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, 2003

        |_|     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. 002-96666

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

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

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

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

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

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

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

        Title of each class          Shares outstanding at August 31, 2003
   Common stock, $0.01 par value                  4,326,929

(This document contains 44 pages)

<PAGE>

                   CANAL CAPITAL CORPORATION AND SUBSIDIARIES
                             FORM 10-Q JULY 31, 2003

                                      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, 2003
       and October 31, 2002 ...............................................    5

     Statements of Consolidated Operations and
       Comprehensive Income for the Nine and Three Month
       Periods ended July 31, 2003 and 2002 ...............................    7

     Statements of Consolidated Changes in
       Stockholders' Equity for the Nine Month and
       One Year Periods ended July 31, 2003 and
       October 31, 2002 ...................................................   11

     Statements of Consolidated Cash Flows for the
       Nine Month Periods ended July 31, 2003 and
       2002 ...............................................................   12

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

Item II. Management's Discussion and Analysis of
         Financial Condition ..............................................   27

     Capital Resources and Liquidity ......................................   30

     Other Factors ........................................................   35

Item III. Quantitative and Qualitative Disclosures
          About Market Risk ...............................................   35

Item IV. Controls and Procedures ..........................................   36

Part II - Other Information ...............................................   37

     Items 1 through 6 ....................................................   38

     Signatures and Certifications ........................................   39


                                       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, 2003, the related consolidated statements of
operations and comprehensive income for the nine and three month periods ended
July 31, 2003 and the consolidated statements of changes in stockholders' equity
and cash flows for the nine month period ended July 31, 2003. 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 is obligated to continue making substantial annual contributions
to its defined benefit pension plan. All of these matters raise substantial
doubt about the Company's ability to continue as a going concern. Management's
plans in regard to these matters are also described in Note 1. The accompanying
financial statements do not include any adjustments relating to the
recoverability and classification of recorded asset amounts or the amounts and
classification of liabilities that might be necessary should the Company be
unable to continue as a going concern.


New York, N.Y.                               /S/ Todman & Co., CPA's,P.C.
September 9, 2003                            -----------------------------------
                                             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, 2003 AND OCTOBER 31, 2002

<TABLE>
<CAPTION>
                                                                 July 31,      OCTOBER 31,
                                                                   2003           2002
                                                               (UNAUDITED)      (AUDITED)
                                                               ----------      -----------
<S>                                                            <C>             <C>
ASSETS:

CURRENT ASSETS:

       CASH AND CASH EQUIVALENTS                               $    3,639      $  139,057
       NOTES AND ACCOUNTS RECEIVABLE, NET OF AN
         ALLOWANCE FOR DOUBTFUL ACCOUNTS OF $0 AT BOTH
         JULY 31, 2003 AND OCTOBER 31, 2002, RESPECTIVELY          53,572         125,227
       ART INVENTORY, NET OF A VALUATION ALLOWANCE OF
                 $1,325,000 AND $1,325,000 AT JULY 31,
                 2003 AND OCTOBER 31, 2002, RESPECTIVELY          250,000         250,000
       STOCKYARDS INVENTORY                                        11,929          13,017
       INVESTMENTS                                                  7,405           7,405
       PREPAID EXPENSES                                            44,492         100,799
                                                               ----------      ----------

            TOTAL CURRENT ASSETS                                  371,037         635,505
                                                               ----------      ----------

NON-CURRENT ASSETS:

       PROPERTY ON OPERATING LEASES, NET OF
                 ACCUMULATED DEPRECIATION OF $1,156,084
                 AND $1,058,219 AT JULY 31, 2003 AND
                 OCTOBER 31, 2002, RESPECTIVELY                 3,376,303       3,336,744
                                                               ----------      ----------

       PROPERTY USED IN STOCKYARD OPERATIONS, NET OF
                 ACCUMULATED DEPRECIATION OF $125,592 AND
                 $285,223 AT JULY 31, 2003 AND OCTOBER
                 31, 2002, RESPECTIVELY                         1,100,118       1,176,027
                                                               ----------      ----------

       ART INVENTORY NON-CURRENT, NET OF A
                 VALUATION ALLOWANCE OF $729,450
                 AND $858,650 AT JULY 31, 2003
                 AND OCTOBER 31, 2002, RESPECTIVELY               558,888         622,388
                                                               ----------      ----------

OTHER ASSETS:

       PROPERTY HELD FOR DEVELOPMENT OR RESALE                    454,279         517,939
       DEFERRED LEASING AND FINANCING COSTS                        33,328          13,366
       DEPOSITS AND OTHER                                         210,902         210,902
                                                               ----------      ----------

                                                                  698,509         742,207
                                                               ----------      ----------

                                                               $6,104,855      $6,512,871
                                                               ==========      ==========
</TABLE>


                                       5
<PAGE>

                    CANAL CAPITAL CORPORATION & SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
                       JULY 31, 2003 AND OCTOBER 31, 2002

<TABLE>
<CAPTION>
                                                             JULY 31,          OCTOBER 31,
                                                               2003               2002
                                                            (UNAUDITED)         (AUDITED)
                                                           ------------       ------------
<S>                                                        <C>                <C>
LIABILITIES & STOCKHOLDERS' EQUITY:

CURRENT LIABILITIES:

       CURRENT PENSION LIABILITY                           $    224,492       $    224,492
       REAL ESTATE TAXES PAYABLE                                232,363            451,958
       ACCOUNTS PAYABLE AND ACCRUED EXPENSES                    432,782            574,974
       INCOME TAXES PAYABLE                                       1,701              9,892
                                                           ------------       ------------

         TOTAL CURRENT LIABILITIES                              891,338          1,261,316
                                                           ------------       ------------

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

LONG-TERM PENSION LIABILITY                                     605,247            605,247
                                                           ------------       ------------

COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS' EQUITY:

  PREFERRED STOCK, $0.01 PAR VALUE:
       10,000,000 SHARES AUTHORIZED; 6,436,234 AND
       5,647,993 SHARES ISSUED AND OUTSTANDING
       AT JULY 31, 2003 AND OCTOBER 31, 2002,
       RESPECTIVELY AND AGGREGATE LIQUIDATION
       PREFERENCE OF $10 PER SHARE FOR $ 64,362,340
       AND $56,479,930 AT JULY 31, 2003 AND
       OCTOBER 31, 2002, RESPECTIVELY                            64,362             56,480

  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, 2003 AND OCTOBER 31, 2002,
       RESPECTIVELY                                              53,138             53,138

  ADDITIONAL PAID-IN CAPITAL                                 28,066,300         27,958,498

  ACCUMULATED DEFICIT                                       (12,863,586)       (12,709,864)

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

  COMPREHENSIVE INCOME:
    PENSION VALUATION RESERVE                                (2,375,399)        (2,375,399)
                                                           ------------       ------------

                                                              1,941,270          1,979,308
                                                           ------------       ------------

                                                           $  6,104,855       $  6,512,871
                                                           ============       ============
</TABLE>


                                       6
<PAGE>

                    CANAL CAPITAL CORPORATION & SUBSIDIARIES
          CONSOLIDATED STATEMENTS OF OPERATIONS & COMPREHENSIVE INCOME
                FOR THE NINE MONTHS ENDED JULY 31, 2003 AND 2002

                                                      2003               2002
                                                   (UNAUDITED)       (UNAUDITED)
                                                   -----------       -----------
STOCKYARD OPERATIONS:
 STOCKYARD REVENUES:
    YARD HANDLING AND AUCTION                       $2,326,071        $2,480,161
    FEED AND BEDDING INCOME                            145,577           155,878
    RENTAL INCOME                                        2,525             4,571
    OTHER INCOME                                       125,281           141,282
                                                    ----------        ----------

                                                     2,599,454         2,781,892
                                                    ----------        ----------

