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, 1997

                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 March 31, 1997
Common stock, $0.01 par value                4,326,930

(This document contains 24 pages)


                           CANAL CAPITAL CORPORATION & SUBSIDIARIES 
                                CONSOLIDATED BALANCE SHEETS  
                            JANUARY 31, 1997 AND OCTOBER 31, 1996 

                                           JANUARY 31,          OCTOBER 31,
                                              1997                1996 
                                           (UNAUDITED)           (AUDITED) 
                            
ASSETS: 
  
CURRENT ASSETS: 
 
  CASH AND CASH EQUIVALENTS               $    4,132         $    10,632 
  RESTRICTED CASH AND CASH EQUIVALENTS       470,000             470,000
  NOTES AND ACCOUNTS RECEIVABLE              214,094             295,202 
   ART INVENTORY, NET OF A VALUATION ALLOWANCE OF
   $ 500,000  AT JANUARY 31, 1997 AND 
   OCTOBER 31, 1996, RESPECTIVELY            500,000             500,000
  INVESTMENTS                                406,425             535,558 
  PREPAID EXPENSES                           165,760             203,238 
 
       TOTAL CURRENT ASSETS                 1,760,411           2,014,630 
 
 
 
 
NON-CURRENT ASSETS: 
 
  PROPERTY ON OPERATING LEASES, NET OF
   ACCUMULATED DEPRECIATION OF $ 5,850,632
   AND $ 5,753,088 AT JANUARY 31, 1997 AND  
   OCTOBER 31, 1996, RESPECTIVELY           7,025,299           7,105,534 
 
 
  ART INVENTORY NON-CURRENT, NET OF
   VALUATION ALLOWANCE OF $ 2,000,000
   AT JANUARY 31, 1997 AND OCTOBER 31,  
   1996, RESPECTIVELY                       3,066,088           3,089,088
            
 
  
 
 
OTHER ASSETS: 
 
  PROPERTY HELD FOR DEVELOPMENT OR RESALE   2,923,605           2,938,905 
  DEFERRED LEASING AND FINANCING COSTS         78,798              92,919 
  DEPOSITS AND OTHER                          240,879             248,132 
 
                                            3,243,282           3,279,956
 
                                          $15,095,080         $15,489,208 
                                         ============         =========== 
                                      


                                     2


                  CANAL CAPITAL CORPORATION & SUBSIDIARIES
                       CONSOLIDATED BALANCE SHEETS  
                   JANUARY 31, 1997 AND OCTOBER 31, 1996 
                                               
                                         JANUARY 31,        OCTOBER 31,
                                            1997              1996
                                         (UNAUDITED)         (AUDITED)
LIABILITIES & STOCKHOLDERS' EQUITY: 
  
CURRENT LIABILITIES: 
 
  CURRENT PORTION OF LONG-TERM
   DEBT RELATED PARTY                 $    500,000       $    500,000      
  CURRENT PORTION OF LONG-TERM DEBT         64,000             64,000 
  ACCOUNTS PAYABLE AND ACCRUED EXPENSES  1,659,161          1,984,692 
  ACCRUED LITIGATION SETTLEMENT            775,000            850,000 
  INCOME TAXES PAYABLE                      19,233             27,877  
 
    TOTAL CURRENT LIABILITIES            3,017,394          3,426,569  
 
 
LONG-TERM DEBT, LESS CURRENT PORTION     6,433,716          6,130,769 
LONG-TERM DEBT, LESS CURRENT PORTION
  -RELATED PARTY                           747,000            849,000  
 
                                         7,180,716          6,979,769  
 
COMMITMENTS AND CONTINGENCIES                 

STOCKHOLDERS' EQUITY: 
 
PREFERRED STOCK, $0.01 PAR VALUE: 
  5,000,000 SHARES AUTHORIZED; 2,812,484 AND 
  2,703,299 SHARES ISSUED AND OUTSTANDING 
  AT JANUARY 31, 1997 AND OCTOBER 31, 1996,
  RESPECTIVELY AND AGGREGATE LIQUIDATION  
  PREFERENCE OF $ 28,124,840 AND $ 27,032,990  
  AT JANUARY 31, 1997 AND OCTOBER 31, 1996
  RESPECTIVELY                              28,125              27,033 
 
COMMON STOCK, $0.01 PAR VALUE: 
  10,000,000 SHARES AUTHORIZED; 5,313,794 
  SHARES ISSUED AND OUTSTANDING AT 
  JANUARY 31, 1997 AND OCTOBER 31, 1996,
  RESPECTIVELY                              53,138              53,138 
 
