~~SECURITIES~~UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549

Washington, D.C. 20549

FORM 10-Q

x	QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) of
	THE SECURITIES EXCHANGE ACT OF 1934
	For the quarterly period ended JULY 31, 2011
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

[X] QUARTERLY REPORT UNDER SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

~~CANAL~~For ~~CAPITAL~~the ~~CORPORATION~~quarterly period ended April 30, 2012

~~(Exact~~TRANSITION ~~name~~REPORT ofUNDER ~~registrant~~SECTION as13 ~~specified~~or in15(d) ~~its~~OF ~~charter)~~THE SECURITIES EXCHANGE ACT OF 1934

Delaware		51-0102492
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification Number)

For the transition period from __________ to __________

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

002-96666
(Commission File Number)

~~Indicate~~CANAL byCAPITAL ~~check mark whether the registrant~~ CORPORATION (1)Exact ~~has~~name ~~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~~as ~~required~~specified toin ~~file~~its ~~such reports~~charter), ~~and (2) has been subject to such filing requirements for the past 90 days. Yes x No~~

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

Delaware	51-0102492
(State or other jurisdiction of	(I.R.S. Employer Identification Number)
incorporation or organization)

~~Indicate~~4 byMorris ~~check~~Street ~~mark~~Port ~~whether~~Jefferson ~~the Registrant is a large accelerated filer~~Station, anNew ~~accelerated~~York 11776 ~~filer,~~United orStates ~~a non-accelerated filer. See definition~~ of ~~“accelerated~~America ~~filer~~(Address ~~and large accelerated filer” in Rule 12b-2~~ of ~~the~~principal executive ~~Exchange Act. (Check one~~offices):

~~Large~~(631) ~~accelerated~~234-0140 ~~filer~~(Registrant's otelephone ~~Accelerated~~number, including ~~filer~~area ocode) ~~Non-accelerated filer x~~

~~Indicate~~N/A by(Former ~~check~~name, ~~mark~~address ~~whether~~and ~~the~~former ~~Registrant~~fiscal year, isif achanged ~~shell~~since ~~company~~last ~~(as defined in Rule 12b-2 of the Exchange Act~~report)~~. Yes~~ ~~o Nox~~

~~The~~Indicate ~~number~~by check mark whether the issuer (1) has filed all reports required to be filed by Section 13 or 15(d) of ~~shares~~the Securities Exchange Act of ~~Common~~1934 ~~Stock,~~during ~~$.01~~the ~~par~~preceding ~~value,~~12 ~~outstanding~~months at(or ~~August~~for ~~31,~~such ~~2011~~shorter period that the registrant was 4required to file such reports),~~326,929~~ and (2) has been subject to such filing requirements for the past 90 days. Yes [_] No [X]

~~CANAL~~Indicate ~~CAPITAL~~by ~~CORPORATION~~check ~~AND~~mark ~~SUBSIDIARIES~~whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes [_] No [_]

~~FORM~~Indicate 10by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-Qaccelerated ~~JULY~~filer, 31or a smaller reporting company. See definition of “large accelerated filer,” ~~2011~~“accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

~~INDEX~~Large accelerated filer [_] Accelerated filer [_] Non-accelerated filer [_] Smaller reporting company [X]

~~The~~Indicate ~~following~~by ~~documents~~check ~~are~~mark ~~filed~~whether the Registrant is a shell company (as ~~part~~defined in Rule 12b-2 of ~~this~~the ~~report:~~Exchange Act). Yes [_] No [X]

Part I -	Financial Information:	3
Item I .	Condensed Financial Statements:
Consolidated Balance Sheets - July 31, 2011 and October 31, 2010		4
Consolidated Statements of Operations and Comprehensive Income (Loss) for the Nine Month Periods ended April 30, 2011 and 2010		6
Consolidated Statements of Changes in Stockholders’ Equity for the One Year and Nine Month Periods ended October 31, 2010 and July 31, 2011		10
Consolidated Statements of Cash Flows for the Nine Month Periods ended July 31, 2011 and 2010		11
Notes to Consolidated Financial Statements		13
Item II	Management’s Discussion and Analysis of Financial Condition	28
Liquidity and Capital Resources		37
Other Factors		38
Item III	Quantitative and Qualitative Disclosures About Market Risk	39
Item IV	Controls and Procedures	39
Part II	Other Information	40
Items 1 through 6		41
Signatures and Certifications		42

State the number of shares outstanding of each of the Issuers classes of common equity, as of the latest practicable date:

Common Stock, $.01 par value per share: 4,326,929 outstanding at June 15, 2012.

EXPLANATORY NOTE

As a result of financial constraints, the Company’s financial statements for the fiscal years ended October 31, 2011, 2010 and 2009, and for the interim fiscal quarters had not been previously audited or reviewed by an independent auditor. In February 2012, the Company received notice from the SEC of its obligation to file audited and reviewed financial statements with its periodic reports and the nine reports outlined above were appropriately amended and filed with the SEC on October 30, 2012. This report is the second of the final three filings which the Company expects to file in order to become fully compliant with its reporting requirements with SEC. The Company expects to be fully compliant on or before January 31, 2013.

Where indicated, the financial data presented in the 10-Q is as of April 30, 2012, however, the other disclosures have been updated to reflect the Company’s operations as at the date of this filing.

~~Index~~CANAL CAPITAL CORPORATION

TABLE OF CONTENTS

PART I - FINANCIAL INFORMATION
		PAGE
ITEM 1.	INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS	4
ITEM 2.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	23
ITEM 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	31
ITEM 4.	CONTROLS AND PROCEDURES	32

PART II – OTHER INFORMATION

ITEM 1.	LEGAL PROCEEDINGS	33
ITEM 1A.	RISK FACTORS	34
ITEM 2.	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	34
ITEM 3.	DEFAULTS UPON SENIOR SECURITIES	34
ITEM 4.	MINE SAFETY DISCLOSURES	34
ITEM 5.	OTHER INFORMATION	34
ITEM 6.	EXHIBITS	34
SIGNATURES		35

PART I

FINANCIAL INFORMATION

3ITEM 1. FINANCIAL STATEMENTS

Index

Consolidated Balance Sheets (Unaudited) – April 30, 2012 and October 31, 2011	5

Consolidated Statements of Operations and Comprehensive Income (Loss)(Unaudited) for the Six and Three Month Periods ended April 30, 2012 and 2011	7

Consolidated Statements of Cash Flows (Unaudited) for the Six Month Periods ended April 30, 2012 and 2011	11

Notes to Unaudited Consolidated Financial Statements	13

~~CANAL~~4 ~~CAPITAL CORPORATION & SUBSIDIARIES~~

CANAL CAPITAL CORPORATION & SUBSIDIARIES CONSOLIDATED BALANCE SHEETS APRIL 30, 2012 (UNAUDITED) AND OCTOBER 31, 2011

JULY 31, 2011 AND OCTOBER 31, 2010

		APRIL 30,		OCTOBER 31,
		2012		2011
ASSETS:
CURRENT ASSETS:
CASH AND CASH EQUIVALENTS	$	191,152	$	35,514
RESTRICTED CASH – TRANSIT INSURANCE		83,711		35,484
ACCOUNTS RECEIVABLE		214,634		120,300
STOCKYARDS INVENTORY		8,274		20,749
PREPAID EXPENSES		49,691		13,948
TOTAL CURRENT ASSETS		547,462		225,995


NON-CURRENT ASSETS:
PROPERTY ON OPERATING LEASES, NET OF ACCUMULATED DEPRECIATION OF $505,699 AND $494,599 AT APRIL 30, 2012 AND OCTOBER 31, 2011, RESPECTIVELY		1,181,908		1,668,008

PROPERTY USED IN STOCKYARD OPERATIONS, NET OF ACCUMULATED DEPRECIATION OF $221,857 AND $212,257 AT APRIL 30, 2012 AND OCTOBER 31, 2011, RESPECTIVELY		1,062,667		1,072,267

PROPERTY HELD FOR DEVELOPMENT OR RESALE		52,250		52,250

OTHER ASSETS:
RESTRICTED CASH – LETTER OF CREDIT		155,000		140,000
ART INVENTORY		10,000		10,000
		165,000		150,000
	$	3,009,287	$	3,168,520

	JULY 31,		OCT. 31,
	2011		2010
	(UNAUDITED)		(UNAUDITED)
ASSETS:
CURRENT ASSETS:
CASH AND CASH EQUIVALENTS	$	78,472	$	510,361
NOTES AND ACCOUNTS RECEIVABLE, NET OF AN ALLOWANCE FOR DOUBTFUL ACCOUNTS OF $ZERO AT BOTH JULY 31, 2011 AND OCTOBER 31, 2010,		71,784		138,879
STOCKYARDS INVENTORY		1,260		14,608
PREPAID EXPENSES		29,642		12,461
TOTAL CURRENT ASSETS		181,158		676,309
NON-CURRENT ASSETS:
PROPERTY ON OPERATING LEASES, NET OF ACCUMULATED DEPRECIATION OF $489,049AND $472,399 AT JULY 31, 2011 AND OCTOBER 31, 2010, RESPECTIVELY		1,388,557		1,391,407
PROPERTY USED IN STOCKYARD OPERATIONS, NET OF ACCUMULATED DEPRECIATION OF $207,157 AND $191,857 AT JULY 31, 2011 AND OCTOBER 31, 2010, RESPECTIVELY		554,282		532,672
ART INVENTORY, NET OF A VALUATION ALLOWANCE OF $396,522 AT BOTH JULY 31, 2011 AND OCTOBER 31, 2010		100,000		100,000
OTHER ASSETS:
PROPERTY HELD FOR DEVELOPMENT OR RESALE		52,250		52,250
RESTRICTED CASH – LETTER OF CREDIT		140,000		140,000
RESTRICTED CASH - TRANSIT INSURANCE		40,700		26,000
DEPOSITS AND OTHER ASSETS		0		0
		232,950		218,250
	$	2,456,947	$	2,918,638

SEE ACCOMPANYING NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS.

~~SEE~~5 ~~ACCOMPANYING NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS.~~

4CANAL CAPITAL CORPORATION & SUBSIDIARIES CONSOLIDATED BALANCE SHEETS APRIL 30, 2012 (UNAUDITED) AND OCTOBER 31, 2011

Index

		APRIL 30,			OCTOBER 31,
		2012			2011

LIABILITIES & STOCKHOLDERS' EQUITY:

CURRENT LIABILITIES:
ACCOUNTS PAYABLE AND ACCRUED EXPENSES	$	134,634		$	160,370
LINE OF CREDIT – ORDER BUYING		164,050			106,395
TRANSIT INSURANCE		83,711			35,484

TOTAL CURRENT LIABILITIES		382,395			302,249


NON-CURRENT LIABILITIES:
LONG-TERM DEBT, RELATED PARTY		564,000			847,000
LONG-TERM PENSION LIABILITY		630,761			812,820
SALARIES AND INTEREST PAYABLE – OFFICERS		480,600			458,700
REAL ESTATE TAXES PAYABLE		56,867			56,200

TOTAL NON-CURRENT LIABILITIES		1,732,228			2,174,720


COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS' EQUITY:

PREFERRED STOCK, $0.01 PAR VALUE:
10,000,000 SHARES AUTHORIZED; 9,102,655 SHARES ISSUED AND OUTSTANDING AT APRIL 30, 2012 AND OCTOBER 31, 2011, RESPECTIVELY AND AGGREGATE LIQUIDATION PREFERENCE OF $10 PER SHARE FOR $ 91,026,550 AT APRIL 30, 2012 AND OCTOBER 31, 2011, RESPECTIVELY		91,027			91,027

COMMON STOCK, $0.01 PAR VALUE:
10,000,000 SHARES AUTHORIZED; 5,313,794 SHARES ISSUED AND 4,326,929 SHARES OUT- STANDING AT APRIL 30, 2012 AND OCTOBER 31, 2011, RESPECTIVELY		53,138			53,138

ADDITIONAL PAID-IN CAPITAL		25,526,721			25,526,721

ACCUMULATED DEFICIT		(11,907,551	)		(12,056,664	)

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

COMPREHENSIVE INCOME:
PENSION VALUATION RESERVE		(1,865,126	)		(1,919,126	)

		894,664			691,551

	$	3,009,287		$	3,168,520

~~CANAL~~SEE ~~CAPITAL~~ACCOMPANYING ~~CORPORATION~~NOTES &TO ~~SUBSIDIARIES~~THE CONSOLIDATED FINANCIAL STATEMENTS.

