FORM 10-Q

                      SECURITIES AND EXCHANGE COMMISSION

                            WASHINGTON, D.C.  20549

               X   QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
             OF THE SECURITIES EXCHANGE ACT OF 1934 (Fee Required)
                 For the quarterly period ended April 30, 1997

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

                                        Commission File No. 1-8709


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


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

       717 Fifth Avenue, New York, NY                           10022      

   (Address of principal executive offices)                   (Zip Code)

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


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

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


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


       Title of each class          Shares outstanding at May 31, 1997
   Common stock, $0.01 par value                4,326,930

   (This document contains 27 pages)


                              CANAL CAPITAL CORPORATION & SUBSIDIARIES 
                                   CONSOLIDATED BALANCE SHEETS  
                               APRIL 30, 1997 AND OCTOBER 31, 1996 
    
    
                                      APRIL 30,          OCTOBER 31,       
                                        1997                1996 
                                    (UNAUDITED)           (AUDITED)        
                   
   ASSETS: 
    
   CURRENT ASSETS: 
    
    CASH AND CASH EQUIVALENTS       $ 1,475,580         $    10,632 
    RESTRICTED CASH AND CASH EQUIVALENTS470,000             470,000
    NOTES AND ACCOUNTS RECEIVABLE       195,803             295,202 
    ART INVENTORY, NET OF A VALUATION
     ALLOWANCE OF $ 500,000  AT
     APRIL 30, 1997 AND 
     OCTOBER 31, 1996, RESPECTIVELY     500,000             500,000
    INVESTMENTS                         361,267             535,558 
    PREPAID EXPENSES                    201,507             203,238 
    
     TOTAL CURRENT ASSETS             3,204,157           2,014,630 
    
    
    
    
   NON-CURRENT ASSETS: 
    
    PROPERTY ON OPERATING LEASES, NET OF
     ACCUMULATED DEPRECIATION OF $ 5,948,644
     AND $ 5,753,088 AT APRIL 30, 1997 AND  
     OCTOBER 31, 1996,
     RESPECTIVELY                     6,632,945           7,105,534 
    
    
    ART INVENTORY NON-CURRENT, NET OF
    VALUATION ALLOWANCE OF $ 2,000,000
    AT APRIL 30, 1997 AND OCTOBER 31,  
    1996, RESPECTIVELY                3,063,888           3,089,088
               
    
     
    
    
   OTHER ASSETS: 
    
    PROPERTY HELD FOR 
     DEVELOPMENT OR RESALE           2,660,604           2,938,905 
    DEFERRED LEASING AND 
     FINANCING COSTS                    68,112              92,919 
    DEPOSITS AND OTHER                 233,625             248,132 
    
                                     2,962,341           3,279,956
    
                                   $15,863,331         $15,489,208 
                                  ============         =========== 
                                       
                                       2


                   CANAL CAPITAL CORPORATION & SUBSIDIARIES
                         CONSOLIDATED BALANCE SHEETS  
                     APRIL 30, 1997 AND OCTOBER 31, 1996 
                                                  
                                   APRIL 30,        OCTOBER 31,
                                      1997              1996
                                  (UNAUDITED)         (AUDITED)
   LIABILITIES & STOCKHOLDERS' EQUITY: 
     
   CURRENT LIABILITIES: 
    CURRENT PORTION OF LONG-TERM 
     DEBT RELATED PARTY         $    400,000       $    500,000            
    CURRENT PORTION OF LONG-TERM DEBT 64,000             64,000 
    ACCOUNTS PAYABLE AND 
      ACCRUED EXPENSES             1,950,975          1,984,692 
    ACCRUED LITIGATION SETTLEMENT    450,000            850,000 
    INCOME TAXES PAYABLE              15,457             27,877  
    
    TOTAL CURRENT LIABILITIES      2,880,432          3,426,569  
    
    
   LONG-TERM DEBT, LESS
    CURRENT PORTION                6,411,663          6,130,769 
   LONG-TERM DEBT, LESS 
    CURRENT PORTION-RELATED PARTY    747,000            849,000  
    
                                   7,158,663          6,979,769  
    
   COMMITMENTS AND CONTINGENCIES                 

   STOCKHOLDERS' EQUITY: 
   PREFERRED STOCK, $0.01 PAR VALUE: 
    5,000,000 SHARES AUTHORIZED; 2,903,702 AND 
    2,703,299 SHARES ISSUED AND OUTSTANDING 
    AT APRIL 30, 1997 AND OCTOBER 31, 1996,
    RESPECTIVELY AND AGGREGATE LIQUIDATION  
    PREFERENCE OF $ 29,037,020 AND $ 27,032,990  
    AT APRIL 30, 1997 AND OCTOBER 31, 1996
    RESPECTIVELY                      29,037              27,033 
    
   COMMON STOCK, $0.01 PAR VALUE: 
    10,000,000 SHARES AUTHORIZED; 5,313,794 
    SHARES ISSUED AND OUTSTANDING AT 
    APRIL 30, 1997 AND OCTOBER 31, 1996,
    RESPECTIVELY                      53,138              53,138 
    
   PAID-IN CAPITAL                26,735,136          26,636,939  

   RETAINED EARNINGS (DEFICIT)    (8,369,834)         (9,010,999) 
    
    LESS-VALUATION RESERVE        (1,619,696)         (1,619,696) 
    
    LESS-986,865 SHARES OF COMMON STOCK 
     HELD IN TREASURY, AT COST   (11,003,545)        (11,003,545) 
    
                                   5,824,236           5,082,870 
                                $ 15,863,331        $ 15,489,208 
                                =============       ============= 

