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, 2001

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

                                     Commission File No. 1-8709


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


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

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

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


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

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


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


       Title of each class           Shares outstanding at February 28, 2001
 Common stock, $0.01 par value                       4,326,929

(This document contains 27 pages)




<PAGE>


                   CANAL CAPITAL CORPORATION AND SUBSIDIARIES
                           FORM 10-Q JANUARY 31, 2001

                                      INDEX


The following documents are filed as part of this report:

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

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

Item I.    Condensed Financial Statements:

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

           Statements of Consolidated Operations and
             Comprehensive Income for the Three
             Month Periods ended January 31, 2001 and 2000...........   7

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

           Statements of Consolidated Cash Flows for the
             Three Month Periods ended January 31, 2001 and
             2000 ...................................................  10

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

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

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

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

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

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

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

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





<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 January 31, 2001,  the related  consolidated  statements  of
operations and comprehensive income for the three month period ended January 31,
2001 and the consolidated statements of changes in stockholders' equity and cash
flows for the three month period  ended  January 31,  2001.  These  consolidated
financial statements are the responsibility of the company's management.

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

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

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




New York, N.Y.                               /S/ Todman & Co., CPA's,P.C.
                                             ----------------------------
March 8, 2001                                TODMAN & CO., CPA's,P.C.
                                             Certified Public Accountants (N.Y.)


                                        3




<PAGE>





















                                     PART I

                              FINANCIAL INFORMATION

























                                       4

<PAGE>


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



<TABLE>
<CAPTION>
                                                                   JANUARY 31,   OCTOBER 31,
                                                                      2001         2000
                                                                  (UNAUDITED)    (AUDITED)
                                                                  -----------   -----------

ASSETS:


     CURRENT ASSETS:

<S>                                                                <C>          <C>
            CASH AND CASH EQUIVALENTS                              $   13,472   $   87,269
            NOTES AND ACCOUNTS RECEIVABLE, NET                        585,297      736,388
            ART INVENTORY, NET OF A VALUATION ALLOWANCE OF
                     $ 1,500,000 AT BOTH JANUARY 31, 2001 AND
                     OCTOBER 31, 2000                                 500,000      500,000
            STOCKYARDS INVENTORY                                       25,930       21,361
            INVESTMENTS                                                37,025       68,461
            PREPAID EXPENSES                                          111,694      154,875
                                                                   ----------   ----------

                 TOTAL CURRENT ASSETS                               1,273,418    1,568,534
                                                                   ----------   ----------




     NON-CURRENT ASSETS:

            PROPERTY ON OPERATING LEASES, NET OF
                     ACCUMULATED DEPRECIATION OF $1,441,324
                     AND $ 1,420,681 AT JANUARY 31, 2001 AND
                     OCTOBER 31, 2000, RESPECTIVELY                 3,091,261    3,097,938
                                                                   ----------   ----------


            PROPERTY USED IN STOCKYARD OPERATIONS, NET OF
                     ACCUMULATED DEPRECIATION OF $22,535 AND
                     $18,458 AT JANUARY 31, 2001 AND OCTOBER
                     31, 2000, RESPECTIVELY                         1,251,485    1,237,476
                                                                   ----------   ----------



            ART INVENTORY NON-CURRENT, NET OF A
                     VALUATION ALLOWANCE OF $ 1,227,950
                     AND $1,227,950 AT JANUARY 31, 2001
                     AND OCTOBER 31, 2000, RESPECTIVELY               696,657      696,657
                                                                   ----------   ----------





OTHER ASSETS:

            PROPERTY HELD FOR DEVELOPMENT OR RESALE                   647,669       647,669
            DEFERRED LEASING AND FINANCING COSTS                        9,002         8,202
            DEPOSITS AND OTHER                                        200,221       204,421
                                                                  -----------   -----------

                                                                      856,892       860,292
                                                                  -----------   -----------

                                                                  $ 7,169,713   $ 7,460,897
                                                                 ============   ===========
</TABLE>



                                        5


<PAGE>



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


<TABLE>
<CAPTION>
                                                                   JANUARY 31,   OCTOBER 31,
                                                                      2001         2000
                                                                  (UNAUDITED)    (AUDITED)
                                                                  -----------   -----------