~~CONSOLIDATED~~6 ~~BALANCE SHEETS~~

~~JULY~~CANAL ~~31,~~CAPITAL ~~2011~~CORPORATION & SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS AND ~~OCTOBER~~COMPREHENSIVE 31INCOME (LOSS) FOR THE SIX MONTHS ENDED APRIL 30, ~~2010~~2012 AND 2011 (UNAUDITED)

	JULY 31, 2011				OCT.31, 2010
	2012			2011
	(UNAUDITED)				(UNAUDITED)
REAL ESTATE OPERATIONS:
LIABILITIES & STOCKHOLDERS' EQUITY:
REAL ESTATE REVENUES:
CURRENT LIABILITIES:
SALE OF REAL ESTATE	852,000			0
ACCOUNTS PAYABLE AND ACCRUED EXPENSES	$	73,886			$	267,827
OUTSIDE REAL ESTATE RENT	133,045			136,488
ACCRUED PROFESSIONAL FEES		37,205				55,000
EXCHANGE BUILDING RENTAL INCOME	0			0
INCOME TAXES PAYABLE		10,000				10,000
	985,045			136,488
TOTAL CURRENT LIABILITIES		121,091				332,827
REAL ESTATE EXPENSES:
NON-CURRENT LIABILITIES:
COST OF REAL ESTATE SOLD	505,821			0
LONG-TERM PENSION LIABILITY		714,830				869,676
LABOR, OPERATING AND MAINTENANCE	4,828			4,534
PREFERRED STOCK DIVIDEND PAYABLE		223,550				169,550
DEPRECIATION AND AMORTIZATION	11,100			11,100
SALARIES AND INTEREST PAYABLE – OFFICERS		344,025				175,000
TAXES OTHER THAN INCOME TAXES	7,500			7,500
REAL ESTATE TAXES PAYABLE		55,182				44,543
GENERAL AND ADMINISTRATIVE	5,100			5,100
OTHER NON-CURRENT LIABILITIES		40,700				26,000
	534,349			28,234
TOTAL NON-CURRENT LIABILITIES		1,378,287				1,284,769
INCOME FROM REAL ESTATE OPERATIONS	450,696			108,254
LONG-TERM DEBT, RELATED PARTY		847,000				847,000
GENERAL AND ADMINISTRATIVE EXPENSE	(487,974	)		(414,027	)
COMMITMENTS AND CONTINGENCIES
(LOSS) FROM CONTINUING OPERATIONS	(37,278	)		(305,773	)
STOCKHOLDERS' EQUITY:
OTHER (EXPENSE) INCOME:
PREFERRED STOCK, $0.01 PAR VALUE:10,000,000 SHARES AUTHORIZED; 9,102,655SHARES ISSUED AND OUTSTANDING AT JULY 31,2011 AND OCTOBER 31, 2010, RESPECTIVELY AND AGGREGATE LIQUIDATION PREFERENCE OF $10 PER SHARE FOR $ 91,026,550 AT JULY 31, 2011AND OCTOBER 31, 2010, RESPECTIVELY		91,027				91,027
INTEREST & OTHER INCOME	272			269
COMMON STOCK, $0.01 PAR VALUE:10,000,000 SHARES AUTHORIZED; 5,313,794SHARES ISSUED AND 4,326,929 SHARES OUT-STANDING AT JULY 31, 2011 AND OCTOBER 31,2010, RESPECTIVELY		53,138				53,138
INTEREST EXPENSE	(44,629	)		(42,350	)
ADDITIONAL PAID-IN CAPITAL		28,322,341				28,322,341
ART SALES AND OPERATIONS	0			0
ACCUMULATED DEFICIT		(15,539,019.00	)			(15,114,546.00	)
	(44,357	)		(42,081	)
986,865 SHARES OF COMMON STOCK HELD IN TREASURY, AT COST		(11,003,545.00	)			(11,003,545.00	)
(LOSS) INCOME BEFORE PROVISION FOR INCOME TAXES	(81,635	)		(347,854	)
COMPREHENSIVE INCOME:
PROVISION FOR INCOME TAXES	0			0
PENSION VALUATION RESERVE		(1,813,373.00	)			(1,894,373.00	)
(LOSS) FROM CONTINUING OPERATIONS	(81,635	)		(347,854	)
		110,569			454,042
	$	2,456,947			$	2,918,638

SEE ACCOMPANYING NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS.

~~Index~~CANAL CAPITAL CORPORATION & SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS) FOR THE SIX MONTHS ENDED APRIL 30, 2012 AND 2011 Continued

CANAL CAPITAL CORPORATION & SUBSIDIARIES

		2012		2011

DISCONTINUED STOCKYARD OPERATIONS:

STOCKYARD REVENUES:
YARD HANDLING AND AUCTION	$	1,095,691	$	1,039,421
FEED AND BEDDING INCOME		69,787		67,063
RENTAL & OTHER INCOME		82,763		65,158
		1,248,241		1,171,642

STOCKYARD EXPENSES:
LABOR AND RELATED COSTS		425,201		411,153
OTHER OPERATING AND MAINTENANCE		266,836		239,682
FEED AND BEDDING EXPENSE		65,492		50,114
DEPRECIATION AND AMORTIZATION		9,600		10,200
TAXES OTHER THAN INCOME TAXES		40,953		40,396
GENERAL AND ADMINISTRATIVE		209,411		201,184
		1,017,493		952,729

INCOME FROM DISCONTINUED STKY OPERATIONS		230,748		218,913


NET INCOME (LOSS)		149,113		(128,941	)

OTHER COMPREHENSIVE INCOME (LOSS):

MINIMUM PENSION LIABILITY ADJUSTMENT		54,000		54,000

COMPREHENSIVE INCOME (LOSS)	$	203,113	$	(74,941	)

NET INCOME (LOSS) PER COMMON SHARE
BASIC AND DILUTED	$	0.03	$	(0.03	)

WEIGHTED AVERAGE SHARES OUTSTANDING
BASIC AND DILUTED		4,326,929		4,326,929

~~CONSOLIDATED~~SEE ~~STATEMENTS~~ACCOMPANYING OFNOTES ~~OPERATIONS~~TO &THE ~~COMPREHENSIVE~~CONSOLIDATED ~~INCOME~~FINANCIAL ~~(LOSS)~~STATEMENTS.

~~FOR~~8 ~~THE NINE MONTHS ENDED JULY 31, 2011 AND 2010~~

	2011			2010
	(UNAUDITED)			(UNAUDITED)
REAL ESTATE OPERATIONS:
REAL ESTATE REVENUES:
SALE OF REAL ESTATE		0			0
OUTSIDE REAL ESTATE RENT		202,732			202,284
EXCHANGE BUILDING RENTAL INCOME		0			14,493
		202,732			216,777
REAL ESTATE EXPENSES:
COST OF REAL ESTATE SOLD		0			0
LABOR, OPERATING AND MAINTENANCE		7,034			19,343
DEPRECIATION AND AMORTIZATION		16,650			16,650
TAXES OTHER THAN INCOME TAXES		11,250			16,550
GENERAL AND ADMINISTRATIVE		7,650			16,873
		42,584			69,416
INCOME FROM REAL ESTATE OPERATIONS		160,148			147,361
STOCKYARD OPERATIONS:
STOCKYARD REVENUES:
YARD HANDLING AND AUCTION	$	1,255,424		$	1,353,303
FEED AND BEDDING INCOME		83,224			79,836
RENTAL & OTHER INCOME		92,629			214,369
		1,431,277			1,647,508
STOCKYARD EXPENSES:
LABOR AND RELATED COSTS		562,070			610,017
OTHER OPERATING AND MAINTENANCE		332,280			386,417
FEED AND BEDDING EXPENSE		66,311			66,125
DEPRECIATION AND AMORTIZATION		15,300			10,103
TAXES OTHER THAN INCOME TAXES		56,909			116,272
GENERAL AND ADMINISTRATIVE		246,315			244,123
		1,279,185			1,433,057
INCOME (LOSS) FROM STOCKYARD OPERATIONS		152,092			214,451
GENERAL AND ADMINISTRATIVE EXPENSE		(619,510.00	)		(627,896.00	)
(LOSS) INCOME FROM OPERATIONS		(307,270.00	)		(266,084.00	)

CANAL CAPITAL CORPORATION & SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

AND COMPREHENSIVE INCOME (LOSS)

FOR THE THREE MONTHS ENDED APRIL 30, 2012 AND 2011

(UNAUDITED)

SEE ACCOMPANYING NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS.

	2012		2011
REAL ESTATE OPERATIONS:
REAL ESTATE REVENUES:
SALE OF REAL ESTATE	852,000		0
OUTSIDE REAL ESTATE RENT	62,801		66,244
EXCHANGE BUILDING RENTAL INCOME	0		0
	914,801		66,244
REAL ESTATE EXPENSES:
COST OF REAL ESTATE SOLD	505,821		0
LABOR, OPERATING AND MAINTENANCE	2,289		2,204
DEPRECIATION AND AMORTIZATION	5,550		5,550
TAXES OTHER THAN INCOME TAXES	3,750		3,750
GENERAL AND ADMINISTRATIVE	2,550		2,550
	519,960		14,054
INCOME FROM REAL ESTATE OPERATIONS	394,841		52,190

GENERAL AND ADMINISTRATIVE EXPENSE	(280,253	)	(208,167	)

INCOME (LOSS) FROM CONTINUING OPERATIONS	114,588		(155,977	)

OTHER (EXPENSE) INCOME:
INTEREST & OTHER INCOME	152		52
INTEREST EXPENSE	(23,454	)	(21,175	)
ART SALES AND OPERATIONS	0		0
	(23,302	)	(21,123	)

INCOME (LOSS) BEFORE PROVISION FOR INCOME TAXES	91,286		(177,100	)
PROVISION FOR INCOME TAXES	0		0
INCOME (LOSS) FROM CONTINUING OPERATIONS	91,286		(177,100	)

6SEE ACCOMPANYING NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS.

~~Index~~9

CANAL CAPITAL CORPORATION & SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS) FOR THE THREE MONTHS ENDED APRIL 30, 2012 AND 2011 Continued

CONSOLIDATED STATEMENTS OF OPERATIONS & COMPREHENSIVE INCOME (LOSS)

		2012		2011

DISCONTINUED STOCKYARD OPERATIONS:

STOCKYARD REVENUES:
YARD HANDLING AND AUCTION	$	481,226	$	533,348
FEED AND BEDDING INCOME		26,500		27,165
RENTAL & OTHER INCOME		50,945		32,312
		558,671		592,825

STOCKYARD EXPENSES:
LABOR AND RELATED COSTS		206,418		205,508
OTHER OPERATING AND MAINTENANCE		147,618		132,516
FEED AND BEDDING EXPENSE		27,615		21,308
DEPRECIATION AND AMORTIZATION		4,800		5,100
TAXES OTHER THAN INCOME TAXES		19,805		20,181
GENERAL AND ADMINISTRATIVE		99,904		97,583
		506,160		482,196

INCOME FROM DISCONTINUED STKY OPERATIONS		52,511		110,629

NET INCOME (LOSS)		143,797		(66,471	)

OTHER COMPREHENSIVE INCOME (LOSS):

MINIMUM PENSION LIABILITY ADJUSTMENT		27,000		27,000

COMPREHENSIVE INCOME (LOSS)	$	170,797	$	(39,471	)

NET INCOME (LOSS) PER COMMON SHARE
BASIC AND DILUTED	$	0.03	$	(0.02	)

WEIGHTED AVERAGE SHARES OUTSTANDING
BASIC AND DILUTED		4,326,929		4,326,929

~~FOR~~SEE ~~THE~~ACCOMPANYING ~~NINE~~NOTES ~~MONTHS~~TO ~~ENDED~~THE ~~JULY~~CONSOLIDATED ~~31,~~FINANCIAL ~~2011 AND 2010~~STATEMENTS.

