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 July 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 August 31, 2001
    -------------------          -------------------------------------
Common stock, $0.01 par value                4,326,929

(This document contains 31 pages)


<PAGE>



                   CANAL CAPITAL CORPORATION AND SUBSIDIARIES
                             FORM 10-Q JULY 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 - July 31, 2001
            and October 31, 2000 ......................................     5

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

          Statements of Consolidated Changes in
            Stockholders' Equity for the Nine Month and
            One Year Periods ended July 31, 2001 and
            October 31, 2000 ..........................................    11

          Statements of Consolidated Cash Flows for the
            Nine Month Periods ended July 31, 2001 and
            2000 ......................................................    12

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

Item II.  Management's Discussion and Analysis of
            Financial Condition .......................................    21

          Capital Resources and Liquidity .............................    26

          Other Factors ...............................................    27

Item III. Quantitative and Qualitative Disclosures
            About Market Risk .........................................    28

Part II - Other Information ...........................................    29

          Items 1 through 6 ...........................................    30

          Signatures ..................................................    31


                                        2


<PAGE>


                           ACCOUNTANTS' REVIEW REPORT

To the Stockholders of Canal Capital Corporation:

We have reviewed the consolidated balance sheet of Canal Capital Corporation and
subsidiaries as of July 31, 2001, the related consolidated statements of
operations and comprehensive income for the nine and three month periods ended
July 31, 2001 and the consolidated statements of changes in stockholders' equity
and cash flows for the nine month period ended July 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.



                                              /S/ Todman & Co., CPA's,P.C.
New York, N.Y.                               -----------------------------------
September 11, 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
                       JULY 31, 2001 AND OCTOBER 31, 2000

<TABLE>
<CAPTION>
                                                               JULY 31,    OCTOBER 31,
                                                                 2001         2000
                                                              (UNAUDITED)   (AUDITED)
                                                              ----------   ----------
<S>                                                           <C>          <C>
ASSETS:

CURRENT ASSETS:

       CASH AND CASH EQUIVALENTS                              $   39,818   $   87,269
       NOTES AND ACCOUNTS RECEIVABLE, NET                        268,503      736,388
       ART INVENTORY, NET OF A VALUATION ALLOWANCE OF
             $ 1,500,000 AT BOTH JULY 31, 2001 AND
             OCTOBER 31, 2000                                    500,000      500,000
       STOCKYARDS INVENTORY                                       29,805       21,361
       INVESTMENTS                                                24,333       68,461
       PREPAID EXPENSES                                           91,418      154,875
                                                              ----------   ----------

             TOTAL CURRENT ASSETS                                953,877    1,568,534
                                                              ----------   ----------

NON-CURRENT ASSETS:

       PROPERTY ON OPERATING LEASES, NET OF
             ACCUMULATED DEPRECIATION OF $1,505,438
             AND $ 1,420,681 AT JULY 31, 2001 AND
             OCTOBER 31, 2000, RESPECTIVELY                    3,374,672    3,097,938
                                                              ----------   ----------

          PROPERTY USED IN STOCKYARD OPERATIONS, NET OF
             ACCUMULATED DEPRECIATION OF $31,948 AND
             $18,458 AT JULY 31, 2001 AND OCTOBER
             31, 2000, RESPECTIVELY                            1,274,468    1,237,476
                                                              ----------   ----------

       ART INVENTORY NON-CURRENT, NET OF A
             VALUATION ALLOWANCE OF $ 1,192,150
             AND $1,227,950 AT JULY 31, 2001
             AND OCTOBER 31, 2000, RESPECTIVELY                  683,739      696,657
                                                              ----------   ----------

OTHER ASSETS:

       PROPERTY HELD FOR DEVELOPMENT OR RESALE                   647,669      647,669
       DEFERRED LEASING AND FINANCING COSTS                       23,709        8,202
       DEPOSITS AND OTHER                                        217,523      204,421
                                                              ----------   ----------

                                                                 888,901      860,292
                                                              ----------   ----------

                                                              $7,175,657   $7,460,897
                                                              ==========   ==========
</TABLE>


                                        5

<PAGE>


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

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

CURRENT LIABILITIES:

       ACCOUNTS PAYABLE AND ACCRUED EXPENSES               $  2,079,178    $  2,209,724
       INCOME TAXES PAYABLE                                       3,490           5,379
                                                           ------------    ------------

         TOTAL CURRENT LIABILITIES                            2,082,668       2,215,103
                                                           ------------    ------------