                                      3 


                              CANAL CAPITAL CORPORATION & SUBSIDIARIES
                              CONSOLIDATED STATEMENTS OF OPERATIONS
               FOR THE SIX MONTHS ENDED APRIL 30, 1997 AND 1996



                                                   1997            1996    
       
                                               (UNAUDITED)     (UNAUDITED) 
       

   REAL ESTATE OPERATIONS:
    REAL ESTATE REVENUES:
       SALE OF REAL ESTATE                    $ 2,262,000     $   476,627  
       RENTAL INCOME                              834,760       1,073,330  
       GROUND LEASE INCOME                        462,000         468,000  
       VOLUME BASED RENTAL INCOME                  52,409         366,525  
       OTHER INCOME                                 8,472           3,550  
    
                                                3,619,641       2,388,032  
    

    REAL ESTATE EXPENSES:
       COST OF REAL ESTATE SOLD                   796,131         159,733  
       LABOR, OPERATING AND MAINTENANCE           437,798         482,663  
       DEPRECIATION AND AMORTIZATION              184,446         183,192  
       TAXES OTHER THAN INCOME TAXES              149,400         180,000  
       PROVISION FOR LITIGATION SETTLEMENT              0               0  
       GENERAL AND ADMINISTRATIVE                  53,657          54,250  
    
                                                1,621,432       1,059,838  

   INCOME FROM REAL ESTATE OPERATIONS           1,998,209       1,328,194  
    

   ART OPERATIONS:
    ART REVENUES:
       SALES                                       17,300         108,900  
       OTHER REVENUES                               2,982               0  
    
                                                   20,282         108,900  
        

    ART EXPENSES:
       COST OF ART SOLD                            26,558         226,581  
       VALUATION RESERVE                                0               0  
       SELLING, GENERAL AND ADMINISTRATIVE         20,491          25,011  
    
                                                   47,049         251,592  

   LOSS FROM ART OPERATIONS                       (26,767)       (142,692) 
    







                                       4


                         CANAL CAPITAL CORPORATION & SUBSIDIARIES
                          CONSOLIDATED STATEMENTS OF OPERATIONS
                       FOR THE SIX MONTHS ENDED APRIL 30, 1997 AND 1996
                                   Continued ...


                                                   1997           1996     
       
                                               (UNAUDITED)     (UNAUDITED) 
      

   GENERAL AND ADMINISTRATIVE EXPENSE        $  (619,754)     $  (637,143) 
    

   INCOME (LOSS) FROM OPERATIONS               1,351,688          548,359  
      

   OTHER INCOME (EXPENSE):
     GAIN (LOSS) ON SALE OF INVESTMENTS                0                0  
     GAIN (LOSS) ON MARK-TO-MARKET OF 
       INVESTMENTS                              (174,291)               0  
     INTEREST & OTHER INCOME                      78,858            7,799  
     INTEREST EXPENSE                           (448,433)        (696,012) 
     INTEREST EXPENSE-RELATED PARTY              (77,000)         (87,000) 
    
                                                (620,866)        (775,213) 
                                                   

   GAIN (LOSS) BEFORE PROVISION FOR INCOME 
     TAXES                                       730,822         (226,854) 
       
   PROVISION (BENEFIT) FOR INCOME TAXES                0                0  
    
   NET INCOME (LOSS)                             730,822         (226,854) 

   PREFERRED STOCK DIVIDEND                      (89,657)         (78,265) 
    
   NET INCOME (LOSS) APPLICABLE TO COMMON
    SHARES                                   $   641,165     $   (305,119) 
                                             =============    ============ 
    

   NET INCOME (LOSS) PER COMMON SHARE        $      0.15     $     (0.07)  
                                             =============    ============ 
    













                                   5       


                    CANAL CAPITAL CORPORATION & SUBSIDIARIES
                     CONSOLIDATED STATEMENTS OF OPERATIONS
              FOR THE THREE MONTHS ENDED APRIL 30, 1997 AND 1996



                                                   1997            1996    
       
                                               (UNAUDITED)     (UNAUDITED) 
       

   REAL ESTATE OPERATIONS:
    REAL ESTATE REVENUES:
       SALE OF REAL ESTATE                    $ 1,983,000     $         0  
       RENTAL INCOME                              397,404         536,912  
       GROUND LEASE INCOME                        231,000         234,000  
       VOLUME BASED RENTAL INCOME                  21,974         162,523  
       OTHER INCOME                                 4,378           1,943  
    
                                                2,637,756         935,378  
    

    REAL ESTATE EXPENSES:
       COST OF REAL ESTATE SOLD                   676,059               0  
       LABOR, OPERATING AND MAINTENANCE           220,580         243,939  
       DEPRECIATION AND AMORTIZATION               92,401          91,779  
       TAXES OTHER THAN INCOME TAXES               74,700          90,000  
       PROVISION FOR LITIGATION SETTLEMENT              0               0  
       GENERAL AND ADMINISTRATIVE                  25,963          25,940  
    
                                                1,089,703         451,658  
    
   INCOME FROM REAL ESTATE OPERATIONS           1,548,053         483,720  
    


   ART OPERATIONS:
    ART REVENUES:
       SALES                                        2,200           4,500  
       OTHER REVENUES                                   0               0  
    
                                                    2,200           4,500  
        
    ART EXPENSES:
       COST OF ART SOLD                             2,200           6,948  
       VALUATION RESERVE                                0               0  
       SELLING, GENERAL AND ADMINISTRATIVE         10,541          13,843  
    
                                                   12,741          20,791  
    
   LOSS FROM ART OPERATIONS                       (10,541)        (16,291) 
    






                                       6
    


                        CANAL CAPITAL CORPORATION & SUBSIDIARIES
                          CONSOLIDATED STATEMENTS OF OPERATIONS
                       FOR THE THREE MONTHS ENDED APRIL 30, 1997 AND 1996
                                   Continued ...


