SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
                                    FORM 10-Q

             |X| QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) of
                       THE SECURITIES EXCHANGE ACT OF 1934

                  For the quarterly period ended April 30, 2009

              |_| TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934

                        For the transition period from to

                        Commission File Number 002-96666

                            CANAL CAPITAL CORPORATION
             (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 Number)

      490 WHEELER ROAD SUITE 185 HAUPPAUGE, NY            11788
    (Address of principal executive offices)            (Zip Code)

    (Registrant's telephone number, including area code) (631) 234-0140

    Securities registered pursuant to Section 12(b) of the Act:   None

    Securities registered pursuant to Section 12(g) of the Act:
             Common Stock, $.01 par value

      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 by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's  knowledge,  in definitive proxy or information  statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. Yes |X| No |_|

      Indicate  by check mark  whether  the  Registrant  is a large  accelerated
filer,  an accelerated  filer,  or a  non-accelerated  filer.  See definition of
"accelerated  filer and large  accelerated  filer" in Rule 12b-2 of the Exchange
Act. (Check one):

Large accelerated filer |_|   Accelerated filer  |_|  Non-accelerated filer |X|

      Indicate  by check mark  whether  the  Registrant  is a shell  company (as
defined in Rule 12b-2 of the Exchange Act). Yes |_| No |X|

      The number of shares of Common Stock,  $.01 par value,  outstanding at May
31, 2009 was 4,326,929.

<PAGE>

                   CANAL CAPITAL CORPORATION AND SUBSIDIARIES
                            FORM 10-Q APRIL 30, 2009

                                      INDEX

The following documents are filed as part of this report:

Part I -  Financial Information ...........................................    3

Item I.   Condensed Financial Statements:

     Consolidated Balance Sheets - April 30, 2009
       and October 31, 2008 ...............................................    4

     Consolidated Statements of Operations and
       Comprehensive Income (Loss) for the Six and Three
       Month Periods ended April 30, 2009 and 2008 ........................    6

     Consolidated Statements of Changes in Stockholders'
       Equity for the One Year and Six Month Periods
       ended October 31, 2008 and April 30, 2009 ..........................   10

     Consolidated Statements of Cash Flows for the
       Six Month Periods ended April 30, 2009 and
       2008 ...............................................................   11

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

Item II.  Management's Discussion and Analysis of
          Financial Condition .............................................   28

     Liquidity and Capital Resources ......................................   37

     Other Factors ........................................................   39

Item III. Quantitative and Qualitative Disclosures
          About Market Risk ...............................................   39

Item IV.  Controls and Procedures .........................................   40

Part II   Other Information ...............................................   41

     Items 1 through 6 ....................................................   42

     Signatures and Certifications ........................................   43


                                       2
<PAGE>

                                     PART I

                              FINANCIAL INFORMATION


                                       3
<PAGE>

                    CANAL CAPITAL CORPORATION & SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
                       APRIL 30, 2009 AND OCTOBER 31, 2008

<TABLE>
<CAPTION>
                                                           APR. 30,         OCT. 31,
                                                             2009            2008
                                                          (UNAUDITED)      (AUDITED)
                                                          ----------      ----------
<S>                                                       <C>             <C>
ASSETS:

CURRENT ASSETS:

       CASH AND CASH EQUIVALENTS                          $  191,673      $   21,115

       NOTES AND ACCOUNTS RECEIVABLE, NET OF AN
         ALLOWANCE FOR DOUBTFUL ACCOUNTS OF $ZERO AT
         BOTH APRIL 30, 2009 AND OCTOBER 31, 2008,           241,861         147,140

       ART INVENTORY, NET OF A VALUATION ALLOWANCE
         OF $396,522 AT APRIL 30, 2009 AND
         OCTOBER 31, 2008                                    100,000         100,000

       STOCKYARDS INVENTORY                                   22,187          24,426

       PREPAID EXPENSES                                       53,013          12,955
                                                          ----------      ----------

            TOTAL CURRENT ASSETS                             608,734         305,636
                                                          ----------      ----------

NON-CURRENT ASSETS:

       PROPERTY ON OPERATING LEASES, NET OF
          ACCUMULATED DEPRECIATION OF $439,099
          AND $427,799 AT APRIL 30, 2009 AND
          OCTOBER 31, 2008, RESPECTIVELY                   1,634,708       1,645,807
                                                          ----------      ----------

       PROPERTY USED IN STOCKYARD OPERATIONS, NET OF
          ACCUMULATED DEPRECIATION OF $240,596 AND
          $230,687 AT APRIL 30, 2009 AND OCTOBER
          31, 2007, RESPECTIVELY                           1,114,962       1,124,871
                                                          ----------      ----------

  OTHER ASSETS:

       PROPERTY HELD FOR DEVELOPMENT OR RESALE                52,250          91,510
       RESTRICTED CASH - LETTER OF CREDIT                    100,000         100,000
       RESTRICTED CASH - TRANSIT INSURANCE                    66,430          26,736
       DEPOSITS AND OTHER ASSETS                               2,700           2,700
                                                          ----------      ----------

                                                             221,380         220,946
                                                          ----------      ----------

                                                          $3,579,784      $3,297,260
                                                          ==========      ==========
</TABLE>

SEE ACCOMPANYING NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS.


                                       4
<PAGE>

                    CANAL CAPITAL CORPORATION & SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
                       APRIL 30, 2009 AND OCTOBER 31, 2008

<TABLE>
<CAPTION>
                                                        APR.30, 2009       OCT.31, 2008
                                                         (UNAUDITED)         (AUDITED)
                                                        ------------       ------------
<S>                                                     <C>                <C>
LIABILITIES & STOCKHOLDERS' EQUITY:

CURRENT LIABILITIES:
       ACCOUNTS PAYABLE AND ACCRUED EXPENSES            $    400,099       $    363,306
       PENSION PLAN PAYABLE                                  104,895            149,919
       SALARIES AND INTEREST PAYABLE - OFFICERS              233,417             27,317
       ACCRUED PROFESSIONAL FEES                             101,649            113,523
       PREFERRED STOCK DIVIDEND PAYABLE                      120,712             84,712
       INCOME TAXES PAYABLE                                   10,000             10,000
                                                        ------------       ------------
         TOTAL CURRENT LIABILITIES                           970,772            748,777
                                                        ------------       ------------

NON-CURRENT LIABILITIES:
       LONG-TERM PENSION LIABILITY                           440,156            440,156
       REAL ESTATE TAXES PAYABLE                             145,798            115,165
                                                        ------------       ------------
         TOTAL NON-CURRENT LIABILITIES                       585,954            555,321
                                                        ------------       ------------

LONG-TERM DEBT, RELATED PARTY                              1,262,000          1,262,000
                                                        ------------       ------------

COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS' EQUITY:

  PREFERRED STOCK, $0.01 PAR VALUE:
       10,000,000 SHARES AUTHORIZED; 9,102,655
       SHARES ISSUED AND OUTSTANDING AT APRIL 30,
       2009 AND OCTOBER 31, 2008, RESPECTIVELY AND
       AGGREGATE LIQUIDATION PREFERENCE OF $10 PER
       SHARE FOR $ 91,026,550 AT APRIL 30, 2009
       AND OCTOBER 31, 2008, RESPECTIVELY                     91,027             91,027

  COMMON STOCK, $0.01 PAR VALUE:
       10,000,000 SHARES AUTHORIZED; 5,313,794
       SHARES ISSUED AND 4,326,929 SHARES OUT-
       STANDING AT APRIL 30, 2009 AND OCTOBER 31,
       2008, RESPECTIVELY                                     53,138             53,138

  ADDITIONAL PAID-IN CAPITAL                              28,322,341         28,322,341

  ACCUMULATED DEFICIT                                    (15,055,431)       (15,025,327)

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

  COMPREHENSIVE INCOME:
    PENSION VALUATION RESERVE                             (1,646,472)        (1,706,472)
                                                        ------------       ------------
                                                             761,058            731,162
                                                        ------------       ------------

                                                        $  3,579,784       $  3,297,260
                                                        ============       ============
</TABLE>

SEE ACCOMPANYING NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS.