PAID-IN CAPITAL                         26,690,440          26,636,939  

RETAINED EARNINGS (DEFICIT)             (9,251,492)         (9,010,999) 
 
LESS-VALUATION RESERVE                  (1,619,696)         (1,619,696) 
 
LESS-986,865 SHARES OF COMMON STOCK 
     HELD IN TREASURY, AT COST         (11,003,545)        (11,003,545) 
 
                                         4,896,970           5,082,870 
 
                                      $ 15,095,080        $ 15,489,208 
                                     =============       ============= 
                                     3 


                   CANAL CAPITAL CORPORATION & SUBSIDIARIES
                    CONSOLIDATED STATEMENTS OF OPERATIONS
            FOR THE THREE MONTHS ENDED JANUARY 31, 1997 AND 1996



                                               1997            1996        
                                          (UNAUDITED)     (UNAUDITED)      

REAL ESTATE OPERATIONS:
 REAL ESTATE REVENUES:
    SALE OF REAL ESTATE                    $   279,000     $   476,621    
    RENTAL INCOME                              437,356         536,418     
    GROUND LEASE INCOME                        231,000         234,000     
    VOLUME BASED RENTAL INCOME                  30,435         204,002     
    OTHER INCOME                                 4,094           1,613     

                                               981,885       1,452,654     

 REAL ESTATE EXPENSES:
    COST OF REAL ESTATE SOLD                   120,072         159,733     
    LABOR, OPERATING AND MAINTENANCE           217,218         238,724     
    DEPRECIATION AND AMORTIZATION               92,045          91,413     
    TAXES OTHER THAN INCOME TAXES               74,700          90,000     
    PROVISION FOR LITIGATION SETTLEMENT              0               0     
    GENERAL AND ADMINISTRATIVE                  27,694          28,310     

                                               531,729         608,180     



INCOME FROM REAL ESTATE OPERATIONS             450,156         844,474     


ART OPERATIONS:
 ART REVENUES:
    SALES                                       15,100         104,400     
    OTHER REVENUES                               2,982               0     

                                                18,082         104,400     
  

ART EXPENSES:
    COST OF ART SOLD                            24,358         219,633     
    VALUATION RESERVE                                0               0     
    SELLING, GENERAL AND ADMINISTRATIVE          9,950          11,168     
    
                                                34,308         230,801     


LOSS FROM ART OPERATIONS                       (16,226)       (126,401)    








                                     4


                    CANAL CAPITAL CORPORATION & SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS
             FOR THE THREE MONTHS ENDED JANUARY 31, 1997 AND 1996
                                Continued ...


                                              1997           1996          
                                           (UNAUDITED)     (UNAUDITED)     

GENERAL AND ADMINISTRATIVE EXPENSE        $  (312,768)     $  (328,640)    


INCOME (LOSS) FROM OPERATIONS                 121,162          389,433     


OTHER INCOME (EXPENSE):
  GAIN (LOSS) ON SALE OF INVESTMENTS                0                0     
  GAIN (LOSS) ON MARK-TO-MARKET OF 
    INVESTMENTS                              (129,133)               0     
  INTEREST & OTHER INCOME                      77,083            3,561     
  INTEREST EXPENSE                           (224,663)        (352,058)    
  INTEREST EXPENSE-RELATED PARTY              (41,000)         (45,000)    

                                             (317,713)        (393,497)    
                                             

GAIN (LOSS) BEFORE PROVISION FOR INCOME 
  TAXES                                      (196,551)          (4,064)    
 

PROVISION (BENEFIT) FOR INCOME TAXES                0                0     

NET INCOME (LOSS)                            (196,551)          (4,064)    
 
PREFERRED STOCK DIVIDEND                      (43,942)         (38,341)    

NET INCOME (LOSS) APPLICABLE TO COMMON
 SHARES                                   $  (240,493)     $   (42,405)    
                                          =============    ============    

NET INCOME (LOSS) PER COMMON SHARE        $     (0.06)     $     (0.01)    
                                          =============    ============    

















                                5          


                  CANAL CAPITAL CORPORATION & SUBSIDIARIES
                   CONSOLIDATED STATEMENTS OF CASH FLOWS
            FOR THE THREE MONTHS ENDED JANUARY 31, 1997 AND 1996


                                          1997              1996           
                                      (UNAUDITED)       (UNAUDITED)

CASH FLOWS FROM OPERATING ACTIVITIES:
  NET INCOME (LOSS)                     $  (195,551)     $    (4,064)     