                                                   1997           1996     
       
                                               (UNAUDITED)     (UNAUDITED) 
      

   GENERAL AND ADMINISTRATIVE EXPENSE        $  (306,986)     $  (308,503) 
    
   INCOME (LOSS) FROM OPERATIONS               1,230,526          158,926  
      

   OTHER INCOME (EXPENSE):
     GAIN (LOSS) ON SALE OF INVESTMENTS                0                0  
     GAIN (LOSS) ON MARK-TO-MARKET OF 
       INVESTMENTS                               (45,158)               0  
     INTEREST & OTHER INCOME                       1,775            4,238  
     INTEREST EXPENSE                           (223,770)        (343,954) 
     INTEREST EXPENSE-RELATED PARTY              (36,000)         (42,000) 
    
                                                (303,153)        (381,716) 
                                                   
   GAIN (LOSS) BEFORE PROVISION FOR INCOME 
     TAXES                                       927,373         (222,790) 
       
   PROVISION (BENEFIT) FOR INCOME TAXES                0                0  
    
   NET INCOME (LOSS)                             927,373         (222,790) 
       
   PREFERRED STOCK DIVIDEND                      (45,715)         (39,924) 
    
   NET INCOME (LOSS) APPLICABLE TO COMMON
    SHARES                                   $   881,658      $  (262,714) 
                                             =============    ============ 
    

   NET INCOME (LOSS) PER COMMON SHARE        $      0.20      $     (0.06) 
                                             =============    ============ 
    
















                                  7          


                   CANAL CAPITAL CORPORATION & SUBSIDIARIES
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
               FOR THE SIX MONTHS ENDED APRIL 30, 1997 AND 1996


                                              1997              1996       
                                         (UNAUDITED)       (UNAUDITED)

   CASH FLOWS FROM OPERATING ACTIVITIES:
     NET INCOME (LOSS)                    $   730,822       $ (226,854)    
     ADJUSTMENTS TO RECONCILE NET INCOME (LOSS) TO
      NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES:
      PROVISION FOR LITIGATION SETTLEMENT     (75,000)               0     
      DEPRECIATION AND AMORTIZATION           195,555          194,647     
      GAIN  ON SALES OF REAL ESTATE        (1,465,869)        (316,894)    
      GAIN FROM SALE OF INVESTMENTS                 0                0     
      VALUATION RESERVE - ART INVENTORY             0                0     
      (GAIN )LOSS ON MARK-TO-MARKET OF
        INVESTMENTS                           174,291                0     
     
   CHANGES IN ASSETS AND LIABILITIES:
     NOTES AND ACCOUNTS RECEIVABLES, NET       99,399          (71,086)  
     ART INVENTORY, NET                        25,200          148,189     
     PREPAID EXPENSES AND OTHER, NET          (78,640)          53,387     
     PAYABLES AND ACCRUED EXPENSES, NET      (446,137)        (108,994)    
   NET CASH (USED) PROVIDED 
       BY OPERATING ACTIVITIES               (840,379)        (327,605)

   CASH FLOWS FROM INVESTING ACTIVITIES:
     PROCEEDS FROM SALES OF REAL ESTATE     2,262,000          476,627
     PROCEEDS FROM SALE OF INVESTMENTS              0                0     
     CAPITAL EXPENDITURES                     (35,567)         (43,129)    
   NET CASH PROVIDED BY 
   INVESTING ACTIVITIES                     2,226,433          433,498    

   CASH FLOWS FROM FINANCING ACTIVITIES:
     PROCEEDS FROM LONG-TERM DEBT-RELATED
       PARTIES                                      0                0     
     TRANSFERS TO LONG-TERM                   325,000                0 
     REPAYMENT OF LONG-TERM
       DEBT OBLIGATIONS                      (246,106)        (250,075) 
   NET CASH USED BY FINANCING ACTIVITIES       78,894         (250,075) 

   (INCREASE) IN RESTRICTED CASH AND
     CASH EQUIVALENTS                               0                0     

   NET (DECREASE) INCREASE IN CASH AND CASH
     EQUIVALENTS                            1,464,948         (144,182)    
   CASH AND CASH EQUIVALENTS AT 
      BEGINNING OF YEAR                        10,632          114,750     

   CASH AND CASH EQUIVALENTS AT 
      END OF YEAR                         $ 1,475,580      $   (29,432)    
                                          ============     ============

   NOTE:    Canal made federal and state income tax payments of $12,000 and
   $24,000  and interest payments of $525,000 and $780,000 in the six month
   periods ended April 30, 1997 and 1996, respectively.
                                       8


                  CANAL CAPITAL CORPORATION AND SUBSIDIARIES
          CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
              FOR THE YEAR ENDED OCTOBER 31, 1996 (AUDITED) AND 
              FOR THE SIX MONTHS ENDED APRIL 30, 1997 (UNAUDITED)


                               COMMON STOCK        PREFERRED STOCK
                               NUMBER               NUMBER         
                                 OF                  OF
                               SHARES   AMOUNT      SHARES       AMOUNT