LONG-TERM DEBT, RELATED PARTY                                 2,667,000       2,522,000
                                                           ------------    ------------

COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS' EQUITY:

  PREFERRED STOCK, $0.01 PAR VALUE: 5,000,000 SHARES
       AUTHORIZED; 4,998,446 AND 4,407,614 SHARES ISSUED
       AND OUTSTANDING AT JULY 31, 2001 AND OCTOBER 31,
       2000, RESPECTIVELY AND AGGREGATE LIQUIDATION
       PREFERENCE OF $10 PER SHARE FOR $ 40,076,140
       AND $49,984,460 AT JULY 31, 2001 AND
       OCTOBER 31, 2000, RESPECTIVELY                            49,984          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 JULY 31, 2001 AND OCTOBER 31, 2000,
       RESPECTIVELY                                              53,138          53,138

  ADDITIONAL PAID-IN CAPITAL                                 27,770,561      27,545,053

  ACCUMULATED DEFICIT                                       (12,430,220)    (11,945,307)

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

  COMPREHENSIVE INCOME:

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

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

                                                              2,425,989       2,723,794
                                                           ------------    ------------

                                                           $  7,175,657    $  7,460,897
                                                           ============    ============
</TABLE>



                                        6


<PAGE>

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


                                                        2001            2000
                                                     (UNAUDITED)     (UNAUDITED)
                                                     ----------       ----------
REAL ESTATE OPERATIONS:
 REAL ESTATE REVENUES:
    SALE OF REAL ESTATE                              $   72,500       $        0
    EXCHANGE BUILDING RENTAL INCOME                     317,768          310,226
    OUTSIDE REAL ESTATE RENT                            438,180          426,561
    OTHER INCOME                                          1,000               75
                                                     ----------       ----------
                                                        829,448          736,862
                                                     ----------       ----------
 REAL ESTATE EXPENSES:
    COST OF REAL ESTATE SOLD                             37,955                0
    LABOR, OPERATING AND MAINTENANCE                    335,897          324,946
    DEPRECIATION AND AMORTIZATION                        87,032           79,963
    TAXES OTHER THAN INCOME TAXES                       113,300          103,400
    GENERAL AND ADMINISTRATIVE                           44,761           66,092
                                                     ----------       ----------
                                                        618,945          574,401
                                                     ----------       ----------
INCOME FROM REAL ESTATE OPERATIONS                      210,503          162,461
                                                     ----------       ----------
STOCKYARD OPERATIONS:
 STOCKYARD REVENUES:
    YARD HANDLING AND AUCTION                         2,656,555        2,833,211
    FEED AND BEDDING INCOME                             198,402          207,768
    RENTAL INCOME                                         3,787            2,746
    OTHER INCOME                                        152,395          164,793
                                                     ----------       ----------
                                                      3,011,139        3,208,518
                                                     ----------       ----------
STOCKYARD EXPENSES:
    LABOR AND RELATED COSTS                           1,212,767        1,307,659
    OTHER OPERATING AND MAINTENANCE                     694,223          641,655
    FEED AND BEDDING EXPENSE                            153,765          153,186
    DEPRECIATION AND AMORTIZATION                        14,498           11,402
    TAXES OTHER THAN INCOME TAXES                       190,332          200,767
    GENERAL AND ADMINISTRATIVE                          365,431          411,993
                                                     ----------       ----------
                                                      2,631,016        2,726,662
                                                     ----------       ----------
INCOME FROM STOCKYARD OPERATIONS                        380,123          481,856
                                                     ----------       ----------



                                        7


<PAGE>


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

                                                       2001             2000
                                                    (UNAUDITED)      (UNAUDITED)
                                                    ----------       ----------
ART OPERATIONS:
 ART REVENUES:
    SALES                                               24,400           51,500
    OTHER REVENUES                                           0                0
                                                    ----------       ----------

                                                        24,400           51,500
                                                    ----------       ----------

 ART EXPENSES:
    COST OF ART SOLD                                    48,958           89,000
    VALUATION RESERVE                                  (35,800)         (50,750)
    SELLING, GENERAL AND ADMINISTRATIVE                 24,132           21,752
                                                    ----------       ----------
                                                        37,290           60,002
                                                    ----------       ----------

(LOSS) FROM ART OPERATIONS                             (12,890)          (8,502)
                                                    ----------       ----------

GENERAL AND ADMINISTRATIVE EXPENSE                    (792,180)        (814,879)
                                                    ----------       ----------