STOCKYARD EXPENSES:
    LABOR AND RELATED COSTS                          1,014,304         1,093,552
    OTHER OPERATING AND MAINTENANCE                    529,500           650,007
    FEED AND BEDDING EXPENSE                           123,655           126,276
    DEPRECIATION AND AMORTIZATION                       15,797            16,066
    TAXES OTHER THAN INCOME TAXES                      131,878           171,143
    GENERAL AND ADMINISTRATIVE                         283,155           291,972
                                                    ----------        ----------

                                                     2,098,289         2,349,016
                                                    ----------        ----------

INCOME FROM STOCKYARD OPERATIONS                       501,165           432,876
                                                    ----------        ----------

REAL ESTATE OPERATIONS:
 REAL ESTATE REVENUES:
    SALE OF REAL ESTATE                                369,500           576,503
    EXCHANGE BUILDING RENTAL INCOME                    330,535           367,876
    OUTSIDE REAL ESTATE RENT                           374,798           408,946
    OTHER INCOME                                           130                 0
                                                    ----------        ----------

                                                     1,074,963         1,353,325
                                                    ----------        ----------

 REAL ESTATE EXPENSES:
    COST OF REAL ESTATE SOLD                           243,389           250,452
    LABOR, OPERATING AND MAINTENANCE                   317,800           348,201
    DEPRECIATION AND AMORTIZATION                       93,645            98,200
    TAXES OTHER THAN INCOME TAXES                      111,600            90,900
    GENERAL AND ADMINISTRATIVE                          38,133            33,633
                                                    ----------        ----------

                                                       804,567           821,386
                                                    ----------        ----------

INCOME FROM REAL ESTATE OPERATIONS                     270,396           531,939
                                                    ----------        ----------


                                       7
<PAGE>

                    CANAL CAPITAL CORPORATION & SUBSIDIARIES
          CONSOLIDATED STATEMENTS OF OPERATIONS & COMPREHENSIVE INCOME
                FOR THE NINE MONTHS ENDED JULY 31, 2003 AND 2002
                                  Continued ...

                                                     2003              2002
                                                  (UNAUDITED)       (UNAUDITED)
                                                  -----------       -----------

GENERAL AND ADMINISTRATIVE EXPENSE                   (635,934)         (694,744)
                                                  -----------       -----------

INCOME FROM OPERATIONS                                135,627           270,071
                                                  -----------       -----------

OTHER (EXPENSE) INCOME:
  INTEREST & OTHER INCOME                                 133           354,057
  INTEREST EXPENSE                                   (200,022)         (200,025)
  INCOME FROM ART SALES                                26,269             6,518
  REALIZED GAIN (LOSS) ON INVESTMENTS                       0                 0
  OTHER EXPENSE                                             0                 0
                                                  -----------       -----------

                                                     (173,620)          160,550
                                                  -----------       -----------

(LOSS) INCOME BEFORE PROVISION FOR
  INCOME TAXES                                        (37,993)          430,621

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

NET (LOSS) INCOME                                     (37,993)          430,621

OTHER COMPREHENSIVE (LOSS) INCOME:

  UNREALIZED GAIN (LOSS) ON INVESTMENTS
  AVAILABLE FOR SALE                                        0                 0
                                                  -----------       -----------

COMPREHENSIVE (LOSS) INCOME                       $   (37,993)      $   430,621
                                                  ===========       ===========

(LOSS) INCOME PER COMMON SHARE - BASIC
  AND DILUTED                                     $     (0.03)      $      0.09
                                                  ===========       ===========

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, 2003 AND 2002

                                                        2003             2002
                                                     (UNAUDITED)     (UNAUDITED)
                                                     -----------     -----------

STOCKYARD OPERATIONS:
 STOCKYARD REVENUES:
    YARD HANDLING AND AUCTION                         $ 524,435       $ 574,007
    FEED AND BEDDING INCOME                              34,227          34,429
    RENTAL INCOME                                           657             947
    OTHER INCOME                                         39,079          30,396
                                                      ---------       ---------

                                                        598,398         639,779
                                                      ---------       ---------

STOCKYARD EXPENSES:
    LABOR AND RELATED COSTS                             324,383         294,932
    OTHER OPERATING AND MAINTENANCE                     152,399         161,443
    FEED AND BEDDING EXPENSE                             28,979          29,514
    DEPRECIATION AND AMORTIZATION                         5,266           4,259
    TAXES OTHER THAN INCOME TAXES                        40,729          43,194
    GENERAL AND ADMINISTRATIVE                           60,036          50,979
                                                      ---------       ---------

                                                        611,792         584,321
                                                      ---------       ---------

(LOSS) INCOME FROM STOCKYARD OPERATIONS                 (13,394)         55,458
                                                      ---------       ---------

REAL ESTATE OPERATIONS:
 REAL ESTATE REVENUES:
    SALE OF REAL ESTATE                                       0         387,000
    EXCHANGE BUILDING RENTAL INCOME                     101,054         118,105
    OUTSIDE REAL ESTATE RENT                            125,322         137,650
    OTHER INCOME                                              0               0
                                                      ---------       ---------

                                                        226,376         642,755
                                                      ---------       ---------

 REAL ESTATE EXPENSES:
    COST OF REAL ESTATE SOLD                                  0         152,616
    LABOR, OPERATING AND MAINTENANCE                     84,917         116,610
    DEPRECIATION AND AMORTIZATION                        30,331          31,457
    TAXES OTHER THAN INCOME TAXES                        37,200          30,300
    GENERAL AND ADMINISTRATIVE                           13,910          10,648
                                                      ---------       ---------

                                                        166,358         341,631
                                                      ---------       ---------

INCOME FROM REAL ESTATE OPERATIONS                       60,018         301,124
                                                      ---------       ---------


                                       9
<PAGE>

                    CANAL CAPITAL CORPORATION & SUBSIDIARIES
          CONSOLIDATED STATEMENTS OF OPERATIONS & COMPREHENSIVE INCOME
                FOR THE THREE MONTHS ENDED JULY 31, 2003 AND 2002
                                  Continued ...

                                                     2003              2002
                                                  (UNAUDITED)       (UNAUDITED)
                                                  -----------       -----------

GENERAL AND ADMINISTRATIVE EXPENSE                   (205,397)         (232,746)
                                                  -----------       -----------

(LOSS) INCOME FROM OPERATIONS                        (158,773)          123,836
                                                  -----------       -----------

OTHER (EXPENSE) INCOME:
  INTEREST & OTHER INCOME                                   5            30,658
  INTEREST EXPENSE                                    (66,672)          (66,675)
  INCOME FROM ART SALES                                (1,297)           (5,187)
  REALIZED GAIN (LOSS) ON INVESTMENTS                       0                 0
  OTHER EXPENSE                                             0                 0
                                                  -----------       -----------

                                                      (67,964)          (41,204)
                                                  -----------       -----------

(LOSS) INCOME BEFORE PROVISION FOR
  INCOME TAXES                                       (226,737)           82,632

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

NET (LOSS) INCOME                                    (226,737)           82,632

OTHER COMPREHENSIVE (LOSS) INCOME:

  UNREALIZED GAIN (LOSS) ON INVESTMENTS
  AVAILABLE FOR SALE                                        0                 0
                                                  -----------       -----------

COMPREHENSIVE (LOSS) INCOME                       $  (226,737)      $    83,632
                                                  ===========       ===========

(LOSS) INCOME PER COMMON SHARE - BASIC
  AND DILUTED                                     $     (0.06)      $      0.04
                                                  ===========       ===========

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, 2002 (AUDITED) AND
               FOR THE NINE MONTHS ENDED JULY 31, 2003 (UNAUDITED)

<TABLE>
<CAPTION>
                                         COMMON STOCK                        PREFERRED STOCK
                                   NUMBER                              NUMBER
                                     OF                                  OF
                                   SHARES           AMOUNT             SHARES             AMOUNT
<S>                               <C>            <C>                   <C>             <C>
BALANCE, OCTOBER 31, 2001         5,313,794      $     53,138          4,998,446       $     49,984
 NET INCOME                               0                 0                  0                  0
 PREFERRED STOCK DIVIDEND                 0                 0            649,547              6,496
 MINIMUM PEN. LIAB. ADJ                   0                 0                  0                  0
                               ------------------------------       -------------------------------