  ADJUSTMENTS TO RECONCILE NET INCOME (LOSS) TO
   NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES:
   PROVISION FOR LITIGATION SETTLEMENT      (75,000)               0      
   DEPRECIATION AND AMORTIZATION             97,543          110,175       
   GAIN  ON SALES OF REAL ESTATE           (158,928)        (316,888)      
   GAIN FROM SALE OF INVESTMENTS                  0                0       
   VALUATION RESERVE - ART INVENTORY              0                0       
   (GAIN )LOSS ON MARK-TO-MARKET OF
     INVESTMENTS                            129,133                0       

CHANGES IN ASSETS AND LIABILITIES:
     NOTES AND ACCOUNTS RECEIVABLES, NET     81,108          (74,277)  
     ART INVENTORY, NET                      80,235          206,664       
     PREPAID EXPENSES AND OTHER, NET        (27,957)        (226,458)      
     PAYABLES AND ACCRUED EXPENSES, NET    (409,175)         (61,295)     
NET CASH (USED) PROVIDED 
    BY OPERATING ACTIVITIES                (478,592)        (366,143)


CASH FLOWS FROM INVESTING ACTIVITIES:
  PROCEEDS FROM SALES OF REAL ESTATE        279,000          476,621
  PROCEEDS FROM SALE OF INVESTMENTS               0                0       
  CAPITAL EXPENDITURES                      (29,908)               0    
NET CASH PROVIDED BY INVESTING ACTIVITIES   249,092          476,621    

CASH FLOWS FROM FINANCING ACTIVITIES:
  PROCEEDS FROM LONG-TERM DEBT-RELATED
    PARTIES                                       0                0       
  TRANSFERS TO LONG-TERM                    325,000                0 
  REPAYMENT OF LONG-TERM DEBT OBLIGATIONS  (102,000)        (236,425) 
NET CASH USED BY FINANCING ACTIVITIES       223,000         (236,425) 

(INCREASE) IN RESTRICTED CASH AND
  CASH EQUIVALENTS                                0                0       
NET (DECREASE) INCREASE IN CASH AND CASH
  EQUIVALENTS                                (6,500)        (125,947)     
CASH AND CASH EQUIVALENTS AT
 BEGINNING OF YEAR                           10,632          114,750       

CASH AND CASH EQUIVALENTS AT 
 END OF YEAR                            $     4,132      $   (11,197)      
                                        ============     ============

NOTE:    Canal  made  federal  and  state income tax payments of $8,600 and
$21,000  and  interest payments of $265,000 and $397,000 in the three month
periods ended January 31, 1997 and 1996, respectively.

                                     6 


                 CANAL CAPITAL CORPORATION AND SUBSIDIARIES
         CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
             FOR THE YEAR ENDED OCTOBER 31, 1996 (AUDITED) AND 
          FOR THE THREE MONTHS ENDED JANUARY 31, 1997 (UNAUDITED)


                              COMMON STOCK     PREFERRED STOCK
                              NUMBER                NUMBER         
                                OF                  OF
                             SHARES   AMOUNT     SHARES       AMOUNT
BALANCE, OCTOBER 31, 1995 5,313,794   $53,138    2,358,542    $23,585   
 NET INCOME (LOSS)                0         0            0          0
 PREFERRED STOCK DIVIDEND         0         0      344,757      3,448
 RESERVE                          0         0            0          0      
                         --------------------   ---------------------   

BALANCE, OCTOBER 31, 1996 5,313,794   $53,138    2,703,299    $27,033  
 NET INCOME (LOSS)                0         0            0          0      
 PREFERRED STOCK DIVIDEND         0         0      109,185      1,092      
 RESERVE                          0         0            0          0      
                         --------------------   ---------------------   

BALANCE, JANUARY 31, 1997 5,313,794   $53,138    2,812,484    $28,125    
                         ====================   =====================   


                                    RETAINED                   TREASURY
                         PAID-IN    EARNINGS     VALUATION       STOCK
                         CAPITAL     DEFICIT      RESERVE       AT COST

BALANCE,OCT.31,1995  $26,468,008 ($9,690,693)   ($1,736,671)  ($11,003,545)
 NET INCOME (LOSS)             0     841,733              0              0 
 PREFERRED STOCK DIVIDEND168,931    (162,039)             0              0
 RESERVE                       0           0        116,975              0 
                     ------------ ------------- ------------  ------------