(LOSS) FROM OPERATIONS                                (214,444)        (179,064)
                                                    ----------       ----------
OTHER INCOME (EXPENSE):
  INTEREST & OTHER INCOME                              143,398          139,075
  INTEREST EXPENSE                                           0          (43,676)
  INTEREST EXPENSE-RELATED PARTY                      (190,347)        (149,341)
  OTHER EXPENSE                                              0                0
                                                    ----------       ----------
                                                       (46,949)         (53,942)
                                                    ----------       ----------
(LOSS) BEFORE PROVISION FOR
  INCOME TAXES                                        (261,393)        (233,006)

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

NET (LOSS)                                            (261,393)        (233,006)

OTHER COMPREHENSIVE (LOSS) INCOME:
  UNREALIZED (LOSS) INCOME ON
  INVESTMENTS AVAILABLE FOR SALE                       (44,308)        (101,516)
                                                    ----------       ----------

COMPREHENSIVE (LOSS)                                $ (305,701)      $ (334,522)
                                                    ==========       ==========

(LOSS) PER COMMON SHARE - BASIC
  AND DILUTED                                       $    (0.11)      $    (0.12)
                                                    ==========       ==========

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

                                        8


<PAGE>



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


                                                       2001            2000
                                                    (UNAUDITED)      (UNAUDITED)
                                                    ----------       ----------
REAL ESTATE OPERATIONS:
 REAL ESTATE REVENUES:
    SALE OF REAL ESTATE                             $   72,500       $        0
    EXCHANGE BUILDING RENTAL INCOME                    115,847          101,697
    OUTSIDE REAL ESTATE RENT                           150,747          138,076
    OTHER INCOME                                             0                0
                                                    ----------       ----------
                                                       339,094          239,773
                                                    ----------       ----------
 REAL ESTATE EXPENSES:
    COST OF REAL ESTATE SOLD                            37,955                0
    LABOR, OPERATING AND MAINTENANCE                   102,893           90,118
    DEPRECIATION AND AMORTIZATION                       29,563           27,737
    TAXES OTHER THAN INCOME TAXES                       38,400           34,200
    GENERAL AND ADMINISTRATIVE                          16,107           23,404
                                                    ----------       ----------
                                                       224,918          175,459
                                                    ----------       ----------
INCOME FROM REAL ESTATE OPERATIONS                     114,176           64,314
                                                    ----------       ----------

STOCKYARD OPERATIONS:
 STOCKYARD REVENUES:
    YARD HANDLING AND AUCTION                          576,674          652,737
    FEED AND BEDDING INCOME                             46,410           49,771
    RENTAL INCOME                                        1,157              990
    OTHER INCOME                                        31,232           41,876
                                                    ----------       ----------
                                                       655,473          745,374
                                                    ----------       ----------
STOCKYARD EXPENSES:
    LABOR AND RELATED COSTS                            333,755          399,680
    OTHER OPERATING AND MAINTENANCE                    181,090          181,640
    FEED AND BEDDING EXPENSE                            36,261           30,507
    DEPRECIATION AND AMORTIZATION                        5,116            3,826
    TAXES OTHER THAN INCOME TAXES                       57,068           62,225
    GENERAL AND ADMINISTRATIVE                          73,976           85,717
                                                    ----------       ----------
                                                       687,266          763,595
                                                    ----------       ----------
(LOSS) FROM STOCKYARD OPERATIONS                       (31,793)         (18,221)
                                                    ----------       ----------




                                        9



<PAGE>


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

                                                       2001             2000
                                                    (UNAUDITED)      (UNAUDITED)
                                                    ----------       ----------
ART OPERATIONS:
 ART REVENUES:
    SALES                                               24,400           24,000
    OTHER REVENUES                                           0                0
                                                    ----------       ----------

                                                        24,400           24,000
                                                    ----------       ----------
 ART EXPENSES:
    COST OF ART SOLD                                    48,958           16,500
    VALUATION RESERVE                                  (35,800)               0
    SELLING, GENERAL AND ADMINISTRATIVE                  9,523            7,114
                                                    ----------       ----------

                                                        22,681           23,614
                                                    ----------       ----------

INCOME FROM ART OPERATIONS                               1,719              386
                                                    ----------       ----------

GENERAL AND ADMINISTRATIVE EXPENSE                    (256,800)        (272,963)
                                                    ----------       ----------

(LOSS) FROM OPERATIONS                                (172,698)        (226,484)
                                                    ----------       ----------

