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

x  ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) of
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended October 31, 2010

o  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 incorporation or organization)
(I.R.S. Employer Identification Number)

4 MORRIS STREET PORT JEFFERSON STATION, NY
11776
(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  o

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  o

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  o  Accelerated filer  o  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  o  No  x

The aggregate market value of the voting stock held by non-affiliates of the registrant at April 30, 2010, was approximately $75,000. The number of shares of Common Stock, $.01 par value, outstanding at January 15, 2011 was 4,326,929.
 


 
 

 

CANAL CAPITAL CORPORATION AND SUBSIDIARIES
2010 ANNUAL REPORT ON FORM 10-K
TABLE OF CONTENTS


PART I
Page
ITEM
 
1.
 
1
ITEM
 
2
 
6
ITEM
 
3.
 
7
ITEM
 
4.
 
7
           
           
PART II
 
           
ITEM
 
5.
 
8
ITEM
 
6.
 
9
ITEM
 
7.
 
11
ITEM
 
7A.
 
24
ITEM
 
8.
 
25
ITEM
 
9.
 
25
ITEM
 
9A.
 
25
ITEM
 
9B.
 
26
           
           
PART III
 
           
ITEM
 
10.
 
27
ITEM
 
11.
 
28
ITEM
 
12.
 
30
ITEM
 
13.
 
32
ITEM
 
14.
 
32
           
           
PART IV
 
           
ITEM
 
15.
 
33
           
           
F-1
           
S-1
           
EXHIBITS
E-1


PART I

This Annual Report on Form 10-K includes “forward-looking statements”.  The words “may,”  “will,” “should,” “continue,” “future,” “potential,” “believe,” “expect,”    “anticipate,” “project,” “plan,” “intend,” “seek,” “estimate” and similar expressions identify forward-looking statements.  We caution you that any forward-looking statements made by us are not guarantees of future performance and that a variety of factors, including those discussed below, could cause our actual results and experience to differ materially from the anticipated results or other expectations expressed in our forward-looking statements.  Please see “Risk Factors” below for detailed information about the uncertainties and other factors that may cause actual results to materially differ from the views stated in such forward-looking statements.  All forward-looking statements and risk factors included in this Annual Report on Form 10-K are made as of the date hereof, based on information available to us as of the date hereof, and we assume no obligation to update any forward-looking statement or risk factors.

Canal Capital Corporation’s fiscal year ends on October 31, of each calendar year.  Each reference to a fiscal year in this Annual Report on Form 10K refers to the fiscal year ending October 31, of the calendar year indicated.  Unless the context requires otherwise, references to “we”, “us”, “our”, “Canal Capital Corporation” and the “Company” refer to Canal Capital Corporation and its subsidiaries.
 
Item 1.
Business

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 and Omaha, Nebraska. Canal sold all of the property it owned in Sioux Falls. South Dakota, in September 2010.  The properties consist, for the most part, of land and 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 the real estate properties currently under operating leases, stockyard operating properties and properties held for development or resale in order to support cash flow and to enhance the value of the existing properties and surrounding real estate. See "Real Estate Operations".



Stockyard Operations - Canal currently operates one central public stockyard located in St. Joseph, Missouri. Canal closed the stockyard it operated in  Sioux Falls, South Dakota in December 2009(collectively the “Stockyards”). 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 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
 
General - Canal is involved in the management, development or sale of its real estate properties located in four Midwest states. Real estate operations, resulted in operating income of $0.9 million, while contributing $2.3 million to Canal's revenues for fiscal 2010.  During fiscal 2010, Canal sold approximately 37 acres of land located in Sioux Falls, South Dakota for $2.0 million generating operating income of $0.7 million.
 
As of October 31, 2009, there are approximately 2 acres of undeveloped land owned by Canal located in Sioux City, Iowa (see ITEM 2) .  Canal is continuing the program, which it started several years ago, to develop or sell this property.  Additionally, Canal will continue to entertain any offers to purchase, develop and restructure the real estate properties currently under operating leases, stockyard operating properties and properties held for development or resale in order to support cash flow and to enhance the value of the existing properties and surrounding real estate in fiscal 2011.
 
Risk - Real estate activities in general may involve various degrees of risk, such as 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 - Canal currently operates one central public stockyard located in St. Joseph, Missouri. Canal closed the stockyard it operated in  Sioux Falls, South Dakota in December 2009(collectively the “Stockyards”).


Sioux Falls Stockyard Closure - In December 2009, after extensive efforts to reorganize and return this stockyard to profitability, Canal ceased all stockyard operations at its Sioux Falls, South Dakota location. Canal leased a portion of this property (approximately 10 acres), on a month to month basis, to a group that formerly operated at the stockyards as independent commission firms. In September 2010, Canal sold approximately 37 acres of land previously used for stockyard operations located in Sioux Falls, South Dakota for $2.0 million generating operating income of $0.7 million.
 
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 stockyard 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 stockyard provides 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 stockyard provides 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 stockyard. 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.
 
 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 2010. 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 stockyard 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 approximately $0.2 million while contributing approximately $2.0 million to Canal’s revenues for fiscal 2010. The Saint Joseph stockyard generated operating income of $155,000 while the Sioux Falls stockyard generated operating income (primarily through the sale of equipment) of $27,000 in fiscal 2010. The sharp decrease in operating results experienced in recent years is due primarily to the general weakness of the national economy coupled with a decrease in production by the smaller livestock producers who are the primary users of the Company’s stockyards.
 
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.
 
Art Inventory Held for Sale

Canal established its art operations in the late 1980's by acquiring for resale a significant inventory of antiquities primarily from the ancient Mediterranean cultures.

Canal is in the process of selling, in an orderly manner, its remaining art inventory consisting of antiquities only as of October 31, 2010. This will be accomplished primarily through consignment arrangements with various independent art dealers and through sale at public art auctions.

In fiscal 2010, Canal did not have any art sales.  Canal’s remaining art inventory consists of seven pieces of antiquity art at both October 31, 2010 and 2009.

Risk & Competition - Selling art in general involves various degrees of risk.  Canal’s success in selling its art inventory is dependent at least in part, on general economic conditions, including supply, demand, international monetary conditions and inflation. Canal competes in the sale of its art inventory with investment groups and other dealers, most of whom are substantially larger and have greater financial resources and staff than Canal.

 
Employees - At October 31, 2010, Canal had approximately 25 employees.
 
Executive Officers - At October 31, 2010 Canal’s Executive Officers were:
 
       
Held
   
Name
 
Age
 
Since
 
Title
             
Asher B. Edelman
 
71
 
1991
 
Chairman of the Board
             
Michael E. Schultz
 
74
 
1991
 
President and Chief Executive Officer
             
Reginald Schauder
 
61
 
1989
 
Vice President, Chief Financial Officer, Treasurer and Secretary
 
Risk Factors  - In addition to other information in this Annual Report on Form 10-K, the following risk factors should be carefully considered when evaluating our Company and our business. Investing in our common stock involves a high degree of risk, and you should be able to bear the complete loss of your investment.  The risk and uncertainties described below are not the only ones we face.  Additional risks and uncertainties not presently known to us or that we currently deem immaterial also may impair our business operations.  If any of the following risk and uncertainties actually occur, our future operating results and financial condition could be harmed and the market price of our common stock could decline.
 
Risk Related to Our Business - The Company’s risk and uncertainties related to our financial condition and our business include a variety of factors that are beyond our control.  Such factors include, without limitation: overall economic conditions; public confidence in the government’s ability to safeguard the food supply from infectious diseases; competition for tenants in the agribusiness; the ability of the Company’s tenants to compete in their respective businesses; the effect of fluctuations in supply, demand, international monetary conditions and inflation on the Company’s art inventories; securities risks associated with collections of antiquities and art; and the effect of fluctuations in interest rates and inflation on the Company’s indebtedness.


ITEM 2.
Properties
 
Canal's real estate properties located in four Midwest states are primarily associated with its current and former stockyards operations.  Each property consists, for the most part, of 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. 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.  As landlord, Canal's management responsibilities include leasing, billing, repairs and maintenance and overseeing the day to day operations of its properties.  Canal's properties at October 31, 2010 include:
 
New York Headquarters - Canal’s New York operations consist of approximately 200 square feet of office space located in Port Jefferson Station, New York.
 