BALANCE,OCT.31,1996  $26,636,939 ($9,010,999)   ($1,619,696)  ($11,003,545)
 NET INCOME (LOSS)             0    (196,551)             0              0
 PREFERRED STOCK DIVIDEND 53,501     (43,942)             0              0
 RESERVE                       0           0              0              0
                      ----------  -------------  ------------ ------------  

BALANCE,JAN.31,1997$26,690,440   ($9,251,492)   ($1,619,696)  ($11,003,545)
                 =============  ============== ============= =============














                                     7


                 CANAL CAPITAL CORPORATION AND SUBSIDIARIES
               NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                    THREE MONTHS ENDED JANUARY 31, 1997
                                (UNAUDITED)



1.   GENERAL

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

     Canal  is  engaged  in two distinct businesses - the management of its
agribusiness  related real estate properties located in the Midwest and art
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  six  of  the  last eight years, has a working capital
deficit  at  January 31, 1997 of approximately $1.3 million, is involved in
various litigations and on December 31, 1996 defaulted on its obligation to
repay  a  $500,000  note.    A  reserve  has been provided in the amount of
$450,000  associated  with  the  litigation  in  Minnesota.   The financial
statements  do  not  include  any  adjustments  that  might result from the
resolution  of  these  other  uncertainties.    The  accompanying financial
statements  do  not  include any adjustments relating to the recoverability
a n d   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.

     In   the  past  three  years,  Canal  has  made  significant  cuts  in
expenditures,  primarily  in salaries and other overhead expenses and plans
to  continue  to reduce the level of its art inventories to enhance current
cash  flows.  Management believes that 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 cost
cutting  program  in  itself  will  be  sufficient  to  fund operating cash
requirements.





                                     8




2.   Interim Financial Statements

     The  interim  consolidated  financial  statements included herein have
been  prepared  by  Canal without audit.  In the opinion of Management, the
a c c o mpanying  unaudited  financial  statements  of  Canal  contain  all
adjustments  necessary  to  present  fairly  its  financial  position as of
January  31,  1997 and the results of its operations and its cash flows for
the three month period ended January 31, 1997.  All of the above referenced
adjustments  were  of  a  normal recurring nature.  Certain information and
footnote  disclosures normally included in financial statements prepared in
a c cordance  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, 1996 and the notes thereto which are contained in Canal s
1996  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 1997.


3.   Reclassification

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


4.   Notes Receivable

     Included in the notes and accounts receivable were the current portion
of  notes  from  real  estate sales in the amount of $25,000 at January 31,
1997 and October 31, 1996.



5.   INVESTMENTS

     Canal s investments consisted of the following:

    (Thousands of Dollars)       January 31, 1997     October 31, 1996

    Aggregate market value..........   $ 406                $ 535

    Aggregate carrying value........   $ 406                $ 535

       Canal has investments in the equity securities of a company in which
other entities affiliated with Canal also have made investments, and which 

                                     9
                                      



entities  together comprise a group for regulatory reporting purposes.   At
January  31,  1997,  100%  of  the  market value of Canal s investments was
invested in equity securities of this company in which such parties held 5%
or  more  of  the  outstanding equity securities of the issuer.  Certain of
Canal  s  officers and directors also serve as officers and/or directors of
this company.
     

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.
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 64% ($2,288,825) and 36% ($1,277,263) and
64% ($2,311,825) and 36% ($1,277,263) of total art inventory at January 31,
1997  and  October  31,  1996,  respectively.    Substantially  all  of the
contemporary  art  inventory  held  for  resale is comprised of the work of
Jules Olitski.

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

     Canal  has  its  art  inventory  appraised by an independent appraiser
annually.    The  1996 appraisal covered approximately 66% 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 34% 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 1996 


                                     10




C a nal  recognized  a  $1,500,000  valuation  allowance  against  its  art
inventory,  thereby, increasing the total valuation allowance to $2,500,000
as  of  October  31, 1996 as compared to $1,000,000 and $500,000 at October
31, 1995 and 1994, respectively.  These estimates were based in part on the
Company  s  history  of  losses  sustained  on art sales in the current and
previous years.

     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.  The price at which pieces are consigned is usually in line with
appraisals  and  above  the  cost  of  the piece.  The amount classified as
current represents management s best estimate  of the amount of inventory 
that will be  sold  in this market.  Management believes that the provision 
discussed above  has  effectively  reduced  inventory to its estimated net 
realizable value.