LIABILITIES & STOCKHOLDERS' EQUITY:

CURRENT LIABILITIES:

<S>                                                              <C>            <C>
            CURRENT PORTION OF LONG-TERM DEBT                    $          0             0
            ACCOUNTS PAYABLE AND ACCRUED EXPENSES                   1,836,447     2,209,724
            INCOME TAXES PAYABLE                                        4,544         5,379
                                                                -------------   -----------

                 TOTAL CURRENT LIABILITIES                          1,840,991     2,215,103
                                                                -------------   -----------


LONG-TERM DEBT, LESS CURRENT PORTION                                        0             0
LONG-TERM DEBT, RELATED PARTY                                       2,522,000     2,522,000
                                                                -------------   -----------

                                                                    2,522,000     2,522,000
                                                                -------------   -----------
COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS' EQUITY:

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

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

   ADDITIONAL PAID-IN CAPITAL                                      27,617,053    27,545,053

   ACCUMULATED DEFICIT                                            (11,902,763)  (11,945,307)

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


   COMPREHENSIVE INCOME:

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

    UNREALIZED LOSS ON INVESTMENTS AVAILABLE
       FOR SALE                                                       (31,616)            0
                                                                -------------   ------------

                                                                    2,806,722     2,723,794
                                                                -------------   ------------

                                                                 $  7,169,713   $  7,460,897
                                                                =============   ============
</TABLE>




                                        6


<PAGE>


                    CANAL CAPITAL CORPORATION & SUBSIDIARIES
          CONSOLIDATED STATEMENTS OF OPERATIONS & COMPREHENSIVE INCOME
              FOR THE THREE MONTHS ENDED JANUARY 31, 2001 AND 2000



                                                  2001            2000
                                              (UNAUDITED)     (UNAUDITED)
                                              -----------     -----------

REAL ESTATE OPERATIONS:
 REAL ESTATE REVENUES:
    SALE OF REAL ESTATE                      $         0     $         0
    EXCHANGE BUILDING RENTAL INCOME              108,883         105,517
    OUTSIDE REAL ESTATE RENT                     133,374         148,641
    OTHER INCOME                                       0              75
                                             ------------    ------------
                                                 242,257         254,233
                                             ------------    ------------

 REAL ESTATE EXPENSES:
    COST OF REAL ESTATE SOLD                           0               0
    LABOR, OPERATING AND MAINTENANCE             122,684         117,782
    DEPRECIATION AND AMORTIZATION                 28,348          25,819
    TAXES OTHER THAN INCOME TAXES                 36,500          35,000
    GENERAL AND ADMINISTRATIVE                    13,166          18,328
                                             ------------    ------------
                                                 200,698         196,929
                                             ------------    ------------

INCOME FROM REAL ESTATE OPERATIONS                41,559          57,304
                                             ------------    ------------



STOCKYARD OPERATIONS:
 STOCKYARD REVENUES:
    YARD HANDLING AND AUCTION                  1,148,428       1,154,267
    FEED AND BEDDING INCOME                       81,581          85,862
    RENTAL INCOME                                  1,566           1,396
    OTHER INCOME                                  72,685          62,063
                                             ------------    ------------
                                               1,304,260       1,303,588
                                             ------------    ------------

STOCKYARD EXPENSES:
    LABOR AND RELATED COSTS                      463,269         462,943
    OTHER OPERATING AND MAINTENANCE              271,337         245,383
    FEED AND BEDDING EXPENSE                      62,615          64,462
    DEPRECIATION AND AMORTIZATION                  4,563           3,750
    TAXES OTHER THAN INCOME TAXES                 67,482          75,680
    GENERAL AND ADMINISTRATIVE                   155,814         179,527
                                             ------------    ------------
                                               1,025,080       1,031,745
                                             ------------    ------------


INCOME FROM STOCKYARD OPERATIONS                 279,180         271,843
                                             ------------    ------------







                                        7


<PAGE>


                    CANAL CAPITAL CORPORATION & SUBSIDIARIES
          CONSOLIDATED STATEMENTS OF OPERATIONS & COMPREHENSIVE INCOME
              FOR THE THREE MONTHS ENDED JANUARY 31, 2001 AND 2000
                                  Continued ...