Location
   
Year
Acquired
   
Total
Site (2)
   
Stkyds
Opertns (1)
   
Leased
to Third
Parties
   
Held for
Development (3)
 
St. Joseph, MO
   
1942
      30       30       0       0  
S. St. Paul, MN
   
1937
      1       0       1       0  
Sioux City, IA
   
1937
      8       0       6       2  
Omaha, NE
   
1976
      9       0       9       0  
Total
   
 
      48       30       16       2  
 
NOTES
(1)  Canal operates one central public stockyard.
(2)  For information with respect to mortgages and pledges see Note 4.
(3)  For information related to property held for development see Note 2(D).

 
ITEM 3.
Legal Proceedings
 
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 October 31, 2010.  The following situation did arise in fiscal 2005.
 
Environmental Protection Agency - Special Notice Letter for Remedial 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 October 31, 2010, the liability for remediation, if any, is not estimatable and therefore no accrual has been recorded in the financial statements.
 
ITEM 4.
Submission of Matters to a Vote of Security Holders

No matters were submitted to our stockholders during the fourth quarter of the fiscal year ended October 31, 2010.


PART II


ITEM 5.
Market for the Registrant's Common Stock and Related Stockholder Matters

Market Information
 
Canal's stock is no longer listed over-the-counter on the "pink sheets". The stock was delisted by the SEC as a result of Canal’s filing it’s fiscal 2009 Form 10K without benefit of an independent audit.  The high and low price ranges of Canal's common stock for the eight quarters ended October 31, 2010 based on managements estimate or as reported on the "pink sheets" were:
 
   
Management Estimate
   
“Pink sheets”
 
   
Fiscal 2010
   
Fiscal 2009
 
Quarter Ended
 
High
   
Low
   
High
   
Low
 
                         
January 31
  $ 0.04     $ 0.02     $ 0.04     $ 0.02  
                                 
April 30
  $ 0.04     $ 0.02     $ 0.07     $ 0.02  
                                 
July 31
  $ 0.04     $ 0.02     $ 0.07     $ 0.03  
                                 
October 31
  $ 0.04     $ 0.02     $ 0.05     $ 0.03  
 
Dividend Policy and Holders
 
There were no cash dividends paid during fiscal 2010 or 2009.  Canal is subject to restrictions on the payment of cash dividends under certain debt agreements.  As of January 15, 2011, Canal had approximately 1,500 holders of record of its common stock, par value $.01 per share.


ITEM 6.
SELECTED CONSOLIDATED FINANCIAL DATA
 
THE FOLLOWING SELECTED FINANCIAL DATA HAVE BEEN DERIVED FROM OUR CONSOLIDATED FINANCIAL STATEMENTS THAT, WITH THE EXCEPTION OF FISCAL 2010 AND 2009, HAVE BEEN AUDITED BY TODMAN & CO., CPAs, P.C.,  INDEPENDENT AUDITORS.  THE INFORMATION SET FORTH BELOW IS NOT NECESSARILY INDICATIVE OF THE RESULTS OF FUTURE OPERATIONS AND SHOULD BE READ IN CONJUNCTION WITH OUR CONSOLIDATED FINANCIAL STATEMENTS AND RELATED NOTES THERETO AND “MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS” INCLUDED IN ITEM 7 OF OUR ANNUAL REPORT ON FORM 10-K.
 
   
YEARS ENDED OCTOBER 31,
 
STATEMENT OF OPERATIONS DATA
 
2010
   
2009
   
2008
   
2007
   
2006
 
   
UNAUDITED
   
UNAUDITED
   
AUDITED
   
AUDITED
   
AUDITED
 
   
(IN THOUSANDS, EXCEPT PER SHARE DATA)
 
                               
REVENUES FROM CONTINUING OPERATIONS
  $ 4,288 (1)   $ 4,533 (2)   $ 4,450 (3)   $ 3,629 (4)   $ 4,404 (5)
                                         
NET (LOSS) INCOME
  $ 11     $ 30     $ ( 56 )   $ (948 )   $ (322 )
                                         
                                         
(LOSS) INCOME PER SHARE:
                                       
                                         
BASIC
  $ 0.01     $ (0.04 )   $ (0.03 )   $ (0.25 )   $ (0.10 )
                                         
DILUTED
  $ 0.01     $ (0.04 )   $ (0.03 )   $ (0.25 )   $ (0.10 )
                                         
                                         
CASH DIVIDENDS PAID
  $ 0.00     $ 0.00     $ 0.00     $ 0.00     $ 0.00  
                                         
                                         
WEIGHTED AVERAGE NUMBER OF SHARES:
                                       
                                         
- BASIC
    4,327       4,327       4,327       4,327       4,327  
                                         
- DILUTED
    4,327       4,327       4,327       4,327       4,327  

   
OCTOBER 31,
 
   
2010
   
2009
   
2008
   
2007
   
2006
 
   
UNAUDITED
   
UNAUDITED
   
AUDITED
   
AUDITED
   
AUDITED
 
(IN THOUSANDS, EXCEPT PER SHARE DATA)
                             
                               
BALANCE SHEET DATA:
                             
                               
CURRENT ASSETS
  $ 776     $ 361     $ 305     $ 1,849     $ 2,283  
PROPERTY ON OPERATING LEASES, NET
    1,391       1,074       1,646       1,741       1,763  
PROPERTY USED AS STOCKYARDS
    533       988       1,125       1,080       1,100  
OTHER ASSETS
    219       433       221       139       313  
                                         
TOTAL ASSETS
  $ 2,919     $ 2,856     $ 3,297     $ 4,809     $ 5,459  
                                         
                                         
CURRENT LIABILITIES
  $ 534     $ 289     $ 749     $ 708     $ 606  
NON-CURRENT LIABILITIES
    1,084       1,096       555       429       436  
LONG-TERM DEBT
    847       992       1,262       2,687       2,687  
STOCKHOLDERS' EQUITY
    454       479       731       985       1,730  
                                         
TOTAL LIAB. & STOCKHOLDERS'EQUITY (6)
  $ 2,919     $ 2,856     $ 3,297     $ 4,809     $ 5,459  
                                         
                                         
COMMON SHARES OUTSTANDING AT YEAR-END
    4,327       4,327       4,327       4,327       4,327  

 
ITEM 6.
Selected Financial Data (continued..)
 
NOTES:
 
(1)
The revenue decrease was due primarily to a $0.6 million decrease in revenues from stockyard operations as a result of the closing of the Sioux Falls Stockyard. This was offset to a certain extent by a $0.3 million increase in sales of real estate.
 
(2)
The revenue increase was due primarily to a $0.3 million increase in sales of real estate offset to a certain extent by a $0.2 million decrease in revenues from stockyard operations.
 
(3)
The revenue increase was due primarily to a $1.1 million increase in sales of real estate offset to a certain extent by a $0.3 million decrease in revenues from stockyard operations.
 
(4)
The revenue decrease was due primarily to a $0.5 million decrease in sales of real estate coupled with a $0.2 million decrease in revenues from stockyard operations.
 
(5)
The revenue decrease was due primarily to a $2.2 million decrease in sales of real estate offset to a certain extent by the $0.2 million increase in revenues from stockyard operations.
 
(6)
For discussion of material uncertainties and commitments, see Notes 9 and 17 to the Consolidated Financial Statement.


ITEM 7.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

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”.

You should also be aware that due to financial constraints Canal’s fiscal 2010 and 2009 Financial Statements have been presented without audit.


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 and Omaha, Nebraska. Canal sold all of the property it owned in Sioux Falls, South Dakota, in September 2010.  The properties consist, for the most part, of land and 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 Buildings, 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 - Canal currently operates one central public stockyard located in St. Joseph, Missouri. Canal closed the stockyard it operated in  Sioux Falls, South Dakota in December 2009(collectively the “Stockyards”). 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 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

General - Canal is involved in the management, development or sale of its real estate properties located in four Midwest states. Real estate operations, resulted in operating income of $0.9 million, while contributing $2.3 million to Canal's revenues for fiscal 2010.  During fiscal 2010, Canal sold approximately 37 acres of land located in Sioux Falls, South Dakota for $2.0 million generating operating income of $0.7 million.
 
