FROM FINANCING ACTIVITIES:

  PROCEEDS FROM LONG-TERM DEBT-RELATED
    PARTIES                                                  0                0
  REPAYMENT OF SHORT-TERM BORROWINGS                         0                0
  REPAYMENT OF LONG-TERM DEBT OBLIGATIONS                    0                0
                                                     ---------        ---------
NET CASH (USED) BY FINANCING ACTIVITIES                      0                0
                                                     ---------        ---------

NET INCREASE (DECREASE) IN CASH AND CASH
  EQUIVALENTS                                           20,144          (79,212)

CASH AND CASH EQUIVALENTS AT BEGN OF YEAR               13,680           87,269
                                                     ---------        ---------

CASH AND CASH EQUIVALENTS AT END OF YEAR             $  33,824        $   8,057
                                                     =========        =========

NOTE: CANAL MADE FEDERAL AND STATE INCOME TAX PAYMENTS OF $9,000 AND $7,000 AND
      INTEREST PAYMENTS OF $133,000 AND $126,000 IN THE SIX MONTH PERIODS ENDED
      APRIL 30, 2002 AND 2001, RESPECTIVELY.


                                       12
<PAGE>

                   CANAL CAPITAL CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                     FOR THE SIX MONTHS ENDED APRIL 30, 2002
                                   (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 two distinct businesses - the management and further
development of its agribusiness related real estate properties located in the
midwest and stockyard operations.

      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 nine of the last ten years and is obligated to continue making
substantial annual contributions to its defined benefit pension plan. 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 operating
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.


                                       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 material 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 1%) 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.

      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, 2002 and
October 31, 2001, 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 Financial 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, 2002 and the results of
its operations and its cash flows for the six month period ended April 30, 2002.
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, 2001 and the notes thereto which are contained in Canal's 2001
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 2002.

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 (two 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, railcar repair shops, 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 $231,000 and
$96,000 for the six month periods ended April 30, 2002 and 2001, respectively.
Additionally, real estate operations contributed $711,000 and $490,000 to
Canal's revenues for the six month periods ended April 30, 2002 and 2001,
respectively.

      As of April 30, 2002, there are approximately 129 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 SALE AND SUBSEQUENT REPURCHASE

      Canal currently operates assets of two public stockyards (formerly subject
to the Master Lease between the Company and United Market Services) located in
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 stockyards
include cattle, hogs and sheep. Cattle and hogs may come through the stockyard
facilities at two 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, auctioneers, weigh masters and scales, feed and
bedding, and security personnel. In addition, the stockyards 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 of producers.

      In fiscal 2001 Canal entered into an option agreement to sell the property
on which the Sioux City Stockyards operates. The Company anticipates that the
sale of this property will be completed in the third or fourth quarter of fiscal
2002. On March 31, 2002, all stockyard operations at the Sioux City yards
ceased. Canal is currently engaged in salvage and demolition operations at this
location in preparation for this sale.

6. ART INVENTORY HELD FOR SALE

      Canal has not purchased inventory in several years nor does it currently
have any intention of purchasing additional art inventory in the foreseeable
future. It is the Company's intention to liquidate, in an orderly manner, its
art inventory. 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 primarily on general economic conditions and the
competitiveness of the art market itself. Accordingly, there can be no assurance
that Canal will be successful in disposing of its art inventory within the time
frame discussed above.

      Antiquities and contemporary art represented 43% ($475,388) and 57%
($641,749) and 46% ($541,990) and 54% ($641,749) of total art inventory at April
30, 2002 and 2001, respectively. Substantially all of the contemporary art
inventory held for resale is comprised of the work of Jules Olitski.


                                       16
<PAGE>

      The amount recorded as the current portion of art inventory represents
management's estimate of the inventory expected to be sold during the next
twelve months. The Company recorded a valuation allowance against the current
portion of its inventory to reduce it to its estimated net realizable value
based on the history of losses sustained on inventory items sold in the current
and previous years. In fiscal 2002 Canal applied against sales $108,000 of the
valuation allowance against its art inventory, thereby, decreasing the total
valuation allowance to $2,584,150 as of April 30, 2002 as compared to $2,692,150
at October 31, 2001.