BALANCE, OCTOBER 31, 2002         5,313,794      $     53,138          5,647,993       $     56,480
 NET (LOSS) INCOME                        0                 0                  0                  0
 PREFERRED STOCK DIVIDEND                 0                 0            788,241              7,882
 MINIMUM PEN. LIAB. ADJ                   0                 0                  0                  0
                               ------------------------------       -------------------------------

BALANCE, JULY 31, 2003            5,313,794      $     53,138          6,436,234       $     64,362
                               ==============================       ===============================
</TABLE>

<TABLE>
<CAPTION>
                                ADDITIONAL                                              TREASURY
                                 PAID-IN         ACCUMULATED        COMPREHENSIVE         STOCK,
                                 CAPITAL            DEFICIT         (LOSS) INCOME        AT COST
<S>                            <C>               <C>                 <C>               <C>
BALANCE, OCTOBER 31, 2001      $ 27,848,561      ($13,019,374)       ($2,165,445)      ($11,003,545)
 NET INCOME                               0           425,990                  0                  0
 PREFERRED STOCK DIVIDEND           109,937          (116,480)                 0                  0
 MINIMUM PEN. LIAB. ADJ                   0                 0           (209,954)                 0
                               ------------------------------       -------------------------------

BALANCE, OCTOBER 31, 2002      $ 27,958,498      ($12,709,864)       ($2,375,399)      ($11,003,545)
 NET (LOSS) INCOME                        0           (37,993)                 0                  0
 PREFERRED STOCK DIVIDEND           107,802          (115,729)                 0                  0
 MINIMUM PEN. LIAB. ADJ                   0                 0                  0                  0
                               ------------------------------       -------------------------------
BALANCE, JULY 31, 2003         $ 28,066,300      ($12,863,586)       ($2,375,399)      ($11,003,545)
                               ==============================       ===============================
</TABLE>


                                       11
<PAGE>

                    CANAL CAPITAL CORPORATION & SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
          FOR THE NINE MONTHS ENDED JULY 31, 2003 AND 2002 (UNAUDITED)

                                                        2003            2002
                                                        ----            ----

CASH FLOWS FROM OPERATING ACTIVITIES:
  NET (LOSS) INCOME                                  $ (37,993)       $ 430,621
                                                     ---------        ---------

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

   DEPRECIATION AND AMORTIZATION                       118,964          121,696
   GAIN  ON SALES OF REAL ESTATE                      (126,111)        (326,051)

CHANGES IN ASSETS AND LIABILITIES:

   NOTES AND ACCOUNTS RECEIVABLES, NET                  71,655           (1,071)
   ART INVENTORY, NET                                   63,500           66,602
   PREPAID EXPENSES AND OTHER, NET                     (55,675)          73,124
   PAYABLES AND ACCRUED EXPENSES, NET                 (369,978)        (845,257)
                                                     ---------        ---------

NET CASH (USED) BY OPERATING
   ACTIVITIES                                         (335,638)        (480,336)
                                                     ---------        ---------

CASH FLOWS FROM INVESTING ACTIVITIES:

  PROCEEDS FROM SALES OF REAL ESTATE                   369,500          576,503
  CAPITAL EXPENDITURES                                (169,280)         (66,641)
                                                     ---------        ---------

NET CASH PROVIDED BY INVESTING
  ACTIVITIES                                           200,220          509,862
                                                     ---------        ---------

CASH FLOWS FROM FINANCING ACTIVITIES:

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

NET (DECREASE) INCREASE IN CASH AND CASH
  EQUIVALENTS                                         (135,418)          29,526

CASH AND CASH EQUIVALENTS AT BEGN OF YEAR              139,057           13,680
                                                     ---------        ---------

CASH AND CASH EQUIVALENTS AT END OF YEAR             $   3,639        $  43,206
                                                     =========        =========

NOTE: CANAL MADE FEDERAL AND STATE INCOME TAX PAYMENTS OF $18,000 AND $9,000 AND
      INTEREST PAYMENTS OF $200,000 AND $200,000 IN THE NINE MONTH PERIODS ENDED
      JULY 31, 2003 AND 2002, RESPECTIVELY.


                                       12
<PAGE>

                   CANAL CAPITAL CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                     FOR THE NINE MONTHS ENDED JULY 31, 2003
                                   (UNAUDITED)

1. DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION

      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 - real estate and stockyard
operations.

      Real Estate Operations - Canal's real estate properties located in five
Midwest states are primarily associated with its current and former agribusiness
related operations. Each property is adjacent to a stockyards operation (two of
which are operated by the company) and consist, for the most part, of an
Exchange Building (commercial office space), land and structures leased to third
parties (meat packing facilities, 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. In addition to
selling what was excess stockyard property, the company entertains any offers to
purchase, develop and restructure real estate lots surrounding its existing
operating lease properties, stockyard operating properties and properties held
for development or resale in order to enhance the value of the existing
properties and surrounding real estate.

      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 two different stages, either as feeder livestock or
slaughter livestock. The Company's stockyards provide all services and
facilities required to operate an independent market for the sale of livestock,
including veterinary facilities, auction arenas, auctioneers, weigh masters and
scales, feed and bedding, and security personnel. In addition, the stockyards
provide other services including pure bred and other specialty sales for
producer organizations. The Company promotes its stockyard business through
public relations efforts, advertising, and personal solicitation of producers.


                                       13
<PAGE>

      Actual marketing transactions at a stockyard are managed for livestock
producers by market agencies and independent commission sales people to which
the livestock are consigned for sale. These market agencies (some of which are
owned and operated by the Company) and independent sales people receive
commissions from the seller upon settlement of a transaction and the stockyard
receives a yardage fee on all livestock using the facility which is paid within
twenty-four hours of the sale. Yardage fees vary depending upon the type of
animal, the extent of services provided by the stockyard, and local competition.
Yardage revenues are not directly dependent upon market prices, but rather are a
function of the volume of livestock handled. In general, stockyard livestock
volume is dependent upon conditions affecting livestock production and upon the
market agencies and independent commission sales people which operate at the
stockyards. Stockyard operations are seasonal, with greater volume generally
experienced during the first and fourth quarters of each fiscal year, during
which periods livestock is generally brought to market.

      Virtually all of the volume at Canal's Sioux Falls stockyards is handled
through market agencies and independent commission sales people, while the St.
Joseph stockyards has solicitation operations of its own which account for
approximately 50% of its livestock volume annually.

      Canal intends to continue its soliciting efforts at its St. Joseph
stockyards in fiscal 2003. Further, Canal tries to balance its dependence on
market agencies and independent commission sales people in various ways,
including: developing solicitation operations of its own; direct public
relations; advertising and personal solicitation of producers on behalf of the
stockyards; providing additional services at the stockyards to attract sellers
and buyers; and providing incentives to market agencies and independent
commission sales people for increased business.

      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 obligated to continue making
substantial annual contributions to its defined benefit pension plan. The
financial statements do not include any adjustments that might result from the
resolution of these uncertainties. Additionally, the accompanying financial
statements do not include any adjustments relating to the recoverability and
classification of recorded asset amounts or the amounts and classification of
liabilities that might be necessary should the Company be unable to continue as
a going concern.

      Canal continues to closely monitor and reduce where possible its operating
expenses and plans to continue its program to develop or sell the property it
holds for development or resale as well as 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.


                                       14
<PAGE>

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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

      B) Revenue Recognition -- Lease and rental revenues are recognized ratably
over the period covered. All real estate leases are accounted for as operating
leases. Revenues from real estate sales are recognized generally when title to
the property passes. Revenues from stockyard operations which consist primarily
of yardage fees (a standard per head charge for each animal sold through the
stockyards) and sale of feed and bedding are recognized at the time the service
is rendered or the feed and bedding are delivered.