As of October 31, 2010, there are approximately 2 acres of undeveloped land owned by Canal located in Sioux City, Iowa (see ITEM 2) .  Canal is continuing the program, which it started several years ago, to develop or sell this property.  Additionally, Canal will continue to entertain any offers to purchase, develop and restructure the real estate properties currently under operating leases, stockyard operating properties and properties held for development or resale in order to support cash flow and to enhance the value of the existing properties and surrounding real estate in fiscal 2011.
 
Risk - Real estate activities in general may involve various degrees of risk, such as 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 - Canal currently operates one central public stockyard located in St. Joseph, Missouri. Canal closed the stockyard it operated in  Sioux Falls, South Dakota in December 2009(collectively the “Stockyards”).

Sioux Falls Stockyard Closure - In December 2009, after extensive efforts to reorganize and return this stockyard to profitability, Canal ceased all stockyard operations at its Sioux Falls, South Dakota location. Canal leased a portion of this property (approximately 10 acres), on a month to month basis, to a group that formerly operated at the stockyards as independent commission firms. In September 2010, Canal sold approximately 37 acres of land previously used for stockyard operations located in Sioux Falls, South Dakota for $2.0 million generating operating income of $0.7 million.

 
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 in fiscal 2009 was 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 2011. 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 approximately $0.2 million while contributing approximately $2.0 million to Canal’s revenues for fiscal 2010. The Saint Joseph stockyard generated operating income of $155,000 while the Sioux Falls stockyard generated operating income (primarily through the sale of equipment) of $27,000 in fiscal 2010. The sharp decrease in operating results experienced in recent years is due primarily to the general weakness of the national economy coupled with a decrease in production by the smaller livestock producers who are the primary users of the Company’s stockyards.

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 Annual Report.
 
Revenue Recognition –- Lease and rental revenues are recognized ratably over the period covered.  All real estate leases are accounted for as operating leases.  Revenues from real estate sales are recognized generally when title to the property passes.  Revenues from stockyard operations which consist primarily of yardage fees (a standard per head charge for each animal sold through the stockyards) and sale of feed and bedding are recognized at the time the service is rendered or the feed and bedding are delivered.
 
Art Inventory Held for Sale –- Inventory of art consisting of antiquities only as of October 31, 2010 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.   For fiscal 2010 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 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.
 
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.

 
Results of Operations

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

   
Fiscal Year Ended October 31,
 
   
UNAUDITED
   
UNAUDITED
   
AUDITED
 
   
2010
   
2009
   
2008
 
   
(In Thousands)
 
Revenues:
                 
Real Estate Revenue
  $ 2,285     $ 1,942     $ 1,681  
Stockyard Revenue
    2,003       2,591       2,796  
Total Revenue
    4,288       4,533       4,450  
                         
Costs and Expenses:
                       
Real Estate Expenses
    1,432       921       349  
Stockyard Expenses
    1,820       2,520       2,959  
General and Administrative Expenses
    924       957       1,071  
Total Costs and Expenses
    4,176       4,397       4,379  
                         
Income (Loss) from Operations
    112       135       71  
Other Income
    25       32       55  
Other Expenses
    (126 )     (137 )     (182 )
                         
Net Income (Loss)
  $ 11     $ 30     $ (56 )
 
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 (See Note 1). 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 $0.0 million for 2010 as compared to the 2009 net income of $0.1 million and the 2008 net loss of $0.1 million.  After recognition of preferred stock dividend payments (accrued or paid in additional shares of preferred stock for each of fiscal 2010, 2009 and 2008  of $57,000 in 2010, $73,000 in 2009 and $85,000 in 2008, the results attributable to common stockholders were a net loss of $0.1 million in 2010, a net loss of $0.1 million in 2009 and a net loss of $0.1 million in 2008. Canal’s 2010 net loss of $0.1 million was due primarily to the $0.2 million decrease in income from real estate operations off set to a certain extent by the $0.1 million increase in income from stockyard operations. Canal’s 2009 net loss of $0.1 million is due primarily to a $0.3 million increase in operating income from stockyard operations combined with a $0.1 million decrease in general and administrative expenses, which were offset by a $0.3 million decrease in operating income generated by sales of real estate.

 
Canal's revenues from continuing operations consist of revenues from its  real estate and stockyard operations.  Revenues in 2010 decreased by $0.2 million to $4.3 million as compared with 2009 revenues which had increased  by $0.1 million to $4.5 million as compared with 2008 revenues of $4.4  million. The fiscal 2010 decrease in revenues is due primarily to the $0.6 million decrease in revenues from stockyard operations  offset to a certain  extent  by  the $0.3 million increase in sales of real estate. The fiscal 2009 increase in revenues is due primarily to the $0.3 million increase in sales of real estate  offset to a certain  extent  by  the $0.2 million decrease in revenues from stockyard operations.

Contractual Obligations

The following table summarizes the Company’s commitments as of October 31, 2010 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
   
5 Yrs.
 
                                   
Pension Plan Liability (a)
  $ 870     $ 173     $ 414     $ 283     $ 0  
Mortgage Notes Payable (b)
    847       0       847       0       0  
                                         
    $ 1,717     $ 173     $ 1,261     $ 283     $ 0  
 
 
(a)
See Note 21 and Item 15 Exhibits, Financial Statement Schedules and Reports on Form 8-K.

 
(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 interest at 10% per annum and are collateralized by substantially all of Canal’s property, the stock of certain subsidiaries and its art inventories.
 
COMPARISON OF FISCAL YEARS ENDED OCTOBER 31, 2010 AND 2009
 
Real Estate Revenues

Real estate revenues for 2010 of $2.3 million accounted for 53.3% of the 2010 total revenues as compared to revenues of $1.9 million or 42.8% for 2009.  Real estate revenues are comprised of sale of real estate (87.5% and 79.2%), rentals and other lease income from the rental of vacant land and certain structures (11.8% and 19.4%) and rental income from commercial office space in its Exchange Buildings (0.7% and 1.4%) for 2010 and 2009, respectively.   The percentage variations in the year to year comparisons are due primarily to the $0.6 million decrease in stockyard revenues for fiscal 2010.

 
Real Estate Expenses

Real estate expenses for 2010 of $1.4 million increased by $0.5 million (55.5%) from $0.9 million in 2009.  Real estate expenses are comprised of cost of real estate sold (93.7% and 76.2%), labor, operating and maintenance (1.7% and 5.5%), depreciation and  amortization  (1.6% and 2.2%),  taxes  other than  income taxes (1.5% and 2.4%), and general and administrative  expenses (1.5% and 4.0%) for 2010 and 2009, respectively. The 2009 increase in the cost of real estate sold of $0.5 million reflects the carrying value of the specific property sold.  The percentage variations in the year to year comparisons of the other real estate operating expenses is due to the sharp increase in cost of real estate sold in fiscal 2010.
 
Stockyard Revenues

Stockyard revenues for 2010 of $2.0 million accounted for 46.7% of the 2010 total revenues as compared to revenues of $2.6 million or 57.2% for 2009.  Stockyard revenues are comprised of yard handling and auction (82.9% and 87.0%), feed and bedding income (5.0% and 7.0%), rental and other income (12.1% and 6.0%) for 2010 and 2009, respectively.  The 2010 decrease in stockyard revenues as a percent of total revenues is due to the closing of the Sioux Falls stockyards at the end of fiscal 2009. There were no other significant percentage variations in the year to year comparisons.


Stockyard Expenses

Stockyard expenses for 2010 of $1.8 million decreased by $0.7 million (27.8%) from $2.5 million in 2009.  Stockyard expenses are comprised of labor and related costs (42.9% and 45.4%), operating and maintenance (27.0% and 27.8%), feed and bedding expense (4.6% and 5.2%), depreciation and amortization (0.7% and 0.8%), taxes other than income taxes (8.1% and 6.5%) and general and administrative expenses (16.7% and 14.3%) for 2010 and 2009, respectively.  The 2010 decrease is due primarily to the closing of the Sioux Falls stockyards at the end of fiscal 2009.  There were no significant percentage variations in the year to year comparisons.
 