~~Continued~~10 ~~...~~

	2011			2010
	(UNAUDITED)			(UNAUDITED)
OTHER (EXPENSE) INCOME:
INTEREST & OTHER INCOME		322			407
INTEREST EXPENSE		(63,525.00	)		(88,179.00	)
ART SALES AND OPERATIONS		0		0
		(63,203.00	)		(87,772.00	)
(LOSS) INCOME BEFORE PROVISION FOR INCOME TAXES		(370,473.00	)		(353,856.00	)
PROVISION FOR INCOME TAXES		0		0
NET (LOSS) INCOME		(370,473	)		(353,856	)
OTHER COMPREHENSIVE (LOSS) INCOME:
MINIMUM PENSION LIABILITY ADJUSTMENT		81,000		81,000
COMPREHENSIVE (LOSS) INCOME	$	(289,473	)	$	(272,856	)
(LOSS) EARNINGS PER COMMON SHARE:
NET (LOSS) INCOME	$	(370,473	)	$	(353,856	)
LESS PREFERRED STOCK DIVIDEND		(54,000.00	)		(54,000.00	)
(LOSS) INCOME AVAILABLE TO COMMON STKDERS	$	(424,473	)	$	(407,856	)
NET (LOSS) INCOME PER COMMON SHARE BASIC AND DILUTED	$	(0.10	)	$	(0.09	)
AVERAGE SHARES OUTSTANDING - BASIC AND DILUTED		4,326,929			4,326,929

CANAL CAPITAL CORPORATION & SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE SIX MONTHS ENDED APRIL 30, 2012 AND 2011

(UNAUDITED)

SEE ACCOMPANYING NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS.

		2012			2011
CASH FLOWS FROM OPERATING ACTIVITIES:
NET (LOSS)	$	149,113		$	(128,941	)
ADJUSTMENTS TO RECONCILE NET LOSS TO NET CASH (USED IN) PROVIDED BY OPERATING ACTIVITIES:
DEPRECIATION AND AMORTIZATION		20,700			21,300
GAIN ON SALES OF REAL ESTATE		(346,179	)		0
MINIMUM PENSION LIABILITY ADJUSTMENT		54,000			54,000

DECREASE (INCREASE) IN OPERATING ASSETS
ACCOUNTS RECEIVABLE		(94,334	)		17,049
STOCKYARDS INVENTORY		12,475			(8,531	)
PREPAID EXPENSES		(35,743	)		(39,855	)
RESTRICTED CASH – LETTER OF CREDIT		(15,000	)		0
RESTRICTED CASH – TRANSIT INSURANCE		(48,227	)		(44,652	)

INCREASE (DECREASE) IN OPERATING LIABILITIES:
ACCOUNTS PAYABLE AND ACCRUED EXPENSES		(25,736	)		(93,435	)
LINE OF CREDIT – ORDER BUYING		57,655			(57,000	)
PENSION PLAN PAYABLE		(182,059	)		(146,470	)
SALARIES AND INTEREST PAYABLE - OFFICERS		21,900			54,350
REAL ESTATE TAXES PAYABLE		667			889
TRANSIT INSURANCE		48,227			44,652
TOTAL ADJUSTMENTS		(531,654	)		(197,703	)
NET CASH (USED IN) PROVIDED BY OPERATING ACTIVITIES		(382,541	)		(326,644	)

7SEE ACCOMPANYING NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS.

~~Index~~11

CANAL CAPITAL CORPORATION & SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE SIX MONTHS ENDED APRIL 30, 2012 AND 2011 Continued

CONSOLIDATED STATEMENTS OF OPERATIONS & COMPREHENSIVE INCOME (LOSS)

		2012			2011

CASH FLOWS FROM INVESTING ACTIVITIES:

PROCEEDS FROM SALES OF REAL ESTATE		852,000			0
COSTS RELATING TO SALES OF REAL ESTATE		(30,821	)		0
CAPITAL EXPENDITURES		0			(7,500	)

NET CASH PROVIDED BY INVESTING ACTIVITIES		821,179			(7,500	)

CASH FLOWS (USED IN) PROVIDED BY FINANCING ACTIVITIES:

PROCEEDS FROM LONG-TERM DEBT OBLIGATION		(283,000	)		0
REPAYMENT OF LONG-TERM DEBT OBLIGATION		0			0

NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES		(283,000	)		0

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS		155,638			(334,144	)

CASH AND CASH EQUIVALENTS AT BEGN OF YEAR		35,514			510,361

CASH AND CASH EQUIVALENTS AT END OF YEAR	$	191,152		$	176,217

		APRIL 30,
		2012			2011
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:

CASH PAID DURING THE YEAR FOR:

INTEREST	$	44,629		$	42,350
INCOME TAXES	$	0		$	0

~~FOR~~SEE ~~THE~~ACCOMPANYING ~~THREE~~NOTES ~~MONTHS~~TO ~~ENDED~~THE ~~JULY~~CONSOLIDATED ~~31,~~FINANCIAL ~~2011 AND 2010~~STATEMENTS.

	2011			2010
	(UNAUDITED)			(UNAUDITED)
REAL ESTATE OPERATIONS:
REAL ESTATE REVENUES:
SALE OF REAL ESTATE		0			0
OUTSIDE REAL ESTATE RENT		66,244			67,270
EXCHANGE BUILDING RENTAL INCOME		0			2,414
		66,244			69,684
REAL ESTATE EXPENSES:
COST OF REAL ESTATE SOLD		0			0
LABOR, OPERATING AND MAINTENANCE		2,500			5,765
DEPRECIATION AND AMORTIZATION		5,550			5,550
TAXES OTHER THAN INCOME TAXES		3,750			5,550
GENERAL AND ADMINISTRATIVE		2,550			7,257
		14,350			24,122
INCOME FROM REAL ESTATE OPERATIONS		51,894			45,562
STOCKYARD REVENUES:
YARD HANDLING AND AUCTION	$	216,003		$	277,142
FEED AND BEDDING INCOME		16,161			21,817
RENTAL & OTHER INCOME		27,471			34,028
		259,635			332,987
STOCKYARD EXPENSES:
LABOR AND RELATED COSTS		150,917			145,810
OTHER OPERATING AND MAINTENANCE		92,598			111,536
FEED AND BEDDING EXPENSE		16,197			15,826
DEPRECIATION AND AMORTIZATION		5,100			3,368
TAXES OTHER THAN INCOME TAXES		16,513			35,886
GENERAL AND ADMINISTRATIVE		45,131			54,641
		326,456			367,067
INCOME (LOSS) FROM STOCKYARD OPERATIONS		(66,821.00	)		(34,080.00	)
GENERAL AND ADMINISTRATIVE EXPENSE		(205,483.00	)		(208,042.00	)
(LOSS) INCOME FROM OPERATIONS		(220,410.00	)		(196,560.00	)

~~SEE~~CANAL ~~ACCOMPANYING~~CAPITAL CORPORATION AND SUBSIDIARIES NOTES TO ~~THE~~UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS.

81. DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION

~~Index~~Canal Capital Corporation, incorporated in the state of Delaware in 1964, commenced business operations through a predecessor in 1936.

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

~~CONSOLIDATED~~Due ~~STATEMENTS~~to OFcash ~~OPERATIONS~~flow &constraints, ~~COMPREHENSIVE~~the ~~INCOME~~Company has entered a program of closely monitoring and reducing where possible its operating expenses. As part of that program, the Company has sold most of its property and has reduced the level of its art inventories to enhance cash flows. As of the date of this report, the Company has sold its Sioux Falls, South Dakota property (~~LOSS~~formerly used in stockyard operations), two of its three remaining rental properties and its stockyard operations, including the 30 acres of land and the improvements thereon located in St. Joseph, Missouri. The Company’s only remaining real estate property is a rental property located in Omaha, Nebraska. Management is unsure if its income from operations combined with its cost-cutting program and planned reduction of its antiquities art inventory will enable it to finance its future business activities or fund operating cash requirements. In the interim, the Company is undertaking efforts to identify alternative business opportunities for the Company. If for some reason the Company is not able to identify an acceptable alternative business opportunity within a reasonable period of time, it may not have sufficient resources to continue meeting its reporting obligations with the Securities and Exchange Commission or other obligations which arise from its minimal operations. This in turn would severely diminish the ability of the Company to explore alternative business opportunities.

~~FOR~~13 ~~THE THREE MONTHS ENDED JULY 31, 2011 AND 2010~~

~~Continued~~Canal was engaged in two distinct businesses - real estate and stockyard operations. As discussed above, as of the date of this report, Canal is no longer in the stockyards business..

	2011			2010
	(UNAUDITED)			(UNAUDITED)
OTHER (EXPENSE) INCOME:
INTEREST & OTHER INCOME		53			177
INTEREST EXPENSE		(21,175.00	)		(33,300.00	)
ART SALES AND OPERATIONS		0			0
		(21,122.00	)		(33,123.00	)
(LOSS) INCOME BEFORE PROVISION FOR INCOME TAXES		(241,532.00	)		(229,683.00	)
PROVISION FOR INCOME TAXES		0			0
NET (LOSS) INCOME		(241,532.00	)		(229,683.00	)
OTHER COMPREHENSIVE (LOSS) INCOME:
MINIMUM PENSION LIABILITY ADJUSTMENT		27,000			27,000
COMPREHENSIVE (LOSS) INCOME	$	(214,532	)	$	(202,683	)
(LOSS) EARNINGS PER COMMON SHARE:
NET (LOSS) INCOME	$	(241,532	)	$	(229,683	)
LESS PREFERRED STOCK DIVIDEND		(18,000.00	)		(18,000.00	)
(LOSS) INCOME AVAILABLE TO COMMON STKDERS	$	(259,532	)	$	(247,683	)
NET (LOSS) INCOME PER COMMON SHARE BASIC AND DILUTED	$	(0.06	)	$	(0.06	)
AVERAGE SHARES OUTSTANDING - BASIC AND DILUTED		4,326,929			4,326,929

Real Estate Operations - Canal's real estate properties are located in Sioux City, Iowa, South St Paul, Minnesota, St Joseph, Missouri, Omaha, Nebraska and Sioux Falls, South Dakota. The properties consist, for the most part, of 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, and proceeds from the sale of real estate properties.

~~SEE~~In ~~ACCOMPANYING~~April ~~NOTES~~2012, TOCanal ~~THE~~sold ~~CONSOLIDATED~~6 ~~FINANCIAL~~acres ~~STATEMENTS~~of land and the improvements thereon located in Sioux City, Iowa to the company’s Chief Executive Officer, Michael E. Schultz for $852,000 generating a gain of $346,000. Canal repaid $283,000 of its outstanding mortgage notes from the proceeds of this sale.

9Stockyard Operations – At April 30, 2012 Canal operated one central public stockyard located in St. Joseph, Missouri. In August 2012, Canal sold its St. Joseph, Missouri stockyard operation (including approximately 30 acres of land and improvements) for $500,000 generating a loss of $577,000. Canal repaid $164,000 of its outstanding mortgage notes from the proceeds of this sale.

~~Index~~2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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

~~CONSOLIDATED~~B) ~~STATEMENTS~~Recent OFAccounting ~~CHANGES~~Pronouncements IN-- ~~STOCKHOLDERS'~~In ~~EQUITY~~May 2011, the FASB issued ASU 2011-04, “Fair Value Measurement (Topic 820): Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs” (“ASU 2011-04"). This update amends ASC Topic 820, “Fair Value Measurement and Disclosure.” ASU 2011-04 clarifies the application of certain existing fair value measurement guidance and expands the disclosures for fair value measurements that are estimated using significant unobservable (Level 3) inputs. ASU 2011-04 is effective for annual and interim reporting periods beginning on or after December 15, 2011. The new guidance is to be adopted prospectively and early adoption is not permitted. We do not believe that adoption of ASU 2011-04 will have a significant impact on our financial position, results of operations or cash flows.

~~FOR~~14 ~~THE YEAR ENDED OCTOBER 31, 2010 (UNAUDITED) AND~~

~~FOR~~On ~~THE~~June ~~NINE~~16, ~~MONTHS~~2011, ~~ENDED~~the ~~JULY~~FASB ~~31,~~issued ASU 2011-05, “Comprehensive Income (~~UNAUDITED~~Topic 220): Presentation of Comprehensive Income” (“ASU 2011-05"). This update amends ASC Topic 220, “Comprehensive Income” to provide that total comprehensive income will be reported in one continuous statement or two separate but consecutive statements of financial performance. Presentation of total comprehensive income in the statement of stockholders’ equity or the footnotes will no longer be allowed. The calculation of net income and basic and diluted net income per share will not be affected. ASU 2011-05 is effective for fiscal years, and interim periods within those years, beginning on or after December 15, 2011. Retrospective adoption is required and early adoption is permitted. We do not believe that adoption of ASU 2011-05 will have a significant impact on our financial position, results of operations or cash flows.