                                       5
<PAGE>

                    CANAL CAPITAL CORPORATION & SUBSIDIARIES
       CONSOLIDATED STATEMENTS OF OPERATIONS & COMPREHENSIVE INCOME (LOSS)
                FOR THE SIX MONTHS ENDED APRIL 30, 2009 AND 2008

                                                     2009               2008
                                                 (UNAUDITED)        (UNAUDITED)
                                                 -----------        -----------
REAL ESTATE OPERATIONS:

 REAL ESTATE REVENUES:
    SALE OF REAL ESTATE                              262,720            200,000
    OUTSIDE REAL ESTATE RENT                         193,044            247,288
    EXCHANGE BUILDING RENTAL INCOME                   15,387             16,635
                                                 -----------        -----------
                                                     471,151            463,923
                                                 -----------        -----------

 REAL ESTATE EXPENSES:
    COST OF REAL ESTATE SOLD                          69,069             72,567
    LABOR, OPERATING AND MAINTENANCE                  29,630             37,971
    DEPRECIATION AND AMORTIZATION                     11,100             11,100
    TAXES OTHER THAN INCOME TAXES                     12,300             10,800
    GENERAL AND ADMINISTRATIVE                        19,800             22,040
                                                 -----------        -----------
                                                     141,899            154,478
                                                 -----------        -----------

INCOME FROM REAL ESTATE OPERATIONS                   329,252            309,445
                                                 -----------        -----------

STOCKYARD OPERATIONS:

STOCKYARD REVENUES:
    YARD HANDLING AND AUCTION                    $ 1,479,436        $ 1,526,329
    FEED AND BEDDING INCOME                          115,691            111,067
    RENTAL & OTHER INCOME                             89,675             88,132
                                                 -----------        -----------
                                                   1,684,802          1,725,528
                                                 -----------        -----------

STOCKYARD EXPENSES:
    LABOR AND RELATED COSTS                          679,897            733,725
    OTHER OPERATING AND MAINTENANCE                  405,622            444,988
    FEED AND BEDDING EXPENSE                          92,148            103,540
    DEPRECIATION AND AMORTIZATION                      9,909              9,909
    TAXES OTHER THAN INCOME TAXES                     90,021             87,363
    GENERAL AND ADMINISTRATIVE                       223,412            221,110
                                                 -----------        -----------
                                                   1,501,009          1,600,635
                                                 -----------        -----------

INCOME FROM STOCKYARD OPERATIONS                     183,793            124,893
                                                 -----------        -----------

GENERAL AND ADMINISTRATIVE EXPENSE                  (449,428)          (551,360)
                                                 -----------        -----------

INCOME (LOSS) FROM OPERATIONS                         63,617           (117,022)
                                                 -----------        -----------

SEE ACCOMPANYING NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS.


                                       6
<PAGE>

                    CANAL CAPITAL CORPORATION & SUBSIDIARIES
       CONSOLIDATED STATEMENTS OF OPERATIONS & COMPREHENSIVE INCOME (LOSS)
                FOR THE SIX MONTHS ENDED APRIL 30, 2009 AND 2008
                                  Continued ...

                                                      2009               2008
                                                  (UNAUDITED)        (UNAUDITED)
                                                  -----------       -----------
OTHER (EXPENSE) INCOME:
  INTEREST & OTHER INCOME                               7,779            26,784
  INTEREST EXPENSE                                    (63,100)         (105,841)
  ART SALES AND OPERATIONS                             (2,400)           (2,400)
                                                  -----------       -----------

                                                      (57,721)          (81,457)
                                                  -----------       -----------

(LOSS) INCOME BEFORE PROVISION FOR
  INCOME TAXES                                          5,896          (198,479)
PROVISION FOR INCOME TAXES                                  0                 0
                                                  -----------       -----------

NET INCOME (LOSS)                                       5,896          (198,479)

OTHER COMPREHENSIVE INCOME:

  MINIMUM PENSION LIABILITY ADJUSTMENT                 60,000           126,000
                                                  -----------       -----------

COMPREHENSIVE INCOME                              $    65,896       $    72,479
                                                  ===========       ===========

EARNINGS (LOSS) PER COMMON SHARE:

   NET INCOME (LOSS)                              $     5,896       $  (198,479)

   LESS PREFERRED STOCK DIVIDEND                      (36,000)          (54,000)
                                                  -----------       -----------

(LOSS) AVAILABLE TO COMMON STOCKHOLDERS           $   (30,104)      $  (252,479)
                                                  -----------       -----------

NET (LOSS) PER COMMON SHARE
  BASIC AND DILUTED                               $     (0.01)      $     (0.06)
                                                  ===========       ===========

AVERAGE SHARES OUTSTANDING - BASIC
  AND DILUTED                                       4,326,929         4,326,929
                                                  ===========       ===========

SEE ACCOMPANYING NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS.


                                       7
<PAGE>

                    CANAL CAPITAL CORPORATION & SUBSIDIARIES
       CONSOLIDATED STATEMENTS OF OPERATIONS & COMPREHENSIVE INCOME (LOSS)
               FOR THE THREE MONTHS ENDED APRIL 30, 2009 AND 2008

                                                        2009           2008
                                                    (UNAUDITED)     (UNAUDITED)
                                                    -----------     -----------
REAL ESTATE OPERATIONS:

 REAL ESTATE REVENUES:
    SALE OF REAL ESTATE                                262,720                0
    OUTSIDE REAL ESTATE RENT                            97,045          124,727
    EXCHANGE BUILDING RENTAL INCOME                      7,674            8,917
                                                    ----------       ----------
                                                       367,439          133,644
                                                    ----------       ----------

 REAL ESTATE EXPENSES:
    COST OF REAL ESTATE SOLD                            69,069                0
    LABOR, OPERATING AND MAINTENANCE                    14,464           20,202
    DEPRECIATION AND AMORTIZATION                        5,550            5,550
    TAXES OTHER THAN INCOME TAXES                        6,150            5,400
    GENERAL AND ADMINISTRATIVE                           9,900           11,100
                                                    ----------       ----------
                                                       105,133           42,252
                                                    ----------       ----------

INCOME FROM REAL ESTATE OPERATIONS                     262,306           91,392
                                                    ----------       ----------

STOCKYARD OPERATIONS:

STOCKYARD REVENUES:
    YARD HANDLING AND AUCTION                       $  763,564       $  725,898
    FEED AND BEDDING INCOME                             57,657           53,373
    RENTAL & OTHER INCOME                               49,066           45,323
                                                    ----------       ----------
                                                       870,287          824,594
                                                    ----------       ----------

STOCKYARD EXPENSES:
    LABOR AND RELATED COSTS                            329,891          358,943
    OTHER OPERATING AND MAINTENANCE                    221,753          228,567
    FEED AND BEDDING EXPENSE                            49,271           47,324
    DEPRECIATION AND AMORTIZATION                        4,955            4,955
    TAXES OTHER THAN INCOME TAXES                       45,858           45,663
    GENERAL AND ADMINISTRATIVE                         123,249          112,979
                                                    ----------       ----------
                                                       774,977          798,431
                                                    ----------       ----------

INCOME FROM STOCKYARD OPERATIONS                        95,310           26,163
                                                    ----------       ----------

GENERAL AND ADMINISTRATIVE EXPENSE                    (224,745)        (267,510)
                                                    ----------       ----------

INCOME (LOSS) FROM OPERATIONS                          132,871         (149,955)
                                                    ----------       ----------

SEE ACCOMPANYING NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS.


                                       8
<PAGE>

                    CANAL CAPITAL CORPORATION & SUBSIDIARIES
       CONSOLIDATED STATEMENTS OF OPERATIONS & COMPREHENSIVE INCOME (LOSS)
               FOR THE THREE MONTHS ENDED APRIL 30, 2009 AND 2008
                                  Continued ...

                                                     2009               2008
                                                 (UNAUDITED)        (UNAUDITED)
                                                 -----------       ------------
OTHER (EXPENSE) INCOME:
  INTEREST & OTHER INCOME                              7,602              3,182
  INTEREST EXPENSE                                   (31,550)           (42,312)
  ART SALES AND OPERATIONS                            (1,200)            (1,200)
                                                 -----------       ------------

                                                     (25,148)           (40,330)
                                                 -----------       ------------

INCOME (LOSS) BEFORE PROVISION FOR
  INCOME TAXES                                       107,723           (190,285)
PROVISION FOR INCOME TAXES                                 0                  0
                                                 -----------       ------------

NET INCOME (LOSS)                                    107,723           (190,285)

OTHER COMPREHENSIVE INCOME:

  MINIMUM PENSION LIABILITY ADJUSTMENT                30,000             63,000
                                                 -----------       ------------

COMPREHENSIVE INCOME (LOSS)                      $   137,723       $   (127,285)
                                                 ===========       ============

EARNINGS (LOSS) PER COMMON SHARE:

   NET INCOME (LOSS)                             $   107,723       $   (190,285)

   LESS PREFERRED STOCK DIVIDEND                     (18,000)           (27,000)
                                                 -----------       ------------

INCOME (LOSS) AVAILABLE TO COMMON STKHDRS        $    89,723       $   (217,285)
                                                 -----------       ------------

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

AVERAGE SHARES OUTSTANDING - BASIC
  AND DILUTED                                      4,326,929          4,326,929
                                                 ===========       ============

SEE ACCOMPANYING NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS.