General and Administrative

General and administrative expenses for 2010 of $0.9 million decreased by $0.1 million (6.9%) from $1.0 million in 2009.  The major components of general and administrative expenses are officers salaries (53.2% and 48.4%),pension expense (12.1% and 13.1%), insurance expense (8.3% and 8.3%), office salaries (9.8% and 9.6%), travel expense (3.9% and 3.6%), rent expense (0.0% and 2.1%) and legal fees (2.7% and 5.4%)  for  2010 and 2009, respectively.  As discussed in Note 6 the Company no longer rents office space. There were no other significant percentage variations in the year to year comparisons.

 
Interest Expense

Interest expense for 2010 of $126,000 decreased by $6,000 (4.8%) from $132,000 in 2009.  The 2010 decrease is due primarily to the $145,000 decrease in long-term debt outstanding during fiscal 2010.  Interest rates on Canal's variable rate mortgage notes averaged 10.00% in 2010 and 2009.  At October 31, 2010 the outstanding balance of these notes was $847,000.
 
Interest and Other Income

Interest and other income of $24,000 for 2010 decreased $8,000 (23.6%) from $32,000 in fiscal 2009.  Interest and other income is primarily comprised of dividend and interest income.
 
Income from Art Sales

Art revenues are comprised of the proceeds from the sale of art.  There were no art sales in fiscal 2010 or fiscal 2009. Art expenses are comprised of the cost of inventory sold and selling, general and administrative expenses.  In fiscal 2009  Canal incurred selling, general and administrative expenses of $5,000. 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.
 
Other Expense

There was no transaction of this nature in either fiscal 2010 or 2009.
 
COMPARISON OF FISCAL YEARS ENDED OCTOBER 31, 2009 AND 2008
 
Real Estate Revenues

Real estate revenues for 2009 of $1.9 million accounted for 42.8% of the 2009 total revenues as compared to revenues of $1.7 million or 37.8% for 2008.  Real estate revenues are comprised of sale of real estate (79.2% and 70.8%), rentals and other lease income from the rental of vacant land and certain structures (19.4% and 27.2%) and rental income from commercial office space in its Exchange Buildings (1.4% and 2.0%) for 2009 and 2008, respectively.   The percentage variations in the year to year comparisons are due primarily to the $0.3 million increase in real estate sales for fiscal 2009.

 
Real Estate Expenses

Real estate expenses for 2009 of $0.9 million increased by $0.6 million (163.8%) from $0.3 million in 2008.  Real estate expenses are comprised of cost of real estate sold (76.2% and 50.8%), labor, operating and maintenance (5.5% and 22.6%), depreciation and  amortization  (2.2% and 6.4%),  taxes  other than  income taxes (2.4% and 7.5%), and general and administrative  expenses (4.0% and 12.7%) for 2009 and 2008, respectively. The 2009 increase in the cost of real estate sold of $0.6 million is due to the increase in real estate sales discussed above.  The percentage variations in the year to year comparisons of the other real estate operating expenses is also due to the sharp increase in cost of real estate sold in fiscal 2009.
 
Stockyard Revenues

Stockyard revenues for 2009 of $2.6 million accounted for 57.2% of the 2009 total revenues as compared to revenues of $2.8 million or 62.2% for 2008.  Stockyard revenues are comprised of yard handling and auction (87.0% and 87.8%), feed and bedding income (7.0% and 6.8%), rental and other income (6.0% and 5.4%) for 2009 and 2008, respectively.  The 2009 decrease in stockyard revenues as a percent of total revenues is due to the $0.3 million increase in sales of real estate this year. There were no other significant percentage variations in the year to year comparisons.
 
Stockyard Expenses

Stockyard expenses for 2009 of $2.5 million decreased by $0.5 million (14.8%) from $3.0 million in 2008.  Stockyard expenses are comprised of labor and related costs (45.4% and 47.3%), operating and maintenance (27.8% and 28.6%), feed and bedding expense (5.2% and 5.9%), depreciation and amortization (0.8% and 0.7%), taxes other than income taxes (6.5% and 5.7%) and general and administrative expenses (14.3% and 12.0%) for 2009 and 2008, respectively.  The 2009 decrease is due primarily to certain operating efficiencies coupled with somewhat milder weather conditions experienced throughout the mid-west this past winter .  There were no significant percentage variations in the year to year comparisons.
 
General and Administrative

General and administrative expenses for 2009 of $1.0 million decreased by $0.1 million (10.7%) from $1.1 million in 2008.  The major components of general and administrative expenses are officers salaries (48.4% and 46.1%),pension expense (13.1% and 10.3%), insurance expense (8.3% and 11.3%), office salaries (9.6% and 9.7%), travel expense (3.6% and 4.3%), rent expense (2.1% and 2.1%) and legal fees (5.4% and 5.0%)  for  2009 and 2008, respectively. There were no significant percentage variations in the year to year comparisons.

 
Interest Expense

Interest expense for 2009 of $132,000 decreased by $45,000 (25.2%) from $177,000 in 2008.  The 2009 decrease is due primarily to the $270,000 decrease in long-term debt outstanding during fiscal 2009.  Interest rates on Canal's variable rate mortgage notes averaged 10.00% in 2009 and 2008.  At October 31, 2009 the outstanding balance of these notes was $992,000.
 
Interest and Other Income

Interest and other income of $32,000 for 2009 decreased $23,000 (41.8%) from $55,000 in fiscal 2008.  Interest and other income is primarily comprised of dividend and interest income.
 
Income from Art Sales

In fiscal 2009, Canal recognized a loss from art operations of $5,000 which was unchanged from fiscal 2008.   Art revenues are comprised of the proceeds from the sale of art.  There were no art sales in fiscal 2009 or fiscal 2008. Art expenses are comprised of the cost of inventory sold and selling, general and administrative expenses.  In both fiscal 2009 and fiscal 2008 Canal incurred selling, general and administrative expenses of $5,000. 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.
 
Related Party Transactions

Interest Expense Related Party - At October 31, 2010, 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 $126,000, $132,000 and $177,000 for the years ended October 31, 2010, 2009 and 2008, respectively. At various times during fiscal 2010 certain holders of these notes agreed to defer interest payments. This deferred interest liability accrued additional interest at a rate of 10% per annum, while outstanding and was repaid as funds became available in fiscal 2010.  As of October 31, 2010, the balance due under these notes was $847,000 all of which is classified as long-term debt related party.

 
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 contributions to its defined benefit pension plan.  The financial statements do not include any adjustments that might result from the resolution of these uncertainties (See Note 1). 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 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. As of October 31, 2010, the balance due under these notes was $847,000, all of which is classified as long-term debt-related party.
 
Cash and cash equivalents of $510,000 at October 31, 2010 increased $355,000 from $155,000 at October 31, 2009. Net cash used by operations in fiscal 2010 was $0.4 million.   Substantially all of the 2010 net proceeds from the sale of real estate of $2.0 million was used in operations, to reduce long-term debt and to meet the company’s long-term pension liability.
 
At October 31, 2010 the Company’s current assets exceeded current liabilities by approximately $0.4 million which represented a increase of $0.5 million over October 31, 2009  when current liabilities exceeded current assets by approximately $0.1 million.
 
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 antiquities 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 antiquities 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.

 
QUARTERLY RESULTS OF OPERATIONS

The following table sets forth certain quarterly financial data for the eight quarters ended October 31, 2010.  This quarterly information is unaudited, has been prepared on the same basis as the annual financial statements, and, in our opinion, reflects all adjustments (consisting only of normal recurring accruals) necessary for a fair presentation of the information for periods presented.