   BALANCE, OCTOBER 31, 1995 5,313,794   $53,138    2,358,542    $23,585   
    NET INCOME (LOSS)                0         0            0          0
    PREFERRED STOCK DIVIDEND         0         0      344,757      3,448
    RESERVE                          0         0            0          0   
                            --------------------   ---------------------   
   BALANCE, OCTOBER 31, 1996 5,313,794   $53,138    2,703,299    $27,033  
    NET INCOME (LOSS)                0         0            0          0   
    PREFERRED STOCK DIVIDEND         0         0      200,403      2,004   
    RESERVE                          0         0            0          0   
                            --------------------   ---------------------   
   BALANCE, APRIL 30, 1997   5,313,794   $53,138    2,903,702    $29,037   
                            ====================   =====================   

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

   BALANCE,OCT 31,1995$26,468,008($9,690,693)   ($1,736,671)  ($11,003,545)
    NET INCOME (LOSS)           0     41,733              0             0  
   PFD STOCK DIVIDEND    168,931    (162,039)             0             0
    RESERVE                     0           0        116,975            0  
                       ----------  ------------   ------------  -----------

   BALANCE,OCT31,1996$26,636,939 ($9,010,999)   ($1,619,696)  ($11,003,545)
    NET INCOME (LOSS)          0     730,822              0              0
    PFD STOCK DIVIDEND   98,197      (89,657)             0              0
    RESERVE                    0           0              0              0
                      ---------- -------------   ------------  ----------  

   BALANCE,APR30,1997$26,735,136  $8,369,834)   ($1,619,696)  ($11,003,545)
                    ===========  =============  ============= =============














                                       9


                  CANAL CAPITAL CORPORATION AND SUBSIDIARIES
                NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                        SIX MONTHS ENDED APRIL 30, 1997
                                  (UNAUDITED)



   1.   GENERAL

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

        Canal is engaged in two distinct businesses - the management of its
   agribusiness  related  real estate properties located in the Midwest and
   art operations.

        While  the  Company  is  currently  operating  as  a going concern,
   certain  significant factors raise substantial doubt about the Company s
   ability  to  continue  as  a  going  concern.   The Company has suffered
   recurring  losses  from operations in six of the last eight years, has a
   working  capital  deficit  at  April  30,  1997 (after reflecting a $1.2
   million  debt  repayment made on May 1, 1997) of approximately $876,000,
   and  is involved in various litigations.  A reserve has been provided in
   the  amount  of  $450,000  associated  with the litigation in Minnesota.
   However,  the  financial  statements do not include any adjustments that
   might  result  from  the  resolution  of these other uncertainties.  The
   accompanying   financial  statements  do  not  include  any  adjustments
   relating  to  the  recoverability  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.

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




                                      10




   2.   Interim Financial Statements

        The  interim consolidated financial statements included herein have
   been prepared by Canal without audit.  In the opinion of Management, the
   accompanying   unaudited  financial  statements  of  Canal  contain  all
   adjustments  necessary  to  present  fairly its financial position as of


   April  30, 1997 and the results of its operations and its cash flows for
   the  six month period ended April 30, 1997.  All of the above referenced
   adjustments  were of a normal recurring nature.  Certain information and
   footnote  disclosures normally included in financial statements prepared
   in  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, 1996 and the notes thereto which are contained
   in  Canal  s 1996 Annual Report on Form 10-K.  The results of operations
   for the period presented is not necessarily indicative of the results to
   be expected for the remainder of fiscal 1997.


   3.   Reclassification

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


   4.   Notes Receivable

        Included  in  the  notes  and  accounts receivable were the current
   portion  of  notes  from  real  estate sales in the amount of $25,000 at
   April 30, 1997 and October 31, 1996.



   5.   INVESTMENTS

        Canal s investments consisted of the following:

       (Thousands of Dollars)         April 30, 1997     October 31, 1996

       Aggregate market value..........   $ 361                $ 535

       Aggregate carrying value........   $ 361                $ 535

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

                                      11
                                       



   entities  together  comprise a group for regulatory reporting purposes. 
   At   April 30, 1997, 100% of the market value of Canal s investments was
   invested in equity securities of this company in which such parties held
   5%  or more of the outstanding equity securities of the issuer.  Certain
   of  Canal  s  officers  and  directors  also  serve  as  officers and/or
   directors of this company.
        

   6.   ART OPERATIONS

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

        Due  to  general  economic  conditions  and the softness of the art
   markets,  Canal  has not purchased inventory in several years.  However,
   Canal continues its marketing efforts to sell its existing art inventory
   t h r ough  various  consignment  agreements  and  at  public  auctions.
   Antiquities  and  contemporary  art represented 64% ($2,286,625) and 36%
   ($1,277,263)  and  64%  ($2,311,825)  and  36% ($1,277,263) of total art
   inventory  at  April  30,  1997  and  October  31,  1996,  respectively.
   Substantially  all  of the contemporary art inventory held for resale is
   comprised of the work of Jules Olitski.

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

        Canal  has  its art inventory appraised by an independent appraiser
   annually.  The 1996 appraisal covered approximately 66% of the inventory
   value.    The appraised values estimate the current market value of each
   piece   giving  consideration  to  Canal  s  practices  of  engaging  in
   consignment, private and public auction sales.  The net realizable value
   of  the remaining 34% of the inventory was estimated by management based
   in  part  on  operating  history  and  in  part  on  the  results of the
   independent appraisals done. In fiscal 1996 


                                      12




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

        The  nature  of  art  makes it difficult to determine a replacement
   value.    The  most  compelling  evidence of a value in most cases is an
   independent  appraisal.    The  price  at  which pieces are consigned is
   usually  in  line  with appraisals and above the cost of the piece.  The
   amount classified as current 
   represents  management  s best estimate  of the amount of inventory that
   will  be  sold  in  this market.  Management believes that the provision
   discussed  above  has effectively reduced inventory to its estimated net
   realizable value.