                                       9
<PAGE>

                   CANAL CAPITAL CORPORATION AND SUBSIDIARIES
           CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
                FOR THE YEAR ENDED OCTOBER 31, 2008 (AUDITED) AND
               FOR THE SIX MONTHS ENDED APRIL 30, 2009 (UNAUDITED)

<TABLE>
<CAPTION>
                                      COMMON STOCK            PREFERRED STOCK
                                 NUMBER                     NUMBER
                                   OF                         OF
                                 SHARES        AMOUNT       SHARES        AMOUNT
<S>                            <C>            <C>          <C>            <C>
BALANCE, OCTOBER 31, 2007      5,313,794      $53,138      9,102,655      $91,027
 NET LOSS                              0            0              0            0
 PREFERRED STOCK DIVIDEND              0            0              0            0
 MINIMUM PEN. LIAB. ADJ.               0            0              0            0
                             ------------------------     -----------------------

BALANCE, OCTOBER 31, 2008      5,313,794      $53,138      9,102,655      $91,027
 NET LOSS                              0            0              0            0
 PREFERRED STOCK DIVIDEND              0            0              0            0
 MINIMUM PEN. LIAB. ADJ.               0            0              0            0
                             ------------------------     -----------------------

BALANCE, APRIL 30, 2009        5,313,794      $53,138      9,102,655      $91,027
                             ========================     =======================

<CAPTION>
                               ADDITIONAL                                              TREASURY
                                PAID-IN          ACCUMULATED       COMPREHENSIV         STOCK,
                                CAPITAL            DEFICIT             LOSS            AT COST
<S>                            <C>              <C>                <C>               <C>
BALANCE, OCTOBER 31, 2007      $28,322,341      ($14,885,103)      ($1,592,262)      ($11,003,545)
 NET LOSS                                0           (55,512)                0                  0
 PREFERRED STOCK DIVIDEND                0           (84,712)                0                  0
 MINIMUM PEN. LIAB. ADJ.                 0                 0          (114,210)                 0
                               -----------------------------       ------------------------------

BALANCE, OCTOBER 31, 2008      $28,322,341      ($15,025,327)      ($1,706,472)      ($11,003,545)
 NET LOSS                                0             5,896                 0                  0
 PREFERRED STOCK DIVIDEND                0           (36,000)                0                  0
 MINIMUM PEN. LIAB. ADJ.                 0                 0            60,000                  0
                               -----------------------------       ------------------------------
BALANCE, APRIL 30, 2009        $28,322,341      ($15,055,431)      ($1,646,472)      ($11,003,545)
                               =============================       ==============================
</TABLE>

SEE ACCOMPANYING NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS.


                                       10
<PAGE>

                  CANAL CAPITAL CORPORATION & SUBSIDIARIES
                   CONSOLIDATED STATEMENTS OF CASH FLOWS
             FOR THE SIX MONTHS ENDED APRIL 30, 2009 AND 2008


                                                    APR. 2009       APR. 2008
                                                    ---------       ---------
CASH FLOWS FROM OPERATING ACTIVITIES:
  NET INCOME (LOSS)                                $     5,896     $  (198,479)
                                                   -----------     -----------

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

   DEPRECIATION AND AMORTIZATION                        21,009          21,009

   GAIN ON SALES OF REAL ESTATE                       (193,651)       (127,433)

   MINIMUM PENSION LIABILITY ADJUSTMENT                 60,000         126,000

DECREASE (INCREASE) IN ASSETS:

   MORTGAGE NOTE RECEIVABLE - PROCEEDS                       0       1,600,000

   NOTES AND ACCOUNTS RECEIVABLE                       (94,721)        (50,832)

   STOCKYARDS INVENTORY                                  2,239           7,799

   PREPAID EXPENSES                                    (40,058)        (52,065)

   RESTRICTED CASH - TRANSIT INSURANCE                 (39,694)         (4,839)

INCREASE (DECREASE) IN LIABILITIES:

   ACCOUNTS PAYABLE AND ACCRUED EXPENSES                36,793         (80,968)

   PENSION PLAN PAYABLE                                (45,024)        (94,677)

   SALARIES AND INTEREST PAYABLE - OFFICERS            206,100        (213,916)

   ACCRUED PROFESSIONAL FEES                           (11,874)        (53,459)

   REAL ESTATE TAXES PAYABLE                            30,633         (43,497)
                                                   -----------     -----------

        TOTAL ADJUSTMENTS                              (68,248)      1,033,122
                                                   -----------     -----------

NET CASH (USED IN) PROVIDED BY
OPERATING ACTIVITIES                                   (62,352)        834,643
                                                   -----------     -----------

SEE ACCOMPANYING NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS.


                                       11
<PAGE>

                    CANAL CAPITAL CORPORATION & SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                FOR THE SIX MONTHS ENDED APRIL 30, 2009 AND 2008
                                  Continued ...

                                                    APR. 2009        APR. 2008
                                                   -----------      -----------

CASH FLOWS FROM INVESTING ACTIVITIES:

  PROCEEDS FROM SALES OF REAL ESTATE                   262,720          200,000
  COSTS RELATING TO SALES OF REAL ESTATE               (29,810)         (52,567)
  CAPITAL EXPENDITURES                                       0           (4,740)
                                                   -----------      -----------

NET CASH PROVIDED BY INVESTING ACTIVITIES              232,910          142,693
                                                   -----------      -----------

CASH FLOWS USED BY FINANCING ACTIVITIES:

   REPAYMENT OF LONG-TERM DEBT OBLIGATION                    0       (1,000,000)
                                                   -----------      -----------

NET CASH USED BY FINANCING ACTIVITIES                        0       (1,000,000)
                                                   -----------      -----------

NET INCREASE (DECREASE) IN CASH AND CASH
  EQUIVALENTS                                          170,558          (22,664)

CASH AND CASH EQUIVALENTS AT BEGN OF YEAR               21,115           27,925
                                                   -----------      -----------

CASH AND CASH EQUIVALENTS AT END OF YEAR           $   191,673      $     5,261
                                                   ===========      ===========

                                                             APRIL 30,
                                                             ---------
                                                       2009             2008
                                                       ----             ----
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
  INFORMATION:

CASH PAID DURING THE YEAR FOR:

  INTEREST                                         $    63,100      $   105,841
                                                   ===========      ===========
  INCOME TAXES                                     $         0      $         0
                                                   ===========      ===========

SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING
  AND FINANCING ACTIVITIES:

  PREFERRED STOCK DIVIDENDS                        $    36,000      $    54,000
                                                   ===========      ===========

SEE ACCOMPANYING NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS.


                                       12
<PAGE>

                   CANAL CAPITAL CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                     FOR THE SIX MONTHS ENDED APRIL 30, 2009

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.

      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 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.

      Canal is engaged in two distinct  businesses  - real estate and  stockyard
operations.

      Real Estate  Operations  - Canal's real estate  properties  are located in
Sioux City, Iowa, South St Paul, Minnesota, St Joseph, Missouri, Omaha, Nebraska
and Sioux Falls, South Dakota. The properties consist,  for the most part, of an
Exchange Building (commercial office space), land and


                                       13
<PAGE>

structures  leased to third  parties  (rail car 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 lease income from land and structures leased to various  commercial
and retail enterprises,  rental income from its Exchange Building,  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.

      Real estate  operations  resulted  in  operating  income of  $329,000  and
$309,000 for the six month periods ended April 30, 2009 and 2008,  respectively.
Included  in  the  fiscal  2009  results  is a  194,000  gain  on  the  sale  of
approximately 16 acres of vacant land located in St. Joseph, Missouri.  Included
in the 2008  real  estate  operating  income is a  $127,000  gain on the sale of
approximately  1 acre of land and the associated  improvements  located in South
Saint Paul, Minnesota. Additionally, real estate operations contributed $471,000
and $464,000 to Canal's  revenues for the six month periods ended April 30, 2009
and 2008, respectively.

      As of April 30, 2009, there are  approximately 2 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.

      Stockyard  Operations  -  Through  an  August  1,  1999  asset  repurchase
agreement,  Canal now  operates  two central  public  stockyards  located in St.
Joseph, Missouri and Sioux Falls, South Dakota.

      Public stockyards act much like a securities  exchange,  providing markets
for all  categories  of  livestock  and  fulfilling  the  economic  functions of
assembly,  grading, and price discovery.  The livestock handled by the 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 services  facilities,  auction arenas,  auctioneers,  weigh
masters and


                                       14
<PAGE>

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.

      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 2009.  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 $22,000 and
$24,000 at April 30, 2009 and October 31, 2008, respectively.

      Stockyard operations resulted in operating income of $184,000 and $125,000
for the  six  month  periods  ended  April  30,  2009  and  2008,  respectively.
Additionally,  stockyard  operations  contributed  $1,685,000  and $1,726,000 to
Canal's  revenues  for the six month  periods  ended  April  30,  2009 and 2008,
respectively.


                                       15
<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) 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 2 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.

      C)  Expenditures  for maintenance and repairs are charged to operations as
incurred.  Significant renewals and betterments are capitalized. When properties
are sold or otherwise disposed of, the cost and related accumulated depreciation
are  removed  from the  accounts  and any gain or loss is  reflected  in current
income.

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

      E) Art  Inventory  Held for Sale - Inventory of art is valued at the lower
of  cost,  including  direct  acquisition  and  restoration   expenses,  or  net
realizable value on a specific  identification basis. The nature of art makes it
difficult to determine a replacement  value.  The most compelling  evidence of a
value in most cases is an independent  appraisal.  The net  realizable  value of
Canals remaining art inventory has been estimated by


                                       16
<PAGE>

management  based in part on the  Company's  history of art sales in the current
and previous years and in part on the results of the independent appraisals done
in  previous  years.  However,  because  of the  nature of art  inventory,  such
determination  is very subjective  and,  therefore,  the estimated  values could
differ significantly from the amount ultimately realized.