   
UNAUDITED
 
   
QUARTER ENDED
 
   
JAN. 31,
   
APRIL 30,
   
JULY 31,
   
OCT. 31,
       
   
2010
   
2010
   
2010
   
2010
   
TOTAL
 
   
(IN THOUSANDS, EXCEPT PER SHARE DATA)
 
                               
REAL ESTATE REVENUES
  $ 76     $ 71     $ 70     $ 2,068     $ 2,285  
REAL ESTATE EXPENSES
    22       23       24       1,363       1,432  
OPERATING INCOME
  $ 54     $ 48     $ 46     $ 705     $ 853  
                                         
                                         
STOCKYARD REVENUES
  $ 658     $ 656     $ 333     $ 356     $ 2,003  
STOCKYARD EXPENSES
    551       515       367       388       1,821  
OPERATING INCOME
  $ 107     $ 141     $ (34 )   $ (32 )   $ 182  
                                         
NET INCOME (LOSS)
  $ (212 )   $ (49 )   $ (230 )   $ 502     $ 11  
NET INCOME (LOSS) PER COMMON SHARE:
                                       
BASIC & DILUTED
  $ (0.05 )   $ (0.01 )   $ (0.05 )   $ 0.12     $ 0.01  
                                         
WEIGHTED AVERAGE NUMBER OF SHARES:
                                       
BASIC & DILUTED
    4,327       4,327       4,327       4,327       4,327  
 
   
AUDITED
 
   
QUARTER ENDED
 
   
JAN. 31,
   
APRIL 30,
   
JULY 31,
   
OCT. 31,
       
   
2009
   
2009
   
2009
   
2009
   
TOTAL
 
   
(IN THOUSANDS, EXCEPT PER SHARE DATA)
 
                               
REAL ESTATE REVENUES
  $ 104     $ 367     $ 104     $ 1,367     $ 1,942  
REAL ESTATE EXPENSES
    37       105       36       743       921  
OPERATING INCOME
  $ 67     $ 262     $ 68     $ 624     $ 1,021  
                                         
                                         
STOCKYARD REVENUES
  $ 814     $ 870     $ 466     $ 441     $ 2,591  
STOCKYARD EXPENSES
    726       775       529       490       2,520  
OPERATING INCOME
  $ 88     $ 95     $ (63 )   $ (49 )   $ 71  
                                         
NET INCOME (LOSS)
  $ (102 )   $ 108     $ (259 )   $ 283     $ 30  
NET INCOME (LOSS) PER COMMON SHARE:
                                       
BASIC & DILUTED
  $ (0.03 )   $ 0.02     $ (0.06 )   $ 0.07     $ 0.01  
                                         
WEIGHTED AVERAGE NUMBER OF SHARES:
                                       
BASIC & DILUTED
    4,327       4,327       4,327       4,327       4,327  

 
ITEM 7A.
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.  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 October 31, 2010, the following long-term debt-related party financial instruments are sensitive to changes in interest rates by expected maturity dates:
 
As of
October 31,
 
Fixed Amount
($ US)
   
Average
Interest Rate
   
Fair
Value
 
                   
2011
  $ 0       N/A        
                       
2012
    847       10 %      
                       
2013
    0       N/A        
                         
2014
    0       N/A          
                         
2015
    0       N/A          
                         
Thereafter
    0       N/A          
                         
                         
Total
  $ 847               N/A (A)
 
 
(A)
Long-term debt related party (See Note 5): it is not practicable to estimate the fair value of the related party debt (See Note 18).

 
ITEM  8.
Financial Statements and Supplemental Data
 
 The financial statements filed as part of this Annual Report are identified in the Index to Consolidated Financial Statements on page F-1 hereto and are set forth on pages F-2 through F-31 included in Item 15(A) of the report.
 
ITEM  9.
Changes and Disagreements with Accountants on Accounting and Financial Disclosure
 
None.

Due to financial constraints Canal’s fiscal 2010 and 2009 Financial Statements have been presented without audit.
 
ITEM 9A(T).
Controls and Procedures
 
(a) Evaluation of Disclosure Controls and Procedures.  Our Chief Executive Officer and Chief Financial Officer have evaluated the effectiveness of our disclosure controls and procedures (as such term is defined in Rules 13a-15 (e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of the end of the period covered by this Annual Report.  Based on such evaluation, such officers have concluded that, as of such date, our disclosure controls and procedures are effective in alerting them on a timely basis to material information relating to Canal Capital Corporation (and its consolidated subsidiaries) required to be included in our reports filed or submitted under the Exchange Act.

(b) Management’s Report on Internal Control over Financial Reporting.  Management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rules 13a-15(f) and 15d-15(f).  In evaluating the Company’s internal control over financial reporting, management has adopted the framework of Internal Control-Integrated Framework issued by the Committee of Sponsoring organizations of the Treadway Commission (the “COSO Framework”).  Under the supervision and with the participation of our management including the Chief Executive Officer and Chief Financial Officer of the Company, the Company conducted an evaluation of the effectiveness of its internal control over financial reporting as of the end of the period covered by this report.  The Company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting  and the preparation of financial statements for external reporting purposes in accordance with generally accepted accounting principals.  Internal control over financial reporting includes those policies and procedures that (1)  pertain to the maintenance  of  records  that, in  reasonable  detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principals, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the Company’s assets that could have a material effect on the financial statements.  However, because of inherent limitations internal control over financial reporting may not prevent or detect misstatements.  Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions or that the degree of compliance with the policies or procedures may deteriorate.


Based on management’s evaluation under the COSO Framework, it has concluded that the Company’s internal control over financial reporting, was, as of the end of the period covered by this report, effective.
 
This annual report does not include an attestation report of the Company’s registered public accounting firm regarding internal control over financial reporting.  The Company’s internal control over financial reporting was not subject to attestation by the Company’s registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission  that permit the Company to provide only for this report.
 
(C) Changes in Internal Control over Financial Reporting.  There were no significant changes in our internal control over financial reporting that have materially affected or are reasonably likely to materially affect, our internal control over financial reporting.
 
ITEM 9B.
Other Information
 
None.


PART III


ITEM 10.
Directors and Executive Officers of the Registrant
 
The company’s Board of Directors is comprised of two non-independent directors, the Chairman, Asher B. Edelman and the President, Michael E. Schultz. Due to the limited number of directors, the creation of numerous independent committees is not feasible. During fiscal 2010, the Board of Directors held three meetings.
 
In addition to Messrs. Edelman and Schultz, there is one additional executive officer, Reginald Schauder, Vice President and Chief Financial Officer.  Due to, among other things, the financial condition of the company and the limited number of executive officers, the company has not adopted a code of ethics that applies to the Company’s principle executive officer, principle financial and accounting officer, or persons performing similar functions.  The Company has not adopted such a code of ethics because all of management’s efforts have been directed to maintaining the business of the Company.  At a later time, a code of ethics may be adopted by the Board of Directors.

The following information with respect to the principal occupation or employment of each director and executive officer and the name and principal business of the Company or other organization in which such occupation or employment is carried on, and in regard to other affiliations and business experience during the past five years, has been furnished to the Company by the respective directors.

Asher B. Edelman, age 71, has been Chairman of the Board since September 1991 and prior thereto Vice Chairman of the Board and Chairman of the Executive Committee since February, 1985.  Mr. Edelman was a Director, Vice-Chairman of the Board, and Chairman of the Executive Committee of The CattleSale Company formerly known as  Dynacore Holdings Corporation,  ("CattleSale") from March 1985 to December 2003.

Michael E. Schultz, age 74, has been President and Chief Executive Officer since September 1991 and a Director since 1985; and had been a partner in the law firm of Ehrenkranz, Ehrenkranz & Schultz until December 31, 1994.

Reginald Schauder, age 61, has been Vice President, Chief Financial Officer and Treasurer since January 1989 and assumed responsibility as Secretary of the Company in September 1995.
 
There are no family relationships between any of the aforementioned executive officers of the Registrant and such executive officers were elected to serve for a term of one year or until the election and qualification of their respective successors.

 
ITEM 11.
Executive Compensation
 
The following table summarizes the compensation of the Company's Chief Executive Officer and the other two executive officers of the Company whose salary for fiscal 2010 exceeded $100,000.