     The Company s plan to sell inventory at auction is contemplated in the
normal  course  of  business.   Auction in this context is one of the usual
channels  used  for disposal of its art inventory.  The proceeds from these
sales  will  be  used  to  reduce the Company s outstanding debt.  If these
sales are not made, the Company has alternate means of raising cash such as
sales  of  investments,  sale  of  real  estate, raising of new capital and
rescheduling  of debt.  Because of the alternatives in raising cash to meet
its  debt requirements available to the Company, it does not anticipate any
extraordinary  losses  associated  with  the  sale  of its art inventory in
fiscal 1997.   

     Canal  s art operations have generated operating losses of $16,000 and
$126,000  on  revenues  of  $18,000 and $104,000 for the three months ended
January 31, 1997 and 1996, respectively.  Art sales have resulted primarily
through  activities  in  conjunction  with  sales  of antiquities.  Canal s
management  believes  that  through  its  consignment agreements as well as
other  potential  distribution  outlets  Canal  will  continue  to  deal in
antiquities and contemporary art.


     Inventory on Consignment - The Company had $1,268,000 of art inventory
on consignment with third party dealers at January 31, 1997 and October 31,
1996, respectively. 


7.   Property and Equipment

     Included  in  property  and  equipment  were  the cost of buildings of
approximately $5 million at January 31, 1997 and October 31, 1996.

                                     11



8.   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.

9.   BORROWINGS

     At January 31, 1997, 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,
                                              1997            1996    
                                          (Unaudited)        (Audited)
(Thousands of Dollars)
Variable rate mortgage notes due
 May 15, 1998.............................   $ 3,960         $ 3,960
Variable rate mortgage notes due
 September 15, 1998 - related party.......       747             849
11% mortgage note; original principal
 amount $1,697; due April 1, 2011;
 payable in monthly installments
 (including interest) of $17..............     1,319           1,336
9.5% mortgage note; original principal
 amount $472; due November 1, 2012,
 payable in monthly installments
 (including interest) of $4...............       412             414
10 1/2% mortgage note (adjusted
 periodically to prime plus 1 3/4%);
 original principal amount $556 due
 January 15, 2013; payable in monthly
 installments (including interest) of $6..       482             485

Other Note - Related Party................       500             500

Other.....................................       325               0

Total ....................................     7,745           7,544 

Less -- current maturities ...............       564             564

Long-term debt ...........................   $ 7,181         $ 6,980
                                     12


     
     On May 22, 1985, Canal completed the sale of $20 million face value of
Variable  Rate  Mortgage  Notes, due May 15, 1993.  As discussed more fully
below, Canal has extended these notes to May 15, 1998 under essentially the
same terms and conditions.  The notes carry interest at the highest of four
variable rates, determined on a quarterly basis.

     The  new  agreement, among other things, prohibits Canal from becoming
an  investment  company  as  defined by the Investment Company Act of 1940;
requires  Canal to maintain minimum net worth; restricts Canal s ability to
pay  cash  dividends or repurchase stock; requires principal prepayments to
be  made  only  out  of  the  proceeds from the sale of certain assets; and
requires  the  accrual  of  additional interest (to be paid at maturity) of
two,  three  and four percent per annum for the fiscal years commencing May
15,  1995, 1996 and 1997, respectively.  In fiscal 1996, this agreement was
amended  to  provide for the forgiveness of all additional interest accrued
in  the  event  that  the  Company  meets  on  a  timely  basis  all of its
obligations  under  the  Note, including the payment of all other principal
and  accrued  interest on or before May 15, 1998.  In consideration for the
new  agreement,  Canal  agreed to pay a fee to the noteholders of 2% of the
principal amount outstanding as of May 15, 1995.

     On  September 20, 1995, the Company issued $1,032,000 of variable rate
mortgage  notes  due  September  15,  1998  to  a  group  which includes an
investment  partnership  controlled  by  the  Company  s  Chairman  and the
Company  s  Chief  Executive  Officer and members of his family.  The notes
issued  have  essentially  the  same  terms  and  conditions  as  the notes
discussed  above.    These  notes, among other things, prohibits Canal from
becoming  an investment company as defined by the Investment Company Act of
1940;  requires  Canal  to  maintain  minimum  net worth; restricts Canal s
ability  to  pay  cash  dividends  or  repurchase stock; requires principal
prepayments  to  be  made only out of the proceeds from the sale of certain
assets,  and  requires  the  accrual  of additional interest (to be paid at
maturity)  of  two,  three  or  four percent per annum for the fiscal years
commencing September 15, 1995, 1996 and 1997, respectively.