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

        Canal  s  art operations have generated operating losses of $27,000
   and  $143,000  on  revenues  of  $20,000 and $109,000 for the six months
   ended  April  30,  1997 and 1996, respectively.  Art sales have resulted
   primarily  through  activities in conjunction with sales of antiquities.
   Canal  s  management believes that through its consignment agreements as
   well as other potential distribution outlets Canal will continue to deal
   in antiquities and contemporary art.


        I n ventory  on  Consignment  -  The  Company  had  $2,023,000  and
   $1,268,000  of  art inventory on consignment with third party dealers at
   April 30, 1997 and October 31, 1996, respectively. 


   7.   Property and Equipment

        Included  in  property  and equipment were the cost of buildings of
   approximately $5 million at April 30, 1997 and October 31, 1996.


                                      13



   8.   VALUATION RESERVE

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

   9.   BORROWINGS

        At  April  30,  1997, substantially all of Canal s real properties,
   the  stock  of  certain  subsidiaries, the investments and a substantial
   portion  of  its art inventories are pledged as collateral to secure the
   following obligations:
                                              April 30,       October 31,
                                                 1997            1996    
                                             (Unaudited)        (Audited)
   (Thousands of Dollars)
   Variable rate mortgage notes due
    May 15, 1998.............................   $ 3,960         $ 3,960
   Variable rate mortgage notes due
    September 15, 1998 - related party.......       747             849
   11% mortgage note; original principal
    amount $1,697; due April 1, 2011;
    payable in monthly installments
    (including interest) of $17..............     1,303           1,336
   9.5% mortgage note; original principal
    amount $472; due November 1, 2012,
    payable in monthly installments
    (including interest) of $4...............       410             414
   10 1/2% mortgage note (adjusted
    periodically to prime plus 1 3/4%);
    original principal amount $556 due
    January 15, 2013; payable in monthly
    installments (including interest) of $6..       478             485

   Other Note - Related Party................       400             500

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

   Total ....................................     7,623           7,544 

   Less -- current maturities ...............       464             564

   Long-term debt ...........................   $ 7,159         $ 6,980
                                      14


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

        The  new  agreement,  among  other  things,  prohibits  Canal  from
   becoming  an investment company as defined by the Investment Company Act
   of 1940; requires Canal to maintain minimum net worth; restricts Canal s
   ability  to  pay  cash dividends or repurchase stock; requires principal
   prepayments to be made only out of the proceeds from the sale of certain
   assets;  and  requires the accrual of additional interest (to be paid at
   maturity)  of two, three and four percent per annum for the fiscal years
   commencing  May  15, 1995, 1996 and 1997, respectively.  In fiscal 1996,
   this  agreement  was  amended  to  provide  for  the  forgiveness of all
   additional  interest  accrued  in  the event that the Company meets on a
   timely  basis  all  of  its  obligations  under  the Note, including the
   payment of all other principal and accrued interest on or before May 15,
   1998.  In consideration for the new agreement, Canal agreed to pay a fee
   to  the  noteholders of 2% of the principal amount outstanding as of May
   15,  1995.    On  May  1, 1997, the Company repaid $1.2 million of these
   notes from the proceeds of an April 30, 1997 real estate sale.

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

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


                                      15





   Company  to  meet  its  obligations  under  its secured credit line.  On
   February  14, 1997, these notes were extended to December 31, 1997.  The
   Company  agreed  to  increase the interest rate to prime (8.50% at April
   30, 1997) and pay down $100,000 no later than March 31, 1997.





                                      16


                     Management s Discussion and Analysis
               Of Results of Operations and Financial Condition
                    For the Six Months Ended April 30, 1997


   Results of Operations - General

        While  the  Company  is  currently  operating  as  a going concern,
   certain  significant factors raise substantial doubt about the Company s
   ability  to  continue  as  a  going  concern.   The Company has suffered
   recurring  losses  from operations in six of the last eight years, has a
   working  capital  deficit  at  April  30,  1997 (after reflecting a $1.2
   million  debt  repayment made on May 1, 1997) of approximately $876,000,
   and  is involved in various litigations.  A reserve has been provided in
   the  amount  of  $450,000  associated  with the litigation in Minnesota.
   However,  the  financial  statements do not include any adjustments that
   m i ght  result  from  the  resolution  of  these  other  uncertainties.
   Furthermore,  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 $731,000 and $927,000 for the six
   and  three  month periods ended April 30, 1997 as compared to net losses
   of   $227,000  and  $223,000  for  the  same  periods  in  fiscal  1996,
   respectively.  After recognition of preferred stock dividend payments of
   $90,000  and $46,000 for the six and three month periods ended April 30,
   1997  and  $78,000  and  $40,000  for  the  same periods in fiscal 1996,
   respectively,  the  results attributable to common stockholders were net
   income  of  $641,000  and  $882,000  for the six and three month periods
   ended  April 30, 1997 as compared to net losses of $305,000 and $263,000
   for  the  same  periods  in  fiscal 1996, respectively.  Included in the
   current  year  results  are  gains  on  the  sales  of  real  estate  of
   $1,466,000,  other  income  of  $75,000  representing a reduction in the
   provision  for litigation settlement and a $174,000 loss on the mark-to-
   market of investments.   
   