SUMMARY COMPENSATION TABLE - Annual Compensation


Name and Principal
             
Position
   
Year
   
Salary
 
               
Michael E. Schultz
   
2010
    $ 175,000  
President and Chief
   
2009
    $ 175,000  
Executive Officer
   
2008
    $ 175,000  
                 
Asher B. Edelman
   
2010
    $ 175,000  
Chairman of the Board
   
2009
    $ 175,000  
and Executive Committee
   
2008
    $ 175,000  
                 
Reginald Schauder
   
2010
    $ 124,000  
Vice President, Chief
   
2009
    $ 124,000  
Financial Officer
   
2008
    $ 124,000  
Treasurer and Secretary
               
 
In order to improve the Company’s cash flow, Messrs. Edelman and Schultz each agreed to defer receipt of their annual salaries effective November 1, 2009.  Additionally, effective November 1, 2009 Mr. Schauder agreed to defer receipt for $24,000 of his annual salary. These amounts are accrued by the Company with payments made from time to time as cash becomes available to the Company. At October 31, 2010, the total liability under these agreements was $175,000.  Additionally, Mr. Schultz has deferred interest and other reimbursable expenses during the year. All of the outstanding liability under these agreements were repaid as funds become available in the first quarter of fiscal 2011.

Retirement Plans - The Canal Capital Corporation Retirement Plan (the "Retirement Plan") provides benefits to eligible employees of the Company and its subsidiaries and affiliates.  Directors who are not employees are not eligible to participate in the Retirement Plan.  The Retirement Plan is administered by the Company.  All Company contributions under the Retirement Plan were deposited with an insurance company and invested in a group annuity contract through May 30, 1985.  Thereafter, all Company contributions have been held in trust under a Trust Agreement between the Company and the Executive Committee of the Board of Directors, as trustee.  Contributions to the Retirement Plan are determined on an actuarial basis, without individual allocation.

 
In October 1991, each of three executive officers of the Company voluntarily withdrew from participation in the Retirement Plan.  As a result of prior service, Messrs. Edelman and Schauder have deferred monthly accumulated benefits of approximately $1,900 and $600, respectively, as of October 31, 2010.  Mr. Schultz has no benefit under the Retirement Plan.  For further information on the Retirement Plan (see Note 21).
 
COMPENSATION OF DIRECTORS

Fees and Expenses; Other Benefits

Directors who are not officers of the Company (if any) do not receive cash compensation for service as Directors.  Directors are reimbursed for expenses incurred in attending Board and Committee meetings, including those for travel, food and lodging.  There have been no expense reimbursements made in the past three years.
 
Stock Options for Directors

The Company maintains an option plan for the benefit of directors of the Company -- the 1985 Directors' Stock Option Plan (the "1985 Plan"), which was approved by the stockholders of the Company on March 12, 1986.  Pursuant to the 1985 Plan, a maximum of 264,000 shares of common stock, $0.01 par value per share, of the Company have been reserved for issuance to directors and members of the Executive Committee of the Company and its subsidiaries.

Options granted under the 1985 Plan are non-qualified stock options and have an exercise price equal to 100% of fair market value of the shares on the date of grant.  The options may be exercised no earlier than one year from the date of grant and no later than ten years after the date of grant.  Under the 1985 Plan, options covering 22,000 shares are automatically granted to each new director upon the effective date of his election to office and options covering 5,500 shares are automatically granted to each new member of the Executive Committee upon the effective date of his appointment to office.

During the 2010 fiscal year, no options under the 1985 plan were granted and no options previously granted were exercised.  At October 31, 2010, there were no options outstanding under the 1985 Plan.
 
Compensation Committee - Interlocks and Insider Participation

The Board of Directors (comprised of Asher B. Edelman, Chairman of the Board and Chairman of the Executive Committee, Michael E. Schultz, President and Chief Executive Officer) determines the compensation of the Chief Executive Officer and the Company's other executive officers and administers the Company's 1984 Employees Stock Option Plan and 1985 Directors Stock Option Plan.

 
In connection with the Company's investment activities, if any, the Executive Committee of the Board of Directors, through Mr. Edelman, has the authority to invest funds of the Company in securities of other companies. At October 31, 2010, the Company had no such investments.
 
ITEM 12.
Securities Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
 
To the knowledge of the Company, the only beneficial owners of 5% or more of the voting stock of the Company (other than those listed below under "Securities Owned by Management") as of January 15, 2011 were:


SECURITIES BENEFICIALLY OWNED

Name
   
No. of Common Shares Beneficially owned (a)
   
Percent of Class of Common Stock
 
               
Asher B. Edelman
      1,909,605 (d)     44.13  
                   
Michael E. Schultz
      58,835 (d)     1.36  
                   
William G. Walters
      234,440 (b)     5.42  
                   
Timothy D. O’Donnell
      347,126 (c)     8.02  
 
(a)  Under applicable regulations of the Securities and Exchange Commission (the "SEC"), a person who has or shares the power to direct the voting or disposition of stock is considered a "beneficial owner".  Each individual referred to in the above table has the sole power to direct the voting and disposition of the shares shown.

(b)  The number reported herein for Mr. Walters includes 117,220 shares owned by Mr. Walters, 117,220 shares owned by Whale Securities Co., L.P., of which Mr. Walters is Chief Executive Officer.  Mr. Walters has sole power to vote and dispose of the shares described herein.

(C)   Represents 347,126 shares owned directly.

(d)  For additional information about beneficial ownership see "Securities Owned by Management" below.

 
SECURITIES OWNED BY MANAGEMENT

The following table sets forth certain information as of January 15, 2011, with respect to the beneficial ownership of the Company's Common Stock with respect to all persons who are directors, each of the executives named in the Executive Compensation Table and by all directors and officers as of the most practical date.  Unless otherwise indicated, the percentage of stock owned constitutes less than one percent of the outstanding Common Stock and the beneficial ownership for each person consists of sole voting and sole investment power.
 
     
No. of Common Shares
   
Percent of Class
 
Name
   
Beneficially owned (a)
   
of Common Stock
 
               
               
Asher B. Edelman
      1,909,605 (b)     44.13  
                   
Reginald Schauder
      100 (c)     0.01  
                   
Michael E. Schultz
      58,835 (d)(e)     1.36  
                   
All Directors and Officers as a group (3 persons)
      1,968,540       45.50  
 
(a)           Under applicable regulations of the Securities and Exchange Commission (the "SEC"), a person who has or shares the power to direct the voting or disposition of stock is considered a "beneficial owner".  Each director and officer referred to in the above table has the sole power to direct the voting and disposition of the shares shown, except as otherwise set forth in footnote (e)below.
 
(b)           The number reported herein for Mr. Edelman includes 31,300 shares held in Mr. Edelman's retirement plan, 1,017,220 shares owned by A.B. Edelman Limited Partnership ("Edelman Limited Partnership"), of which Mr. Edelman is the sole general partner, 590,186 shares of common stock owned by the Edelman Family Partnership, L.P. (“Edelman Family Partnership”), of which Mr. Edelman is the general partner,  43,830 shares of common stock owned by Edelman Value Partners, L.P. (“Value Partners”), of which Mr. Edelman is the sole stockholder of the general partner, 26,620 shares of common stock held by Canal Capital Corporation Retirement Plan (“Canal Retirement Plan”), of which Mr. Edelman serves as a trustee, 8,400 shares owned by Aile Blanche, Inc., of which Mr. Edelman is the sole stockholder and 3,399 shares owned by Felicitas Partners, L.P. ("Felicitas"), the general partner of which is Citas Partners ("Citas") of which Mr. Edelman is the controlling general partner. Edelman Limited Partnership has the sole power to vote and dispose of the shares owned by it, which power is exercisable by Mr. Edelman as the sole general partner of Edelman Limited Partnership. Edelman Family Partnership has the sole power to vote and dispose of the shares owned by it, which power is exercisable by Mr. Edelman as the general partner.  Value Partners has shared power to vote and dispose of the shares owned by it. The power to dispose of such shares is exercisable by A. B. Edelman Management Company, Inc., a corporation controlled by Mr. Edelman  as the sole stockholder. Canal Retirement Plan has the sole power to vote and dispose of the shares owned by it, which power is exercisable by Mr. Edelman as trustee. Aile Blanche, Inc. has the sole power to vote and dispose of the shares owned by it, which power is exercisable by Mr. Edelman as President.  Felicitas has the sole power to vote and dispose of the shares owned by it, which power is exercisable by Mr. Edelman as the controlling general partner of Citas.  Additionally, the number reported herein for Mr. Edelman includes 188,650 shares of common stock held in three Uniform Gifts to Minors Act accounts for the benefit of Mr. Edelman's children of which Mr. Edelman is the custodian.