OTHER INCOME (EXPENSE):
  INTEREST & OTHER INCOME                                   83              112
  INTEREST EXPENSE                                           0                0
  INTEREST EXPENSE-RELATED PARTY                       (63,900)         (63,501)
  OTHER EXPENSE                                              0                0
                                                    ----------       ----------
                                                       (63,817)         (63,389)
                                                    ----------       ----------
(LOSS) BEFORE PROVISION FOR INCOME
  TAXES                                               (236,515)        (289,873)

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

NET (LOSS)                                            (236,515)        (289,873)

OTHER COMPREHENSIVE (LOSS) INCOME:
  UNREALIZED (LOSS) INCOME ON
  INVESTMENTS AVAILABLE FOR SALE                             0         (113,076)
                                                    ----------       ----------

COMPREHENSIVE (LOSS)                                $ (236,515)      $ (402,949)
                                                    ==========       ==========

(LOSS) PER COMMON SHARE - BASIC
  AND DILUTED                                       $    (0.07)      $    (0.11)
                                                    ==========       ==========

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


                                       10


<PAGE>

                   CANAL CAPITAL CORPORATION AND SUBSIDIARIES
           CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
                FOR THE YEAR ENDED OCTOBER 31, 2000 (AUDITED) AND
               FOR THE NINE MONTHS ENDED JULY 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 (LOSS)                                 0             0             0             0             0
 PREFERRED STOCK DIVIDEND                   0             0       590,832         5,908       225,508
 MINIMUM PEN. LIAB. ADJUSTMENT              0             0             0             0             0
 UNREALIZED LOSS ON INVESTMENTS             0             0             0             0             0
                                  -----------   -----------   -----------   -----------   -----------

BALANCE, JULY 31, 2001              5,313,794   $    53,138     4,998,446   $    49,984   $27,770,561
                                  ===========   ===========   ===========   ===========   ===========

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

BALANCE, OCTOBER 31, 2000    (11,945,307)   ($ 1,969,621)              0     (11,003,545)
 NET (LOSS)                     (261,393)              0               0               0
 PREFERRED STOCK DIVIDEND       (225,508)              0               0               0
 MINIMUM PEN. LIAB. ADJ                0               0               0               0
 UNREALIZED LOSS ON INV                0               0         (44,308)              0
                            ------------    ------------    ------------    ------------

BALANCE, JULY 31, 2001      ($12,430,220)   ($ 1,969,621)   $    (44,308)   ($11,003,545)
                            ============    ============    ============    ============
</TABLE>





                                       11


<PAGE>


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


                                                        2001            2000
                                                     (UNAUDITED)     (UNAUDITED)
                                                     -----------    -----------
CASH FLOWS FROM OPERATING ACTIVITIES:
  NET (LOSS)                                         $  (261,393)   $  (233,006)

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


   DEPRECIATION AND AMORTIZATION                         112,105         99,587

CHANGES IN ASSETS AND LIABILITIES:

     NOTES AND ACCOUNTS RECEIVABLES, NET                 467,885        147,348
     ART INVENTORY, NET                                        0         38,250
     PREPAID EXPENSES AND OTHER, NET                     (23,068)       127,267
     PAYABLES AND ACCRUED EXPENSES, NET                 (132,435)      (272,917)
                                                     -----------    -----------

NET CASH (USED) BY OPERATING ACTIVITIES                 (163,094)       (93,471)
                                                     -----------    -----------

CASH FLOWS FROM INVESTING ACTIVITIES:

  CAPITAL EXPENDITURES                                  (355,545)      (128,271)
                                                     -----------    -----------

NET CASH (USED) BY INVESTING ACTIVITIES                 (355,545)      (128,271)
                                                     -----------    -----------

CASH FLOWS FROM FINANCING ACTIVITIES:
  PROCEEDS FROM LONG-TERM DEBT-RELATED
    PARTIES                                              145,000      1,725,000
  REPAYMENT OF CURRENT PORTION OF LONG-TERM                    0        (75,000)
  REPAYMENT OF LONG-TERM DEBT OBLIGATIONS                      0     (1,814,710)
                                                     -----------    -----------
NET CASH PROVIDED (USED) BY FINANCING ACTIVITIES         145,000       (164,710)
                                                     -----------    -----------

NET (DECREASE) IN CASH AND CASH
  EQUIVALENTS                                            (47,451)      (386,452)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD          87,269        416,191
                                                     -----------    -----------

CASH AND CASH EQUIVALENTS AT END OF PERIOD           $    39,818    $    29,739
                                                     ===========    ===========


NOTE:   Canal made federal and state income tax payments of $10,000 and $12,000
        and interest payments of 190,000 and $193,000 in the nine month periods
        ended July 31, 2001 and 2000, respectively.