	COMMON STOCK				PREFERRED STOCK
	NUMBER				NUMBER				ADDITIONAL								TREASURY
	OF				OF				PAID-IN		ACCUMULATED			COMPREHENSIV			STOCK,
	SHARES		AMOUNT		SHARES		AMOUNT		CAPITAL		DEFICIT			LOSS			AT COST
BALANCE, OCTOBER 31, 2009		5,313,794	$	53,138		9,102,655	$	91,027	$	28,322,341	$	(15,068,051	)	$	(1,915,985	)	$	(11,003,545	)
NET INCOME		0		0		0		0		0		10,505			0			0
PREFERRED STOCK DIVIDEND		0		0		0		0		0		-57,000			0			0
MINIMUM PEN. LIAB. ADJ.		0		0		0		0		0		0			21,612			0
BALANCE, OCTOBER 31, 2010		5,313,794	$	53,138		9,102,655	$	91,027	$	28,322,341	$	(15,114,546	)	$	(1,894,373	)	$	(11,003,545	)
NET LOSS		0		0		0		0		0		-370,473			0			0
PREFERRED STOCK DIVIDEND		0		0		0		0		0		-54,000			0			0
MINIMUM PEN. LIAB. ADJ.		0		0		0		0		0		0			81,000			0
BALANCE, JULY 31, 2011		5,313,794	$	53,138		9,102,655	$	91,027	$	28,322,341	$	(15,539,019	)	$	(1,813,373	)	$	(11,003,545	)

3.	INTERIM FINANCIAL STATEMENTS

~~SEE~~The ~~ACCOMPANYING~~interim ~~NOTES~~consolidated TOfinancial ~~THE~~statements ~~CONSOLIDATED~~included ~~FINANCIAL~~herein have ~~STATEMENTS~~been prepared by Management, in accordance with accounting principles generally accepted in the United States, and in the opinion of Management, contain all adjustments necessary to present fairly its financial position as of April 30, 2012 and the results of its operations and its cash flows for the six month period ended April 30, 2012. All of the above referenced adjustments were of a normal recurring nature. Certain information and footnote disclosures normally included in the financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted. These financial statements should be read in conjunction with the consolidated financial statements for the two years ended October 31, 2011 and the notes thereto which are contained in Canal’s 2011 Annual Report on Form 10-K. The results of operations for the period presented is not necessarily indicative of the results to be expected for the remainder of fiscal 2012.

1015

~~Index~~4. RELATED PARTY DEBT

~~CANAL~~The ~~CAPITAL~~Company’s ~~CORPORATION~~mortgage &notes ~~SUBSIDIARIES~~(originally issued in 1998) are due May 15, 2015 and are held entirely by the Company’s Chief Executive Officer. These notes carry interest at the rate of ten percent per annum. These notes, among other things, prohibit Canal from becoming an investment company as defined by the Investment Company Act of 1940; require Canal to maintain minimum net worth; restricts Canal’s ability to pay cash dividends or repurchase stock and require principal prepayments to be made only out of the proceeds from the sale of certain assets. As of April 30, 2012, the balance due under these notes was $564,000, all of which is classified as long-term debt-related party. Canal has incurred interest expense on these notes of approximately $45,000 and $42,000 for the six month periods ended April 30, 2012 and 2011, respectively. Accrued interest of $84,600 and $84,700 is included in salaries and interest payable-officers at April 30, 2012 and October 31, 2011, respectively.

~~CONSOLIDATED~~At ~~STATEMENTS~~April OF30, ~~CASH~~2012, ~~FLOWS~~substantially all of Canal's real properties, the stock of certain subsidiaries, the investments and a substantial portion of its art inventories are pledged as collateral for the following obligations:

FOR THE NINE MONTHS ENDED JULY 31, 2011 AND 2010

		Apr. 31,		October 31,
($ 000's Omitted)		2012		2011
Variable rate mortgage notes due May 15, 2015 - related party	$	564	$	847
Less -- current maturities		0		0
Long-term debt	$	564	$	847

	JULY 2011			JULY 2010
CASH FLOWS FROM OPERATING ACTIVITIES:
NET (LOSS) INCOME	$	(370,473	)	$	(353,856	)
ADJUSTMENTS TO RECONCILE NET LOSS TO NET CASH (USED IN) PROVIDED BY OPERATING ACTIVITIES:
DEPRECIATION AND AMORTIZATION		31,950			26,753
GAIN ON SALES OF REAL ESTATE		0			0
MINIMUM PENSION LIABILITY ADJUSTMENT		81,000			81,000
DECREASE (INCREASE) IN ASSETS:
NOTES AND ACCOUNTS RECEIVABLE		67,095			(164,470.00	)
STOCKYARDS INVENTORY		13,348			11,729
PREPAID EXPENSES		(17,181.00	)		(44,974.00	)
RESTRICTED CASH – LETTER OF CREDIT		0			-10,000
RESTRICTED CASH – TRANSIT INSURANCE		(14,700.00	)		(6,535.00	)
INCREASE (DECREASE) IN LIABILITIES:
ACCOUNTS PAYABLE AND ACCRUED EXPENSES		(193,941.00	)		113,159
PENSION PLAN PAYABLE		0			0
PAYABLE TO EXECUTIVE OFFICERS		169,025			337,875
ACCRUED PROFESSIONAL FEES		(17,795.00	)		(65,969.00	)
LONG-TERM PENSION LIABILITY		(154,846.00	)		(14,540.00	)
REAL ESTATE TAXES PAYABLE		10,639			(27,391.00	)
OTHER NON-CURRENT LIABILITIES		14,700		0
TOTAL ADJUSTMENTS		(10,706.00	)	236,637
NET CASH (USED IN) PROVIDED BY OPERATING ACTIVITIES		(381,179.00	)		(117,219.00	)

The Company has a line of credit with HNB Bank in the amount of $250,000. This credit line is used in the Company’s Saint Joseph stockyard order buying operation. The outstanding balances on this line of credit are secured by either the livestock purchased on order or the associated receivable for the livestock that has been delivered to the purchaser.

~~SEE~~The ~~ACCOMPANYING~~outstanding ~~NOTES~~balances TOon ~~THE~~this ~~CONSOLIDATED~~credit ~~FINANCIAL~~line ~~STATEMENTS~~were $164,000 and $106,000 at April 30, 2012 and October 31, 2011, respectively.

1116

~~Index~~5. RESTRICTED CASH

Letter of Credit - This is a $155,000 deposit with Mercantile ~~CANAL~~Bank ~~CAPITAL~~to ~~CORPORATION~~secure &bonds ~~SUBSIDIARIES~~required by the Packers and Stockyards Administration in relation to the St. Joseph Stockyards clearing operation. This deposit is maintained in an interest bearing account.

~~CONSOLIDATED~~Transit ~~STATEMENTS~~Insurance OF- ~~CASH~~Transit ~~FLOWS~~insurance covers livestock for the period that they are physically at the stockyards and under the care of stockyard personnel. This self insurance program is funded by a per head charge on all livestock received at the stockyard. The restricted cash - transit insurance balances of approximately $84,000 and $35,000 at April 30, 2012 and October 31, 2011, respectively, represents the excess of per head fees charged over actual payments made for livestock that was injured or died while at the stockyards.

~~FOR~~6. ~~THE~~STOCK ~~NINE~~OPTION ~~MONTHS ENDED JULY 31, 2011 AND 2010~~PLAN

~~Continued~~Under Canal's 1984 Employee and 1985 Directors Stock Option Plans, 550,000 and 264,000 shares, respectively, of Canal's common stock have been reserved for option grants. The purchase price of shares subject to each option granted, under the Employee and Directors Plans, will not be less than 85% and 100%, respectively, of their fair market value at the date of grant. Options granted under both plans are exercisable for 10 years from the date of grant, but no option will be exercisable earlier than one year from the date of grant. Under the Employee Plan, stock appreciation rights may be granted in connection with stock options, either at the time of grant of the options or at any time thereafter. No stock appreciation rights have been granted under this plan. There were no exercisable options outstanding under either of these plans at April 30, 2012.

	JULY 2010			JULY 2010
CASH FLOWS FROM INVESTING ACTIVITIES:
PROCEEDS FROM SALES OF REAL ESTATE		0			0
COSTS RELATING TO SALES OF REAL ESTATE		0			0
CAPITAL EXPENDITURES		(50,710	)		(375,000	)
NET CASH PROVIDED BY INVESTING ACTIVITIES		(50,710	)		(375,000	)
CASH FLOWS PROVIDED BY (USED) IN FINANCING ACTIVITIES:
PROCEEDS FROM LONG-TERM DEBT OBLIGATION		0			340,000
REPAYMENT OF LONG-TERM DEBT OBLIGATION		0			0
NET CASH PROVIDED BY (USED) IN FINANCING ACTIVITIES		0			340,000
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS		(431,889.00	)		(152,219.00	)
CASH AND CASH EQUIVALENTS AT BEGN OF YEAR		510,361			154,624
CASH AND CASH EQUIVALENTS AT END OF YEAR	$	78,472		$	2,405
	JULY 31,
	2011			2010
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
CASH PAID DURING THE YEAR FOR:
INTEREST	$	63,525		$	88,179
INCOME TAXES	$	0		$	0
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:
PREFERRED STOCK DIVIDENDS	$	54,000		$	54,000

7.	ART INVENTORY

~~SEE~~Antiquities ~~ACCOMPANYING~~art ~~NOTES~~valued TOat ~~THE~~$10,000 ~~CONSOLIDATED~~represented ~~FINANCIAL~~100% ~~STATEMENTS~~of total art inventory at both April 30, 2012 and October 31, 2011. The Company records a valuation allowance against the current portion of its inventory to reduce it to its estimated net realizable value based on the history of losses sustained on inventory items sold in the current and previous years. As of April 30, 2012 the valuation allowance is approximately $466,000.

1217

~~Index~~8. INCOME TAXES

~~CANAL~~At ~~CAPITAL~~April ~~CORPORATION~~30, ~~AND~~2012, ~~SUBSIDIARIES~~the Company has net operating loss carry forwards of approximately $8,661,000 that expire through 2029. For financial statement purposes, a valuation allowance has been provided to offset the net deferred tax assets due to the cumulative net operating losses incurred during recent years. The valuation allowance will be reduced when and if, in the opinion of management, significant positive evidence exists which indicates that it is more likely than not that the Company will be able to realize its deferred tax assets.

~~NOTES~~9. TOLEASE ~~CONSOLIDATED FINANCIAL STATEMENTS~~COMMITMENTS

~~FOR~~Canal’s ~~THE~~corporate ~~NINE~~headquarters ~~MONTHS~~are ~~ENDED~~now ~~JULY~~located ~~31,~~in ~~2011~~the personal residence of its Chief Financial Officer.

1There are no operating leases that have initial or remaining non-cancellable terms in excess of one year as of April 30, 2012. ~~DESCRIPTION~~Accordingly, Canal OFhas ~~BUSINESS~~no ~~AND~~future ~~BASIS~~minimum OFpayments ~~PRESENTATION~~due over the next five years.

~~Canal~~10. ~~Capital~~MINIMUM ~~Corporation~~FUTURE ~~("Canal"),~~RENTALS ~~incorporated~~ON inOPERATING ~~the state of Delaware in 1964, commenced business operations through a predecessor in 1936.~~LEASES

AsMinimum afuture ~~Stockholder~~rentals consist primarily of ~~Canal~~rental ~~Capital~~income ~~Corporation~~from leased ~~you~~land ~~should~~and bestructures, ~~aware~~Exchange ~~that~~Building ~~due~~rents to(commercial ~~financial~~office ~~constraints~~space) and ~~Canal’s~~other ~~fiscal~~rental ~~2011~~activities, ~~and~~all ~~2010~~of ~~Financial~~which ~~Statements~~are accounted for as operating leases. The estimated minimum future rentals on operating leases are ~~being~~$210,000, ~~presented~~$110,000, $110,000, in$110,000 ~~this~~and ~~Form~~$110,000 ~~10-Q~~for ~~without~~fiscal ~~benefit~~years of2012, ~~independent~~2013, ~~audit~~2014, or2015 ~~review~~and 2016, respectively.