      The nature of art makes it difficult to determine a replacement value. The
most compelling evidence of a value in most cases is an independent appraisal.
Canal has its art inventory appraised by independent appraisers annually. The
2001 appraisal covered approximately 53% 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 47% of the inventory was estimated by
management based in part on the Company's history of losses sustained on art
sales in the current and previous years and in part on the results of the
independent appraisals done.

      Canal's art sales generated income of $12,000 (net of a decrease in the
valuation allowance of $108,000) as compared to a loss of $15,000 for the six
month periods ended April 30, 2002 and 2001, respectively.

      The Company had approximately $857,000 and $1,012,000 of art inventory (at
original cost) on consignment with third party dealers at April 30, 2002 and
October 31, 2001, respectively.

7. PROPERTY AND EQUIPMENT

      Included in property and equipment were the cost of buildings of
approximately $2.5 million at April 30, 2002 and October 31, 2001.

8. PENSION VALUATION RESERVE

      The Pension Valuation Reserve represents the excess of 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
pension benefits of former employees, which benefits were frozen at the time the
stockyard operations were sold in 1989. The additional minimum pension liability
will be expensed as actuarial computations of annual pension cost (made in
accordance with SFAS No. 87) recognize the deficiency that exists.


                                       17
<PAGE>

9. INVESTMENTS AVAILABLE FOR SALE

      At April 30, the investments available for sale consisted of the
following: ($ 000's Omitted)

                                                 April 30,   October 31,
                                                    2002         2001
                                                    ----         ----

      Aggregate market value.....................   $ 21         $ 21
                                                    ----         ----
      Aggregate carrying value...................   $ 21         $ 21
                                                    ----         ----

      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 1%) is carried
at market value and 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 and subsequently emerged in December 2000. This action, in
combination with other factors, has resulted in Canal's determination that the
decline in market value of its investment in this company is permanent, and
accordingly, recognized a realized loss on investments in marketable securities
of approximately $47,000 in fiscal 2001. 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.

6. BORROWINGS

      At April 30, 2002, 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 for the following obligations:

                                                   April 30,   October 31,
($ 000's Omitted)                                     2002        2001
-----------------                                     ----        ----
Variable rate mortgage notes due
  May 15, 2003 - related party ..................   $ 2,667      $  2,667
                                                    -------      --------

      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


                                       18
<PAGE>

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, 2002 the balance due under these notes was
$2,667,000 all of which is classified as long-term debt-related party.

      The scheduled maturities and sinking fund requirements of long-term debt
during the next five years are $2,667,000 due May 15, 2003.


                                       19
<PAGE>

ITEM II. MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE RESULTS OF OPERATIONS AND
         FINANCIAL CONDITION FOR THE SIX MONTHS ENDED APRIL 30, 2002

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 nine of the last ten years and is obligated to continue making
substantial annual contributions to its defined benefit pension plan. 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 $348,000 for the six month period ended
April 30, 2002 as compared to a net loss of $25,000 for the same period in
fiscal 2001. After recognition of an unrealized loss on investments held for
sale of $0 and $44,000 for the six month periods ended April 30, 2002 and 2001,
respectively, the Company recognized comprehensive income of $348,000 and a
comprehensive loss of $69,000 for the six month periods ended April 30, 2002 and
2001, respectively. Further, after recognition of preferred stock dividend
payments of $156,000 and $144,000 for the six month periods ended April 30, 2002
and 2001, respectively, the Company recognized net income applicable to common
stockholders of $192,000 ($0.04 per common share) and a net loss applicable to
common stockholders of $169,000 ($0.04 per common share) for the six month
periods ended April 30, 2002 and 2001, respectively. Included in the 2002
results is other income of approximately $323,000 received by Canal as a
demutualization compensation payment from an insurance company, from which,
Canal had purchased annuity contracts in the early 1980's for certain of its
retired stockyards employees. 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 which was subsequently fully reserved at year end due to the financial
instability of the debtor.