            Other Income (Expense) Items -- Art sales are recognized using the
specific identification method, when the piece is shipped to the purchaser. Art
owned by Canal which is on consignment, joint venture, or being examined in
contemplation of sale is not removed from inventory and not recorded as a sale
until notice of sale or acceptance has been received. The sale of investments
available for sale, if any, are recognized, on a specific identification method,
on a trade date basis.

      C) Investments Available for Sale -- Canal has an investment in a company
in which it, together with other affiliated entities, comprise a reporting group
for regulatory purposes. It is important to note that it is the group (as
defined) that can exercise influence over this company, not Canal. Accordingly,
this investment does not qualify for consolidation as a method of reporting.
Certain of Canal's officers and directors also serve as officers and/or
directors of this company. This investment (in which Canal's ownership interest
is approximately 1%) is carried at market value and the realized gains or
losses, if any, are recognized in operating results. Any unrealized gains or
losses are reflected in Stockholders Equity.

            Investments in Joint Ventures -- Investments in which ownership
interest range from 20% to 50% or less owned joint ventures are accounted for
under the equity method. These joint ventures are not, in the aggregate,
material in relation to the financial position or results of operations of
Canal. The carrying amount of such investments was $101,000 at both July 31,
2003 and October 31, 2002, 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.

      D) Properties and Related Depreciation -- Properties are stated at cost
less accumulated depreciation. Depreciation is provided on the straight-line
method over the estimated useful lives of the properties. Such lives are
estimated from 35 to 40 years for buildings and from 5 to 20 years for
improvements and equipment.


                                       15
<PAGE>

            Property held for Development or Resale -- Property held for
development or resale consist of approximately 101 acres located in the midwest
of undeveloped land not currently utilized for corporate purposes nor included
in any of the present operating leases. The Company constantly evaluates
proposals received for the purchase, leasing or development of this asset. The
land is valued at cost which does not exceed the net realizable value.

            Long-Lived Assets - The Company reviews the impairment of long-lived
assets whenever events or changes in circumstances indicate that the carrying
amount of an asset may not be recoverable. The Company considers historical
performance and future estimated results in its evaluation of potential
impairment and then compares the carrying amount of the assets to the estimated
future cash flows expected to result from the use of the asset. The measurement
of the loss, if any, will be calculated as the amount by which the carrying
amount of the asset exceeds the fair value of the asset.

      E) Statements of Cash Flows -- The company considers all short-term
investments with a maturity of three months or less to be cash equivalents. Cash
equivalents primarily include bank, broker and time deposits with an original
maturity of less than three months. These investments are carried at cost, which
approximates market value. Canal made federal and state income tax payments of
$18,000 and $9,000 and interest payments of $200,000 and $200,000 in the nine
month periods ended July 31, 2003 and 2002, respectively.

      F) Accounting Estimates - The preparation of financial statements in
conformity with accounting principles generally accepted in the United States
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.

      G) Comprehensive Income -- The Company's only adjustments for each
classification of the comprehensive income was for minimum pension liability.

      H) Earnings (Loss) Per Share -- Basic earnings (loss) per share is
computed by dividing the net income (loss) applicable to common shares by the
weighted average of common shares outstanding during the period. Diluted
earnings (loss) per share adjusts basic earnings (loss) per share for the
effects of convertible securities, stock options and other potentially dilutive
financial instruments, only in the period in which such effect is dilutive.
There were no dilutive securities in any of the periods presented herein. The
shares issuable upon the exercise of stock options are excluded from the
calculation of net income (loss) per share as their effect would be
antidilutive.


                                       16
<PAGE>

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

      J) Recent Accounting Pronouncements -- In June 2001, the FASB issued SFAS
No. 143, "Accounting for Asset Retirement Obligations." This standard provides
the accounting for the cost of legal obligations associated with the retirement
of long-lived assets. SFAS No. 143 requires that companies recognize the fair
value of a liability for asset retirement obligations in the period in which the
obligations are incurred and capitalize that amount as a part of the book value
of the long-lived asset. Canal was required to adopt SFAS No. 143 effective
November 1, 2002. The adoption of SFAS No. 143 had no material effect on our
results of operations or financial position.

      In August 2001, the Financial Accounting Standards Board issued SFAS No.
144, Accounting for the Impairment or Disposal of Long-Lived Assets ("SFAS
144"), which supersedes both SFAS No. 121, Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed of ("SFAS 121") and
the accounting and reporting provisions of APB Opinion No. 30, Reporting the
Results of Operations-Reporting the Effects of Disposal of a Segment of a
Business, and Extraordinary, Unusual and Infrequently Occurring Events and
Transactions ("Opinion 30"), for the disposal of a segment of a business (as
previously defined in that Opinion). SFAS 144 retains the fundamental provisions
in SFAS 121 for recognizing and measuring impairment losses on long-lived assets
held for use and long-lived assets to be disposed of by sale, while also
resolving significant implementation issues associated with SFAS 121. For
example, SFAS 144 provides guidance on how a long-lived asset that is used as
part of a group should be evaluated for impairments, establishes criteria for
when a long-lived asset is held for sale and prescribes the accounting for
long-lived asset that will be disposed of other than by sale. SFAS 144 retains
the basic provisions of Opinion 30 on how to present discontinued operations in
the income statement but broadens that presentation to include a component of an
entity (rather than a segment of a business).

      We were required to adopt SFAS 144 effective November 1, 2002, and apply
its provisions for the quarters ending January 31, 2003 and thereafter. We do
not expect the adoption of SFAS 144 for long-lived assets held for use to have a
material impact on our consolidated financial statements because the impairment
assessment under SFAS 144 is largely unchanged from SFAS 121. The provisions of
the Statement for assets held for sale or other disposal generally are required
to be applied prospectively after the adoption date to newly initiated disposal
activities. Therefore, we cannot determine the potential effects that adoption
of SFAS 144 will have on our consolidated financial statements.


                                       17
<PAGE>

      In June 2002, the FASB issued SFAS No. 146, Accounting for Costs
Associated with Exit and Disposal Activities. SFAS No. 146 nullifies Emerging
Issues Task Force ("EITF") issue 94-3, Liability Recognition for Certain
Employee Termination Benefits and Other Costs to Exit an Activity (including
Certain Costs Incurred in a Restructuring). Under EITF issue 94- 3, a liability
for an exit cost is recognized at the date of an entity's commitment to an exit
plan. Under SFAS No. 146, the liabilities associated with an exit or disposal
activity will be measured at fair value and recognized when the liability is
incurred and meets the definition of a liability in the FASB's conceptual
framework. This statement is effective for exit or disposal activities initiated
after December 31, 2002. We believe the adoption of SFAS No. 146 will not have a
material impact on our financial statements.

      In April 2003, the Financial Accounting Standards Board issued SFAS No.
149, "Amendment of Statement 133 on Derivative Instruments and Hedging
Activities." SFAS No. 149 amends and clarifies financial accounting and
reporting for derivative instruments, including certain derivative instruments
embedded in other contracts and for hedging activities under SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities." This statement
will be effective in fiscal 2004 for contracts entered into or modified after
June 30, 2003 and for hedging relationships designated after June 30, 2003. We
do not expect the adoption of this statement to have a material impact on our
consolidated financial position or results of operations.

      In May 2003, the Financial Accounting Standards Board issued SFAS No. 150,
"Accounting for Certain Financial Instruments with Characteristics of both
Liabilities and Equity." SFAS No. 150 changes the accounting for certain
financial instruments that, under previous guidance, issuers could account for
as equity. The new statement requires that those instruments be classified as
liabilities in statements of financial position. Most of the guidance in SFAS
No. 150 is effective for all financial instruments entered into or modified
after May 31, 2003. We do not expect the adoption of this statement to have a
material impact on our consolidated financial position or results of operations.

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, 2003 and the results of its
operations and its cash flows for the nine month period ended July 31, 2003. 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


                                       18
<PAGE>

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, 2002 and the notes
thereto which are contained in Canal's 2002 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 2003.