~~General - While the Company is currently operating as a going concern, certain significant factors raise substantial doubt about the Company's ability to continue as a going concern~~11. ~~The~~ ~~Company~~PROPERTY ~~has~~USED ~~suffered~~IN ~~recurring~~STOCKYARD losses from operations and is obligated to continue making substantial annual contributions to its defined benefit pension plan. The financial statements do not include any adjustments that might result from the resolution of these uncertainties. Additionally, the accompanying financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.OPERATIONS

~~Canal~~A ~~continues~~schedule toof ~~closely monitor and reduce where possible its operating expenses and plans to continue its program to develop or sell~~ the Company’s property itused ~~holds~~in ~~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~~ stockyard operations ~~combined~~at ~~with~~April ~~its cost cutting program and planned reduction of its art inventory will enable it to finance its current business activities. There can~~30, ~~however,~~2012 beis noas ~~assurance~~follows ~~that~~(000's ~~Canal~~omitted): will be able to effectuate its planned art inventory reductions or that its income from operations combined with its cost cutting program in itself will be sufficient to fund operating cash requirements.

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

						Current Year
						(Retirements)
		Historical Cost				Additions							Carrying
				Bldgs. &				Bldgs. &		Accum.			Value
Description (1)		Land		Imprvmts.		Land		Imprvmts.		Depr.			04/30/12

30 acres of land in St. Joseph, MO Acquired in 1942	$	902	$	384	$	0	$	0	$	(223	)	$	1,063

~~Real~~Substantially ~~Estate~~all ~~Operations~~of - Canal'’s real ~~estate~~property ~~properties~~is ~~are~~pledged located in Sioux City, Iowa, South St Paul, Minnesota, St Joseph, Missouri, Omaha, Nebraska and Sioux Falls, South Dakota. The properties consist, for the most part, of land and structures leased to third parties (rail car repair shops, lumber yards and various other commercial and retail businesses) as collateral ~~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, 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~~related ~~operating~~party ~~lease~~debt ~~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~~obligations.

1318

~~Index~~12. PROPERTY ON OPERATING LEASES

~~Real~~A ~~estate~~schedule ~~operations resulted in operating income~~ of ~~$160,000 and $147,000 for~~ the ~~nine~~Company’s ~~month~~property ~~periods~~on ~~ended~~operating ~~July~~leases ~~31,~~at April ~~2011 and 2010~~30, ~~respectively.~~2012 ~~There~~is ~~were~~as nofollows ~~real estate sales in the first nine months of fiscal 2011 or 2010. Additionally, real estate operations contributed $203,~~(000 ~~and $217,000 to Canal’~~'s ~~revenues~~omitted): ~~for the nine month periods ended July 31, 2011 and 2010, respectively.~~

As of July 31, 2011, there are approximately 2 acres of undeveloped land owned by Canal adjacent to its stockyard properties. In addition to selling what was excess stockyard property, the company entertains any offers to purchase, develop and restructure real estate lots surrounding its existing operating lease properties, stockyard operating properties and properties held for development or resale in order to enhance the value of the existing properties and surrounding real estate.

						Current Year
						(Retirements
		Historical Cost				Additions								Carrying
				Bldgs. &					Bldgs. &		Accum.			Value
Description (1)		Land		Imprvmts.		Land			Imprvmts.		Depr.			04/30/12
New York office Leasehold assets	$	0	$	8	$	0		$	0	$	(8	)	$	0

9 acres of land in Omaha, NE Acquired in 1976		1,150		35		0			0		(20	)		1,165

3 acres of land in S. St. Paul, MN Acquired in 1937		10		485		0			0		(478	)		17

4 acres of land in Sioux City, IA Acquired in 1937		475		0		(475	)		0		0			0
	$	1,635	$	528	$	(475	)	$	0	$	(506	)	$	1,182

~~Stockyard~~Substantially ~~Operations~~all -of Canal’s ~~currently~~real ~~operates~~property ~~one~~is ~~central~~pledged ~~public~~as collateral ~~stockyard~~for ~~located~~its inrelated ~~St.~~party ~~Joseph,~~debt ~~Missouri~~obligations.

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 location13. InPROPERTY ~~September~~HELD ~~2010,Canal~~FOR ~~sold~~DEVELOPMENT ~~approximately~~OR ~~37 acres of land previously used in stockyard operations located in Sioux Falls, South Dakota for $2.0 million generating operating income of $0.7 million.~~RESALE

~~Public~~A ~~stockyards~~schedule ~~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~~property ~~include~~held ~~cattle,~~for ~~hogs,~~development ~~and~~or resale ~~sheep. Cattle and hogs may come through the stockyard facilities~~ at ~~two~~April ~~different stages~~30, ~~either~~2012 is as ~~feeder~~follows ~~livestock or slaughter livestock. The Company’~~(000's ~~stockyards~~omitted): provide all services and facilities required to operate an independent market for the sale of livestock, including veterinary services facilities, auction arenas, auctioneers, weigh masters and 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.

Description		Land
02 acres of land Sioux City, IA	$	52

~~Index~~Substantially all of Canal’s real property is pledged as collateral for its related party debt obligations.

~~Actual~~19 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.

~~In addition to market agencies and independent commission sales people the St~~14. ~~Joseph~~PENSION ~~stockyards~~VALUATION 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.RESERVE

~~Stockyard~~The ~~operations~~Pension ~~resulted~~Valuation inReserve ~~operating~~represents ~~income~~the excess of additional ~~$152,000~~minimum ~~and operating~~pension ~~income~~liability ofrequired ~~$214,000~~under ~~for~~ the ~~nine~~provisions ~~month~~of ~~periods~~ACS ~~ended~~715 over ~~July~~the ~~31,~~unrecognized ~~2011~~prior ~~and~~service ~~2010,~~costs ~~respectively. Additionally,~~of former stockyard ~~operations~~employees. ~~contributed~~Such excess ~~$1,431,000~~arose ~~and~~due ~~$1,648,000~~ to ~~Canal’s~~the ~~revenues~~decline ~~for~~in the ~~nine~~market ~~month~~value ~~periods~~of ~~ended~~pension ~~JULY~~assets ~~31,~~available for ~~2011~~pension ~~and~~benefits ~~2010,~~of ~~respectively.~~former ~~Canal~~employees, ~~maintains~~which anbenefits ~~inventory~~were offrozen ~~feed~~at ~~and~~the ~~bedding~~time the ~~which~~stockyard isoperations ~~comprised~~were ~~primarily~~sold ofin ~~hay, corn and straw~~1989. The ~~value~~additional ofminimum ~~this~~pension liability ~~inventory~~will ~~was~~be ~~$1,000~~expensed ~~and~~as ~~$15,000~~actuarial atcomputations ~~July~~of ~~31,~~annual ~~2011~~pension ~~and~~cost recognize ~~October~~the ~~31,~~deficiency ~~2010,~~that ~~respectively~~exists.

15The components of net periodic benefit cost are as follows:

Index

	Six Months		Ended
	4/30/12		4/30/11

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

~~SUMMARY~~For OFthe ~~SIGNIFICANT~~six ~~ACCOUNTING~~months ~~POLICIES~~ended April 30, 2012, amounts have been estimated, actual amounts will be based on the discount rate and assets available at year end.

~~A) Principles~~The ofCompany’s ~~Consolidation~~required --contribution ~~The~~to ~~consolidated~~its ~~financial~~pension ~~statements~~plan ~~include~~for fiscal ~~the~~2012 ~~accounts~~is ofapproximately ~~Canal~~$182,000, ~~Capital~~all ~~Corporation~~of ~~("Canal")~~which ~~and~~was ~~its~~contributed ~~wholly-owned~~to ~~subsidiaries (“~~the pension ~~Company”).~~plan ~~All~~as ~~material~~of ~~intercompany~~April ~~balances~~30, ~~and transactions have been eliminated in consolidation~~2012.

~~B) Properties and Related Depreciation -- Properties are stated at cost less accumulated depreciation~~15. ~~Depreciation~~ is401(k) 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.PLAN

~~Property~~The ~~held~~Company ~~for~~has ~~Development~~a ordefined ~~Resale~~contribution --401(k) ~~Property~~plan ~~held~~covering substantially ~~for~~all ~~development or resale consist~~ of ~~approximately~~its 2full ~~acres~~time ~~located~~stockyard inemployees. ~~the~~The ~~Midwest~~plan ofprovides ~~undeveloped~~for employee ~~land~~contributions ~~not~~and ~~currently~~401(k) ~~utilized~~matching ~~for~~contributions ~~corporate~~of ~~purposes~~up ~~nor~~to ~~included~~2 in½% ~~any~~ of the employee’s ~~present~~annual ~~operating~~salary ~~leases~~by the Company. The Company ~~constantly~~made ~~evaluates~~401(k) ~~proposals~~matching contributions ~~received~~of ~~for~~approximately ~~the purchase~~$5,000 ~~leasing~~for oreach ~~development~~ of ~~this~~the ~~asset. The~~six ~~land~~month isperiods ~~valued~~ended April at30, ~~cost~~2012 ~~which~~and ~~does not exceed the net realizable value~~2011.

~~Long-Lived~~20 Assets – The Company reviews the impairment of long-lived assets whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The Company considers historical performance and future estimated results in its evaluation of potential impairment and then compares the carrying amount of the assets to the estimated future cash flows expected to result from the use of the asset. The measurement of the loss, if any, will be calculated as the amount by which the carrying amount of the asset exceeds the fair value of the asset.

~~C) Expenditures for maintenance and repairs are charged to operations as incurred~~16. ~~Significant~~ ~~renewals~~LEGAL and betterments are capitalized. When properties are sold or otherwise disposed of, the cost and related accumulated depreciation are removed from the accounts and any gain or loss is reflected in current income.PROCEEDINGS

D)From ~~Reclassification~~time --to ~~Certain~~time, ~~prior~~we ~~year~~may ~~amounts~~become ~~have~~involved ~~been~~in ~~reclassified~~various lawsuits and legal proceedings which arise in the ordinary course of business. However, litigation is subject to ~~conform~~inherent uncertainties, and an adverse result in these or other matters may arise from time to ~~the~~time ~~current~~that ~~year~~may ~~presentation~~harm our business.

16Environmental Contingency

~~Index~~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.

~~E) Art~~Since ~~Inventory~~the ~~Held~~receipt ~~for~~of ~~Sale~~the -letter, ~~Inventory~~the ofCompany ~~art~~has isbeen ~~valued~~in periodic atcommunications with the ~~lower~~other ofparties ~~cost,~~who ~~including~~received ~~direct~~a ~~acquisition~~similar ~~and~~letter with ~~restoration~~respect ~~expenses~~to what action, collectively or ~~net~~individually, ~~realizable~~should ~~value~~be ontaken ain response ~~specific~~to ~~identification~~the ~~basis~~EPA assertion of liability. The ~~nature~~Company believes that the remediation of ~~art~~contamination ~~makes~~of itthe ~~difficult~~site tois ~~determine~~properly athe ~~replacement~~responsibility ~~value. The~~of ~~most~~other parties ~~compelling~~that ~~evidence~~have ofoccupied aand ~~value~~used init ~~most~~for ~~cases~~waste isrecycling anpurposes ~~independent~~since ~~appraisal. The~~1961, although ~~net~~under ~~realizable~~CERCLA ~~value~~the ofEPA ~~Canals~~is ~~remaining~~able ~~art~~to ~~inventory~~assert ~~has~~joint ~~been~~and ~~estimated~~several byliability against ~~management based~~all inparties ~~part~~who onever ~~the Company’s history~~owned ofor ~~art sales~~operated in the site or generated or ~~current~~transported ~~and~~wastes ~~previous~~to ~~years~~it. ~~and~~The EPA investigation is in ~~part~~its onpreliminary stages and the ~~results of~~Company ~~the independent appraisals done in previous~~intends ~~years.~~to ~~However,~~vigorously ~~because~~defend ofany ~~the~~liability ~~nature~~for ofremediation. ~~art~~At ~~inventory~~April 30, ~~such~~2012, ~~determination~~the isliability ~~very~~for ~~subjective and~~remediation, ~~therefore~~if any, ~~the~~was ~~estimated~~not ~~values~~estimable ~~could~~and ~~differ~~therefore no ~~significantly~~accrual ~~from~~has ~~the~~been ~~amount~~recorded ~~ultimately~~in ~~realized~~the financial statements.

~~F) Income~~We ~~Taxes~~are --currently ~~Canal~~not ~~and~~aware ~~its~~of ~~subsidiaries~~any ~~file~~other alegal ~~consolidated~~proceedings ~~Federal~~or claims ~~income~~that ~~tax~~we ~~return. The~~believe ~~Company~~will ~~accounts~~have ~~for~~a ~~income~~material ~~taxes~~adverse ~~under~~affect ~~the liability method. Under this method, deferred tax assets and liabilities are determined based~~ on ~~differences~~our ~~between~~ business, financial ~~reporting~~condition ~~and~~or ~~tax~~operating ~~bases of assets and liabilities~~results.