                                       12


<PAGE>


                   CANAL CAPITAL CORPORATION AND SUBSIDIARIES
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                         NINE MONTHS ENDED JULY 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.



                                       13

<PAGE>


2.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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

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

     Investments in Joint Ventures - Investments in which ownership interest
range from 20% to 50% or less owned joint ventures are accounted for under the
equity method. These joint ventures are not, in the aggregate, material in
relation to the financial position or results of operations of Canal. The
carrying amount of such investments was $101,000 at both July 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.


                                       14

<PAGE>


3.   INTERIM FINANCIAL STATEMENTS

     The interim consolidated financial statements included herein have been
prepared by Canal without audit. In the opinion of Management, the accompanying
unaudited financial statements of Canal contain all adjustments necessary to
present fairly its financial position as of July 31, 2001 and the results of its
operations and its cash flows for the nine month period ended July 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 $211,000 and
$114,000 for the nine and three month periods ended July 31, 2001, respectively,
as compared to $162,000 and $64,000 for the same periods in fiscal 2000.
Additionally, real estate operations contributed $829,000 and $339,000 to
Canal's revenues for the nine and three month periods ended July 31, 2001,
respectively, as compared to revenues of $737,000 and $240,000 for the same
periods in fiscal 2000.

     As of July 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.






                                       15
<PAGE>


5.   STOCKYARD OPERATIONS

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

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

     Stockyard operations resulted in operating income of $380,000 and an
operating loss of $32,000 for the nine and three month periods ended July 31,
2001, respectively, as compared to operating income of $482,000 and an operating
loss of $18,000 for the same periods in fiscal 2000. Additionally, stockyard
operations contributed $3,011,000 and $655,000 to Canal's revenues for the nine
and three month periods ended July 31, 2001, respectively, as compared to
revenues of $3,209,000 and $745,000 for the same periods in fiscal 2000.

6.   ART OPERATIONS

     Canal established its art operations in October 1988 by acquiring a
significant inventory for resale of antiquities primarily from the ancient
Mediterranean cultures. In November 1989, Canal expanded its art operations by
entering into a cost and revenue sharing agreement with a New York City gallery
for the exclusive representation of Jules Olitski, a world renowned artist of
contemporary paintings. As part of this agreement Canal purchased a number of
Olitski paintings which it holds for resale with a book value of approximately
$624,000 at July 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
46% ($541,990) and 54% ($641,749) and 45% ($542,758) and 55% ($653,899) of total
art inventory at July 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.



                                       16

<PAGE>


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

     Canal has its art inventory appraised by an independent appraiser annually.
The 2000 appraisal covered approximately 57% of the inventory value. The
appraised values estimate the current market value of each piece giving
consideration to Canal's practices of engaging in consignment, private and
public auction sales. The net realizable value of the remaining 43% of the
inventory was estimated by management based in part on operating history and in
part on the results of the independent appraisals done. In fiscal 2001 Canal
applied against sales $35,800 of the valuation allowance against its art
inventory, thereby, decreasing the total valuation allowance to $2,692,150 as of
July 31, 2001, as compared to $2,727,950 at October 31, 2000.

     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 $13,000 and
operating income of $2,000 for the nine and three month periods ended July 31,
2001, respectively, as compared to an operating loss of $9,000 and operating
income of $1,000 (net of a decrease in the valuation allowance of $35,800 and
$50,750, respectively) for the same periods in fiscal 2000. Additionally, art
operations contributed $24,000 to Canal's revenues for both the nine and three
month periods ended July 31, 2001, as compared to revenues of $52,000 and
$24,000 for the same periods in fiscal 2000. Canal's management believes that
through its consignment agreements as well as other potential distribution
outlets Canal will continue to deal in antiquities and contemporary art.

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


                                       17


<PAGE>


8.   NOTES RECEIVABLE

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

9.   INVESTMENTS AVAILABLE FOR SALE

     At July 31, 2001 the investments available for sale consisted of the
following:

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

          Aggregate market value .................   $    24    $    69
                                                     -------    -------

          Aggregate carrying value ...............   $    24    $    69
                                                     -------    -------

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

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

     For the nine months ended July 31, 2001 Canal recognized an unrealized loss
on investments available for sale of $44,000. Additionally, for the nine months
ended July 31, 2000 Canal recognized an unrealized loss on investments available
for sale of $102,000, both of which are shown in a separate component of
Stockholders' Equity and Comprehensive Income.