     In  March  1994 the Company borrowed $500,000 from an individual.  The
Company  executed  a  $350,000  note  due  December 31, 1996 and a $150,000
convertible  note  also  due  December  31,  1996.    The  $150,000 note is
convertible  at  the holder s option into one million (1,000,000) shares of
the  Company  s common stock.  The notes pay quarterly interest at the rate
of  7% per annum and are secured by 125,000 shares of Datapoint Corporation
common stock owned by the Company.   The  proceeds from this loan were used
by the 



                                     13





Company to meet its obligations under its secured credit line.  On February
14,  1997,  these  notes  were  extended to December 31, 1997.  The Company
agreed  to  increase the interest rate to prime (8.25% at January 31, 1997)
and pay down $100,000 no later than March 31, 1997.







































                                     14



                    Management s Discussion and Analysis
              Of Results of Operations and Financial Condition
                For the Three Months Ended January 31, 1997


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  six  of  the  last eight years, has a working capital
deficit  at  January 31, 1997 of approximately $1.3 million, is involved in
various litigations and on December 31, 1996 defaulted on its obligation to
repay  a  $500,000  note.    A  reserve  has been provided in the amount of
$450,000  associated  with  the  litigation  in  Minnesota.   The financial
statements  do  not  include  any  adjustments  that  might result from the
resolution  of  these  other  uncertainties.    The  accompanying financial
statements  do  not  include any adjustments relating to the recoverability
a n d   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  a  net  loss of $197,000 for the three months ended
January 31, 1997 as compared to a net loss of $4,000 for the same period in
1996.  After recognition of preferred stock dividend payments of $43,000 in
1997  and  $38,000 in 1996, the results attributable to common stockholders
were  net  losses of $240,000 and $42,000 for the three month periods ended
January 31, 1997 and 1996, respectively.

     Canal  s  revenues from continuing operations consist of revenues from
its  real estate and art operations. Due to general economic conditions and
more  specifically  a  depressed  national  art  market,  Canal s aggregate
revenues  from  art  sales  and  the  prices  at which sales were made have
significantly  declined in recent years.  Revenues decreased by $557,000 or
35.8%  to  $1,000,000  for the three month period ended January 31, 1997 as
compared to the same period in 1996.  The 1997 decrease is due primarily to
a  $198,000  reduction in revenues from the sale of real estate, a $174,000
reduction  in  volume  based  rental  income,  a $99,000 decrease in rental
income and a $86,000 reduction in art revenues. 

Real Estate Revenues

     Real  estate  revenues  for the three months ended January 31, 1997 of
$982,000  accounted  for 98.2% of the first quarter revenues as campared to
real  estate  revenues  of $1,453,000 or 93.3% for the same period in 1996.
Real estate revenues are comprised of rental income from  Exchange Building
(commercial office space) rentals and other lease income from the rental of

                                     15



vacant  land  and certain structures (44.5% and 36.9%), Ground lease income
(23.5%  and 16.1%), volume based rental income (3.1% and 14.0%) and sale of
real  estate  and other income (28.9% and 33.0%) for the three months ended
January  31, 1997 and 1996, respectively.  The 1997 revenue decrease is due
primarily  to  reductions  in  rental income ($99,000), volume based rental
income  ($174,000)  and  sales  of real estate ($198,000).  The decrease in
rental income is due to the December 1996 loss of the largest tenant (State


of  Minnesota)  in  Canal  s South St. Paul, Minnesota Exchange Building as
well as the continued consolidation of our stockyards related tenants.  The
decease  in  volume  based rental income is the result of Canal s September
1996  sale  of the John Morrell property located in Sioux City, Iowa.   The
percentage  valuation  in the year to year comparisons are due primarily to
the significant decrease in real estate sales for fiscal 1997.


Real Estate Expenses

     Real  estate  expenses  for the three months ended January 31, 1997 of
$532,000  decreased by $76,000 (12.6%) from $608,000 for the same period in
1996.    Real  estate  expenses  were  comprised  of  labor,  operating and
maintenance  (40.9%  and  39.3%),  depreciation and amortization (17.3% and
15.0%),  taxes  other  than  income  taxes  (14.1% and 14.8%), cost of real
estate sold (22.6% and 26.3%) and general and administrative expenses (5.1%
and   4.6%)  for  the  three  months  ended  January  31,  1997  and  1996,
respectively.    The 1997 decrease in real estate expenses is due primarily
to  the  $40,000  decrease  in  cost  of  real  estate sales coupled with a
decrease  of  $15,000  in  real estate taxes.  The percentage variations in
year  to  year  comparison  is also due to the decrease in the cost of real
estate sold for fiscal 1997.  