~~G) Stockyard~~21 ~~Inventory - Inventory is stated at the lower of cost or market. Cost is determined using the first-in, first-out method.~~

H) Accounting Estimates -- The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period17. ~~Actual~~ ~~results~~RELATED ~~could~~PARTY ~~differ from those estimates.~~TRANSACTIONS

~~I) Revenue~~At ~~Recognition~~April –-30, ~~Lease~~2012, ~~and~~all ~~rental~~of ~~revenues~~Canal’s ~~are~~Long-Term ~~recognized~~Debt ~~ratably~~was ~~over~~held by the ~~period~~company’s ~~covered. All~~Chief ~~real~~Executive ~~estate~~Officer. ~~leases~~The ~~are~~notes ~~accounted~~pay ~~for~~interest asat ~~operating~~a ~~leases. Revenues~~rate ~~from the sale~~ of ~~real~~10% per ~~estate~~annum ~~are~~and ~~recognized~~come atdue ~~the~~May ~~time~~15, ~~the~~2015. ~~sale~~Canal has ~~been~~incurred ~~consummated~~interest expense on these ~~the~~notes ~~full~~of ~~accrual~~approximately ~~method~~$45,000 ~~wherein~~and ~~the~~$42,000 ~~seller~~for ~~has~~the ~~transferred~~six tomonth ~~the~~periods ~~buyer~~ended April ~~the~~30, ~~usual~~2012 ~~risks~~ and ~~rewards~~2011, ofrespectively. ~~ownership~~At invarious atimes ~~transaction~~during ~~that~~fiscal is2012 inthe holder ~~substance~~of athese ~~sale~~notes ~~and~~agrees ~~does~~to ~~not~~defer ~~have~~interest apayments. ~~substantial~~This ~~continuing~~deferred ~~involvement~~interest liability ~~with~~accrues ~~the~~additional ~~property;~~interest ~~the~~at ~~seller’s~~a ~~receivable~~rate isof ~~not~~10% ~~subject~~per toannum, ~~future~~while outstanding ~~subordination~~ and ~~the~~is ~~buyer’s~~repaid ~~initial~~as ~~and~~funds ~~continuing~~become ~~investments~~available. ~~are~~As ~~adequate~~of ~~to demonstrate~~April a30, ~~commitment~~2012, ~~to pay for~~ the balance ~~property.~~due ~~Revenues~~under ~~from~~these ~~stockyard~~notes ~~operations~~was ~~which~~$564,000 ~~consist~~all ~~primarily~~ of ~~yardage~~which ~~fees~~is (aclassified ~~standard~~as long-term ~~per~~debt ~~head~~related ~~charge~~party. ~~for~~Accrued ~~each~~interest ~~animal~~of ~~sold~~$84,600 ~~through the stockyards)~~ and ~~sale~~$84,700 ofis included ~~feed~~in salaries and ~~bedding~~interest ~~are~~payable-officers ~~recognized~~ at ~~the~~April ~~time~~30, ~~the~~2012 ~~service is rendered or the feed~~ and ~~bedding~~October 31, ~~are~~2011, ~~delivered~~respectively.

1718. SUBSEQUENT EVENTS

~~Index~~In July 2012, Canal sold one acre of land and the improvements thereon located in South St. Paul, Minnesota, to an unrelated third party, for $839,000 generating a gain of $791,000.

~~Other~~In ~~Income~~August ~~(Expense)~~2012, ~~Items~~Canal --sold ~~Art~~its ~~sales~~stockyard ~~are~~operation ~~recognized~~(30 ~~using~~acres ~~the~~of land ~~specific~~and ~~identification method, when~~ the ~~piece~~improvements isthereon) ~~shipped~~located toin ~~the purchaser~~St. ~~Art~~ ~~owned~~Joseph, byMissouri, ~~Canal~~to ~~which~~an unrelated isthird ~~on consignment~~party, ~~joint~~for ~~venture~~$500,000 orgenerating ~~being examined in contemplation of sale is not removed from inventory and not recorded as~~ a ~~sale~~loss ~~until notice~~ of ~~sale or acceptance has been received~~$577,000. ~~The~~ ~~sale~~Canal ~~of investments available for sale~~repaid $164,000 ifof ~~any,~~its ~~are~~outstanding ~~recognized~~mortgage onnotes afrom ~~specific~~the ~~identification~~proceeds ~~method,~~of onthis ~~a trade date basis~~sale.

~~J) Statements~~22 of Cash Flows -- The company considers all short-term investments with a maturity of three months or less to be cash equivalents. Cash equivalents primarily include bank, broker and time deposits with an original maturity of less than three months. These investments are carried at cost, which approximates market value. Canal made state income tax payments of $0, and $0, and interest payments of $64,000, and $88,000 for the nine month periods ended July 31, 2011 and 2010, respectively.

K)ITEM ~~Comprehensive~~2. ~~Income (Loss) -- The Company~~MANAGEMENT’sS ~~only~~DISCUSSION ~~adjustments~~AND ~~for~~ANALYSIS ~~each~~OF ~~classification~~FINANCIAL ofCONDITION ~~the~~AND ~~comprehensive~~RESULTS ~~income~~OF ~~was for minimum pension liability~~OPERATIONS.

L)The ~~Earnings~~following ~~(Loss)~~management’s ~~Per~~discussion ~~Share~~and --analysis ~~Basic~~should ~~earnings~~be read ~~(loss)~~in ~~per~~conjunction ~~share~~with isour ~~computed~~financial bystatements ~~dividing~~and the ~~net~~notes ~~income~~thereto ~~(loss)~~and ~~applicable to common shares by~~ the other ~~weighted~~financial ~~average~~information ofappearing ~~common~~elsewhere ~~shares~~in ~~outstanding~~this ~~during the period~~report. ~~Diluted~~In ~~earnings~~addition ~~(loss)~~to historical ~~per~~information, ~~share adjusts basic earnings (loss) per share for~~ the ~~effects~~following ofdiscussion ~~convertible~~contains ~~securities,~~certain forward-looking ~~stock~~information. ~~options~~See ~~and~~“Special ~~other~~Note ~~potentially~~Regarding ~~dilutive~~Forward ~~financial~~Looking Statements” ~~instruments,~~below ~~only~~for incertain ~~the~~information ~~period~~concerning inthose ~~which~~forward ~~such effect is dilutive~~looking statements. ~~There~~Our ~~were~~financial nostatements ~~dilutive~~are ~~securities~~prepared in ~~any of the periods presented herein~~U.S. ~~The~~dollars ~~shares~~and ~~issuable upon the exercise of stock options are excluded from the calculation of net income (loss) per share as their~~in ~~effect~~accordance ~~would~~with beU.S. ~~antidilutive~~GAAP.

InSpecial ~~June~~Note ~~2009,~~Regarding ~~the~~Our ~~FASB~~Financial ~~issued~~Statements ~~SFAS No. 168, “The FASB Accounting Standards Codification~~ and the Hierarchy of Generally Accepted Accounting Principles a replacement of FASB Statement No. 162” (“SFAS 168”). Under SFAS 168, the FASB Accounting Standards Codification (Codification) will become the sole source of authoritative U.S. GAAP to be applied by nongovernmental entities. SFAS 168 is effective for the financial statements issued for interim and annual periods ending after September 15, 2009. The adoption will have no material impact on the Company’s consolidated financial statements but will require that interim and annual filings include references toForward-looking ~~the~~Statements ~~Codification.~~

18In addition to historical information, this report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. We use words such as “believe,” “expect,” “anticipate,” “project,” “target,” “plan,” “optimistic,” “intend,” “aim,” “will” or similar expressions which are intended to identify forward-looking statements. Such statements include, among others, any projections of sales, earnings, revenue, margins or other financial items; any statements of the plans, strategies and objectives of management for future operations; and any statements regarding future economic conditions or performance, as well as all assumptions, expectations, predictions, intentions or beliefs about future events. You are cautioned that any such forward-looking statements are not guarantees of future performance and involve risks and uncertainties, as well as assumptions, which, if they were to ever materialize or prove incorrect, could cause the results of the Company to differ materially from those expressed or implied by such forward-looking statements.

~~Index~~Because the factors discussed in this report could cause actual results or outcomes to differ materially from those expressed in any forward-looking statement made by us or on our behalf, you should not place undue reliance on any such forward-looking statement. Further, any forward-looking statement speaks only as of the date on which it is made, and we undertake no obligation to update any forward-looking statement or statements to reflect events or circumstances after the date on which such statement is made or to reflect the occurrence of unanticipated events, except as required by law. New factors emerge from time to time, and it is not possible for us to predict which will arrive. In addition, we cannot assess the impact of each factor on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statement.

3.Use ~~INTERIM~~of ~~FINANCIAL~~Terms ~~STATEMENTS~~

AsExcept aas ~~Stockholder~~otherwise ofindicated ~~Canal~~by ~~Capital~~the ~~Corporation~~context, ~~you~~all ~~should~~references ~~be aware that due to financial constraints Canal’s fiscal 2011 and 2010 Financial Statements are being presented~~ in this ~~Form~~report ~~10-Q~~to: ~~without benefit of independent audit or review.~~

~~General~~“Canal -Capital,” ~~While~~ the “Company,” is“we,” ~~currently~~“us,” ~~operating~~and ~~as a going concern~~“our,” ~~certain~~are ~~significant factors raise substantial doubt about the Company's ability~~ to ~~continue~~Canal Capital asCorporation ~~a going concern. The Company has suffered recurring losses from operations~~ and ~~is obligated to continue making substantial annual contributions to~~ its ~~defined~~subsidiaries, ~~benefit~~Omaha ~~pension~~Livestock ~~plan.~~Market, ~~The financial statements do not include any adjustments that might result from the resolution of these uncertainties~~Inc. ~~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~~Sioux ~~liabilities~~ Falls ~~that~~Stockyards ~~might be necessary should the~~ Company beand ~~unable~~Canal toArts ~~continue as a going concern.~~Corporation;
~~The~~“SEC” ~~interim~~are ~~consolidated~~to ~~financial statements included herein have been prepared by Management, in accordance with accounting principles generally accepted in~~ the United States, ~~and~~Securities ~~in the opinion of Management, contain all adjustments necessary to present fairly its financial position as of July 31, 2011~~ and ~~the~~Exchange results of its operations and its cash flows for the nine month period ended July 31, 2011. All of the above referenced adjustments were of a normal recurring nature. Certain information and footnoteCommission; disclosures normally included in the financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted. These financial statements should be read in conjunction with the consolidated financial statements for the three years ended October 31, 2010 and the notes thereto which are contained in Canal’s 2010 Annual Report on Form 10-K. The results of operations for the period presented is not necessarily indicative of the results to be expected for the remainder of fiscal 2011.
4.“Securities ~~STOCK~~Act” ~~OPTION~~are ~~PLAN~~to the Securities Act of 1933, as amended;
~~Under~~“Exchange ~~Canal's~~Act” ~~1984~~are ~~Employee and 1985 Directors Stock Option Plans, $550,000 and 264,000 shares, respectively, of Canal's common stock have been reserved for option grants. The purchase price of shares subject~~ to ~~each option granted, under~~ the ~~Employee~~Securities ~~and~~Exchange ~~Directors~~Act ~~Plans, will not be less than 85% and 100%, respectively,~~ of ~~their fair market value at the date of grant. Options granted under both plans are exercisable for 10 years from the date of grant~~1934, ~~but~~as noamended; ~~option will be exercisable earlier than one year from the date of grant. Under the Employee Plan, stock~~and appreciation rights may be granted in connection with stock options, either at the time of grant of the options or at any time thereafter. No stock appreciation rights have been granted under this plan. There were no exercisable options outstanding under either of these plans at July 31, 2011 or 2010.
19“U.S. dollar,” “USD,” “US$” and “$” are to the legal currency of the United States.

~~Index~~23

5Canal Capital Corporation’s fiscal year ends on October 31, of each calendar year. ~~BORROWINGS~~Each reference to a fiscal quarter refers to a three-month period ending on either, January 31, April 30 and July 31, of the calendar year indicated, and each reference to a fiscal year refers to the fiscal year ended October 31 of the calendar year indicated.