                                       18

<PAGE>


10.  BORROWINGS

     At July 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:


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

Variable rate mortgage notes due
 May 15, 2003 - related party............    $ 2,667           $ 2,522
                                             -------           -------


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

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

     On January 10, 2000, the above Notes were further amended to have holders
loan the Company $1,725,000 in additional financing, the proceeds of which was
used to repay in full all of the Company's outstanding non related party
long-term debt. As of July 31, 2001, the balance due under these notes was
$2,667,000 all of which is classified as long-term debt-related party.




                                       19

<PAGE>


11.  PENSION VALUATION RESERVE

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



































                                       20
<PAGE>




                 Item II - Management's Discussion and Analysis
                Of Results of Operations and Financial Condition
                     For the Nine Months Ended July 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 a net loss of $261,000 for the nine month period ended
July 31, 2001 as compared to a net loss of $233,000 for the same period in
fiscal 2000. After recognition of an unrealized loss on investments held for
sale of $44,000 for the nine month period ended July 31, 2001 and an unrealized
loss on investments held for sale of $102,000 for the nine month period ended
July 31, 2000 the Company recognized a comprehensive loss of $306,000 for the
nine month period ended July 31, 2001 as compared to a comprehensive loss of
$335,000 for the same period in fiscal 2000. Further, after recognition of
preferred stock dividend payments of $226,000 for the nine month period ended
July 31, 2001, the Company recognized a net loss applicable to common
stockholders of $532,000 ($0.11 per common share) for the nine month period
ended July 31, 2001 as compared to a net loss applicable to common stockholders
of $537,000 ($0.12 per common share) for the same period in fiscal 2000.
Included in the 2001 results is other income of approximately $143,000 comprised
primarily of a damage award Canal received in connection with its lawsuit
against a meat packing company in South St. Paul, Minnesota. Canal is appealing
this award to gain additional compensation. Included in the 2000 results is
other income of approximately $139,000 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 $132,000 or
3.3% to $3,865,000 for the nine month period ended July 31, 2001, as compared to
the revenues of $3,997,000 for the same period in fiscal 2000. The fiscal 2001
decrease in revenues is due primarily to softer than anticipated volume from our
stockyard operations due to the severe winter conditions experienced throughout
the Midwest, as well as a decrease in sales of art of approximately $28,000.



                                       21

<PAGE>


Real Estate Revenues

     Real estate revenues for the nine months ended July 31, 2001 of $829,000
accounted for 21.5% of the fiscal 2001 revenues as compared to real estate
revenues of $737,000 or 18.4% for the same period in fiscal 2000. Real estate
revenues are comprised of the sale of real estate (8.7% and 0.0%), rental income
from commercial office space in Canal's Exchange Buildings (38.3% and 42.1%),
outside real estate rent consisting of rental and other lease income from the
rental of vacant land and certain structures (52.8% and 57.9%) and other income
(0.2% and 0.0%) for the nine months ended July 31, 2001 and 2000, respectively.
The percentage variations in the year to year comparisons are due primarily to
the fiscal 2001 increase in real estate sales.

     Real estate revenues for the three months ended July 31, 2001 of $339,000
accounted for 33.3% of the fiscal 2001 revenues as compared to real estate
revenues of $240,000 or 23.8% for the same period in fiscal 2000. Real estate
revenues are comprised of the sale of real estate (21.4% and 0.0%), rental
income from commercial office space in Canal's Exchange Buildings (34.2% and
42.4%), outside real estate rent consisting of rental and other lease income
from the rental of vacant land and certain structures (44.4% and 57.6%) and
other income (0.0% and 0.0%) for the three months ended July 31, 2001 and 2000,
respectively. The percentage variations in the year to year comparisons are due
primarily to the fiscal 2001 increase in real estate sales.

Real Estate Expenses

     Real estate expenses for the nine months ended July 31, 2001 of $619,000
increased by $45,000 (7.8%) from real estate expenses of $574,000 for the same
period in fiscal 2000. Real estate expenses were comprised of the cost of real
estate sold (6.1% and 0.0%), labor, operating and maintenance expenses (54.3%
and 56.7%), depreciation and amortization (14.1% and 13.8%), taxes other than
income taxes (18.3% and 18.0%) and general and administrative expenses (7.2% and
11.5%) for the nine months ended July 31, 2001 and 2000, respectively. The
percentage variations in the year to year comparisons are due primarily to the
increase in the cost of real estate sold.