                                                 2001           2000
                                             (UNAUDITED)     (UNAUDITED)
                                             -----------     -----------

ART OPERATIONS:
 ART REVENUES:
    SALES                                              0          27,500
    OTHER REVENUES                                     0               0
                                             ------------    ------------

                                                       0          27,500
                                             ------------    ------------

 ART EXPENSES:
    COST OF ART SOLD                                   0          72,500
    VALUATION RESERVE                                  0         (50,750)
    SELLING, GENERAL AND ADMINISTRATIVE            7,340           7,681
                                             ------------    ------------

                                                   7,340          29,431
                                             ------------    ------------

(LOSS) FROM ART OPERATIONS                        (7,340)         (1,931)
                                             ------------    ------------


GENERAL AND ADMINISTRATIVE EXPENSE              (265,576)       (267,344)
                                             ------------    ------------


INCOME FROM OPERATIONS                            47,823          59,872
                                             ------------    ------------

OTHER INCOME (EXPENSE):
  INTEREST & OTHER INCOME                        130,118         134,084
  INTEREST EXPENSE                                     0         (43,676)
  INTEREST EXPENSE-RELATED PARTY                 (63,397)        (22,340)
  OTHER EXPENSE                                        0               0
                                             ------------    ------------

                                                  66,721          68,068
                                             ------------    ------------


INCOME BEFORE PROVISION FOR INCOME
  TAXES                                          114,544         127,940

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

NET INCOME                                       114,544         127,940

OTHER COMPREHENSIVE (LOSS) INCOME:

  UNREALIZED (LOSS) INCOME ON
  INVESTMENTS AVAILABLE FOR SALE                 (31,616)         11,560
                                             ------------    ------------


COMPREHENSIVE INCOME                         $    82,928     $   139,500
                                            =============    ============

INCOME PER COMMON SHARE - BASIC
  AND DILUTED                                $      0.01     $      0.02
                                            =============    ============

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



                                        8


<PAGE>


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


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

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

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

BALANCE, OCTOBER 31, 2000        5,313,794    53,138    4,407,614     44,076   27,545,053
 NET INCOME                              0         0            0          0            0
 PREFERRED STOCK DIVIDEND                0         0            0          0       72,000
 MINIMUM PEN. LIAB. ADJUSTMENT           0         0            0          0            0
 UNREALIZED LOSS ON INVESTMENTS          0         0            0          0            0
                                --------------------   ---------------------   ----------


BALANCE, JANUARY 31, 2001        5,313,794   $53,138    4,407,614    $44,076  $27,617,053
                                 ====================   ===================== ============
</TABLE>



<TABLE>
<CAPTION>
                                                -COMPREHENSIVE (LOSS) INCOME-    TREASURY
                              ACCUMULATED        VALUATION      UNREALIZED         STOCK
                                DEFICIT           RESERVE       GAIN ON INV.      AT COST
                                -------           -------       ------------      -------

<S>                          <C>                <C>              <C>            <C>
BALANCE, OCTOBER 31, 1999    ($10,758,188)      ($1,903,176)     $  (343,725)   ($11,003,545)
 NET (LOSS)                      (921,582)                0                0               0
 PREFERRED STOCK DIVIDEND        (265,537)                0                0               0
 MINIMUM PEN. LIAB. ADJ.                0           (66,445)               0               0
 UNREALIZED LOSS ON INV.                0                 0          343,725               0
                             -------------    -------------     ------------    ------------

BALANCE, OCTOBER 31, 2000     (11,945,307)      ($1,969,621)               0     (11,003,545)
 NET INCOME                       114,544                 0                0               0
 PREFERRED STOCK DIVIDEND         (72,000)                0                0               0
 MINIMUM PEN. LIAB. ADJ.                0                 0                0               0
 UNREALIZED LOSS ON INV.                0                 0          (31,616)              0
                             -------------    --------------     ------------   ------------

BALANCE, JANUARY 31, 2001    ($11,902,763)      ($1,969,621)     $   (31,616)   ($11,003,545)
                             =============    ==============    =============   =============
</TABLE>