Art Operations

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

     Canal  has  its  art  inventory  appraised by an independent appraiser
annually.    The  fiscal  1996  appraisal  covered approximately 66% 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


                                     16



the  remaining  34%  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 1996 Canal recognized a $1,500,000 valuation
allowance  against  its  art inventory, thereby, increasing the total value
allowance  to  $2,500,000 as of October 31, 1996 compared to $1,000,000 and
$500,000  at  October 31, 1995 and 1994, respectively.  These estimates are
based  in part on the Company s history of losses sustained on art sales in
the current and previous years.

     The  valuation  allowance represents management s best estimate of the
loss that will be incurred by the Company in the normal course of business.
The  estimate  is  predicated  on past history and the information that was
available  at  the  time  that the financial statements were prepared.  The
provision  contemplates  the  loss  that  could result if the level of sale
anticipated was achieved. 


     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.  The price at which pieces are consigned is usually in line with
appraisals  and  above  the  cost  of  the piece.  The amount classified as
current  represents  management  s best estimate of the amount of inventory
that  will  be sold in this market.  Management believes that the provision
discussed  above  has  effectively  reduced  inventory to its estimated net
realizable  value.  The Company will continually monitor the market for its
product and will make adjustments to the value of its art inventory as such
adjustments become necessary.

     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 sales of investments, sale of real
estate,  raising  of new capital and further rescheduling of debt.  Some of
these  measures  were  successfully implemented in fiscal 1996.  Because of
t h e    available  alternatives,  the  Company  does  not  anticipate  any
extraordinary losses associated with the art inventory in fiscal 1997.


Art Revenues

     Art  revenues  for  the three months ended January 31, 1997 of $18,000
decreased  $86,000 or 82.7% from $104,000 for the same period in 1996.  Art
revenues  are  comprised  of  proceeds  from  the  sale  of antiquities and
contemporary art (83.5% and 100.0%) and commission income on sale of art 


                                     17




owned  by  third parties (16.5% and 0.0%) for the three month periods ended
January  31,  1997 and 1996, respectively.  The Company s art inventory was
reduced through sales by $24,000 in the first quarter of fiscal 1997.


Art Expenses

     Art  expenses  for  the three months ended January 31, 1997 of $34,000
decreased  by  $196,000  (85.1%) from $231,000 for the same period in 1996.
Art  expenses (excluding valuation allowances) consisted of the cost of art
sold  (71.0%  and  95.2%)  and selling, general and administrative expenses
(29.0%  and  4.8%)  for  the three month periods ended January 31, 1997 and
1996, respectively. 



General and Administrative

     General and administrative expenses for the three months ended January
31,  1997  of  $313,000 decreased $16,000 (4.8%) from $329,000 for the same
period  in  1996.    The  major  components  of  general and administrative
expenses  are  officers  salaries  (34.5% and 32.8%), rent (9.7% and 8.9%),
legal  and  professional fees (10.1% and 9.6%), insurance (11.5% and 10.7%)


and  office  salaries  (10.8%  and 10.3%) for the three month periods ended
January  31,  1997  and  1996, respectively.  The percentage changes in the
year  to  year  comparisons  are due primarily to the aggregate decrease in
general and administrative expenses in fiscal 1997.


Gain (loss) on Mark-to-Market of Investments

     Canal  recognized  a loss of $129,000 for the three month period ended
January  31,  1997  on the mark-to-market of its investments.  There was no
similar loss recorded in fiscal 1996.


Interest and Other Income

     Interest  and other income for the three months ended January 31, 1997
increased  to  $77,000  from  $4,000 for the same period in 1996.  The 1997
results  included  a  $75,000  reversal  of an amount previously accrued to
settle  certain litigation related to Canal s 1988 sale of property located
in Portland, Oregon.



                                     18





Interest Expense

     Interest expense for the three months ended January 31, 1997 decreased
33.1%  to $266,000 as compared to $397,000 for the same period in 1996. The
1997  decrease is due primarily to a $3,449,000 reduction in aggregate debt
outstanding  at  January 31, 1997 as compared to January 31, 1996.  For the
most  part  interest  rates on Canal s debt have remained unchanged for the
past 12 months.





