      Canal's revenues from continuing operations consist of revenues from its
real estate and stockyards operations. Total revenues increased by $7,000 or
0.2% to $2,853,000 for the six month period ended April 30, 2002, as compared to
revenues of $2,846,000 for the same period in fiscal 2001. The fiscal 2002
increase in revenues is due primarily to a $190,000 increase in sales of real
estate which was offset to a certain extent by softer than anticipated revenue
from the stockyard operations.


                                       20
<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 nine of the last ten years and is obligated to continue making
substantial annual contributions to its defined benefit pension plan. 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. The notes carried interest at the highest
of four variable rates, determined on a quarterly basis. These notes, among
other things, prohibit Canal from becoming an investment company as defined by
the Investment Company Act of 1940; require Canal to maintain minimum net worth;
restrict Canal's ability to pay cash dividends or repurchase stock; require
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 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 the
noteholders 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, 2002, the balance due under these notes
was $2,667,000, all of which is classified as long-term debt- related party.


                                       21
<PAGE>

      Cash and cash equivalents of $34,000 at April 30, 2002 increased $20,000
from $14,000 at October 31, 2001. Net cash used by operations in fiscal 2002 was
$124,000. At April 30, 2002 and October 31, 2001, the Company's current
liabilities exceeded current assets by $1.4 million and $1.9 million,
respectively. Substantially all of the funds received by Canal from the sale of
real estate and as demutualization compensation payments were used to pay down
its accounts payable and accrued expenses. The only required principal
repayments under Canal's debt agreements for fiscal 2002 will be from the
proceeds, if any, of the sale of certain assets.

      Canal's cash flow position has been under significant strain for the past
year. Canal continues to closely monitor and reduce where possible its operating
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.

2002 COMPARED TO 2001

Stockyard Revenues

      Stockyard revenues for the six months ended April 30, 2002 of $2,142,000
accounted for 75.1% of the fiscal 2002 revenues as compared to stockyard
revenues of $2,356,000 or 82.8% for the same period in fiscal 2001. Stockyard
revenues are comprised of yard handling and auction (89.0% and 88.3%), feed and
bedding income (5.7% and 6.5%), rental income (0.1% and 0.1%) and other income
(5.2% and 5.1%) for the six month periods ended April 30, 2002 and 2001,
respectively. There were not significant percentage variations in the year to
year comparisons.

      Stockyard revenues for the three months ended April 30, 2002 of $957,000
accounted for 67.7% of the fiscal 2002 revenues as compared to stockyard
revenues of $1,051,000 or 80.9% for the same period in fiscal 2001. Stockyard
revenues are comprised of yard handling and auction (86.4% and 88.6%), feed and
bedding income (5.5% and 6.7%), rental income (0.1% and 0.1%) and other income
(8.0% and 4.6%) for the three month periods ended April 30, 2002 and 2001,
respectively. There were not significant percentage variations in the year to
year comparisons.


                                       22
<PAGE>

Stockyard Expenses

      Stockyard expenses for the six months ended April 30, 2002 of $1,765,000
decreased by $179,000 (9.2%) from stockyard expenses of $1,944,000 for the same
period in fiscal 2001. Stockyard expenses are comprised of labor and related
costs (45.3% and 45.2%), other operating and maintenance (27.7% and 26.4%), feed
and bedding expense (5.5% and 6.1%), depreciation and amortization (0.5% and
0.4%), taxes other than income taxes (7.3% and 6.9%) and general and
administrative expense (13.7% and 15.0%) for the six month periods ended April
30, 2002 and 2001, respectively. There were no significant percentage variations
in the year to year comparisons.