AtOverview ~~July 31, 2011, substantially all~~ of ~~Canal's real properties,~~ the ~~stock~~Company’s ofBusiness ~~certain subsidiaries, the investments and a substantial portion of its art inventories are pledged as collateral for the following obligations:~~

	July 31,		October 31,
($ 000's Omitted)	2011		2010
Variable rate mortgage notes due May 15, 2012 - related party	$	847	$	847
Less -- current maturities		0		0
Long-term debt	$	847	$	847

Canal Capital Corporation engages in real estate and stockyard operations in the Midwest section of the United States. Canal, along with its wholly owned subsidiaries, Omaha Livestock Market, Inc. and Sioux Falls Stockyards Company is involved in the management and sale of its real estate properties and, until August 2012, in the operation of central public stockyards. Canal also sells antiquities through independent art dealers and at public art auctions through its wholly owned subsidiary Canal Arts Corporation.

At April 30, 2012, Canal's real estate properties were located in Sioux City, Iowa, South St Paul, Minnesota, St Joseph, Missouri, Omaha, Nebraska and Sioux Falls, South Dakota. The ~~following~~properties ~~table~~consisted, ~~summarizes~~for the ~~Company’s~~most part, ~~commitments~~of asan ofExchange ~~July~~Building 31(commercial office space), ~~2011~~land and structures leased to ~~make~~third ~~future~~parties ~~payments~~(rail ~~under~~car ~~its~~repair ~~debt~~shops, ~~agreements~~lumber yards and various other commercial ~~contractual~~and ~~obligations~~retail (businesses) as well as vacant land available for development or resale. Canal owned approximately 2 acres of undeveloped land in Sioux ~~000'~~City, Iowa and it operated a central public stockyard located in St. Joseph, Missouri. Canal’s): stockyard provided various services and facilities required to operate an independent market for the sale of livestock including veterinary facilities, auction arenas, auctioneers, weight masters and scales, feed and bedding facilities and security personnel. Canal also offered other services, such as pure bred and other specialty sales for producer organizations.

	Total		Less Than 1 year		1 - 3 Years		3 - 5 Years		More Than 5Yrs.
Pension Plan Liability (a)	$	715	$	125	$	400	$	190	$	0
Mortgage Notes Payable (b)		847		0		847		0		0
	$	1,562	$	125	$	1,247	$	190	$	0

Recent Developments

Due to cash flow constraints, the Company has entered a program of closely monitoring and reducing where possible its operating expenses. As part of that program, the Company has sold most of its property and has reduced the level of its art inventories to enhance cash flows. In September 2010, Canal sold approximately 35 acres of land and the improvements thereon located in Sioux Falls, South Dakota (formerly used in stockyard operations) for $2,000,000, generating a gain of $1,242,000. In April 2012, Canal sold 6 acres of land and the improvements thereon located in Sioux City, Iowa to the company’s Chief Executive Officer, Michael E. Schultz for $852,000, generating a gain of $346,000. In July 2012, Canal sold one acre of land and the improvements thereon located in South St. Paul, Minnesota for $839,000, generating a gain of $791,000. In August 2012, Canal sold its stockyard operation (30 acres of land and the improvements thereon) ~~See~~located ~~Note~~in 16St. Joseph, Missouri for $500,000, generating a loss of $577,000. The Company’s only remaining real estate property is a rental property located in Omaha, Nebraska.

~~(b)~~As ~~The~~a ~~mortgage~~result ~~notes~~of ~~are~~the ~~due~~foregoing ~~May~~financial 15constraints, ~~2012~~the Company’s financial statements for the fiscal years ended October 31, 2011, 2010 and ~~are~~2009, ~~held~~and ~~entirely~~for the interim fiscal quarters had not been previously audited or reviewed by an independent auditor. In February 2012, the Company’s ~~Chief~~received notice ~~Executive~~from ~~Officer~~the ~~and~~SEC ~~members~~ of ~~his~~its ~~family.~~obligation ~~These~~to ~~notes~~file ~~carry~~audited ~~annual~~and ~~interest~~reviewed offinancial statements ~~10%~~with its periodic reports and ~~are~~the ~~collateralized~~nine byreports ~~substantially~~outlined ~~all~~above ofwere appropriately ~~Canal’s~~amended ~~property~~and filed with the SEC on October 30, 2012. This report is another in the ~~stock~~series of ~~certain~~corrective ~~subsidiaries~~filings ~~and~~which the Company expects to file in order to become fully compliant with its ~~art~~reporting ~~inventories~~requirements with SEC. The Company expects to be fully compliant on or before January 31, 2013.

20Management is unsure if its income from operations combined with its cost-cutting program, planned reduction of its antiquities art inventory and sales of properties will enable it to finance its future business activities or fund operating cash requirements. In the interim, management is undertaking efforts to identify appropriate business opportunities for the Company. If for some reason management is not able to identify an appropriate business opportunity within a reasonable period of time, it may not have sufficient resources to continue meeting its reporting obligations with the Securities and Exchange Commission or other obligations which arise from its minimal operations. This in turn would severely diminish the Company’s ability to explore alternative business opportunities in the future.

~~Index~~24

6.Plan ~~RESTRICTED~~of ~~CASH~~Operations

~~Letter~~We ofare ~~Credit~~undertaking -efforts ~~This~~to isidentify aappropriate ~~$140,000~~business opportunities ~~deposit~~for ~~with~~our ~~Chase~~Company. ~~Bank~~If for some reason the Company is not able to identify ~~secure~~an acceptable business opportunity within a ~~Letter~~reasonable period of ~~Credit~~time, it ~~issued~~may bynot ~~the~~have ~~bank~~sufficient resources to ~~the~~continue ~~Hartford~~meeting ~~Insurance~~its ~~Company~~reporting obligations ~~for~~with ~~bonds~~the ~~issued~~Securities inand ~~relation~~Exchange toCommission ~~the~~or ~~St.~~other ~~Joseph~~obligations which ~~Stockyards~~arise ~~clearing~~from ~~operation~~its minimal operations. This ~~deposit~~in isturn ~~maintained~~would inseverely andiminish the ~~interest~~ability ~~bearing~~of ~~account~~the Company to explore alternative business opportunities.

~~Transit~~Even ~~Insurance~~if -we ~~Transit~~are ~~insurance~~able ~~covers~~to ~~livestock~~identify ~~for~~business ~~the~~opportunities ~~period~~ that ~~they~~our Board ~~are~~deems ~~physically~~appropriate, atwe ~~the~~cannot ~~stockyards~~assure ~~and~~you ~~under~~that ~~the~~such ~~care~~a ofstrategy ~~stockyard~~will ~~personnel. This~~provide you ~~self~~with ~~insurance~~a ~~program~~positive isreturn ~~funded~~on byyour ainvestment, ~~per~~and ~~head~~may ~~charge~~in onfact ~~all~~result ~~livestock~~in ~~received~~a substantial atdecrease in the ~~stockyard.~~value ~~The~~of ~~restricted~~your ~~cash~~stock. -In ~~transit~~addition, ~~insurance~~if ~~balances~~the ofBoard identifies ~~approximately~~a ~~$41,000~~business ~~and~~opportunity ~~$26,000~~that atit ~~July~~deems 31appropriate, ~~2011~~there ~~and~~is ~~October~~no guarantee ~~31,~~that ~~2010,~~the ~~respectively,~~Company ~~represents~~could raise the ~~excess~~additional ofcapital ~~per~~or ~~head~~get ~~fees~~the ~~charged~~needed financing ~~over~~to ~~actual~~pursue ~~payments~~the ~~made~~business ~~for~~opportunity. ~~livestock~~These ~~that~~factors ~~was~~will ~~injured~~substantially increase orthe ~~died~~uncertainty, ~~while~~and atthus the ~~stockyards~~risk, of investing in our shares.

7.Results ~~INCOME~~of ~~TAXES~~Operations

At July 31, 2011, the Company has net operating loss carryforwards of approximately $8,100,000 that expire through 2030. For financial statement purposes, a valuation allowance has been provided to offset the net deferred tax assets due to the cumulative net operating losses incurred during recent years. The ~~valuation~~following ~~allowance~~tables ~~will~~set beforth ~~reduced~~certain ~~when~~items ~~and if,~~ in ~~the~~our ~~opinion~~ statement of ~~management,~~operations ~~significant~~for ~~positive evidence exists which indicates that it is more likely than not that~~ the ~~Company~~periods ~~will~~indicated: ~~be able to realize its deferred tax assets.~~

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

		Six Months Ended April 30,
		2012			2011
		(In Thousands)
Revenues:
Real Estate Revenue	$	985		$	136
Stockyard Revenue		1,248			1,172
Total Revenue		2,233			1,308

Costs and Expenses:

Real Estate Expenses		534			28
Stockyard Expenses		1,018			953
General and Administrative Expenses		488			414
Total Costs and Expenses		2,040			1,395

Income (Loss) from Operations		193			(87	)
Other Income		1			0
Interest Expense		(45	)		(42	)
Other Expenses		0			0

Net Income (Loss)	$	149		$	(129	)

8.25 ~~IMPAIRMENT LOSS ON LONG-LIVED ASSETS~~

~~The~~Revenues ~~Company reviews the values of its long-lived assets annually. There was no impairment in the value of Canal’s long-lived assets to be recorded as of July 31, 2011 and October 31, 2010.~~

21Canal's revenues from continuing operations consist of revenues from its real estate and stockyard operations. Revenues for the six month period ended April 30, 2012 increased by $925,000 to $2,233,000 as compared with $1,308,000 for the same period in fiscal 2011. The fiscal 2012 increase in revenues was due primarily to the $852,000 increase in sale of real estate during the second quarter of fiscal 2012.

~~Index~~Canal’s revenues for the three month period ended April 30, 2012 increased by $814,000 to $1,473,000 as compared with $659,000 for the same period in fiscal 2011. The fiscal 2012 increase in revenues was due primarily to the $852,000 increase in sale of real estate during the second quarter of fiscal 2012.

9Real Estate Revenues: Real estate revenues for the six months ended April 30, 2012 of $985,000 accounted for 44.1% ~~ART~~of ~~INVENTORY~~the ~~HELD~~fiscal ~~FOR~~2012 ~~SALE~~revenues as compared to real estate revenues of $136,000 or 10.4% for the same period in fiscal 2011. Real estate revenues were comprised of sale of real estate (86.5% and 0.0%) and rentals and other lease income from the rental of vacant land and certain structures (13.5% and 100.0%) for the six months ended April 30, 2012 and 2011, respectively. The percentage variations in the year to year comparisons were due primarily to the sharp increase in the sale of real estate experienced during the second quarter of fiscal 2012.

~~Canal~~Real isestate inrevenues for the ~~process~~three ofmonths ~~selling~~ended April 30, in2012 anof ~~orderly manner~~$915,000 ~~its~~accounted ~~remaining~~for ~~art inventory~~62.1% ~~This~~of ~~will~~the befiscal ~~accomplished~~2012 ~~primarily~~revenues ~~through~~as ~~consignment~~compared to ~~arrangements~~real ~~with~~estate ~~various~~revenues ~~independent~~of ~~art~~$66,000 ~~dealers~~or ~~and~~10.1% ~~through~~for ~~sale~~the atsame ~~public~~period ~~art~~in ~~auctions~~fiscal 2011. ~~The~~ Real ~~Company's ability~~estate torevenues ~~dispose~~were comprised of ~~its~~sale ~~art~~of ~~inventory~~real isestate ~~dependent~~(93.1% ~~primarily~~and on0.0%) ~~general~~and rentals ~~economic~~and ~~conditions~~other ~~and~~lease income from the ~~competitiveness~~rental of ~~the~~vacant ~~art~~land ~~market~~and ~~itself~~certain structures (6. ~~Accordingly,~~9% ~~there~~and ~~can~~100.0%) befor nothe ~~assurance~~three ~~that~~months ~~Canal~~ended ~~will~~April be30, ~~successful~~2012 and 2011, respectively. The percentage variations in ~~selling~~the ~~its~~year ~~art~~to ~~inventory.~~year ~~Canal~~comparisons ~~had~~were nodue primarily ~~sales~~to ofthe ~~art~~sharp increase in the ~~first~~sale ~~six~~of ~~months~~real ofestate ~~fiscal~~experienced ~~2011~~during the orsecond ~~2010~~quarter of fiscal 2012.