      F) Income Taxes -- Canal and its subsidiaries file a consolidated  Federal
income tax return.  The Company  accounts for income  taxes under the  liability
method.  Under this method,  deferred tax assets and  liabilities are determined
based on  differences  between  financial  reporting and tax bases of assets and
liabilities.

      G)  Stockyard  Inventory  -  Inventory  is  stated at the lower of cost or
market. Cost is determined using the first-in, first-out method.

      H)  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.

      I) 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 the sale of real estate are  recognized  at the time the
sale has been  consummated  on the full  accrual  method  wherein the seller has
transferred  to the  buyer  the  usual  risks  and  rewards  of  ownership  in a
transaction  that  is in  substance  a sale  and  does  not  have a  substantial
continuing involvement with the property; the seller's receivable is not subject
to future  subordination and the buyer's initial and continuing  investments are
adequate to  demonstrate  a commitment  to pay for the  property.  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.


                                       17
<PAGE>

      J)  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 state income tax payments of $0, and $0,
and  interest  payments of $63,000,  and $106,000 for the six month period ended
April 30, 2009 and 2008, respectively.

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

      L)  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.

      M) Recently  Issued  Accounting  Pronouncements  -- In September 2006, the
FASB issued SFAS No. 157, "Fair Value  Measurements."  SFAS No. 157 defines fair
value,  establishes a frame work for measuring fair value in generally  accepted
accounting  principles,  and expands  disclosures about fair value measurements.
SFAS No.  157 does not  require  any new fair value  measurements.  SFAS No. 157
becomes  effective for fiscal years beginning after November 15, 2007,  which is
the Company's  2009 fiscal year beginning on November 1, 2008. In February 2008,
the FASB issued FASB staff position No. 157-2,  effective date of FASB statement
No. 157 (FSP 157-2),  which delayed the  effective  date of SFAS 157 for certain
non-financial  assets and  non-financial  liabilities to fiscal years  beginning
after  November 15, 2008.  The Company  evaluated the impact of SFAS No. 157 and
FSP 157-2 on its  consolidated  financial  statements,  and has  determined  the
impact  of  adopting  this  standard  does not  have a  material  effect  on the
Company's financial position, results of operations or cash flows.

      3. INTERIM FINANCIAL STATEMENTS

      The interim  consolidated  financial  statements included herein have been
prepared by Canal and in the opinion of Management, contain all


                                       18
<PAGE>

adjustments  necessary to present fairly its financial  position as of April 30,
2009 and the  results  of its  operations  and its cash  flows for the six month
period ended April 30, 2009. All of the above  referenced  adjustments were of a
normal recurring nature.  Certain information and footnote  disclosures normally
included in the  financial  statements  prepared in  accordance  with  generally
accepted accounting  principles have been condensed or omitted.  These financial
statements  should  be read  in  conjunction  with  the  consolidated  financial
statements  for the three  years ended  October  31, 2008 and the notes  thereto
which are contained in Canal's 2008 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 2009.

4. MORTGAGE NOTE RECEIVABLE

      On November 1, 2004 Canal sold its Exchange  Building  and the  associated
five acres of land located in South Saint Paul, Minnesota on a contract for deed
for $1,750,000,  generating  operating income of approximately  $850,000.  Canal
issued a mortgage note for the full sales price,  which note carries interest at
a rate of 4.12% per annum, payable in equal monthly  installments.  The mortgage
note was due and payable in full on October 31, 2007.

      In March, 2007 Canal received a $50,000 payment on this note as the result
of the mortgagee having sold a small piece (0.1 acres of land) of the underlying
collateral.  On October 31, 2007 Canal received a $100,000 payment on this note,
at which time Canal  extended  the due date to December  17, 2007 at an interest
rate of 10% per annum. On December 17, 2007 Canal received a $1,400,000  payment
on this note and  issued a 90 day note for the  balance  due of  $200,000  at an
interest rate of 12% per annum. This note was paid in full in March 2008.

5. STOCK OPTION PLAN

      Under  Canal's  1984  Employee  and 1985  Directors  Stock  Option  Plans,
$550,000 and 264,000  shares,  respectively,  of Canal's  common stock have been
reserved for option grants.  The purchase price of shares subject to each option
granted,  under the Employee and Directors Plans,  will not be less than 85% and
100%,  respectively,  of their fair market  value at the date of grant.  Options
granted  under both plans are  exercisable  for 10 years from the date of grant,
but no option will be exercisable  earlier than one year from the date of grant.
Under the Employee Plan, stock appreciation  rights may be granted in connection
with stock  options,  either at the time of grant of the  options or at any time
thereafter.  No stock  appreciation  rights have been  granted  under this plan.
There were no  exercisable  options  outstanding  under either of these plans at
April 30, 2009 or 2008.


                                       19
<PAGE>

6. BORROWINGS

      The Company's variable rate mortgage notes (originally issued in 1998) are
due May 15, 2012 and are held entirely by the Company's Chief Executive  Officer
and members of his family. These notes carry interest at the rate of ten percent
per annum.  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;  restricts  Canal's  ability to pay cash
dividends or repurchase stock and require principal  prepayments to be made only
out of the  proceeds  from the sale of  certain  assets.  The  Company is in the
process of  negotiating  a three year  extension of these notes and  anticipates
this will be achieved prior to year end. Accordingly,  as of April 30, 2009, the
balance due under  these notes was  $1,262,000,  all of which is  classified  as
long-term debt-related party.

      At April 30, 2009, 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:

                                                   Apr. 30,      October 31,
($ 000's Omitted)                                    2009            2008
-----------------                                    ----            ----

Variable rate mortgage notes due
  May 15, 2012 - related party ..................   $ 1,262        $  1,262
Less -- current maturities ......................         0               0
                                                    -------        --------
Long-term debt                                      $ 1,262        $  1,262
                                                    -------        --------

      The following table  summarizes the Company's  commitments as of April 30,
2009 to make future  payments under its debt  agreements  and other  contractual
obligations (in 000's):

                                                                         More
                                        Less Than    1 - 3     3 - 5     Than
                               Total     1 year      Years     Years     5Yrs.
                               ------   ---------    ------    ------   ------

Pension Plan Liability (a)     $  545     $  105     $  210    $  230   $    0
Mortgage Notes Payable (b)      1,262          0      1,262         0        0
                               ------     ------     ------    ------   ------
                               $1,807     $  105     $1,472    $  230   $    0
                               ------     ------     ------    ------   ------

      (a)   See Note 16.

      (b)   The mortgage notes are due May 15, 2012 and are held entirely by the
            Company's Chief Executive  Officer and members of his family.  These
            notes  carry  annual  interest  of 10%  and  are  collateralized  by
            substantially  all  of  Canal's  property,   the  stock  of  certain
            subsidiaries and its art inventories.


                                       20
<PAGE>

7. RESTRICTED CASH

      Letter of Credit - This is a $100,000  deposit with Chase Bank to secure a
Letter of Credit issued by the bank to the Hartford  Insurance Company for bonds
issued in relation to the St. Joseph Stockyards clearing operation. This deposit
is maintained in an interest bearing account.

      Transit Insurance - Transit insurance covers livestock for the period that
they are physically at the stockyards and under the care of stockyard personnel.
This self  insurance  program  is funded by a per head  charge on all  livestock
received at the stockyard.  The restricted cash - transit insurance  balances of
approximately  $66,000  and  $27,000 at April 30,  2009 and  October  31,  2008,
respectively,  represents  the  excess  of per head  fees  charged  over  actual
payments made for livestock that was injured or died while at the stockyards.

8. INCOME TAXES

      At April 30, 2009,  the Company has net operating  loss  carryforwards  of
approximately  $10,800,000  that expire  through 2028.  For financial  statement
purposes, a valuation allowance has been provided to offset the net deferred tax
assets due to the cumulative net operating  losses incurred during recent years.
The  valuation  allowance  will be  reduced  when  and  if,  in the  opinion  of
management, significant positive evidence exists which indicates that it is more
likely  than not that the  Company  will be able to  realize  its  deferred  tax
assets.

      In July  2006,  the FASB  issued  FASB  Interpretation  No.  48 (FIN  48),
"Accounting  for  Uncertainty  in  Income  Taxes."  FIN 48  prescribes  detailed
guidance for the financial statement recognition,  measurement and disclosure of
uncertain tax positions  recognized in an enterprise's  financial  statements in
accordance  with FASB  Statement  No. 109,  "Accounting  for Income  Taxes." The
Company applied the provisions of this  interpretation  on November 1, 2007. The
provisions  of  FIN 48  were  applied  to  all  existing  uncertain  income  tax
provisions  on the  effective  date.  Upon  the  implementation  of FIN 48,  any
cumulative effect of this Interpretation  would be required to be reported as an
adjustment to the opening balance of retained  earnings.  The  implementation of
FIN 48 did not have any impact on the Company's financial statements.