     Real estate expenses for the three months ended July 31, 2001 of $225,000
increased by $50,000 (28.2%) from real estate expenses of $175,000 for the same
period in fiscal 2000. Real estate expenses were comprised of the cost of real
estate sold (16.8% and 0.0%), labor, operating and maintenance expenses (45.8%
and 51.4%), depreciation and amortization (13.1% and 15.8%), taxes other than
income taxes (17.1% and 19.5%) and general and administrative expenses (7.2% and
13.3%) for the three months ended July 31, 2001 and 2000, respectively. The
percentage variations in the year to year comparisons are due primarily to the
increase in the cost of real estate sold.



                                       22

<PAGE>


Stockyard Revenues

     Stockyard revenues for the nine months ended July 31, 2001 of $3,011,000
accounted for 77.9% of the fiscal 2001 revenues as compared to stockyard
revenues of $3,209,000 or 80.3% for the same period in fiscal 2000. Stockyard
revenues are comprised of yard handling and auction (88.2% and 88.3%), feed and
bedding income (6.6% and 6.5%), rental income (0.1% and 0.1%) and other income
(5.1% and 5.1%) for the nine month periods ended July 31, 2001 and 2000,
respectively. There were no significant percentage variations in the year to
year comparisons.

     Stockyard revenues for the three months ended July 31, 2001 of $655,000
accounted for 64.3% of the fiscal 2001 revenues as compared to stockyard
revenues of $745,000 or 73.9% for the same period in fiscal 2000. Stockyard
revenues are comprised of yard handling and auction (88.0% and 87.6%), feed and
bedding income (7.1% and 6.7%), rental income (0.1% and 0.1%) and other income
(4.8% and 5.6%) for the three month periods ended July 31, 2001 and 2000,
respectively. There were no significant percentage variations in the year to
year comparisons.

Stockyard Expenses

     Stockyard expenses for the nine months ended July 31, 2001 of $2,631,000
decreased by $96,000 (3.5%) from stockyard expenses of $2,727,000 for the same
period in fiscal 2000. Stockyard expenses are comprised of labor and related
costs (46.1% and 48.0%), other operating and maintenance (26.4% and 23.5%), feed
and bedding expense (5.8% and 5.6%), depreciation and amortization (0.6% and
0.4%), taxes other than income taxes (7.2% and 7.4%) and general and
administrative (13.9% and 15.1%) for the nine month periods ended July 31, 2001
and 2000, respectively. There were no significant percentage variations in the
year to year comparisons.

     Stockyard expenses for the three months ended July 31, 2001 of $687,000
decreased by $77,000 (10.0%) from stockyard expenses of $764,000 for the same
period in fiscal 2000. Stockyard expenses are comprised of labor and related
costs (48.6% and 52.3%), other operating and maintenance (26.4% and 23.8%), feed
and bedding expense (5.3% and 4.0%), depreciation and amortization (0.7% and
0.5%), taxes other than income taxes (8.3% and 8.2%) and general and
administrative (10.7% and 11.2%) for the three month periods ended July 31, 2001
and 2000, respectively. There were no significant percentage variations in the
year to year comparisons.





                                       23

<PAGE>


Art Operations - General

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

     Canal has its art inventory appraised by an independent appraiser annually.
The fiscal 2000 appraisal covered approximately 57% of the inventory value. The
appraised values estimate the current market value of each piece giving
consideration to Canal's practices of engaging in consignment, private and
public auction sales. The net realizable value of the remaining 43% of the
inventory was estimated by management based in part on operating history and in
part on the results of the independent appraisals done. In fiscal 2001 Canal
applied against sales $35,800 of the valuation allowance against its art
inventory, thereby, decreasing the total valuation allowance to $2,692,150 as of
July 31, 2001, as compared to $2,727,950 at October 31, 2000. There were no
sales of art in the first six months of 2001.

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

Art Revenues

     Art revenues for the nine months ended July 31, 2001 of $24,000 accounted
for 0.6% of the fiscal 2001 revenues as compared to art revenues of $52,000 or
1.3% for the same period in fiscal 2000. Art revenues are comprised of proceeds
from the sale of antiquities and contemporary art (100.0% and 100.0%) and
commission income on sale of art owned by third parties (0.0% and 0.0%) for the
nine month periods ended July 31, 2001 and 2000, respectively. The Company's art
inventory was reduced through sales by $13,000 in the first nine months of
fiscal 2001.