                                        9


<PAGE>


                    CANAL CAPITAL CORPORATION & SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
              FOR THE THREE MONTHS ENDED JANUARY 31, 2001 AND 2000



                                                    2001              2000
                                                 (UNAUDITED)       (UNAUDITED)
                                                 -----------       -----------

CASH FLOWS FROM OPERATING ACTIVITIES:
  NET INCOME                                      $   114,544      $   127,940

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


   DEPRECIATION AND AMORTIZATION                       36,312           30,398


CHANGES IN ASSETS AND LIABILITIES:

     NOTES AND ACCOUNTS RECEIVABLES, NET              151,091         (129,697)
     ART INVENTORY, NET                                     0           21,750
     PREPAID EXPENSES AND OTHER, NET                   40,853           26,787
     PAYABLES AND ACCRUED EXPENSES, NET              (374,112)         (84,635)
                                                  ------------     ------------
NET CASH (USED) BY OPERATING
     ACTIVITIES                                       (31,312)          (7,457)
                                                  ------------     ------------


CASH FLOWS FROM INVESTING ACTIVITIES:

  CAPITAL EXPENDITURES                                (42,485)         (36,643)
                                                  ------------     ------------

NET CASH (USED) BY INVESTING ACTIVITIES               (42,485)         (36,643)
                                                  ------------     ------------


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


NET (DECREASE) IN CASH AND CASH
  EQUIVALENTS                                         (73,797)        (190,810)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD       87,269          416,191
                                                  ------------     ------------

CASH AND CASH EQUIVALENTS AT END OF PERIOD        $    13,472     $    225,381
                                                  ============     ============


NOTE: Canal made  federal and state income tax payments of $6,000 and $6,000 and
      interest  payments of $63,000 and $66,000 in the three month periods ended
      January 31, 2001 and 2000, respectively.





                                       10


<PAGE>


                   CANAL CAPITAL CORPORATION AND SUBSIDIARIES
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                       THREE MONTHS ENDED JANUARY 31, 2001
                                   (UNAUDITED)



1.   NATURE OF BUSINESS

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

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

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

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




                                       11


<PAGE>


2.       Summary of Significant Accounting Policies


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

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

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

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

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

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




                                       12


<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, 2001 and the results of
its  operations  and its cash flows for the three month period ended January 31,
2001. All of the above referenced adjustments were of a normal recurring nature.
Certain  information  and footnote  disclosures  normally  included in financial
statements prepared in accordance with generally accepted accounting  principles
have been condensed or omitted.  These  financial  statements  should be read in
conjunction with the consolidated financial statements for the three years ended
October 31,  2000 and the notes  thereto  which are  contained  in Canal's  2000
Annual Report on Form 10-K. The results of operations  for the period  presented
is not necessarily indicative of the results to be expected for the remainder of
fiscal 2001.


4.       Real Estate Operations

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

         Real estate operations  resulted in operating income of $42,000 for the
three month  period  ended  January 31, 2001 as compared to $57,000 for the same
period in fiscal 2000. Additionally, real estate operations contributed $242,000
to Canal's  revenues  for the three month  period  ended  January 31,  2001,  as
compared to revenues of $254,000 for the same period in fiscal 2000.

         As  of  January  31,  2001,  there  are   approximately  184  acres  of
undeveloped land owned by Canal adjacent to its stockyard  properties.  Canal is
continuing the program,  which it started  several years ago, to develop or sell
this property.




                                       13


<PAGE>


5.       Stockyard Operations

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

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

         Stockyard  operations  resulted in operating income of $279,000 for the
three month period ended  January 31, 2001, as compared to $272,000 for the same
period in fiscal 2000. Additionally, stockyard operations contributed $1,304,000
to Canal's  revenues  for the three month  period  ended  January 31,  2001,  as
compared to revenues of $1,304,000 for the same period in fiscal 2000.


6.       ART OPERATIONS

         Canal  established  its art  operations  in October 1988 by acquiring a
significant  inventory  for resale of  antiquities  primarily  from the  ancient
Mediterranean  cultures.  In November 1989, Canal expanded its art operations by
entering into a cost and revenue sharing  agreement with a New York City gallery
for the exclusive  representation  of Jules Olitski,  a world renowned artist of
contemporary  paintings.  As part of this agreement  Canal purchased a number of
Olitski  paintings which it holds for resale with a book value of  approximately
$624,000 at January 31, 2001. The  representation  agreement expired December 1,
1994 and Canal now operates  independently  in the marketing of its contemporary
art inventory.