                                     19



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  six  of  the  last eight years, has a working capital
deficit  at  January 31, 1997 of approximately $1.3 million, is involved in
various litigations and on December 31, 1996 defaulted on its obligation to
repay  a  $500,000  note.    A  reserve  has been provided in the amount of
$450,000  associated  with  the  litigation  in  Minnesota.   The financial
statements  doe  not  include  any  adjustments  that might result from the
resolution  of  these  other  uncertainties.    The  accompanying financial
statements  do  not  include any adjustments relating to the recoverability
a n d   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  May 22, 1995 Canal completed the sale of $20 million face value of
Variable  Rate  Mortgage Notes, due May 15, 1993.  Canal has extended these
notes to May 15, 1998 under essentially the same terms and conditions.  The
notes carry interest at the highest of four variable rates, determined on a
quarterly  basis.    The new agreement, 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 form the sale of
certain assets; and requires the accrual of additional interest (to be paid
at  maturity) of two, three and four percent per annum for the fiscal years
commencing May 15, 1995, 1996 and 1996, respectively.  In fiscal 1996, this
agreement  was  amended  to  provide  for the forgiveness of all additional
interest  accrued in the event that the Company meets on a timely basis all
of  its  obligations  under  the  Note,  including the payment of all other
principal   and  accrued  interest  on  or  before  May  15,  1998.      In
consideration  for  the  new  agreement,  Canal  agreed to pay a fee to the
noteholders of 2% of the principal amount outstanding as of May 15, 1995. 

     On  September 20, 1995, the Company issued $1,032,000 of variable rate
mortgage  notes  due September 15, 1998, the proceeds of which were used to
repay  in  full  the  Company s secured credit line and a $650,000 note the
Company  issued  in  1993.    The  purchasers  of  these  notes included an
investment  partnership  controlled  by  the  Company  s  Chairman  and the
Company  s  Chief  Executive  Officer and members of his family.  The notes
issued  have  essentially  the  same  terms  and  conditions  as  the notes
discussed  above.    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 

                                     20




the  proceeds  from the sale of certain assets, and requires the accrual of
additional  interest (to be paid at maturity) of two, three or four percent
per  annum  for  the  fiscal  years commencing September 15, 1995, 1996 and
1997, respectively.
     


     Cash  and  cash  equivalents  of  $4,000 at January 31, 1997 decreased
$7,000  or  63.6%  from  $11,000  at  October  31,  1996.  Net cash used by
operations  in fiscal 1997 was $479,000.  Substantially all of the 1997 net
proceeds from the sale of real estate of $279,000 and the proceeds from the
sale  of  art  of   $18,000 was used to reduce outstanding debt and accrued
expenses.

     During  fiscal  1997 Canal reduced its variable rate mortgage notes by
$102,000  and other long-term debt by $50,000 for a net 1997 debt reduction
of $152,000.  This was offset by a transfer to long-term debt from accounts
payable and accrued expenses in the amount of $325,000.
     
     At January 31, 1997 the Company s current liabilities exceeded current
assets  by  $1.3 million, a decrease of $0.1 million from October 31, 1996.
The  1997  decrease  is  due  primarily  to  a  net  decrease  in aggregate
outstanding  debt.    The  only required principal repayments under Canal s
debt  agreements  for  fiscal 1997 will be from the proceeds of the sale of
certain  assets  (if  any)  and approximately $0.1 million on various fixed
mortgages.

     The  Company  leases  139  acres  of  land  (at  five  locations) to a
stockyard  operator.    This  lease  represents  approximately  25%  of the
Company  s  annual  revenues.    The  lessee  under  the Lease is currently
experiencing  financial  difficulties related primarily to a cattle feeding
and  financing  business  the  lessee entered into after purchasing Canal s
stockyard  operations.  While the payments under the Lease are current, the
lessee  is  in  default under the terms of certain other leases it has with
the  Company  for  office  space  at  various locations.  The cross default
provisions of these leases puts the lessee  in technical default of the 
Lease.  However, the Company is working with  the  lessee  and expects all 
arrears due to the Company to be paid in the   coming  months.    The  
Company  has  explored  the  availability  of alternative  tenants  for the 
stockyard properties covered by the Lease and its  confident  that  should  
the need arise thee are adequate alternatives available  to  the  Company 
which will protect a substantial portion of the revenue stream from the 
Lease.

     Management  believes  that the 1997 cash flow from operations combined
with  the proceeds from the sales of real estate and art will be sufficient
to support its ongoing operations.




                                     21









                                  PART II

                             OTHER INFORMATION
























                                     22




Item 1:        Legal Proceedings:
               
               See Item 3 of Canal s October 31, 1995 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.





                                      


















                                      
                                     23



                                 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




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




Date:  March 10, 1997



                                     24