4. STOCKYARD OPERATIONS

      Canal commenced stockyard operations August 1, 1999 in Sioux City, Iowa,
St. Joseph, Missouri and Sioux Falls, South Dakota. Stockyards act much like a
securities exchange, providing markets for all categories of livestock and
fulfilling the economic functions of assembly, grading and price discovery. The
livestock handled by the stockyards include cattle, hogs and sheep. Cattle and
hogs may come through the stockyard facilities at two different stages, either
as feeder livestock or slaughter livestock. The Company's stockyards provide all
services and facilities required to operate an independent market for the sale
of livestock, including veterinary facilities, auction arenas, auctioneers,
weigh masters and scales, feed and bedding, and security personnel. In addition,
the stockyards provide other services including pure bred and other specialty
sales for producer organizations. The Company promotes its stockyard business
through public relations efforts, advertising, and personal solicitation of
producers.

      In March 2002, Canal permanently closed its stockyard operations in Sioux
City, Iowa. The Sioux City stockyard operations generated operating losses of
$75,000, $118,000 and $124,000 for the three years ended October 31, 2002, 2001
and 2000, respectively. The stockyard facility was dismantled with the
equipment, fixtures and materials going either to Canal's remaining two
stockyards or sold at a public sale held at the Sioux city location in April
2002. The auction generated total sales of $114,000 and operating income of
$58,000.

      On February 27, 2003, the Company entered into a Contract of Sale for the
sale of approximately 30 acres of land located in Sioux City, Iowa (formerly
used by the Company for stockyards operations) at a purchase price of One
Million Three Hundred Thousand ($1,300,000.00) Dollars. The sale is subject to a
number of contingencies which must be satisfied before closing. The Company
anticipates it will take approximately six more months to close this transaction
if, in fact, the transaction does close.

      Actual marketing transactions at a stockyard are managed for livestock
producers by market agencies and independent commission sales people to which
the livestock are consigned for sale. These market agencies (some of which are
owned and operated by the Company) and independent sales people receive
commissions from the seller upon settlement of a transaction and the


                                       19
<PAGE>

stockyard receives a yardage fee on all livestock using the facility which is
paid within twenty-four hours of the sale. Yardage fees vary depending on the
type of animal, the extent of services provided by the stockyard, and local
competition. Yardage revenues are not directly dependent upon market prices, but
rather are a function of the volume of livestock handled. In general, stockyard
livestock volume is dependent upon conditions affecting livestock production and
upon the market agencies and independent commission sales people which operate
at the stockyards. Stockyard operations are seasonal, with greater volume
generally experienced during the first and fourth quarters of each fiscal year,
during which periods livestock is generally brought to market.

      As discussed above, virtually all of the volume at Canal's Sioux Falls
stockyards is handled through market agencies or independent commission sales
people, while the St. Joseph stockyards has solicitation operations of its own
which accounts for approximately 50% of its livestock volume annually. Canal
intends to continue its soliciting efforts at its St. Joseph stockyards in
fiscal 2003. Further, Canal tries to balance its dependence on market agencies
and independent commission sales people in various ways, including developing
solicitation operations of its own; direct public relations advertising and
personal solicitation of producers on behalf of the stockyards; providing
additional services at the stockyards to attract sellers and buyers; and
providing incentives to market agencies and independent commission sales people
for increased business.

      Canal maintains an inventory of feed and bedding which is comprised
primarily of hay, corn and straw. The value of this inventory was $12,000 and
$13,000 at July 31, 2003 and October 31, 2002, respectively.

      Stockyard operations resulted in operating income of $501,000 and $433,000
for the nine month periods ended July 31, 2003 and 2002, respectively.
Additionally, stockyard operations contributed $2,599,000 and $2,782,000 to
Canal's revenues for the nine month periods ended July 31, 2003 and 2002,
respectively.

5. REAL ESTATE OPERATIONS

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


                                       20
<PAGE>

      Real estate operations resulted in operating income of $270,000 and
$532,000 for the nine month periods ended July 31, 2003 and 2002, respectively.
Additionally, real estate operations contributed $1,075,000 and $1,353,000 to
Canal's revenues for the nine month periods ended July 31, 2003 and 2002,
respectively.

      As of July 31, 2003, there are approximately 101 acres of undeveloped land
owned by Canal adjacent to its stockyard properties. In addition to selling what
was excess stockyard property, the company entertains any offers to purchase,
develop and restructure real estate lots surrounding its existing operating
lease properties, stockyard operating properties and properties held for
development or resale in order to enhance the value of the existing properties
and surrounding real estate.

6. ART INVENTORY HELD FOR SALE

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

      Antiquities and contemporary art represented 29% ($230,639) and 71%
($641,749) and 26% ($230,639) and 74% ($578,249) of total art inventory at July
31, 2003 and 2002, respectively. All of the contemporary art inventory held for
resale is comprised of the work of Jules Olitski.

      The amount recorded as the current portion of art inventory represents
management's estimate of the inventory expected to be sold during the next
twelve months. The Company recorded a valuation allowance against the current
portion of its inventory to reduce it to its estimated net realizable value
based on the history of losses sustained on inventory items sold in the current
and previous years. In fiscal 2003 Canal applied against sales $179,000 of the
valuation allowance against its art inventory, thereby, decreasing the total
valuation allowance to $2,054,450 as of July 31, 2003 as compared to $2,183,650
at October 31, 2002.

      The nature of art makes it difficult to determine a replacement value. The
most compelling evidence of a value in most cases is an independent appraisal.
Canal has its art inventory appraised by independent appraisers annually. The
2002 appraisal covered approximately 22% 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


                                       21
<PAGE>

and public auction sales. The net realizable value of the remaining 78% of the
inventory was estimated by management based in part on the Company's history of
losses sustained on art sales in the current and previous years and in part on
the results of the independent appraisals done.

      Canal's art sales generated income of $26,000 (net of a decrease in the
valuation allowance of $179,000) as compared to income of $7,000 (net of a
decrease in the valuation allowance of $108,000) for the nine month periods
ended July 31, 2003 and 2002, respectively.

      The Company had approximately $175,000 of art inventory (at original cost)
on consignment with third party dealers at both July 31, 2003 and October 31,
2002.

7. INVESTMENTS AVAILABLE FOR SALE

      At July 31, the investments available for sale consisted of the following:
($ 000's Omitted)

                                                   July 31,         October 31,
                                                     2003              2002
                                                     ----              ----
      Aggregate market value .................      $    7            $    7
                                                    ------            ------
      Aggregate carrying value ...............      $    7            $    7
                                                    ------            ------

      Canal has an investment in a company in which it, together with other
affiliated entities, comprise a reporting group for regulatory purposes. It is
important to note that it is the group (as defined) that can exercise influence
over this company, not Canal. Accordingly, this investment does not qualify for
consolidation as a method of reporting. Certain of Canal's officers and
directors also serve as officers and/or directors of this company. This
investment (in which Canal's ownership interest is approximately 1%) is carried
at market value and any unrealized gains or losses are reflected in Stockholders
Equity. The realized gains or losses, if any, are recognized in operating
results.

      On May 3, 2000 this company filed for reorganization under Chapter 11 of
the Bankruptcy Code and subsequently emerged in December 2000. This action, in
combination with other factors, has resulted in Canal's determination that the
decline in market value of its investment in this company is permanent, and
accordingly, recognized a realized loss on investments in marketable securities
of approximately $14,000 in fiscal 2002. 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.


                                       22
<PAGE>

8. BORROWINGS

      At July 31, 2003, substantially all of Canal's real properties, the stock
of certain subsidiaries, the investments and a substantial portion of its art
inventories are pledged as collateral for the following obligations:

                                                    July 31,    October 31,
($ 000's Omitted)                                     2003          2002
-----------------                                     ----          ----
Variable rate mortgage notes due
  May 15, 2006 - related party ..................   $ 2,667       $  2,667
                                                    -------       --------

      On January 8, 1998, the Company issued $3,700,000 of variable rate
mortgage notes due May 15, 2001. The purchasers of these notes included certain
entities controlled by the Company's Chairman, the Company's Chief 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. On October 8, 2002, the above notes were amended to extend the
maturity date to May 15, 2006. As of July 31, 2003 the balance due under these
notes was $2,667,000 all of which is classified as long-term debt-related party.