        Canal  s  revenues  from  continuing operations consist of revenues
   from  its  real  estate  and  art  operations.  Due  to general economic
   conditions  and  more  specifically  a  depressed  national  art market,
   Canal  s aggregate revenues from art sales and the prices at which sales
   were  made  have  significantly  declined  in  recent  years.   Revenues
   increased  by  $1,143,000  or  45.8%  to $3,640,000 and by $1,700,000 or
   180.9% to $2,640,000 for the six and three month periods ended April 30,
   1997,  respectively, as compared to the revenues for the same periods in
   fiscal  1996.    The  1997  increase  is  due  primarily to a $1,785,000
   increase  in  revenues from the sale of real estate, offset to a certain
   extent by a $314,000 reduction in volume based rental income, a $239,000
   decrease in rental income and a $89,000 reduction in art revenues. 

                                      17


   Real Estate Revenues

        Real  estate  revenues  for  the six months ended April 30, 1997 of
   $3,620,000  accounted for 99.4% of the year to date revenues as compared
   to  real  estate  revenues of $2,388,000 or 95.6% for the same period in
   1996.    Real  estate  revenues  are  comprised  of  rental  income from
   Exchange Building (commercial office space) rentals and other lease 
   income from the rental of vacant  land  and  certain  structures  (23.1%  
   and 45.0%), Ground lease income  (12.8%  and  19.6%), volume based rental 
   income (1.4% and 15.4%) and sale of real estate and other income (62.7% 
   and 20.0%) for the three months  ended  April  30, 1997 and 1996, 
   respectively.  The 1997 revenue increase  is due primarily to a $1,785,000 
   increase in revenues from the sale  of real estate, offset to a certain 
   extent by reductions in rental income  ($239,000)  and  volume  based  
   rental  income  ($314,000).  The decrease  in  rental  income  is  due  
   to  the December 1996 loss of the largest tenant (State of Minnesota) in 
   Canal s South St. Paul, Minnesota Exchange  Building  as  well  as  the  
   continued  consolidation of other stockyards  related tenants.  The 
   decrease in volume based rental income is  the  result  of  Canal s  
   September  1996  sale of the John Morrell property  located  in Sioux 
   City, Iowa.   The changes in percentages  in  the  year  to  year  
   comparisons  are  due  primarily to the significant increase in real 
   estate sales for fiscal 1997.

        Real  estate  revenues for the three months ended April 30, 1997 of
   $2,638,000  accounted  for  99.9%  of  the  second  quarter  revenues as
   compared  to  real  estate  revenues  of  $935,000 or 99.5% for the same
   period  in  1996.    Real estate revenues are comprised of rental income
   from Exchange Building (commercial office space) rentals and other lease
   income  from the rental of vacant land and certain structures (15.1% and
   57.4%), Ground lease income (8.8% and 25.0%), volume based rental income
   (0.8%  and  17.4%)  and  sale of real estate and other income (75.3% and
   0.2%) for the three months ended April 30, 1997 and 1996, respectively. 

   Real Estate Expenses

        Real  estate  expenses  for  the six months ended April 30, 1997 of
   $1,621,000  increased  by  $561,000 (53.0%) from $1,060,000 for the same
   period in 1996.  Real estate expenses were comprised of labor, operating
   and  maintenance (27.0% and 45.5%), depreciation and amortization (11.4%
   and 17.3%), taxes other than income taxes (9,2% and 17.0%), cost of real
   estate  sold  (49.1%  and 15.1%) and general and administrative expenses
   (3.3%  and  5.1%)  for  the  six  months  ended April 30, 1997 and 1996,
   respectively.    The  1997  increase  in  real  estate  expenses  is due
   primarily  to  the  $636,000 increase in cost of real estate sales.  The
   percentage  variations  in year to year comparison is also due primarily
   to the increase in the cost of real estate sold for fiscal 1997.  


                                      18




        Real  estate  expenses for the three months ended April 30, 1997 of
   $1,090,000  increased  by  $638,000  (141.3%) from $452,000 for the same
   period in 1996.  Real estate expenses were comprised of labor, operating
   and  maintenance  (20.2% and 54.1%), depreciation and amortization (8.5%
   and 20.3%), taxes other than income taxes (6.9% and 19.9%), cost of real
   estate  sold  (62.0%  and  0.0%) and general and administrative expenses
   (2.4%  and  5.7%)  for  the  three months ended April 30, 1997 and 1996,
   respectively.


   Art Operations

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

        Canal  has  its art inventory appraised by an independent appraiser
   annually.    The  fiscal 1996 appraisal covered approximately 66% of the
   inventory value.  The appraised values estimate the current market value
   of  each    piece    giving    consideration  to  Canal s  practices  of
   engaging  in    consignment,  private and public auction sales.  The net
   realizable value of
   the  remaining 34% of the inventory was estimated by management based in
   part  on operating history and in part on the results of the independent
   appraisals done.  In fiscal 1996 Canal recognized a $1,500,000 valuation
   allowance against its art inventory, thereby, increasing the total value
   allowance  to  $2,500,000  as of October 31, 1996 compared to $1,000,000
   and  $500,000  at  October  31,  1995  and  1994,  respectively.   These
   estimates are based in part on the Company s history of losses sustained
   on art sales in the current and previous years.

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

        The  nature  of  art  makes it difficult to determine a replacement
   value.    The  most  compelling  evidence of a value in most cases is an
   independent  appraisal.    The  price  at  which pieces are consigned is
   usually  in  line  with appraisals and above the cost of the piece.  The
   amount classified as current 


                                      19




   represents  management  s  best estimate of the amount of inventory that
   will  be  sold  in  this market.  Management believes that the provision
   discussed  above  has effectively reduced inventory to its estimated net
   realizable  value.   The Company will continually monitor the market for
   its  product and will make adjustments to the value of its art inventory
   as such adjustments become necessary.

        The  Company s plan to sell inventory at auction is contemplated in
   the  normal  course  of business.  Auction in this context is one of the
   usual  channels  used  by the Company for disposal of its art inventory.