9. IMPAIRMENT LOSS ON LONG-LIVED ASSETS

      The Company reviews the values of its long-lived  assets  annually.  There
was no impairment in the value of Canal's long-lived assets to be recorded as of
April 30, 2009 and October 31, 2008.


                                       21
<PAGE>

10. ART INVENTORY HELD FOR SALE

      Canal is in the process of selling,  in an orderly  manner,  its remaining
art  inventory.   This  will  be  accomplished   primarily  through  consignment
arrangements with various independent art dealers and through sale at public art
auctions.  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 selling its art inventory.  Canal had no sales of art in the first
three months of fiscal 2009 or 2008.  Canal's art  operations  have generated an
operating  losses of  approximately  $2,000 and $2,000 in the six month  periods
ended April 30, 2009 and 2008, respectively.

      Antiquities art valued at $100,000 represented 100% of total art inventory
at both April 30,  2009 and October 31,  2008.  The Company  records 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. As of April 30, 2009 the
valuation allowance is approximately $397,000.

11. LEASE COMMITMENTS

      In June 2004 Canal  entered  into a lease for  approximately  1,000 square
feet of office space in Hauppauge, New York at a monthly rental of approximately
$1,900. This lease expires May 31, 2010.

      Canal's  future  minimum  payments for the next five years  required under
operating leases that have initial or remaining  noncancellable  terms in excess
of one year as of April 30,  2009 are  $24,000  and  $14,000 in fiscal  2009 and
2010,  respectively.  There are no  commitments  extending past fiscal 2010. Net
rent expense under these and other operating  leases was $12,000 and $11,000 for
the six month periods ended April 30, 2009 and 2008, respectively.

12. MINIMUM FUTURE RENTALS ON OPERATING LEASES

      Minimum future rentals consist primarily of rental income from leased land
and  structures,  Exchange  Building rents  (commercial  office space) and other
rental  activities,  all of which are  accounted  for as operating  leases.  The
estimated  minimum  future rentals on operating  leases are $450,000,  $475,000,
$500,000,  $525,000 and $550,000 for fiscal  years 2009,  2010,  2011,  2012 and
2013, respectively.


                                       22
<PAGE>

13. PROPERTY ON OPERATING LEASES

      Property on operating  leases  consist of  approximately  30 acres of land
located in Omaha, Nebraska; S. St. Paul, Minnesota;  Sioux City, Iowa as well as
furniture  and  equipment  used in the  Hauppauge,  New  York  office.  Land and
structures  leased to third  parties  include  vacant land,  exchange  buildings
(commercial office space), meat packing facilities, railcar repair shops, lumber
yards and various other commercial and retail businesses.

      A schedule of the Company's property on operating leases at April 30, 2009
is as follows (000's omitted):

<TABLE>
<CAPTION>
                                                  Current Year
                                                  ------------
                                                  (Retirements
                                                  ------------
                            Historical Cost         Additions                       Carrying
                            ---------------         ---------                       --------
                                  Bldgs. &                Bldgs. &        Accum.      Value
---------------------------------------------------------------------------------------------
Description (1)         Land      Imprvmts.      Land     Imprvmts.       Depr.      04/30/09
                        ----      ---------      ----     ---------       -----      --------
<S>                    <C>         <C>         <C>         <C>          <C>          <C>
New York office
Leasehold assets       $     0     $     8     $     0     $     0      $    (8)     $     0

9 acres of land
in Omaha, NE             1,150          21           0           0          (15)       1,156
Acquired in 1976

3 acres of land
in S. St. Paul, MN          10         485           0           0         (416)          79
Acquired in 1937

18 acres of land
in Sioux City, IA          400           0           0           0            0          400
Acquired in 1937       -------     -------     -------     -------      -------      -------

                       $ 1,560     $   514     $     0     $     0      $  (439)     $ 1,635
                       =======     =======     =======     =======      =======      =======
</TABLE>

      A schedule of the Company's reconciliation of property on operating leases
carried for the six months  ended April 30, 2009 and the year ended  October 31,
2008 is as follows (000's omitted):

                                                   Apr. 30,       October 31,
                                                    2009             2008
                                                    ----             ----
              Balance at beginning of year         $ 1,646         $ 1,741
              Acquisitions and Improvements              0               0
              Cost of property sold                      0             (73)
              Depreciation                             (11)            (22)
              Reclassifications                          0               0
                                                   -------         -------
              Balance at end of the period         $ 1,635         $ 1,646
                                                   -------         -------

(1)   Substantially  all of Canal's real property is pledged as  collateral  for
      its debt obligations.


                                       23
<PAGE>

14. PROPERTY USED IN STOCKYARD OPERATIONS

      Property used in stockyard operations consist of approximately 60 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.

      A schedule of the Company's property used in stockyard operations at April
30, 2009 is as follows (000's omitted):

<TABLE>
<CAPTION>
                                                 Current Year
                                                 ------------
                                                 (Retirements)
                                                 -------------                      Carrying
                          Historical Cost          Additions                        --------
                          ---------------          ---------            Accum.        Value
                                  Bldgs. &                Bldgs. &      ------        -----
Description (1)          Land     Imprvmts.     Land      Imprvmts.      Depr.      04/30/09
---------------          ----     ---------     ----      ---------     ------      --------
<S>                    <C>         <C>         <C>         <C>          <C>          <C>
30 acres of land
in St. Joseph, MO      $   902     $   265     $     0     $     0      $  (171)     $   996
Acquired in 1942

30 acres of land
in Sioux Falls, SD         100          89           0           0          (70)         119
Acquired in 1937       -------     -------     -------     -------      -------      -------

                       $ 1,002     $   354     $     0     $     0      $  (241)     $ 1,115
                       =======     =======     =======     =======      =======      =======
</TABLE>

      A schedule of the Company's  reconciliation  of property used in stockyard
operations  carried  for the six months  ended April 30, 2009 and the year ended
October 31, 2008 is as follows (000's omitted):

                                                   Apr. 30,       October 31,
                                                     2009            2008
                                                     ----            ----

              Balance at beginning of year         $ 1,125         $ 1,080
              Acquisitions and Improvements              0              65
              Cost of property sold                      0               0
              Depreciation                             (10)            (20)
                                                   -------         -------
              Balance at end of the period         $ 1,115         $ 1,125
                                                   -------         -------

(1) Substantially all of Canal's real property is pledged as collateral for its
debt obligations.


                                       24
<PAGE>

15. PROPERTY HELD FOR DEVELOPMENT OR RESALE

      Property held for  development or resale consist of  approximately 2 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
April 30, 2009 is as follows (000's omitted):

<TABLE>
<CAPTION>
                                               Current Year
                                               ------------
                                               (Retirements)
                                               -------------                 Carrying
                        Historical Cost          Additions                   --------
                        ---------------          ---------         Accum.     Value
                                Bldgs. &               Bldgs. &    ------     -----
Description (1)         Land    Imprvmts.    Land      Imprvmts.   Depr.     04/30/09
---------------         ----    ---------    ----      ---------   -----     --------
<S>                   <C>                   <C>                               <C>
16 acres of land
in St. Joseph, MO     $   40        N/A     $  (40)        N/A        N/A     $    0
Acquired in 1942

2 acres of land
in Sioux City, IA         52        N/A     $    0         N/A        N/A         52
Acquired in 1937      ------     ------     ------      ------     ------     ------

                      $   92     $    0     $  (40)     $    0     $    0     $   52
                      ======     ======     ======      ======     ======     ======
</TABLE>

      A  schedule  of  the  Company's   reconciliation   of  property  held  for
development  or resale  carried for the six months  ended April 30, 2009 and the
year ended October 31, 2008 is as follows (000's omitted):

                                                    Apr. 30,        October 31,
                                                      2009             2008
                                                      ----             ----

              Balance at beginning of year          $    92          $    92
              Acquisitions and Improvements               0                0
              Cost of property sold                     (40)               0
              Reclassification of property                0                0
                                                    -------          -------
              Balance at end of the period          $    52          $    92
                                                    -------          -------

(1) Substantially all of Canal's real property is pledged as collateral for its
debt obligations.


                                       25
<PAGE>

16. PENSION VALUATION RESERVE

      The Pension Valuation Reserve  represents the excess of additional minimum
pension  liability  required  under the  provisions  of  Statement  of Financial
Accounting  Standards  ("SFAS") No. 87 amended by SFAS 158 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  recognize  the
deficiency that exists.

      The components of net periodic benefit cost are as follows:

                                           Six Months Ended
                                        4/30/09       4/30/08
                                        ---------------------

Service cost                              4,000         3,000
Interest cost                            52,000        50,000
Expected return on plan assets          (56,000)      (54,000)
Amortization of prior service cost            0             0
Recognized net actuarial loss            60,000       135,000
                                       --------      --------
Net periodic benefit cost                60,000       134,000
                                       ========      ========

For the six months  ended April 30, 2009  amounts  have been  estimated,  actual
amounts will be based on the discount rate and assets available at year end.