      The scheduled maturities and sinking fund requirements of long-term debt
during the next five years are $2,667,000 due May 15, 2006.


                                       23
<PAGE>

9. PROPERTY AND EQUIPMENT

      A) Property on Operating Leases

      Property on operating leases consist of approximately 45 acres of land
located in New York, New York; Omaha, Nebraska; S. St. Paul, Minnesota and Sioux
City, Iowa. Land and structures leased to third parties include vacant land,
exchange buildings (commercial office space), meat packing facilities, railcar
repair shops, truck stops, lumber yards and various other commercial and retail
businesses.

      A schedule of the Company's property on operating leases at July 31, 2003
is as follows (000's omitted):

<TABLE>
<CAPTION>
                       Carrying                                              Carrying
                         Value                                                 Value
Description (1)        10/31/02     Additions   Retirements     Deprec.       7/31/03
---------------        --------     ---------   -----------     -------      --------
<S>                     <C>          <C>          <C>           <C>           <C>
New York office
Various leasehold       $    31      $     9      $     0       $   (10)      $    30
improvements

11 acres of land
in Omaha, NE              1,208           11            0            (1)        1,218
Acquired in 1976

15 acres of land
in S. St. Paul, MN        1,182          118            0           (88)        1,212
Acquired in 1937

19 acres of land
in Sioux City, IA           916            0            0             0           916
Acquired in 1937        -------      -------      -------       -------       -------

                        $ 3,337      $   138      $     0       $   (99)      $ 3,376
                        =======      =======      =======       =======       =======
</TABLE>

      B) Property used in Stockyard Operations

      Property used in stockyard operations consist of approximately 54 acres of
land located in St. Joseph, Missouri and Sioux Falls, South Dakota. The
Company's stockyards provide all services and facilities required to operate an
independent market for the sale of livestock. Stockyard facilities include
exchange buildings (commercial office space), auction arenas, scale houses,
veterinary facilities, barns, livestock pens and loading docks.


                                       24
<PAGE>

      A schedule of the Company's property on operating leases at July 31, 2003
is as follows (000's omitted):

<TABLE>
<CAPTION>
                       Carrying                                               Carrying
                         Value                                                  Value
Description (1)        10/31/02     Additions    Retirements     Deprec.       7/31/03
---------------        --------     ---------    -----------     -------      --------
<S>                     <C>          <C>           <C>           <C>           <C>
23 acres of land
in St. Joseph, MO       $ 1,032      $    32       $   (87)      $   (16)      $   961
Acquired in 1942

31 acres of land
in Sioux Falls, SD          144            0             0            (5)          139
Acquired in 1937        -------      -------       -------       -------       -------

                        $ 1,176      $    32       $   (87)      $   (21)      $ 1,100
                        =======      =======       =======       =======       =======
</TABLE>

      C) Property Held for Development or Resale

      Property held for development or resale consist of approximately 101 acres
of land located in the midwest of undeveloped land not currently utilized for
corporate purposes and not included in any of the present operating leases. The
Company constantly evaluates proposals received for the purchase, leasing or
development of this asset. The land is valued at cost which does not exceed the
net realizable value.

      A schedule of the Company's property held for development or resale at
July 31, 2003 is as follows (000's omitted):

<TABLE>
<CAPTION>
                        Carrying                                              Carrying
                          Value                                                 Value
Description (1)         10/31/02    Additions    Retirements      Deprec.      7/31/03
---------------         --------    ---------    -----------      -------     --------
<S>                     <C>          <C>           <C>           <C>           <C>
57 acres of land
in St. Joseph, MO       $   179      $     0       $   (64)      $     0       $   115
Acquired in 1942

11 acres of land
in S. St. Paul, MN          158            0             0             0           158
Acquired in 1937

33 acres of land
in Sioux City, IA           181            0             0             0           181
Acquired in 1937        -------      -------       -------       -------       -------

                        $   518      $     0       $   (64)      $     0       $   454
                        =======      =======       =======       =======       =======
</TABLE>


                                       25
<PAGE>

10. PENSION VALUATION RESERVE

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


                                       26
<PAGE>

ITEM II. MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE RESULTS OF OPERATIONS AND
         FINANCIAL CONDITION FOR THE NINE MONTHS ENDED JULY 31, 2003

      The following discussion should be read in conjunction with our financial
statements and notes thereto included elsewhere in this report. More
specifically, the Company's summary of significant accounting policies is on
page 15 of this report. The following policies have a significant effect on the
determination of our financial position and results of operations and require us
to make subjective judgments.

      Accounting Estimates -- The preparation of financial statements in
conformity with accounting principles generally accepted in the United States
requires management to make estimates and assumptions that affect the reported
amounts 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.

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

      Revenue Recognition -- Lease and rental revenues are recognized ratably
over the period covered. All real estate leases are accounted for as operating
leases. Revenues from real estate sales are recognized generally when title to
the property passes. Revenues from stockyard operations which consist primarily
of yardage fees (a standard per head charge for each animal sold through the
stockyards) and sale of feed and bedding are recognized at the time the service
is rendered or the feed and bedding are delivered.

      Other Income (Expense) Items -- Art sales are recognized using the
specific identification method, when the piece is shipped to the purchaser. Art
owned by Canal which is on consignment, joint venture, or being examined in
contemplation of sale is not removed from inventory and not recorded as a sale
until notice of sale or acceptance has been received. The sale of investments
available for sale, if any, are recognized, on a specific identification method,
on a trade date basis.

      Properties and Related Depreciation -- Properties are stated at cost less
accumulated depreciation. Depreciation is provided on the straight-line method
over the estimated useful lives of the properties. Such lives are estimated from
35 to 40 years for buildings and from 5 to 20 years for improvements and
equipment.

      Property held for Development or Resale -- Property held for development
or resale consist of approximately 101 acres located in the midwest of
undeveloped land not currently utilized for corporate purposes nor included in
any of the present operating leases. The Company constantly evaluates proposals
received for the purchase, leasing or development of this asset. The land is
valued at cost which does not exceed the net realizable value.


                                       27
<PAGE>

      Long-Lived Assets -- The Company reviews the impairment of long-lived
assets whenever events or changes in circumstances indicate that the carrying
amount of an asset may not be recoverable. The Company considers historical
performance and future estimated results in its evaluation of potential
impairment and then compares the carrying amount of the assets to the estimated
future cash flows expected to result from the use of the asset. The measurement
of the loss, if any, will be calculated as the amount by which the carrying
amount of the asset exceeds the fair value of the asset.

      Statements of Cash Flows -- The company considers all short-term
investments with a maturity of three months or less to be cash equivalents. Cash
equivalents primarily include bank, broker and time deposits with an original
maturity of less than three months. These investments are carried at cost, which
approximates market value. Canal made federal and state income tax payments of
$18,000 and $9,000 and interest payments of $200,000 and $200,000 in the nine
month periods ended July 31, 2003 and 2002, respectively.

      Comprehensive Income -- The Company's only adjustments for each
classification of the comprehensive income was for minimum pension liability.

      Earnings (Loss) Per Share -- Basic earnings (loss) per share is computed
by dividing the net income (loss) applicable to common shares by the weighted
average of common shares outstanding during the period. Diluted earnings (loss)
per share adjusts basic earnings (loss) per share for the effects of convertible
securities, stock options and other potentially dilutive financial instruments,
only in the period in which such effect is dilutive. There were no dilutive
securities in any of the periods presented herein. The shares issuable upon the
exercise of stock options are excluded from the calculation of net income (loss)
per share as their effect would be antidilutive.