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




                                       14


<PAGE>


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

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

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

         Canal's art  operations  have generated an operating loss of $7,000 for
the three month period ended January 31, 2001, as compared to an operating  loss
of $2,000 (net of a decrease in the valuation allowance of $50,750) for the same
period  in fiscal  2000.  Additionally,  art  operations  contributed  $ zero to
Canal's  revenues for the three month period ended January 31, 2001, as compared
to revenues of $28,000 for the same period in fiscal  2000.  Canal's  management
believes  that through its  consignment  agreements  as well as other  potential
distribution outlets Canal will continue to deal in antiquities and contemporary
art.

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


7.       Property and Equipment

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




                                       15


<PAGE>


8.       Notes Receivable

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


9.       INVESTMENTS AVAILABLE FOR SALE

         At January 31, 2001 the investments available for sale consisted of the
following:
                                                 January 31,      October 31,
         ($ 000's Omitted)                          2001             2000
                                                 ----------       ----------

         Aggregate market value.................   $   37           $   69
                                                   ------           ------

         Aggregate carrying value...............   $   37           $   69
                                                   ------           ------

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

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

         For the three  months  ended  January  31,  2001  Canal  recognized  an
unrealized loss on investments available for sale of $32,000.  Additionally,  in
fiscal 2000 Canal  recognized an unrealized  gain on  investments  available for
sale  of  $12,000,   both  of  which  are  shown  in  a  separate  component  of
Stockholders' Equity.




                                       16



<PAGE>


10.      BORROWINGS

         At January 31, 2001, substantially all of Canal's real properties,  the
stock of certain subsidiaries,  the investments and a substantial portion of its
art inventories are pledged as collateral to secure the following obligations:


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

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

11% mortgage note; original principal
 amount $1,697; due April 1, 2011;
 payable in monthly installments
 (including interest) of $17................          0               0

9.5% mortgage note; original principal
 amount $472; due November 1, 2012,
 payable in monthly installments
 (including interest) of $4.................          0               0

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

Total ......................................      2,522           2,522

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

Long-term debt .............................    $ 2,522         $ 2,522
                                                -------         -------








                                       17



<PAGE>


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

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

         On January  10,  2000,  the above  Notes were  further  amended to have
holders loan the Company  $1,725,000  in additional  financing,  the proceeds of
which was used to repay in full all of the  Company's  outstanding  non  related
party  long-term debt. As of January 31, 2001, the balance due under these notes
was $2,522,000 all of which is classified as long-term debt-related party.


11.      PENSION VALUATION RESERVE

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








                                       18



<PAGE>


                 Item II - Management's Discussion and Analysis
                Of Results of Operations and Financial Condition
                   For the Three Months Ended January 31, 2001


Results of Operations - General

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


2001 Compared to 2000

         Canal  recognized  net income of $115,000  for the three  month  period
ended January 31, 2001 as compared to net income of $128,000 for the same period
in fiscal 2000. After  recognition of an unrealized loss on investments held for
sale of $32,000 for the three month  period  ended  January 31, 2001 the Company
recognized  comprehensive  income of $83,000  for the three month  period  ended
January 31, 2001 as compared to  comprehensive  income of $140,000  for the same
period in fiscal 2000.  Further,  after  recognition of preferred stock dividend
payments of $72,000 for the three  month  period  ended  January 31,  2001,  the
Company  recognized  net income  applicable  to common  stockholders  of $11,000
($0.01 per common  share) for the three month period  ended  January 31, 2001 as
compared to net income  applicable to common  stockholders of $74,000 ($0.02 per
common  share) for the same period in fiscal 2000.  Included in the 2001 results
is other income of approximately  $130,000 comprised primarily of a damage award
Canal received in connection  with its lawsuit against a meat packing company in
South St.  Paul,  Minnesota.  Canal is appealing  this award to gain  additional
compensation.  Included  in the 2000  results is other  income of  approximately
$134,000 comprised primarily of a discount earned on the early retirement of the
Company's non related party debt.