 
(c) Represents 100 shares owned directly.

(d) Represents 58,835 shares owned directly.

(e) The number reported herein for Mr. Schultz excludes 26,620 shares of common stock held by the Canal Capital Corporation Retirement Plan of which Mr. Schultz serves as a trustee, as to which Mr. Schultz expressly disclaims beneficial ownership.
 
ITEM 13.
Certain Relationships and Related Transactions

 
See:
Item 11 "Compensation Committee Interlocks and Insider Participation"
 
ITEM 14.
Principal Accounting Fees and Services

Due to financial constraints Canal’s fiscal 2010 and 2009 Financial Statements have been presented by management without audit.

The following fees were billed to us by Todman & Co., CPAs, PC during fiscal 2010 and 2009:

 
 
2010
   
2009
 
Audit fees
  $ 0     $ 0  
Tax fees
    0       0  
All other fees
    0       0  
    $ 0     $ 0  

Audit-related fees if any include statutory audits and Sarbanes-Oxley related consultation. Other fees primarily consist of routine advisory services.

 
PART IV


ITEM 15.
Exhibits, Financial Statement Schedules and Reports on Form 8-K.
 
 
(a)           1.
Financial Statements and Notes
 
See accompanying index to consolidated financial statements.
 
 
2.
Schedules and Supplementary Note

None

 
3.
Exhibits

See accompanying index to exhibits.
 
 
(b)           1.
Reports on Form 8-K

None


CANAL CAPITAL CORPORATION AND SUBSIDIARIES
INDEX TO EXHIBITS


Item 15(a)(3).  Exhibits -

The following exhibits required by Item 601 of Regulations S-K are filed as part of this report.  For convenience of reference, the exhibits are listed according to the numbers appearing in Table I to Item 601 of Regulation S-K.  Each exhibit which is incorporated by reference and the document in which such exhibit was originally filed are indicated in parentheses immediately following the description of such exhibit.
 
Exhibit No.

3(a)
 
Restated Certificate of Incorporation (filed as Exhibit 3(a) to the Registrant's Registration Statement on Form 10 filed with the Securities and Exchange Commission  on May 3, 1984 (the "Form 10") and incorporated herein by reference).
     
3(b)
 
Bylaws (filed as Exhibit 3(b) to the Registrant's Registration  Statement on Form 10 and incorporated herein by reference).
     
3(c)
 
Certificate of Amendment of the Restated Certificate of Incorporation dated September 22, 1988 (filed as Exhibit 3(c) to the Registrant's Form 10-K filed January 29, 1989 and incorporated herein by reference).
     
10(a)
 
1984 Stock Option Plan (1) (see Exhibit A included in the Registrant's Proxy Statement dated January 31, 1985, relating to the annual meeting of stockholders held March 18, 1985, which exhibit is incorporated herein by reference).
     
10(b)
 
Form of Incentive Stock Option Agreement (filed as Exhibit 10(b) to the Registrant's Form 10-K filed January 31, 1986 and incorporated herein by reference).
     
10(c)
 
1985 Directors' Stock Option Plan (1) (See Exhibit A included in the Registrant's Proxy Statement dated January 31, 1986, relating to the annual meeting of stockholders held March 12, 1986, which exhibit is incorporated herein by reference).
     
10(d)
 
Form of Directors' Stock Option Agreement (filed as Exhibit 10(ab) to the Registrant's Form 10-K filed January 29, 1986 and incorporated herein by reference).


CANAL CAPITAL CORPORATION AND SUBSIDIARIES
INDEX TO EXHIBITS, CONTINUED

Exhibit No.

10(e)
 
Stock Pledge and Security Agreement dated January 8, 1998 by and between Canal Capital Corporation, SY Trading Corporation and CCC Lending Corporation (filed as Exhibit 10 (ai) to the Registrant’s Form 10-K filed January 30, 1998 and incorporated herein by reference).
     
10(f)
 
Security Agreement dated January 8, 1998 by and between Canal Capital Corporation, Canal Galleries Corporation, Canal Arts Corporation and CCC Lending Corporation (filed as Exhibit 10 (an) to the Registrant’s Form 10-K filed January 30, 1998 and incorporated herein by reference).
     
10(g)
 
$1,000,000 Promissory Note dated January 8, 1998 by and between Michael E. Schultz and Canal Capital Corporation (filed as Exhibit 10 (ao) to the Registrant’s Form 10-K filed January 30, 1998 and incorporated herein by reference).
     
10(h)
 
$242,000 Promissory Note dated January 8, 1998 by and between Michael E. Schultz Defined Benefit Trust and Canal Capital Corporation (filed as Exhibit 10 (ap) to the Registrant’s Form 10-K filed January 30, 1998 and incorporated herein by reference).
     
10(i)
 
$229,000 Promissory Note dated January 8, 1998 by and between Lora K. Schultz and Canal Capital Corporation (filed as Exhibit 10 (aq) to the Registrant’s Form 10-K filed January 30, 1998 and incorporated herein by reference).
     
 
Subsidiaries of the registrant.
     
 
Certification Pursuant to Rule 13a-14(a)/15d-14(A).
     
31.2  
Certification Pursuant to Rule 13a-14(a)/15d-14(a)
     
 
Certification Pursuant to Section 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbane-Oxley Act of 2002.

 
INVESTOR INFORMATION
 
Annual Meeting
 
Corporate Headquarters
     
The Annual Meeting of Shareholders of Canal Capital Corporation will be held in our offices at 4 Morris Street, Port Jefferson Station NY, 11776 on a date to be announced.
 
4 Morris Street, Port Jefferson Station, NY 11776
   
Stock Certificates
     
The Board of Directors of Canal Capital Corporation urges all shareholders to vote their shares in person or by proxy and thus participate in the decisions that will be made at the annual meeting.
 
Inquiries regarding change of name or address, or to replace lost certificates should be made directly to American Stock Transfer and Trust Co., 59 Maiden Lane, New York, NY 10007 or telephone (718) 921-8200
     
Stock Listing
   
     
Canal Capital Corporation common stock is no longer listed on the over-the-counter market through the “pink sheets”.
 
Auditors None
     
Investment Analyst Inquiries
 
General Counsel
     
Analyst inquiries are welcome. Phone or write: Michael E. Schultz, President at (631) 234-0140
 
Proskauer Rose LLP 1585 Broadway New York, NY 10036 (212) 969-3000

 
FORM 10-K -- ITEM 15(a)(1) and (2)
CANAL CAPITAL CORPORATION AND SUBSIDIARIES


INDEX TO
CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULES


The following documents are filed as part of this report:

(a) 1.
 
Financial Statements --
 
       
   
Managements Report
F-2
       
   
Consolidated Balance Sheets as of October 31, 2010 and 2009
F-3
       
   
Consolidated Statements of Operations and Comprehensive (Loss) Income for the years ended October 31, 2010, 2009 and 2008
F-5
       
   
Consolidated Statements of Stockholders' Equity for the years ended October 31, 2010, 2009 and 2008
F-7
       
   
Consolidated Statements of Cash Flows for the years ended October 31, 2010, 2009 and 2008
F-8
       
   
Notes to Consolidated Financial Statements
F-10


MANAGEMENTS  REPORT


To the Stockholders of Canal Capital Corporation:
 
As a Stockholder of Canal Capital Corporation you should be aware that due to financial constraints Canal’s fiscal 2010 and 2009 Financial Statements have been presented in this Form 10k without benefit of independent audit.

Management has prepared the accompanying consolidated balance sheets of CANAL Capital Corporation (a Delaware corporation) and Subsidiaries (the “Company”) as of October 31, 2010 and 2009, and the related consolidated statements of operations and comprehensive (loss) income, stockholders’ equity, and cash flows for each of the three years in the period ended October 31, 2010.

Canals’ fiscal 2010 and 2009 consolidated financial statements have been prepared, by management,  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. Management continually evaluates 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.
 