                    FORWARD-LOOKING AND CAUTIONARY STATEMENTS

      We may from time to time make written or oral forward-looking statements,
including those contained in the following section. These forward-looking
statements involve risks and uncertainties and actual results could differ
materially from those discussed in the forward-looking statements. For this
purpose, any statements contained in this section that are not statements of
historical fact may be deemed to be forward-looking statements. Factors which
may effect our results include, but are not limited to, our ability to expand
our customer base, our ability to develop additional and leverage our existing
distribution channels for our products and solutions, dependance on strategic
and channel partners including their ability to distribute our products and meet
or renew their financial commitments, our ability to address international
markets, the effectiveness of our sales and marketing activities, the acceptance
of our products in the


                                       28
<PAGE>

market place, the timing and scope of deployments of our products by customers,
fluctuations in customer sales cycles, customers' ability to obtain additional
funding, the emergence of new competitors in the marketplace, our ability to
compete successfully against established competitors with greater resources, the
uncertainty of future governmental regulation, our ability to manage growth, and
obtain additional funds, general economic conditions and other risks discussed
in this report and in our other filings with the Securities and Exchange
Commission. All forward- looking statements and risk factors included in this
document are made as of the date hereof, based on information available to us as
of the date thereof, and we assume no obligation to update any forward-looking
statement or risk factors.

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 obligated to continue making
substantial annual contributions to its defined benefit pension plan. The
financial statements do not include any adjustments that might result from the
resolution of these uncertainties. Additionally, the accompanying financial
statements do not include any adjustments relating to the recoverability and
classification of recorded asset amounts or the amounts and classification of
liabilities that might be necessary should the Company be unable to continue as
a going concern.

      Canal recognized a net loss of $38,000 for the nine month period ended
July 31, 2003 as compared to net income of $431,000 for the same period in
fiscal 2002. There were no adjustments necessary to arrive at comprehensive
income for the periods presented. After recognition of preferred stock dividend
payments of $116,000 and $75,000 for the nine month periods ended July 31, 2003
and 2002, respectively, the Company recognized a net loss applicable to common
stockholders of $154,000 ($0.03 loss per common share) and net income applicable
to common stockholders of $356,000 ($0.09 per common share) for the nine month
periods ended July 31, 2003 and 2002, respectively. Included in the 2003 results
is the sale of three parcels of land located in St. Paul, Minnesota and St.
Joseph, Missouri which generated operating income of approximately $126,000 and
the sale of a piece of contemporary art which generated other income of
approximately $33,000. Included in the 2002 results is other income of
approximately $350,000 received by Canal as a demutualization compensation
payment from an insurance company, from which, Canal had purchased annuity
contracts in the early 1980's for certain of its retired stockyards employees.

      Canal's revenues from continuing operations consist of revenues from its
real estate and stockyards operations. Total revenues decreased by $461,000 or
11.1% to $3,674,000 for the nine month period ended July 31, 2003, as compared
to revenues of $4,135,000 for the same period in fiscal 2002.


                                       29
<PAGE>

Capital Resources and Liquidity

      While the Company is currently operating as a going concern, certain
significant factors raise substantial doubt about the Company's ability to
continue as a going concern. The Company has suffered recurring losses from
operations in eight of the last ten years and is obligated to continue making
substantial annual contributions to its defined benefit pension plan. The
financial statements do not include any adjustments that might result from the
resolution of these uncertainties. Additionally, the accompanying financial
statements do not include any adjustments relating to the recoverability and
classification of recorded asset amounts or the amounts and classification of
liabilities that might be necessary should the Company be unable to continue as
a going concern.

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

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

      On January 10, 2000, the above notes were further amended to have the
noteholders loan the Company $1,725,000 in additional financing, the proceeds of
which was used to repay in full all of the Company's outstanding non related
party long-term debt. On October 8, 2002, the above notes were amended to extend
the maturity date to May 15, 2006.

      The scheduled maturities and sinking fund requirements of long-term debt
during the next five years are $2,667,000 due May 15, 2006. As of July 31, 2003
the balance due under these notes was $2,667,000 all of which is classified as
long-term debt-related party.


                                       30
<PAGE>

      Cash and cash equivalents of $4,000 at July 31, 2003 decreased $135,000
from $139,000 at October 31, 2002. Net cash used by operations in fiscal 2003
was $336,000. At July 31, 2003 and October 31, 2002, the Company's current
liabilities exceeded current assets by $0.5 million and $0.6 million,
respectively. Substantially all of the funds received by Canal from the sale of
real estate and art were used to pay down its accounts payable and accrued
expenses. The only required principal repayments under Canal's debt agreements
for fiscal 2003 will be from the proceeds, if any, of the sale of certain
assets.

      Canal's cash flow position has been under significant strain for the past
several years. Canal continues to closely monitor and reduce where possible its
operating expenses and plans to continue its program to develop or sell the
property it holds for development or resale as well as 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.

2003 COMPARED TO 2002

Stockyard Revenues

      Stockyard revenues for the nine months ended July 31, 2003 of $2,599,000
accounted for 70.7% of the fiscal 2003 revenues as compared to stockyard
revenues of $2,782,000 or 67.3% for the same period in fiscal 2002. Stockyard
revenues are comprised of yard handling and auction (89.5% and 89.2%), feed and
bedding income (5.6% and 5.6%), rental income (0.1% and 0.1%) and other income
(4.8% and 5.1%) for the nine month periods ended July 31, 2003 and 2002,
respectively. There were no significant percentage variations in the year to
year comparisons.

      Stockyard revenues for the three months ended July 31, 2003 of $598,000
accounted for 72.6% of the fiscal 2003 revenues as compared to stockyard
revenues of $640,000 or 49.9% for the same period in fiscal 2002. Stockyard
revenues are comprised of yard handling and auction (87.6% and 89.7%), feed and
bedding income (5.7% and 5.4%), rental income (0.2% and 0.1%) and other income
(6.5% and 4.8%) for the three month periods ended July 31, 2003 and 2002,
respectively. There were no significant percentage variations in the year to
year comparisons.


                                       31
<PAGE>

Stockyard Expenses

      Stockyard expenses for the nine months ended July 31, 2003 of $2,098,000
decreased by $251,000 (10.7%) from stockyard expenses of $2,349,000 for the same
period in fiscal 2002. Stockyard expenses are comprised of labor and related
costs (48.3% and 46.6%), other operating and maintenance (25.2% and 27.6%), feed
and bedding expense (5.9% and 5.4%), depreciation and amortization (0.8% and
0.6%), taxes other than income taxes (6.3% and 7.3%) and general and
administrative expense (13.5% and 12.5%) for the nine month periods ended July
31, 2003 and 2002, respectively. There were no significant percentage variations
in the year to year comparisons.

      Stockyard expenses for the three months ended July 31, 2003 of $612,000
increased by $27,000 (4.7%) from stockyard expenses of $584,000 for the same
period in fiscal 2002. Stockyard expenses are comprised of labor and related
costs (53.0% and 50.5%), other operating and maintenance (24.9% and 27.6%), feed
and bedding expense (4.7% and 5.1%), depreciation and amortization (0.9% and
0.7%), taxes other than income taxes (6.7% and 7.4%) and general and
administrative expense (9.8% and 8.7%) for the three month periods ended July
31, 2003 and 2002, respectively. There were no significant percentage variations
in the year to year comparisons.

      In March 2002, Canal permanently closed its stockyard operations in Sioux
City, Iowa. The Sioux City stockyard operations generated operating losses of
$75,000, $118,000, and $124,000 for the three years ended October 31, 2002, 2001
and 2000, respectively. The stockyard facility was dismantled with the
equipment, fixtures and materials going either to Canal's remaining two
stockyards or sold at a public sale held at the Sioux City location in April
2002. The auction generated total sales of $114,000 and operating income of
$58,000.

      On February 27, 2003, the Company entered into a Contract of Sale for the
sale of approximately 30 acres of land located in Sioux City, Iowa (formerly
used by the Company for stockyards operations) at a purchase price of One
Million Three Hundred Thousand ($1,300,000.00) Dollars. The sale is subject to a
number of contingencies which must be satisfied before closing. The Company
anticipates it will take approximately six more months to close this transaction
if, in fact, the transaction does close.