      Stockyard expenses for the three months ended April 30, 2002 of $842,000
decreased by $76,000 (8.3%) from stockyard expenses of $919,000 for the same
period in fiscal 2001. Stockyard expenses are comprised of labor and related
costs (46.4% and 45.3%), other operating and maintenance (27.7% and 26.3%), feed
and bedding expense (4.9% and 6.0%), depreciation and amortization (0.6% and
0.4%), taxes other than income taxes (7.6% and 7.2%) and general and
administrative expense (12.8% and 14.8%) for the three month periods ended April
30, 2002 and 2001, respectively. There were no significant percentage variations
in the year to year comparisons.

      In fiscal 2001, Canal entered into an option agreement to sell the
property on which the Sioux City Stockyards operates. The Company anticipates
that the sale of this property will be completed in the third or fourth quarter
of fiscal 2002. On March 31, 2002, all stockyard operations at the Sioux City
yards ceased. Canal is currently engaged in salvage and demolition operations at
this location in preparation for this sale.

Real Estate Revenues

      Real estate revenues for the six months ended April 30, 2002 of $711,000
accounted for 24.9% of the fiscal 2002 revenues as compared to real estate
revenues of $490,000 or 17.2% for the same period in fiscal 2001. Real estate
revenues are comprised of sale of real estate (26.7% and 0.0%), rental income
from commercial office space in its Exchange Buildings (35.2% and 44.2%),
rentals and other lease income from the rental of vacant land and certain
structures (38.1% and 55.6%) and other income (0.0% and 0.2%) for the six months
ended April 30, 2002 and 2001, respectively. The percentage variations in the
year to year comparisons are due primarily to increased sales of real estate for
fiscal 2002.

      Real estate revenues for the three months ended April 30, 2002 of $457,000
accounted for 32.3% of the fiscal 2002 revenues as compared to real estate
revenues of $248,000 or 19.1% for the same period in fiscal 2001. Real estate
revenues are comprised of sale of real estate (41.5% and 0.0%), rental income
from commercial office space in its Exchange Buildings (27.1% and 43.6%),
rentals and other lease income from the rental of vacant land and certain
structures (31.4% and 56.1%) and other income (0.0% and 0.3%) for the three
months ended April 30, 2002 and 2001, respectively. The percentage variations in
the year to year comparisons are due primarily to increased sales of real estate
for fiscal 2002.


                                       23
<PAGE>

Real Estate Expenses

      Real estate expenses for the six months ended April 30, 2002 of $480,000
increased by $86,000 (21.8%) from real estate expenses of $394,000 for the same
period in fiscal 2001. Real estate expenses are comprised of the cost of real
estate sold (20.4% and 0.0%), labor, operating and maintenance (48.3% and
59.1%), depreciation and amortization (13.9% and 14.6%), taxes other than income
taxes (12.6% and 19.0%) and general and administrative and other expenses (4.8%
and 7.3%) for the six months ended April 30, 2002 and 2001, respectively. The
percentage variations in the year to year comparisons are due primarily to the
increased cost of real estate sold for fiscal 2002.

      Real estate expenses for the three months ended April 30, 2002 of $294,000
increased by $101,000 (52.0%) from real estate expenses of $193,000 for the same
period in fiscal 2001. Real estate expenses are comprised of the cost of real
estate sold (33.3% and 0.0%), labor, operating and maintenance (41.9% and
57.1%), depreciation and amortization (10.7% and 15.1%), taxes other than income
taxes (10.3% and 19.8%) and general and administrative and other expenses (3.8%
and 8.0%) for the three months ended April 30, 2002 and 2001, respectively. The
percentage variations in the year to year comparisons are due primarily to the
increased cost of real estate sold for fiscal 2002.