The  Company's  required  contribution  to  its  pension  plan  fiscal  2009  is
approximately  $150,000.  A  contribution  of $45,000  was made in fiscal  2009.
Additionally,  the Company expects to make the full required contribution before
the end of the fiscal year.

17. 401(k) PLAN

      The Company has a defined contribution 401(k) plan covering  substantially
all of its full  time  stockyard  employees.  The  plan  provides  for  employee
contributions  and  401(k)  matching  contributions  of  up  to 2  1/2%  of  the
employee's  annual  salary by the  Company.  The Company  made  401(k)  matching
contributions of  approximately  $10,000 for each of the six month periods ended
April 30, 2009 and 2008.


                                       26
<PAGE>

18. RELATED PARTY TRANSACTIONS

      Interest  Expense  Related  Party - At  April  30,  2009,  all of  Canal's
Long-Term Debt is held by the company's Chief  Executive  Officer and members of
his family. These notes pay interest at a rate of 10% per annum and come due May
15,  2012.  Canal has  incurred  interest  expense on these notes of $63,000 and
$106,000  and  for the  six  month  periods  ended  April  30,  2009  and  2008,
respectively.  At various times during  fiscal 2009 and 2008 certain  holders of
these notes have agreed to defer  interest  payments due them to help Canal with
its cash flow.  All deferred  interest  liability  for fiscal 2009 and 2008 plus
accrued  interest  at a rate of 10% per  annum,  will be repaid as funds  become
available.  As of April  30,  2009,  the  balance  due  under  these  notes  was
$1,262,000 all of which is classified as long-term debt related party.

19.  LITIGATION

      Canal and its  subsidiaries  are from time to time  involved in litigation
incidental to their normal business activities, none of which, in the opinion of
management,  will have a material adverse effect on the  consolidated  financial
condition and  operations  of the Company.  Canal was not a party to any ongoing
litigation at April 30, 2009. The following situation did arise in fiscal 2005:

Environmental  Protection  Agency - Special  Notice  Letter  for  Investigation,
Portland, Oregon Property

      In 1989, the Company sold its 48 acre Portland, Oregon stockyard to Oregon
Waste  Systems,  Inc. On September  29, 2003,  the United  States  Environmental
Agency  (EPA)  placed  a 4.2  acre  portion  of that  property  on the  National
Priorities   List   pursuant  to  the   Comprehensive   Environmental   Response
Compensation and Liability Act (CERCLA), commonly known as the Superfund Act. In
a letter from the EPA dated June 27, 2005 the Company,  along with approximately
13 other  parties,  including  the current  owner and operator of the site,  was
notified  that it might be  liable  to  perform  or pay for the  remediation  of
environmental  contamination  found on and around the site. Since the receipt of
the  letter,  the Company  has been in  periodic  communications  with the other
parties who received a similar letter with respect to what action,  collectively
or individually,  should be taken in response to the EPA assertion of liability.
The  Company  believes  that the  remediation  of  contamination  of the site is
properly the  responsibility of other parties that have occupied and used it for
waste  recycling  purposes since 1961,  although under CERCLA the EPA is able to
assert  joint and  several  liability  against  all  parties  who ever  owned or
operated the site or generated or transported  wastes to it. This  investigation
is in its preliminary  stages and the Company  intends to vigorously  defend any
liability for remediation.  At April 30, 2009, the liability for remediation, if
any,  is not  estimatable  and  therefore  no accrual  has been  recorded in the
financial statements.


                                       27
<PAGE>

ITEM II. MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE RESULTS OF OPERATIONS AND
         FINANCIAL CONDITION FOR THE SIX MONTHS ENDED APRIL 30, 2009

      You should read the following  discussion  together with the more detailed
business  information and  consolidated  financial  statements and related notes
that appear elsewhere in this report and in the documents that we incorporate by
reference into this report.  This report may contain  certain  "forward-looking"
information within the meaning of the Private  Securities  Litigation Reform Act
of 1995. This information  involves risks and uncertainties.  Our actual results
may  differ  materially  from  the  results  discussed  in  the  forward-looking
statements.  Factors  that might cause such a  difference  include,  but are not
limited to, those discussed in "Risk factors".

Company Overview

      The  Registrant,  Canal Capital  Corporation  ("Canal" or the  "Company"),
incorporated  in the state of Delaware in 1964,  commenced  business  operations
through a predecessor in 1936.

      Canal is engaged in two distinct  businesses  -- real estate and stockyard
operations.

      Real Estate  Operations  - Canal's real estate  properties  are located in
Sioux City, Iowa, South St Paul, Minnesota, St Joseph, Missouri, Omaha, Nebraska
and Sioux Falls, South Dakota. The properties 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,  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 lease income from land and structures leased to various  commercial
and retail enterprises,  rental income from its Exchange Building,  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. See "Real Estate Operations".

      Stockyard  Operations  - As a result of an August 1, 1999  asset  purchase
agreement,  Canal now  operates  two central  public  stockyards  located in St.
Joseph,  Missouri and Sioux Falls, South Dakota (collectively the "Stockyards").
Public stockyards act much like a securities exchange, providing markets for all
categories of livestock and


                                       28
<PAGE>

fulfilling the economic functions of assembly, grading, and price discovery. The
Company's  principal  stockyard  revenues  are  derived  from a per head  charge
("yardage charge") imposed on all livestock consigned for sale at the stockyards
and the sale of feed and bedding. See "Stockyard Operations".

      Real Estate Operations

      Real estate  operations  resulted  in  operating  income of  $329,000  and
$309,000 for the six month periods ended April 30, 2009 and 2008,  respectively.
Included  in  the  fiscal  2009  results  is a  194,000  gain  on  the  sale  of
approximately 16 acres of vacant land located in St. Joseph, Missouri.  Included
in the 2008  real  estate  operating  income is a  $127,000  gain on the sale of
approximately  1 acre of land and the associated  improvements  located in South
Saint Paul, Minnesota. Additionally, real estate operations contributed $471,000
and $464,000 to Canal's  revenues for the six month periods ended April 30, 2009
and 2008, respectively.

      As of April 30, 2009, there are  approximately 2 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.

      Risk - Real estate  activities in general may involve  various  degrees of
risk,  such as the  ability to collect  receivables,  competition  for  tenants,
general  market  conditions  and interest  rates.  Furthermore,  there can be no
assurance that Canal will be successful in the development, lease or sale of its
real estate properties.

      Competition - Canal competes in the area of real estate  development  with
other  regional  developers,  some of which are  substantially  larger  and have
significantly  greater  financial  resources  than Canal.  To a certain  extent,
Canal's  real estate  revenues  are  dependent  on the ability of the  stockyard
operations and the various meat packers located  adjacent to Canal's  properties
to successfully compete in their respective businesses.

      Stockyard Operations

      General - Through an August 1, 1999 asset repurchase agreement,  Canal now
operates two central public stockyards located in St. Joseph, Missouri and Sioux
Falls, South Dakota.


                                       29
<PAGE>

      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.

      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 2009.  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.

      Stockyard operations resulted in operating income of $184,000 and $125,000
for the  six  month  periods  ended  April  30,  2009  and  2008,  respectively.
Additionally,  stockyard  operations  contributed  $1,685,000  and $1,726,000 to
Canal's  revenues  for the six month  periods  ended  April  30,  2009 and 2008,
respectively.


                                       30
<PAGE>

      Risk -  Stockyard  activities  face a variety  of risks and  uncertainties
related to the  safeguarding  of the  national  food supply which are beyond our
control.  Public  confidence in the  government's  efforts to safeguard the food
supply is essential for the success of our stockyard operations.  An outbreak of
a disease such as bovine spongiform encephalopathy (BSE) better known as Mad Cow
Disease  could  have a  devastating  impact  on  stockyard  operations.  For the
company's part we strictly  follow all USDA  regulations to ensure to the extent
we can the  safety of the food  supply.  Furthermore,  stockyard  activities  in
general may involve  various  degrees of risk,  such as  competition  from other
regional  stockyards and sale barns,  general market  conditions and to a lesser
extent interest rates.

      Competition - Canal competes in the area of public  stockyards  with other
regional  public  stockyards  and sale  barns,  some of which are  substantially
larger and have greater  financial  resources than Canal.  To a certain  extent,
Canal's  stockyard  revenues are dependent on the ability of the market agencies
and independent  commission sales people at each of Canal's stockyard  locations
to compete within the region.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

      Our  consolidated  financial  statements  have been prepared in accordance
with  accounting  principles  generally  accepted  in the United  States.  These
generally  accepted  accounting  principles require 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 net sales  and  expenses  during  the
reporting period. We continually evaluate our estimates, including those related
to revenue  recognition,  bad debts, income taxes, fixed assets,  restructuring,
contingencies and litigation. We base our estimates on historical experience and
on various other  assumptions that are believed to be reasonable under the facts
and  circumstances.  Actual  results  may  differ  from  these  estimates  under
different assumptions or conditions.