Real Estate Revenues

      Real estate revenues for the nine months ended July 31, 2003 of $1,075,000
accounted for 29.3% of the fiscal 2003 revenues as compared to real estate
revenues of $1,353,000 or 32.7% for the same period in fiscal 2002. Real estate
revenues are comprised of sale of real estate (34.4% and 42.6%), rental income
from commercial office space in its Exchange Buildings (30.7% and 27.2%),
rentals and other lease income from the rental of vacant land and certain
structures (34.8% and 30.2%) and other income (0.1% and 0.0%) for the nine
months ended July 31, 2003 and 2002, respectively. The percentage variations in
the year to year comparisons are due primarily to decreased sales of real estate
for fiscal 2003.


                                       32
<PAGE>

      Real estate revenues for the three months ended July 31, 2003 of $226,000
accounted for 27.4% of the fiscal 2003 revenues as compared to real estate
revenues of $643,000 or 50.1% for the same period in fiscal 2002. Real estate
revenues are comprised of sale of real estate (0.0% and 60.2%), rental income
from commercial office space in its Exchange Buildings (44.6% and 18.4%),
rentals and other lease income from the rental of vacant land and certain
structures (55.4% and 21.4%) and other income (0.0% and 0.0%) for the three
months ended July 31, 2003 and 2002, respectively. The percentage variations in
the year to year comparisons are due primarily to decreased sales of real estate
for fiscal 2003.

Real Estate Expenses

      Real estate expenses for the nine months ended July 31, 2003 of $805,000
decreased by $17,000 (2.0%) from real estate expenses of $821,000 for the same
period in fiscal 2002. Real estate expenses are comprised of the cost of real
estate sold (30.3% and 30.5%), labor, operating and maintenance (39.5% and
42.4%), depreciation and amortization (11.6% and 11.9%), taxes other than income
taxes (13.9% and 11.1%) and general and administrative and other expenses (4.7%
and 4.1%) for the nine months ended July 31, 2003 and 2002, respectively. The
percentage variations in the year to year comparisons are due primarily to the
decreased cost of real estate sold for fiscal 2003.

      Real estate expenses for the three months ended July 31, 2003 of $166,000
decreased by $175,000 (51.3%) from real estate expenses of $342,000 for the same
period in fiscal 2002. Real estate expenses are comprised of the cost of real
estate sold (0.0% and 44.7%), labor, operating and maintenance (51.0% and
34.1%), depreciation and amortization (18.2% and 9.2%), taxes other than income
taxes (22.4% and 8.9%) and general and administrative and other expenses (8.4%
and 3.1%) for the three months ended July 31, 2003 and 2002, respectively. The
percentage variations in the year to year comparisons are due primarily to the
decreased cost of real estate sold for fiscal 2003.

General and Administrative

      General and administrative expenses for the nine months ended July 31,
2003 of $636,000 decreased by $58,000 (8.5%) from expenses of $695,000 for the
same period in fiscal 2002. The major components of general and administrative
expenses are officers salaries (54.8% and 49.5%), rent (2.5% and 7.8%), legal
and professional fees (1.0% and 0.8%), insurance (11.1% and 14.7%) and office
salaries (9.0% and 8.1%) for the nine month periods ended July 31, 2003 and
2002, respectively. The percentage variations in the year to year comparisons
are due primarily to the sharp decreases in rent expense (resulting from Canal's
subletting substantially all of its New York office space)and insurance premiums
for fiscal 2003.


                                       33
<PAGE>

      General and administrative expenses for the three months ended July 31,
2003 of $205,000 decreased by $27,000 (11.8%) from expenses of $233,000 for the
same period in fiscal 2002. The major components of general and administrative
expenses are officers salaries (56.6% and 49.3%), rent (2.7% and 3.7%), legal
and professional fees (1.0% and 0.8%), insurance (11.5% and 14.6%) and office
salaries (9.3% and 8.1%) for the three month periods ended July 31, 2003 and
2002, respectively. The percentage variations in the year to year comparisons
are due primarily to the sharp decreases in rent expense (resulting from Canal's
subletting substantially all of its New York office space)and insurance premiums
for fiscal 2003.

Interest Expense

      Interest expense for the nine months ended July 31, 2003 of $200,000 was
unchanged from the same period in fiscal 2002. The principal balances
outstanding as well as the interest rates (10%) on Canal's variable rate
mortgage notes have remained unchanged for the past 12 months. At July 31, 2003
the outstanding balance of these notes was $2,667,000.

Interest and Other Income

      Interest and other income for the nine months ended July 31, 2003 of $0
decreased $354,000 (100.0%) from interest and other income of $354,000 for the
same period in fiscal 2002. Included in the 2002 results is other income of
approximately $350,000 received by Canal as a demutalization compensation
payment from an insurance company that Canal had purchased annuity contracts
from in the early 1980's for certain of its retired stockyard employees.

Income (Loss) from Art Sales

      Other income from art sales for the nine months ended July 31, 2003 of
$26,000 increased by $20,000 from other income of $6,000 for the same period in
fiscal 2002. Art revenues are comprised of the proceeds from the sale of
antiquities and contemporary art. Canal recognized gross sales of $103,000 and
$90,000 for the nine month periods ended July 31, 2003 and 2002, respectively.
Art expenses are comprised of the cost of inventory sold and selling, general
and administrative expenses. Canal incurred cost of inventory sold of $64,000
and $67,000 (net of a valuation allowance of $179,000 and $108,000) as well as
selling, general and administrative expenses of $13,000 and $17,000 for the nine
month periods ended July 31, 2003 and 2002, 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.


                                       34
<PAGE>

Other Factors

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

ITEM III. Quantitative and Qualitative Disclosures About Market Risk

      The Securities and Exchange Commission's rule related to market risk
disclosure requires that we describe and quantify our potential losses from
market risk sensitive instruments attributable to reasonably possible market
changes. Market risk sensitive instruments include all financial or commodity
instruments and other financial instruments (such as investments and debt) that
are sensitive to future changes in interest rates, currency exchange rates,
commodity prices or other market factors. We are not exposed to market risks
from changes in foreign currency, exchange rates or commodity prices. As of July
31, 2003, we do not hold derivative financial instruments nor do we hold
securities for trading or speculative purposes. Under our current policies, we
do not use interest rate derivative instruments to manage our exposure to
interest rate changes.

      At July 31, 2002, the following long-term debt-related party financial
      instruments are sensitive to changes in interest rates by expected
      maturity dates:

            As of         Fixed rate        Average         Fair
           July 31,         ($ US)       Interest Rate      Value
           --------       ----------     -------------      -----
            2003           $     0            N/A
            2004                 0            N/A
            2005                 0            N/A
            2006             2,667            10%
            2007                 0            N/A
            Thereafter           0            N/A
                           -------
            Total          $ 2,667                          N/A (A)
                           -------                          -------

      (A)   Long-term debt related party (See Note 8): it is not practicable to
            estimate the fair value of the related party debt.


                                       35
<PAGE>

Item IV. Controls and Procedures

      Our management, which includes our Chief Executive Officer and Chief
Financial Officer, has conducted an evaluation of the effectiveness of our
disclosure controls and procedures (as defined in Rule 13(a)-14(c) promulgated
under the Securities Exchange Act of 1934) as of July 31, 2003 ("the Evaluation
Date") within 45 days prior to the filing date of this report. Based upon that
evaluation our Chief Executive Officer and Chief Financial Officer concluded
that our disclosure controls and procedures are effective for timely gathering,
analyzing and disclosing the information we are required to disclose in our
reports filed under the Securities Exchange Act of 1934, as amended. There have
been no significant changes made in our internal controls or other factors that
could significantly effect our internal controls subsequent to the Evaluation
Date.


                                       36
<PAGE>

                                     PART II

                                OTHER INFORMATION


                                       37
<PAGE>

Item 1: Legal Proceedings:

        See Item 3 of Canal's October 31, 2002 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.


                                       38
<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/ Michael E. Schultz
                                                --------------------------------
                                                Michael E. Schultz
                                                Chief Executive Officer &
                                                President


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

Date: September 15, 2003


                                       39