Dated: January 24, 2011
Dated: January 24, 2011
   
   
/S/ Michael E. Schultz
/S/ Reginald Schauder
Chief Executive Officer
Chief Financial officer

 
CANAL CAPITAL CORPORATION & SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS

 
   
October 31,
 
   
2010
   
2009
 
             
ASSETS
 
UNAUDITED
   
UNAUDITED
 
             
CURRENT ASSETS:
           
             
CASH AND CASH EQUIVALENTS
  $ 510,361     $ 154,624  
                 
NOTES AND ACCOUNTS RECEIVABLE, NET OF AN ALLOWANCE FOR DOUBTFUL ACCOUNTS OF ZERO AT BOTH OCTOBER 31, 2010 AND 2009
    138,879       72,702  
                 
STOCKYARDS INVENTORY
    14,608       16,586  
                 
PREPAID EXPENSES
    12,461       16,965  
                 
TOTAL CURRENT ASSETS
    676,309       260,877  
                 
NON-CURRENT ASSETS:
               
                 
PROPERTY ON OPERATING LEASES, NET OF ACCUMULATED DEPRECIATION OF $ 472,399 AND $ 450,199 AT OCTOBER 31, 2010 AND 2009, RESPECTIVELY
    1,391,407       1,073,607  
                 
PROPERTY USED IN STOCKYARD OPERATIONS, NET OF ACCUMULATED DEPRECIATION OF $ 191,857 AND $ 178,386 AT OCTOBER 31, 2010 AND 2009, RESPECTIVELY
    532,672       988,322  
                 
ART INVENTORY, NET OF A VALUATION ALLOWANCE OF $ 396,522 AND $396,522 AT OCTOBER 31, 2010 AND 2009, RESPECTIVELY
    100,000       100,000  
                 
OTHER ASSETS:
               
                 
PROPERTY HELD FOR DEVELOPMENT OR RESALE
    52,250       272,525  
RESTRICTED CASH - LETTER OF CREDIT
    140,000       130,000  
RESTRICTED CASH - TRANSIT INSURANCE
    26,000       30,690  
DEPOSITS AND OTHER
    0       0  
                 
      218,250       433,215  
                 
    $ 2,918,638     $ 2,856,021  


SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.

 
CANAL CAPITAL CORPORATION & SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS

 
   
October 31,
 
   
2010
   
2009
 
             
LIABILITIES & STOCKHOLDERS' EQUITY
 
UNAUDITED
   
UNAUDITED
 
             
CURRENT LIABILITIES:
           
ACCOUNTS PAYABLE AND OTHER ACCRUED EXPENSES
  $ 293,827     $ 194,394  
SALARIES AND INTEREST PAYABLE - OFFICERS
    175,000       0  
ACCRUED PROFESSIONAL FEES
    55,000       84,570  
INCOME TAXES PAYABLE
    10,000       10,000  
                 
TOTAL CURRENT LIABILITIES
    533,827       288,964  
                 
NON-CURRENT LIABILITIES:
               
LONG-TERM PENSION LIABILITY
    869,676       796,672  
PREFERRED STOCK DIVIDEND PAYABLE
    169,550       157,735  
REAL ESTATE TAXES PAYABLE
    44,543       141,725  
TOTAL NON-CURRENT LIABILITIES
    1,083,769       1,096,132  
                 
                 
LONG-TERM DEBT, RELATED PARTY
    847,000       992,000  
                 
COMMITMENTS AND CONTINGENCIES NOTE 15
               
                 
STOCKHOLDERS' EQUITY:
               
                 
PREFERRED STOCK, $0.01 PAR VALUE: 10,000,000 SHARES AUTHORIZED; 9,102,655 AND 9,102,655 SHARES ISSUED AND OUTSTANDING AT  OCTOBER 31, 2010 AND 2009, RESPECTIVELY AND AGGREGATE LIQUIDATION PREFERENCE OF $10.00 PER SHARE FOR $ 91,026,550 AND $ 91,026,550 AT OCTOBER 31, 2010 AND 2009, RESPECTIVELY
    91,027       91,027  
                 
 
               
COMMON STOCK, $0.01 PAR VALUE: 10,000,000 SHARES AUTHORIZED; 5,313,794 SHARES ISSUED & 4,326,929 SHARES OUTSTANDING AT OCTOBER 31, 2010 AND 2009, RESPECTIVELY
    53,138       53,138  
                 
ADDITIONAL PAID-IN CAPITAL
    28,322,341       28,322,341  
                 
ACCUMULATED DEFICIT
    (15,114,546 )     (15,068,051 )
 
               
986,865 SHARES OF COMMON STOCK HELD IN TREASURY, AT COST
    (11,003,545 )     (11,003,545 )
                 
COMPREHENSIVE INCOME (LOSS): PENSION VALUATION RESERVE
    (1,894,373 )     (1,915,985 )
                 
      454,042       478,925  
                 
    $ 2,918,638     $ 2,856,021  


 SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.

 
CANAL CAPITAL CORPORATION & SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS AND
COMPREHENSIVE (LOSS) INCOME


   
October 31,
 
   
UNAUDITED
   
UNAUDITED
   
AUDITED
 
   
2010
   
2009
   
2008
 
                   
REAL ESTATE OPERATIONS:
 
 
             
                   
REAL ESTATE REVENUES:
                 
SALE OF REAL ESTATE
  $ 2,000,000     $ 1,537,070     $ 1,190,000  
OUTSIDE REAL ESTATE RENT
    274,862       376,941       458,086  
EXCHANGE BUILDING RENT
    10,414       27,525       33,270  
      2,285,276       1,941,536       1,681,356  
                         
REAL ESTATE EXPENSES:
                       
COST OF REAL ESTATE SOLD
    1,341,474       777,859       177,368  
LABOR, OPERATING AND MAINTENANCE
    24,526       56,006       78,979  
DEPRECIATION AND AMORTIZATION
    22,200       22,200       22,200  
TAXES OTHER THAN INCOME TAXES
    21,600       24,600       26,061  
GENERAL AND ADMINISTRATIVE
    21,961       40,335       44,585  
      1,431,761       921,000       349,193  
                         
INCOME FROM REAL ESTATE OPERATIONS
    853,515       1,020,536       1,332,163  
                         
STOCKYARD OPERATIONS:
                       
                         
STOCKYARD REVENUES:
                       
                         
YARD HANDLING AND AUCTION
    1,660,843       2,254,258       2,429,621  
FEED AND BEDDING INCOME
    99,974       180,561       189,004  
RENTAL & OTHER INCOME
    242,014       156,463       150,005  
      2,002,831       2,591,282       2,768,630  
                         
STOCKYARD EXPENSES:
                       
LABOR AND RELATED COSTS
    781,058       1,143,414       1,399,164  
OTHER OPERATING AND MAINTENANCE
    492,031       700,060       844,887  
FEED AND BEDDING EXPENSE
    84,545       131,985       173,371  
DEPRECIATION AND AMORTIZATION
    13,470       21,274       19,817  
TAXES OTHER THAN INCOME TAXES
    146,014       163,448       168,030  
GENERAL AND ADMINISTRATIVE
    303,472       359,947       353,945  
      1,820,590       2,520,128       2,959,214  
                         
INCOME (LOSS) FROM STOCKYARD OPERATIONS
    182,241       71,154       (190,584 )
                         
                         
GENERAL AND ADMINISTRATIVE EXPENSE
    (923,946 )     (956,428 )     (1,070,536 )
                         
                         
INCOME (LOSS) FROM OPERATIONS
    111,810       135,262       71,043  


SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.

 
CANAL CAPITAL CORPORATION & SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS AND
COMPREHENSIVE (LOSS) INCOME
Continued


   
October 31,
 
   
UNAUDITED
   
UNAUDITED
   
AUDITED
 
   
2010
   
2009
   
2008
 
                   
                   
OTHER (EXPENSES) INCOME:
                 
                   
INTEREST AND OTHER INCOME
    24,461       32,010       55,021  
                         
INTEREST EXPENSE-RELATED PARTY
    (125,766 )     (132,173 )     (176,776 )
                         
INCOME (LOSS) FROM ART OPERATIONS
    0       (4,800 )     (4,800 )
                         
OTHER EXPENSE
    0       0       0  
                         
      (101,305 )     (104,963 )     (126,555 )
                         
                         
INCOME (LOSS) BEFORE PROVISION FOR INCOME TAXES
    10,505       30,299       (55,512 )
                         
PROVISION FOR INCOME TAXES
    0       0       0