     Art revenues for the three months ended July 31, 2001 of $24,000 accounted
for 2.4% of the fiscal 2001 revenues as compared to art revenues of $24,000 or
2.4 for the same period in fiscal 2000. Art revenues are comprised of proceeds
from the sale of antiquities and contemporary art



                                       24


<PAGE>


(100.0% and 100.0%) and commission income of sale of art owned by third parties
(0.0% and 0.0%) for the three month periods ended July 31, 2001 and 2000,
respectively. The Company's art inventory was reduced through sales by $13,000
in the third quarter of fiscal 2001.

Art Expenses

     Art expenses for the nine months ended July 31, 2001 of $37,000 decreased
by $23,000 from art expenses of $60,000 for the same period in fiscal 2000. Art
expenses (net of a valuation allowance of $36,000 and $51,000 in fiscal 2001 and
2000, respectively) consisted of the cost of art sold (35.3% and 63.8%) and
selling, general and administrative expenses (64.7% and 36.2%) for the nine
month periods ended July 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.

     Art expenses for the three months ended July 31, 2001 of $23,000 were
unchanged from art expenses of $23,000 for the same period in fiscal 2000. Art
expenses consisted of the cost of art sold (58.0% and 69.9%) and selling,
general and administrative expenses (42.0% and 30.1%) for the three month
periods ended July 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 nine months ended July 31, 2001
of $792,000 decreased by $23,000 (2.8%) from expenses of $815,000 for the same
period in fiscal 2000. The major components of general and administrative
expenses are officers salaries (43.4% and 41.7%), rent (8.6% and 8.3%), legal
and professional fees (5.8% and 6.7%), insurance (10.2% and 9.9%) and office
salaries (11.2% and 11.1%) for the nine month periods ended July 31, 2001 and
2000, respectively. There were no significant percentage variations in the year
to year comparisons.

     General and administrative expenses for the three months ended July 31,
2001 of $257,000 decreased by $16,000 (5.9%) from expenses of $273,000 for the
same period in fiscal 2000. The major components of general and administrative
expenses are officers salaries (44.7% and 42.0%), rent (8.7% and 8.2%), legal
and professional fees (6.0% and 6.7%), insurance (10.5% and 9.9%) and office
salaries (10.6% and 11.3%) for the three month periods ended July 31, 2001 and
2000, respectively. There were no significant percentage variations in the year
to year comparisons.


                                       25


<PAGE>


Interest and Other Income

     Interest and other income for the nine months ended July 31, 2001 of
$143,000 increased by $4,000 (3.1%) from interest and other income of $139,000
for the same period in fiscal 2000. Included in the 2001 results is other income
of approximately $130,000 comprised primarily of a damage award Canal received
in connection with its lawsuit against a meat packing company in South St. Paul,
Minnesota. Canal is appealing this award to gain additional compensation.
Included in the fiscal 2000 results is a $125,000 discount earned on the early
retirement of the Company's non related party debt.

Interest Expense

     Interest expense for the nine months ended July 31, 2001 of $190,000
decreased by $3,000 (l.4%) from interest expense of $193,000 for the same period
in fiscal 2000. For the most part interest rates on Canal's debt have remained
unchanged for the past 12 months.

Capital Resources and Liquidity

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

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



                                       26

<PAGE>


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

     On January 10, 2000, the above Notes were further amended to have holders
loan the Company $1,725,000 in additional financing, the proceeds of which was
used to repay in full all of the Company's outstanding non related party
long-term debt. As of July 31, 2001, the balance due under these notes was
$2,667,000 all of which is classified as long-term debt related party.

     Cash and cash equivalents of $40,000 at July 31, 2001 decreased by $47,000
from cash and cash equivalents of $87,000 at October 31, 2000. Net cash used by
operations so far in fiscal 2001 was $163,000.

     At July 31, 2001 and October 31, 2000, the Company's current liabilities
exceeded current assets by $1.1 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.




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<PAGE>


Item III - Quantitative and Qualitative Disclosures About Market Risk

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

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































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<PAGE>



                                     PART II

                                OTHER INFORMATION














                                       29

<PAGE>


Item 1: Legal Proceedings:

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

Item 2 and 3:

     Not applicable.

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

     None.

Item 5: Other Information:

     None.

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

     (A)  Not applicable.

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






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<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: September 13, 2001



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