   The proceeds 
   from  these  sales are used to reduce the Company s outstanding debt and
   finance current operations.  If these sales are not made the Company has
   alternate  means  of  raising cash such as sales of investments, sale of
   real  estate,  raising  of new capital and further rescheduling of debt.
   Some  of  these  measures  were successfully implemented in fiscal 1996.
   Because  of  the available alternatives, the Company does not anticipate
   any  extraordinary  losses  associated  with the art inventory in fiscal
   1997.


   Art Revenues

        Art  revenues  for  the  six months ended April 30, 1997 of $20,000
   decreased  $89,000  or  81.4% from $109,000 for the same period in 1996.
   Art  revenues are comprised of proceeds from the sale of antiquities and
   contemporary art (85.3% and 100.0%) and commission income on sale of art
   owned  by third parties (14.7% and 0.0%) for the six month periods ended
   April  30, 1997 and 1996, respectively.  The Company s art inventory was
   reduced through sales by $27,000 in the first half of fiscal 1997.

        Art  revenues  for  the three months ended April 30, 1997 of $2,000
   decreased  $2,000 or 51.1% from $5,000 for the same period in 1996.  Art
   revenues  are  comprised  of  proceeds  from the sale of antiquities and
   contemporary  art  (100.0% and 100.0%) and commission income on the sale
   of  art  owned  by  third  parties  (0.0%  and 0.0%) for the three month
   periods ended April 30, 1997 and 1996, respectively.


   Art Expenses

        Art  expenses  for  the  six months ended April 30, 1997 of $47,000
   decreased by $205,000 (81.3%) from $252,000 for the same period in 1996.
   Art  expenses  (excluding valuation allowances) consisted of the cost of
   art  sold  (56.5%  and  90.1%)  and  selling, general and administrative
   expenses (43.5% and 9.9%) for the six month periods ended April 30, 1997
   and 1996, respectively. 

                                      20



        Art  expenses  for the three months ended April 30, 1997 of $13,000
   decreased  by  $8,000  (38.7%) from $21,000 for the same period in 1996.
   Art  expenses  (excluding valuation allowances) consisted of the cost of
   art  sold  (17.3%  and  33.4%)  and  selling, general and administrative
   expenses  (82.7%  and 66.6%) for the three month periods ended April 30,
   1997 and 1996, respectively.


   General and Administrative

        General  and administrative expenses for the six months ended April
   30, 1997 of $620,000 decreased $17,000 (2.7%) from $637,000 for the same
   period  in  1996.    The  major components of general and administrative
   expenses  are officers salaries (34.8% and 33.8%), rent (9.8% and 9.3%),
   legal  and  professional  fees  (10.2%  and  9.9%), insurance (11.6% and
   11.1%)  and  office salaries (10.9% and 10.7%) for the six month periods
   ended  April 30, 1997 and 1996, respectively.  The percentage changes in
   the year to year comparisons are due primarily to the aggregate decrease


   in general and administrative expenses in fiscal 1997.

        General  and  administrative  expenses  for  the three months ended
   April 30, 1997 of $307,000 decreased $2,000 (0.5%) from $309,000 for the
   same period in 1996.  The major components of general and administrative
   expenses  are officers salaries (35.1% and 34.9%), rent (9.9% and 9.8%),
   legal  and  professional  fees  (10.3%  and 10.2%), insurance (11.7% and
   11.4%) and office salaries (10.9% and 11.0%) for the three month periods
   ended April 30, 1997 and 1996, respectively. 


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

        Canal  recognized  a losses of $174,000 and $45,000 for the six and
   three  month periods ended April 30, 1997, respectively, on the mark-to-
   market of its investments.  There was no similar loss recorded in fiscal
   1996.


   Interest and Other Income

        Interest  and  other income for the six months ended April 30, 1997
   increased  to $79,000 from $8,000 for the same period in 1996.  The 1997
   results  included  a $75,000 reversal of an amount previously accrued to
   settle  certain  litigation  related  to  Canal  s 1988 sale of property
   located in Portland, Oregon.

        Interest and other income for the three months ended April 30, 1997
   decreased to $2,000 from $4,000 for the same period in 1996.

                                      21





   Interest Expense

        Interest  expense for the six months ended April 30, 1997 decreased
   32.9%  to  $525,000 as compared to $783,000 for the same period in 1996.
   The  1997  decrease  is  due  primarily  to  a  $3,558,000  reduction in
   aggregate  debt  outstanding  at  April 30, 1997 as compared to the same
   period  in  1996.  For the most part interest rates on Canal s debt have
   remained unchanged for the past 12 months.

        Interest  expense  for  the  three  months  ended  April  30,  1997
   decreased  32.7% to $260,000 as compared to $386,000 for the same period
   in 1996.























                                      22



   Capital Resources and Liquidity

        While  the  Company  is  currently  operating  as  a going concern,
   certain  significant factors raise substantial doubt about the Company s
   ability  to  continue  as  a  going  concern.   The Company has suffered
   recurring  losses  from operations in six of the last eight years, has a
   working capital deficit at April 30, 1997 (after giving effect to a $1.2
   million  debt  repayment  made on May 1, 1997) of approximately $826,000
   and  is involved in various litigations.  A reserve has been provided in
   the  amount  of  $450,000  associated  with the litigation in Minnesota.
   However,  the  financial  statements do not include any adjustments that
   m i ght  result  from  the  resolution  of  these  other  uncertainties.
   Furthermore,  the  accompanying  financial statements do not include any
   adjustments   relating  to  the  recoverability  and  classification  of
   recorded  asset amounts or the amounts and classification of liabilities
   that  might  be  necessary should the Company be unable to continue as a
   going concern. 