General and Administrative

      General and administrative expenses for the six months ended April 30,
2002 of $462,000 decreased by $73,000 (13.7%) from expenses of $535,000 for the
same period in fiscal 2001. The major components of general and administrative
expenses are officers salaries (49.6% and 42.8%), rent (9.8% and 8.5%), legal
and professional fees (0.8% and 5.7%), insurance (14.7% and 10.1%) and office
salaries (8.1% and 11.5%) for the six month periods ended April 30, 2002 and
2001, respectively. The percentage variations in the year to year comparisons
are due primarily to the sharp decrease in legal and professional fees for
fiscal 2002.

      General and administrative expenses for the three months ended April 30,
2002 of $234,000 decreased by $36,000 (13.1%) from expenses of $270,000 for the
same period in fiscal 2001. The major components of general and administrative
expenses are officers salaries (48.9% and 42.5%), rent (9.8% and 8.6%), legal
and professional fees (0.8% and 5.7%), insurance (14.5% and 10.0%) and office
salaries (8.0% and 11.4%) for the three month periods ended April 30, 2002 and
2001, respectively. The percentage variations in the year to year comparisons
are due primarily to the sharp decrease in legal and professional fees for
fiscal 2002.


                                       24
<PAGE>

Interest Expense

      Interest expense for the six months ended April 30, 2002 of $133,000
increased by $7,000 (5.5%) from interest expense of $126,000 for the same period
in fiscal 2001. The 2001 increase is due primarily to a modest increase in the
outstanding debt. Interest rates on Canal's variable rate mortgage notes have
remained unchanged for the past 12 months. At April 30, 2002 the outstanding
balance of these notes was $2,667,000.

Interest and Other Income

      Interest and other income for the six months ended April 30, 2002 of
$323,000 increased $180,000 (125.7%) from interest and other income of $143,000
for the same period in fiscal 2001. Included in the 2002 results is other income
of approximately $323,000 received by Canal as a demutalization compensation
payment from an insurance company that Canal had purchased annuity contracts
from in the early 1980's for certain of its retired stockyard employees.
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 which was
subsequently fully reserved at year end due to the financial instability of the
debtor.

Income (Loss) from Art Sales

      Income from art sales for the six months ended April 30, 2002 of $12,000
increased by $27,000 from a loss of $15,000 for the same period in fiscal 2001.
Art revenues are comprised of the proceeds from the sale of antiquities and
contemporary art. Canal recognized revenues of $90,000 and $0 for the six month
periods ended April 30, 2002 and 2001, respectively. Art expenses are comprised
of the cost of inventory sold and selling, general and administrative expenses.
Canal incurred cost of inventory sold of $67,000 (net of a valuation allowance
of $108,000) and $0 as well as selling, general and administrative expenses of
$12,000 and $15,000 for the six month periods ended April 30, 2002 and 2001,
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.


                                       25
<PAGE>

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 involved 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.

ITEM III. Quantitative and Qualitative Disclosures About Market Risk

The Securities and Exchange Commission's rule related to market risk disclosure
requires that we describe and quantify our potential losses from market risk
sensitive instruments attributable to reasonably possible market changes. Market
risk sensitive instruments include all financial or commodity instruments and
other financial instruments (such as investments and debt) that are sensitive to
future changes in interest rates, currency exchange rates, commodity prices or
other market factors. We are not exposed to market risks from changes in foreign
currency, exchange rates or commodity prices. As of October 31, 2001, we do not
hold derivative financial instruments nor do we hold securities for trading or
speculative purposes. Under our current policies, we do not use interest rate
derivative instruments to manage our exposure to interest rate changes.


                                       26
<PAGE>

                                     PART II

                                OTHER INFORMATION


                                       27
<PAGE>

Item 1: Legal Proceedings:

      See Item 3 of Canal's October 31, 2001 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)   The Company filed a Form 8-K on April 26, 2002 in which the Company
            disclosed that it has signed a letter of intent with AEI
            Environmental Inc. to acquire certain business interests that are
            involved in the sale of livestock on the internet. The Company is
            still in the process of negotiations in this transaction.


                                       28
<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 11, 2002


                                       29