         Canal's  revenues from continuing  operations  consist of revenues from
its  real  estate,  stockyards  and  art  operations.  Due to  general  economic
conditions  and more  specifically  a depressed  national  art  market,  Canal's
aggregate  revenues  from art sales and the prices at which sales were made have
significantly  declined in recent years.  Total revenues decreased by $39,000 or
2.5% to  $1,547,000  for the three  month  period  ended  January 31,  2001,  as
compared to the revenues of $1,585,000  for the same period in fiscal 2000.  The
fiscal 2001  decrease in revenues is due primarily to a decrease in sales of art
of approximately $28,000.




                                       19



<PAGE>


Real Estate Revenues

         Real estate  revenues for the three  months  ended  January 31, 2001 of
$242,000  accounted  for 15.7% of the fiscal  2001  revenues as compared to real
estate  revenues of $254,000 or 16.0% for the same period in fiscal  2000.  Real
estate revenues are comprised of the sale of real estate (0.0% and 0.0%), rental
income from commercial  office space in Canal's  Exchange  Buildings  (45.0% and
41.5%),  outside  real estate rent  consisting  of rental and other lease income
from the  rental of vacant  land and  certain  structures  (55.0% and 58.4%) and
other income  (0.0% and 0.1%) for the three  months  ended  January 31, 2001 and
2000,  respectively.  The percentage  variations in the year to year comparisons
are due  primarily  to the  decrease  in outside  real estate rent which was the
result of having sold certain income producing  properties in the second half of
fiscal 2000.


Real Estate Expenses

         Real estate  expenses for the three  months  ended  January 31, 2001 of
$201,000  increased by $4,000  (1.9%) from real estate  expenses of $197,000 for
the same period in fiscal 2000.  Real estate expenses were comprised of the cost
of real estate sold (0.0% and 0.0%), labor,  operating and maintenance  expenses
(61.1% and 59.8%),  depreciation and amortization (14.1% and 13.1%), taxes other
than income  taxes  (18.2% and 17.8%) and general  and  administrative  expenses
(6.6%  and  9.3%)  for the  three  months  ended  January  31,  2001  and  2000,
respectively.  There were no  significant  percentage  variations in the year to
year comparisons.


Stockyard Revenues

         Stockyard  revenues  for the three  months  ended  January  31, 2001 of
$1,304,000  accounted  for 84.3% of the fiscal  2001  revenues  as  compared  to
stockyard  revenues of  $1,304,000  or 82.2% for the same period in fiscal 2000.
Stockyard revenues are comprised of yard handling and auction (88.1% and 88.5%),
feed and bedding income (6.3% and 6.7%), rental income (0.1% and 0.1%) and other
income (5.5% and 4.7%) for the three month  periods  ended  January 31, 2001 and
2000, respectively.  There were no significant percentage variations in the year
to year comparisons.


Stockyard Expenses

         Stockyard  expenses  for the three  months  ended  January  31, 2001 of
$1,025,000  decreased by $7,000 (6.5%) from stockyard expenses of $1,032,000 for
the same period in fiscal 2000.  Stockyard  expenses are  comprised of labor and
related  costs (45.2% and 44.9%),  other  operating and  maintenance  (26.5% and
23.8%), feed and bedding expense (6.1% and 6.3%),  depreciation and amortization
(0.4% and 0.3%), taxes other than income taxes (6.6% and 7.3%)




                                       20



<PAGE>


and general  and  administrative  (15.2% and 17.4%) for the three month  periods
ended  January  31,  2001 and  2000,  respectively.  There  were no  significant
percentage variations in the year to year comparisons.


Art Operations - General

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

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

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


Art Revenues

         Art  revenues  for the three  months  ended  January  31, 2001 of $zero
accounted  for zero% of the fiscal 2001  revenues as compared to art revenues of
$28,000 or 1.8% for the same period in fiscal 2000.  Art revenues are  comprised
of proceeds from the sale of antiquities and  contemporary art (0.0% and 100.0%)
and commission  income on sale of art owned by third parties (0.0% and 0.0%) for
the three month  periods  ended  January 31,  2001 and 2000,  respectively.  The
Company's art  inventory  was reduced  through sales by $zero in the first three
months of fiscal 2001.