        On  May 22, 1995 Canal completed the sale of $20 million face value
   of  Variable  Rate Mortgage Notes, due May 15, 1993.  Canal has extended
   these  notes  to  May  15,  1998  under  essentially  the same terms and
   conditions.    The  notes carry interest at the highest of four variable
   rates,  determined on a quarterly basis.  The new agreement, among other
   things,  prohibits  Canal from becoming an investment company as defined
   by  the  Investment  Company  Act  of  1940;  requires Canal to maintain
   minimum  net  worth;  restricts Canal s ability to pay cash dividends or
   repurchase  stock; requires principal prepayments to be made only out of
   the  proceeds  form the sale of certain assets; and requires the accrual
   of  additional  interest (to be paid at maturity) of two, three and four
   percent per annum for the fiscal years commencing May 15, 1995, 1996 and
   1996,  respectively.    In  fiscal  1996,  this agreement was amended to
   provide  for  the  forgiveness of all additional interest accrued in the
   event  that  the  Company meets on a timely basis all of its obligations
   under the Note, including the payment of all other principal and accrued
   interest  on  or  before  May  15,  1998.   In consideration for the new


   agreement,  Canal  agreed  to  pay a fee to the noteholders of 2% of the
   principal amount outstanding as of May 15, 1995. 

        On  September  20,  1995, the Company issued $1,032,000 of variable
   rate  mortgage  notes due September 15, 1998, the proceeds of which were
   used  to  repay in full the Company s secured credit line and a $650,000
   note the Company issued in 1993.  The purchasers of these notes included
   an  investment  partnership controlled by the Company s Chairman and the
   Company  s Chief Executive Officer and members of his family.  The notes
   issued  have  essentially  the  same  terms  and conditions as the notes
   discussed  above.  These notes, among other things, prohibits Canal from
   becoming an investment 
   company as defined by the Investment Company Act of 1940; requires Canal
   to 


                                      23



   maintain  minimum  net  worth;  restricts  Canal  s  ability to pay cash
   dividends or repurchase stock; requires principal prepayments to be made
   only out of 
   the  proceeds  from the sale of certain assets, and requires the accrual
   of  additional  interest  (to be paid at maturity) of two, three or four
   percent  per  annum  for the fiscal years commencing September 15, 1995,
   1996 and 1997, respectively.
        
        Cash and cash equivalents of $1,476,000 at April 30, 1997 increased
   $1,465,000  from $11,000 at October 31, 1996.  The cash balance at April
   30,  1997  is a result of closing a $1.9 million dollar real estate sale
   on  April  30,  1997.  As required under its debt agreements, Canal made
   principal  repayments  of  $1,240,000 and paid down accounts payable and
   accrued  expenses  by  approximately  $250,000  in the first week of May
   1997.  Net  cash  used  by  operations  in  fiscal  1997  was  $840,000.
   Substantially  all of the 1997 net proceeds from the sale of real estate
   of  $2,262,000 and the proceeds from the sale of art of $20,000 was used
   to reduce outstanding debt and accrued expenses.

        During fiscal 1997 Canal (excluding the May 1997 payments discussed
   above)  reduced  its  variable rate mortgage notes by $100,000 and other
   long-term  debt  by  $144,000 for a net 1997 debt reduction of $244,000.
   This  was  offset  by a transfer to long-term debt from accounts payable
   and accrued expenses in the amount of $325,000.
        
        At  April  30,  1997  (after  giving  effect to a $1.2 million debt
   repayment  made  on  May  1,  1997)  the  Company  s current liabilities
   exceeded  current  assets  by  $876,000, a decrease of $0.5 million from
   October  31, 1996.  The 1997 decrease is due primarily to a net decrease
   in  aggregate  outstanding debt.  The only required principal repayments
   under  Canal s debt agreements for fiscal 1997 will be from the proceeds
   of the sale of certain assets (if any) and approximately $0.1 million on
   various fixed mortgages.

        The  Company  leases  139  acres  of  land (at five locations) to a
   stockyard  operator.    This  lease  represents approximately 25% of the
   Company  s  annual  revenues.    The lessee under the Lease is currently
   experiencing  financial  difficulties  related  primarily  to  a  cattle
   feeding  and financing business the lessee entered into after purchasing
   Canal  s  stockyard  operations.  While the payments under the Lease are


   current,  the  lessee  was  in  default under the terms of certain other
   leases  it  has  with the Company for office space at various locations.
   The cross default provisions of these leases puts the 
   lessee  in  technical  default  of  the  Lease.  The Company has reached
   agreement  with the stockyard operator for repayment of all arrears over
   the  balance  of  the lease term.  Currently, all payments due under the
   revised agreement have been made by the stockyard operator.



                                      24


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




                                       


























                                       


                                      25
                                       





















                                    PART II

                               OTHER INFORMATION
























                                      26




   Item 1:        Legal Proceedings:
                  
                  See Item 3 of Canal s October 31, 1996 Form 10-K.

   Item 2 and 3:


                  Not applicable.

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

                  None.

   Item 5:        Other Information:

                  None.

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

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





                                       


















                                       
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                                  SIGNATURES



             Pursuant  to the requirement of the Securities Exchange Act of
   1934,  the  registrant  had  duly caused this report to be signed on its
   behalf by the undersigned thereunto duly authorized.




                                           Canal Capital Corporation
                                                 Registrant


                                                                    
                                           Reginald Schauder
                                           Vice President-Finance &
                                           Chief Financial Officer




   Date: June 11, 1997





















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