      Management  believes the following critical accounting policies impact our
most difficult,  subjective and complex judgments used in the preparation of our
consolidated  financial  statements,  often  as a  result  of the  need  to make
estimates  about the  effect of matters  that are  inherently  uncertain.  For a
further discussion of these and other accounting policies,  please see Note 2 of
the  Notes to  Consolidated  Financial  Statements  included  elsewhere  in this
Quarterly Report.


                                       31
<PAGE>

      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 the sale of real estate are  recognized  at the time the
sale has been  consummated  on the full  accrual  method  wherein the seller has
transferred  to the  buyer  the  usual  risks  and  rewards  of  ownership  in a
transaction  that  is in  substance  a sale  and  does  not  have a  substantial
continuing involvement with the property; the seller's receivable is not subject
to future  subordination and the buyer's initial and continuing  investments are
adequate to  demonstrate  a commitment  to pay for the  property.  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.

      Art  Inventory  Held for Sale -- 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 had varying percentages of its art
inventory appraised by independent appraisers in previous years. For fiscal 2009
the net realizable value of Canals remaining art inventory has been estimated by
management  based in part on the  Company's  history of art sales in the current
and previous years and in part on the results of the independent appraisals done
in previous years.

      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 2 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.


                                       32
<PAGE>

Results of Operations

      The  following  tables  set  forth  certain  items  in  our  statement  of
operations for the periods indicated:


                                            Six Months Ended April 30,
                                            --------------------------
                                              2009              2008
                                              ----              ----
                                                 (In Thousands)
Revenues:
Real Estate Revenues                       $     471         $     464
Stockyard Revenues                             1,685             1,725
                                           ---------         ---------
    Total Revenues                             2,156             2,189
                                           ---------         ---------

Costs and Expenses:
Real Estate Expenses                             142               154
Stockyard Expenses                             1,501             1,601
General and Administrative Expenses              449               551
                                           ---------         ---------
     Total Costs and Expenses                  2,092             2,306
                                           ---------         ---------

Income from Operations                            64              (117)

Other Income                                       8                27
Other Expenses                                   (66)             (108)
                                           ---------         ---------

Net Income (Loss)                          $       6         $    (198)
                                           ---------         ---------

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

      Canal  recognized  net  income  of  approximately  $6,000 in the first six
months of fiscal 2009 as compared to a net loss of $198,000  for the same period
in fiscal  2008.  After  recognition  of accrued  preferred  stock  dividends of
$36,000 and $54,000 in 2009 and 2008, respectively,  the results attributable to
common  stockholders  were a net  loss  of  $30,000  in 2009  and a net  loss of
$252,000 in 2008.

      Canal's revenues from continuing  operations  consist of revenues from its
real  estate  and  stockyard  operations.  Revenues  for the first six months of
fiscal 2009 decreased by $33,000 to $2,156,000 as compared with 2008 revenues of
$2,189,000.  The fiscal 2009  decrease in revenues is due primarily to a $40,000
decrease in stockyard revenues due.


                                       33
<PAGE>

COMPARISON OF FISCAL PERIODS ENDED APRIL 30, 2009 AND 2008

Real Estate Revenues

      Real estate  revenues  for the six months ended April 30, 2009 of $471,000
accounted  for 21.9% of the fiscal  2009  revenues  as  compared  to real estate
revenues of $464,000  or 21.2% for the same period in fiscal  2008.  Real estate
revenues  are  comprised of sale of real estate  (55.8% and 43.1%),  rentals and
other lease income from the rental of vacant land and certain  structures (41.0%
and  53.3%) and rental  income  from  commercial  office  space in its  Exchange
Buildings  (3.2% and 3.6%) for the six  months  ended  April 30,  2009 and 2008,
respectively.  The percentage variations in the year to year comparisons are due
to the increase in sales of real estate combined with a decrease in outside real
estate  rent (due to a fiscal  2008  property  sale) in the first six  months of
fiscal 2009.

Real Estate Revenues

      Real estate revenues for the three months ended April 30, 2009 of $367,000
accounted  for 29.7% of the fiscal  2009  revenues  as  compared  to real estate
revenues of $134,000  or 13.9% for the same period in fiscal  2008.  Real estate
revenues  are  comprised  of sale of real estate  (71.5% and 0.0%),  rentals and
other lease income from the rental of vacant land and certain  structures (26.4%
and  93.3%) and rental  income  from  commercial  office  space in its  Exchange
Buildings  (2.1% and 6.7%) for the three  months  ended April 30, 2009 and 2008,
respectively.  The percentage variations in the year to year comparisons are due
to the increase in sales of real estate in the second quarter of fiscal 2009.

Real Estate Expenses

      Real estate  expenses  for the six months ended April 30, 2009 of $142,000
decreased by $12,000  (8.1%) from real estate  expenses of $154,000 for the same
period in fiscal 2008. The decrease in real estate  expenses is consistent  with
the 2009  decrease  in outside  real  estate  rent.  Real  estate  expenses  are
comprised  of the cost of real estate sold (48.7% and 47.0%),  labor,  operating
and  maintenance  (20.9% and 24.6%),  depreciation  and  amortization  (7.8% and
7.2%),   taxes  other  than  income  taxes  (8.7%  and  7.0%)  and  general  and
administrative  expenses  (13.9% and 14.2%) for the six months  ended  April 30,
2009 and  2008,  respectively.  The  percentage  variations  in the year to year
comparisons  are consistent with the decrease in the cost of real estate sold in
the first fiscal quarter of 2009.


                                       34
<PAGE>

Real Estate Expenses

      Real estate expenses for the three months ended April 30, 2009 of $105,000
increased by $63,000  (148.8%) from real estate expenses of $42,000 for the same
period in fiscal 2008. The increase in real estate  expenses is consistent  with
the 2009 increase in real estate revenues. Real estate expenses are comprised of
the cost of real estate sold (65.7% and 0.0%), labor,  operating and maintenance
(13.8% and 47.8%),  depreciation and amortization (5.3% and 13.1%),  taxes other
than income taxes (5.8% and 12.8%) and general and administrative expenses (9.4%
and 26.3%) for the three months ended April 30, 2009 and 2008, respectively. The
percentage  variations in the year to year  comparisons  are consistent with the
increase in the cost of real estate sold in the second fiscal quarter of 2009.

Stockyard Revenues

Stockyard  revenues  for the six  months  ended  April  30,  2009 of  $1,685,000
accounted  for 78.1% of the  fiscal  2009  revenues  as  compared  to  stockyard
revenues of  $1,726,000  or 78.8% for the same period in fiscal  2008.  The 2009
decrease in stockyard  revenue was due  primarily to the severity of the weather
experienced in the mid-west.  Stockyard  revenues are comprised of yard handling
and auction  (87.8% and  88.5%),  feed and  bedding  income  (6.9% and 6.4%) and
rental and other  income (5.3% and 5.1%) for the six month  periods  ended April
30, 2009 and 2008, respectively. There were no significant percentage variations
in the year to year comparisons.

Stockyard Revenues

Stockyard  revenues  for the  three  months  ended  April 30,  2009 of  $870,000
accounted  for 70.3% of the  fiscal  2009  revenues  as  compared  to  stockyard
revenues  of  $825,000  or 86.1% for the same  period in fiscal  2008.  The 2009
decrease in stockyard  revenue was due  primarily to the severity of the weather
experienced in the mid-west.  Stockyard  revenues are comprised of yard handling
and auction  (87.7% and  88.0%),  feed and  bedding  income  (6.6% and 6.5%) and
rental and other income (5.7% and 5.5%) for the three month  periods ended April
30, 2009 and 2008, respectively.  The 2009 decrease in the stockyard revenues as
a percent of total revenues,  is due primarily to the $263,000 increase in sales
of real estate in the second fiscal  quarter of 2009.  There were no significant
percentage variations in the year to year comparisons.


                                       35
<PAGE>

Stockyard Expenses

      Stockyard  expenses for the six months ended April 30, 2009 of  $1,501,000
decreased by $100,000 (6.2%) from stockyard  expenses of $1,601,000 for the same
period in fiscal 2008.  Stockyard  expenses  are  comprised of labor and related
costs (45.3% and 45.8%), other operating and maintenance (27.0% and 27.8%), feed
and bedding expense (6.1% and 6.5%),  depreciation  and  amortization  (0.7% and
0.6%),   taxes  other  than  income  taxes  (6.0%  and  5.5%)  and  general  and
administrative  expense  (14.9% and 13.8%) for the six month periods ended April
30, 2009 and 2008, respectively. There were no significant percentage variations
in the year to year comparisons.

Stockyard Expenses

      Stockyard  expenses  for the three months ended April 30, 2009 of $775,000
decreased  by $23,000  (2.9%) from  stockyard  expenses of $798,000 for the same
period in fiscal 2008.  Stockyard  expenses  are  comprised of labor and related
costs (42.6% and 45.0%), other operating and maintenance (28.6% and 28.6%), feed
and bedding expense (6.4% and 5.9%),  depreciation  and  amortization  (0.6% and
0.6%),   taxes  other  than  income  taxes  (5.9%  and  5.7%)  and  general  and
administrative expense (15.9% and 14.2%) for the three month periods ended April
30, 2009 and 2008, respectively. There were no significant percentage variations
in the year to year comparisons.