                                       21



<PAGE>


Art Expenses

         Art  expenses  for the three  months  ended  January 31, 2001 of $7,000
decreased  by $22,000 from art expenses of $29,000 for the same period in fiscal
2000.  Art  expenses  (net of a valuation  allowance  of $51,000 in fiscal 2000)
consisted  of the cost of art sold  (0.0% and 73.9%) and  selling,  general  and
administrative  expenses  (100.0% and 26.1%) for the three month  periods  ended
January 31, 2001 and 2000,  respectively.  It is the Company's policy to use the
adjusted  carrying  value for sales,  thereby  reducing  the  valuation  reserve
proportionately as the inventory is sold.


General and Administrative

         General and administrative  expenses for the three months ended January
31, 2001 of $265,000  decreased by $2,000  (6.6%) from  expenses of $267,000 for
the  same  period  in  fiscal  2000.   The  major   components  of  general  and
administrative  expenses are officers salaries (43.2% and 41.2%), rent (8.4% and
8.3%), legal and professional fees (5.8% and 6.9%),  insurance (10.2% and 10.1%)
and office  salaries (11.6% and 10.8%) for the three month periods ended January
31, 2001 and 2000, respectively. There were no significant percentage variations
in the year to year comparisons.


Interest and Other Income

         Interest and other  income for the three months ended  January 31, 2001
of  $130,000  decreased  by $4,000  (3.0%)  from  interest  and other  income of
$134,000  for the same period in fiscal  2000.  Included in the 2001  results is
other income of  approximately  $130,000  comprised  primarily of a damage award
Canal received in connection  with its lawsuit against a meat packing company in
South St.  Paul,  Minnesota.  Canal is appealing  this award to gain  additional
compensation.  Included in the fiscal 2000 results is a $125,000 discount earned
on the early retirement of the Company's non related party debt.


Interest Expense

         Interest expense for the three months ended January 31, 2001 of $63,000
decreased by $3,000 (4.0%) from interest  expense of $66,000 for the same period
in fiscal  2000.  The fiscal 2001  decrease is due  primarily  to a reduction in
aggregate debt outstanding at January 31, 2001 as compared to the same period in
fiscal 2000.  For the most part  interest  rates on Canal's  debt have  remained
unchanged for the past 12 months.




                                       22



<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 eight of the last ten years and is involved in  litigation  with a
meat packer located in South St. Paul,  Minnesota.  The financial  statements do
not include any  adjustments  that might  result  from the  resolution  of these
uncertainties.  Additionally,  the  accompanying  financial  statements  do  not
include any adjustments  relating to the  recoverability  and  classification of
recorded asset amounts or the amounts and  classification  of  liabilities  that
might be necessary should the Company be unable to continue as a going concern.

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

         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, 2001, the balance due under these notes
was $2,522,000 all of which is classified as long-term debt related party.

         Cash and cash  equivalents  of $13,000 at January 31, 2001 decreased by
$74,000 from cash and cash  equivalents of $87,000 at October 31, 2000. Net cash
used by operations so far in fiscal 2001 was $31,000.




                                       23



<PAGE>


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

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


Other Factors

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


Item III - Quantitative and Qualitative Disclosures About Market Risk

         We do not have any derivative  financial  instruments in our marketable
securities  portfolio as of January 31, 2001. We employ established policies and
procedures  to  manage  our  exposure  to  changes  in the  market  risk  of our
marketable  securities which are classified as  available-for-sale as of January
31,  2001.  Canal's  related  party  mortgage  notes have fixed  interest  rates
therefore,  the fair value of these  instruments  is not  affected by changes in
market interest rates.  Canal believes that the market risk arising from holding
its financial instruments is not material.

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




                                       24



<PAGE>









                                     PART II

                                OTHER INFORMATION
















                                       25


<PAGE>


Item 1:          Legal Proceedings:

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


Item 2 and 3:

                 Not applicable.


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

                 None.


Item 5:          Other Information:

                 None.


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

                 (A) Not applicable.
                 (b) No reports on Form 8-K have been filed during the
                     quarter for which the report is filed.











                                       26



<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, 2001




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