General and Administrative

      General and  administrative  expenses  for the six months  ended April 30,
2009 of $449,000  decreased by $102,000  (18.5%) as compared to $551,000 for the
same period in fiscal 2008. The major  components of general and  administrative
expenses are officers  salaries  (52.7% and 43.0%),  pension  expense (13.4% and
22.9%),  insurance  expense (5.9% and 6.5%),  office  salaries (10.5% and 8.5%),
travel expense (4.3% and 3.5%), rent (2.6% and 2.0%) and professional fees (3.2%
and 2.6%) for the six month periods ended April 30, 2009 and 2008, respectively.
The percentage  variations in the year to year  comparisons are due primarily to
the sharp decrease in pension expenses in fiscal 2009.

General and Administrative

      General and  administrative  expenses for the three months ended April 30,
2009 of $225,000  decreased  by $43,000  (16.0%) as compared to $268,000 for the
same period in fiscal 2008. The major  components of general and  administrative
expenses are officers  salaries  (52.7% and 44.3%),  pension  expense (13.3% and
23.6%),  insurance  expense (5.9% and 6.7%),  office  salaries (10.5% and 8.8%),
travel expense (4.5% and 3.1%), rent (2.6% and 2.1%) and professional fees (3.2%
and  2.7%)  for  the  three  month  periods  ended  April  30,  2009  and  2008,
respectively.  The percentage variations in the year to year comparisons are due
primarily to the sharp decrease in pension  expenses in fiscal 2009.


                                       36
<PAGE>

Interest and Other Income

      Interest  and other  income for the six  months  ended  April 30,  2009 of
$8,000  decreased by $19,000  (70.9%) from $27,000 for the same period in fiscal
2008.  Interest  and other  income in fiscal  2008 was  comprised  primarily  of
interest  income on the $1,600,000  note  receivable  associated with the fiscal
2005 sale of the company's South St. Paul, Minnesota Exchange Building.  As more
fully  described  in  note 4 the  terms  of this  mortgage  note  were  amended,
including  an  increase  of the  rate of  interest  to 12% per  annum.  The 2009
decrease  in  interest  and  other  income  is due  primarily  to the  principal
reduction of this mortgage note  receivable,  which was repaid in full in March,
2008.

Interest Expense

      Interest  expense  for the six  months  ended  April 30,  2009 of  $63,000
decreased by $43,000  (40.4%) from  $106,000 for the same period in fiscal 2008.
The 2009 decrease is due primarily to Canal's  $1,425,000  partial  repayment of
this debt in fiscal 2008.  The principal  balance  outstanding at both April 30,
2009 and October 31, 2008 was $1,262,000 all of which is classified as long-term
debt-related  party.  The interest rate (10%) on Canal's  variable rate mortgage
notes has remained unchanged for the past 12 months.

(Expense) Income from Art Sales & Operations

      Other  expense from art sales & operations  for the six months ended April
30, 2009 was $2,000, while the same period in fiscal 2008 also generated an loss
from art sales & operations  of $2,000.  Canal had no art sales in the first six
months of fiscal 2009 or fiscal 2008. Art revenues, if any, are comprised of the
proceeds from the sale of  antiquities  and  contemporary  art. Art expenses are
comprised of the cost of inventory sold and selling,  general and administrative
expenses.  Canal incurred selling, general and administrative expenses of $2,000
and  $2,000  for  the  six  month   periods  ended  April  30,  2009  and  2008,
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.

Liquidity and Capital Resources

      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 and is obligated to continue making substantial annual


                                       37
<PAGE>

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.

      The Company's  variable rate mortgage notes (originally issued in 1998 and
amended  several times since then) are due May 15, 2012 and are held entirely by
the Company's  Chief  Executive  Officer and members of his family.  These notes
carry  interest at the rate of ten percent per annum.  These notes,  among other
things, prohibit Canal from becoming an investment company as this is defined by
the  Investment  Company  Act of  1940;restricts  Canal's  ability  to pay  cash
dividends or repurchase stock and require principal  prepayments to be made only
out of the  proceeds  from the sale of  certain  assets.  The  Company is in the
process of  negotiating  a three year  extension of these notes and  anticipates
this will be achieved prior to year end. Accordingly,  as of April 30, 2009, the
balance due under  these notes was  $1,262,000,  all of which is  classified  as
long-term debt-related party.

      Cash and cash equivalents of $192,000 at April 30, 2009 increased $171,000
from  $21,000 at October 31,  2008.  Net cash used in  operating  activities  in
fiscal 2009 was $62,000. Substantially all of the net proceeds from the sales of
real estate or art, if any,  will be used in operating  activities  or to reduce
debt. During fiscal 2009 the balance of Canal's liabilities increased by a total
of $253,000.

      At April 30, 2009 the Company's current  liabilities exceed current assets
by  approximately  $0.4 million  which was  unchanged as compared to October 31,
2008 when the Company's  current  liabilities  exceeded  current  assets by $0.4
million.  The only required  principal  repayments under Canal's debt agreements
for  fiscal  2009  will be from the  proceeds  (if  any) of the sale of  certain
assets.

      As discussed above,  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.


                                       38
<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
April 30, 2009, 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  April  30,  2009,  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
          April 30,         ($ US)       Interest Rate       Value
        -----------       ----------     -------------       -----
            2009           $     0            N/A
            2010                 0            N/A
            2011                 0            N/A
            2012             1,262            10%
            2013                 0            N/A
            Thereafter           0            N/A
                           -------
            Total          $ 1,262                          N/A (A)
                           -------                          -------

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


                                       39
<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 April 30, 2009 ("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.


                                       40
<PAGE>

                                     PART II

                                OTHER INFORMATION


                                       41
<PAGE>

Item 1: Legal Proceedings:

     Also see Item 3 of Canal's October 31, 2008 Form 10-K.

      Canal and its  subsidiaries  are from time to time  involved in litigation
incidental to their normal business activities, none of which, in the opinion of
management,  will have a material adverse effect on the  consolidated  financial
condition and  operations  of the Company.  Canal was not a party to any ongoing
litigation at April 30, 2009.

The following situation did arise in fiscal 2005:

Environmental  Protection  Agency - Special  Notice  Letter  for  Investigation,
Portland, Oregon Property

      In 1989, the Company sold its 48 acre Portland, Oregon stockyard to Oregon
Waste  Systems,  Inc. On September  29, 2003,  the United  States  Environmental
Agency  (EPA)  placed  a 4.2  acre  portion  of that  property  on the  National
Priorities   List   pursuant  to  the   Comprehensive   Environmental   Response
Compensation and Liability Act (CERCLA), commonly known as the Superfund Act. In
a letter from the EPA dated June 27, 2005 the Company,  along with approximately
13 other  parties,  including  the current  owner and operator of the site,  was
notified  that it might be  liable  to  perform  or pay for the  remediation  of
environmental  contamination  found on and around the site. Since the receipt of
the  letter,  the Company  has been in  periodic  communications  with the other
parties who received a similar letter with respect to what action,  collectively
or individually,  should be taken in response to the EPA assertion of liability.
The  Company  believes  that the  remediation  of  contamination  of the site is
properly the  responsibility of other parties that have occupied and used it for
waste  recycling  purposes since 1961,  although under CERCLA the EPA is able to
assert  joint and  several  liability  against  all  parties  who ever  owned or
operated the site or generated or transported  wastes to it. This  investigation
is in its preliminary  stages and the Company  intends to vigorously  defend any
liability for remediation.  At April 30, 2009, the liability for remediation, if
any,  is not  estimatable  and  therefore  no accrual  has been  recorded in the
financial statements.

Item 2 and 3: Not applicable.

Item 4: Submission of Matters to a Vote of Security Holders:  None.

Item 5: Other Information:   None.

Item 6: Exhibits and Reports on Form 8-K:   (A)   Not applicable.
                                            (B)   None


                                       42
<PAGE>

                                   SIGNATURES

      Pursuant  to the  requirements  of Section  13 or 15(d) of the  Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the  undersigned,  thereunto duly  authorized,  on the 11th day of
June, 2009.

                                     CANAL CAPITAL CORPORATION


                                     By: /S/ Michael E. Schultz
                                         ----------------------------
                                         Michael E. Schultz
                                         President and Chief
                                         Executive Officer
                                         (Principal Executive Officer)

      Pursuant to the requirements of the Securities  Exchange Act of 1934, this
report  has  been  signed  below  by the  following  persons  on  behalf  of the
Registrant and in the capacities and on the dates indicated.

      Signature                      Title                    Date
      ---------                      -----                    ----

                             President and Chief
/S/ Michael E. Schultz   Executive Officer and Director
----------------------    (Principal Executive Officer)    June 11, 2009
Michael E. Schultz

                            Vice President-Finance
                            Secretary and Treasurer
/S/ Reginald Schauder       (Principal Financial and
----------------------
Reginald Schauder             Accounting Officer)          June 11, 2009

/S/ Asher B. Edelman          Chairman of the Board
----------------------
Asher B. Edelman                and Director               June 11, 2009


                                       43