~~Antiquities~~Stockyard ~~art~~Revenues: ~~valued~~Stockyard atrevenues for the six months ended April 30, 2012 of $~~100~~1,248,000 ~~represented~~accounted ~~100~~for 55.9% of ~~total~~the ~~art~~fiscal ~~inventory~~2012 atrevenues ~~both~~as compared ~~July~~to 31stockyard revenues of $1,172,000 ~~2011~~or ~~and~~89.6% ~~October~~for ~~31,~~the ~~2010~~same period in fiscal 2011. The ~~Company~~2012 ~~records~~increase ain ~~valuation~~stockyard ~~allowance~~revenues ~~against~~was ~~the~~due ~~current~~primarily ~~portion~~to an increase in the volume of ~~its~~livestock ~~inventory~~handled toat ~~reduce~~the itSt. toJoseph ~~its~~stockyards ~~estimated~~during the ~~net~~first ~~realizable~~quarter ~~value~~of ~~based~~fiscal on2012. ~~the~~Stockyard ~~history~~revenues were comprised of ~~losses~~yard handling ~~sustained~~and onauction ~~inventory~~(87.2% ~~items~~and ~~sold~~88.7%), infeed ~~the~~and ~~current~~bedding income (4.4% and ~~previous~~5.7%) and ~~years~~rental and other income (8. As4% ofand ~~July~~5.6%) 31for the six month periods ended April 30, 2012 and 2011, ~~the~~respectively. ~~valuation~~There ~~allowance~~were isno ~~approximately~~significant ~~$397,000~~percentage variations in the year to year comparisons.

10Stockyard revenues for the three months ended April 30, 2012 of $559,000 accounted for 37.9% ~~LEASE~~of ~~COMMITMENTS~~the fiscal 2012 revenues as compared to stockyard revenues of $593,000 or 89.9% for the same period in fiscal 2011. The 2012 increase in stockyard revenues was due primarily to an increase in the volume of livestock handled at the St. Joseph stockyards during the first quarter of fiscal 2012. Stockyard revenues were comprised of yard handling and auction (86.1% and 90.0%), feed and bedding income (4.7% and 4.6%) and rental and other income (9.2% and 5.4%) for the three month periods ended April 30, 2012 and 2011, respectively. There were no significant percentage variations in the year to year comparisons.

In26 July 2009 Canal terminated its lease on approximately 1,000 square feet of office space in Hauppauge, New York at a monthly rental of approximately $1,900. Canal relocated its New York operations to approximately 300 square feet of rent free office space located in Port Jefferson Station, New York.

~~There~~Art ~~are~~Revenues: Canal had no ~~operating~~art ~~leases~~sales ~~that~~in ~~have~~the ~~initial~~six month periods ended April 30, 2012 or ~~remaining~~2011. ~~noncancellable~~Art ~~terms~~revenues, inif ~~excess~~any, were comprised of ~~one~~the proceeds ~~year~~from asthe sale of ~~July~~antiquities 31art. Canal had no art expenses for the six month periods ended April 30, 2012 and 2011, respectively. ~~Accordingly~~Art expenses, ~~Canal~~if ~~has~~any, were nocomprised ~~future~~of ~~minimum~~the ~~payments~~cost ~~due~~of ~~over~~inventory sold and selling, general and administrative expenses. It is the ~~next~~Company’s ~~five~~policy ~~years~~to use the adjusted carrying value for sales, thereby reducing the valuation reserve proportionately as the inventory is sold.

11Canal had no art sales in the three month periods ended April 30, 2012 or 2011. ~~MINIMUM~~Art ~~FUTURE~~revenues, ~~RENTALS~~if ONany, ~~OPERATING~~were ~~LEASES~~comprised of the proceeds from the sale of antiquities art. Canal had no art expenses for the three month periods ended April 30, 2012 and 2011, respectively. Art expenses, if any, were comprised of the cost of inventory sold and selling, general and administrative expenses. 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.

~~Minimum~~Expenses future rentals consist primarily of rental income from leased land and structures, Exchange Building rents (commercial office space) and other rental activities, all of which are accounted for as operating leases. The estimated minimum future rentals on operating leases are $275,000, $275,000, $300,000, $300,000 and $350,000 for fiscal years 2011, 2012, 2013, 2014 and 2015, respectively.

22Real Estate Expenses: Real estate expenses for the six months ended April 30, 2012 of $534,000 increased by $506,000 from real estate expenses of $28,000 for the same period in fiscal 2011. The increase in real estate expenses is consistent with the 2012 increase in real estate revenues. Real estate expenses were comprised of the cost of real estate sold (94.7% and 0.0%), labor, operating and maintenance (0.9% and 16.1%), depreciation and amortization (2.1% and 39.3%), taxes other than income taxes (1.4% and 26.6%) and general and administrative expenses (0.9% and 18.0%) for the six months ended April 30, 2012 and 2011, respectively. The percentage variations in the year to year comparisons were consistent with the increase in real estate revenues discussed above.

~~Index~~Real estate expenses for the three months ended April 30, 2012 of $520,000 increased by $506,000 from real estate expenses of $14,000 for the same period in fiscal 2011. The increase in real estate expenses is consistent with the 2012 increase in real estate revenues. Real estate expenses were comprised of the cost of real estate sold (97.3% and 0.0%), labor, operating and maintenance (0.4% and 15.7%), depreciation and amortization (1.1% and 39.5%), taxes other than income taxes (0.7% and 26.7%) and general and administrative expenses (0.5% and 18.1%) for the three months ended April 30, 2012 and 2011, respectively. The percentage variations in the year to year comparisons were consistent with the increase in real estate revenues discussed above.

12Stockyard Expenses: Stockyard expenses for the six months ended April 30, 2012 of $1,018,000 increased by $65,000 (6.8%) ~~PROPERTY~~from ONstockyard ~~OPERATING~~expenses of ~~LEASES~~$953,000 for the same period in fiscal 2011. The increase in stockyard expenses is consistent with the 2012 increase in stockyard revenues. Stockyard expenses were comprised of labor and related costs (42.7% and 43.2%), other operating and maintenance (24.6% and 25.2%), feed and bedding expense (6.6% and 5.3%), depreciation and amortization (1.0% and 1.1%), taxes other than income taxes (4.1% and 4.2%) and general and administrative expense (21.0% and 21.0%) for the six month periods ended April 30, 2012 and 2011, respectively. There were no significant percentage variations in the year to year comparisons.

~~Property~~Stockyard onexpenses ~~operating~~for ~~leases~~the ~~consist~~three ofmonths ~~approximately~~ended 16April ~~acres~~30, 2012 of $506,000 ~~land~~increased ~~located~~by ~~in Omaha~~$24,000 ~~Nebraska; S~~(5.0%) ~~St.~~from ~~Paul,~~stockyard ~~Minnesota;~~expenses ~~Sioux~~of ~~City~~$482,000 ~~Iowa~~for asthe same ~~well~~period asin ~~furniture~~fiscal ~~and~~2011. ~~equipment~~The ~~used~~increase in ~~the~~stockyard ~~Port~~expenses ~~Jefferson~~is ~~Station,~~consistent with ~~New~~the ~~York~~2012 ~~office~~increase in stockyard revenues. ~~Land~~Stockyard ~~and~~expenses ~~structures~~were ~~leased~~comprised of tolabor ~~third~~and ~~parties~~related ~~include~~costs ~~vacant~~(40.8% ~~land~~and 42.6%), ~~exchange~~other ~~buildings~~operating and maintenance (~~commercial~~29.2% ~~office~~and ~~space~~27.5%), ~~meat~~feed ~~packing~~and ~~facilities,~~bedding ~~railcar~~expense ~~repair~~(5.5% ~~shops~~and 4.4%), ~~lumber~~depreciation ~~yards~~and amortization (0.9% and ~~various~~1.1%), taxes other ~~commercial~~than income taxes (3.9% and ~~retail~~4.2%) ~~businesses~~and general and administrative expense (19.7% and 20.2%) for the three month periods ended April 30, 2012 and 2011, respectively. There were no significant percentage variations in the year to year comparisons.

A27 ~~schedule of the Company’s property on operating leases at July 31, 2011 is as follows (000's omitted):~~

	Current Year
	(Retirements
	Historical Cost				Additions							Carrying
Description (1)	Land		Bldgs. & Imprvmts.		Land		Bldgs. & Imprvmts.		Accum. Depr.			Value 07/31/11
New York office
Leasehold assets	$	0	$	8	$	0	$	0	$	(8	)	$	0
9 acres of land
in Omaha, NE	$	800	$	21	$	0	$	14	$	(19	)	$	816
Acquired in 1976
3 acres of land
in S. St. Paul, MN	$	10	$	485	$	0	$	0	$	(462	)	$	33
Acquired in 1937
4 acres of land
in Sioux City, IA Acquired in 1937	$	540	0		$	0	$	0	$	0		$	540
	$	1,350	$	514	$	0	$	14	$	(489	)	$	1,389

General and Administrative

AGeneral ~~schedule~~and administrative expenses for the six months ended April 30, 2012 of $488,000 increased by $74,000 (17.9%) as compared to $414,000 for the ~~Company’s~~same ~~reconciliation~~period in fiscal 2011. The major components of ~~property~~general onand administrative ~~operating~~expenses ~~leases~~were ~~carried~~officers’ salaries (49.7% and 57.2%), pension expense (11.0% and 13.0%), insurance expense (12.4% and 6.7%), administrative salaries (9.8% and 11.4%), travel expense (3.0% and 2.1%) and professional fees (6.3% and 1.5%) for the ~~nine~~six ~~months~~month periods ended ~~July~~April 3130, ~~2011~~2012 and 2011, respectively. The percentage variations in the year ~~ended~~to ~~October~~year ~~31,~~comparisons ~~2010~~were isdue primarily asto ~~follows~~the ~~(000's~~sharp ~~omitted):~~increases in insurance expense and professional fees during the first six months of fiscal 2012.

	July 31,			October 31,
	2011			2010
Balance at beginning of year		1391			1074
Acquisitions and Improvements		14			0
Cost of property sold		0			0
Depreciation		(16	)		(23	)
Reclassifications		0			340
Balance at end of the period		1389			1391

General and administrative expenses for the three months ended April 30, 2012 of $280,000 increased by $72,000 (34.6%) as compared to $208,000 for the same period in fiscal 2011. The major components of general and administrative expenses were officers’ salaries (43.3% and 56.9%), pension expense (9.6% and 13.0%), insurance expense (16.2% and 6.6%), administrative salaries (8.7% and 11.3%), travel expense (3.9% and 2.4%) and professional fees (9.1% and 1.4%) for the three month periods ended April 30, 2012 and 2011, respectively. The percentage variations in the year to year comparisons were due primarily to the sharp increases in insurance expense and professional fees during the first six months of fiscal 2012.

~~(1)~~Interest ~~Substantially~~Expense ~~all of Canal’s real property is pledged as collateral for its debt obligations.~~

23Interest expense for the six months ended April 30, 2012 of $45,000 increased by $3,000 (5.4%) from $42,000 for the same period in fiscal 2011. The 2012 increase was due primarily to Canal’s payment of additional interest accrued on certain interest payments that had been deferred by the holder of its outstanding mortgage notes. The principal balance outstanding at April 30, 2012 of $564,000 was classified as long-term debt-related party.

~~Index~~Interest expense for the three months ended April 30, 2012 of $23,000 increased by $2,000 (10.8%) from $21,000 for the same period in fiscal 2011. The 2012 increase was due primarily to Canal’s payment of additional interest accrued on certain interest payments that had been deferred by the holder of its outstanding mortgage notes. The principal balance outstanding at April 30, 2012 of $564,000 was classified as long-term debt-related party.

~~13.~~Net ~~PROPERTY~~(Loss) ~~USED~~Income ~~IN STOCKYARD OPERATIONS~~

~~Property~~Canal ~~used~~recognized innet ~~stockyard~~income ~~operations consist~~ of approximately 30$149,000 ~~acres~~in ofthe six ~~land~~month ~~located~~period inended ~~St.~~April ~~Joseph~~30, ~~Missouri. The~~2012 ~~Company’s~~as ~~stockyards~~compared ~~provide~~to ~~all~~a ~~services~~net ~~and~~loss ~~facilities~~of ~~required~~approximately $129,000 tofor ~~operate~~the ansame ~~independent~~period ~~market~~in ~~for~~fiscal ~~the~~2011. ~~sale~~The ofincome ~~livestock.~~in ~~Stockyard~~fiscal ~~facilities~~2012 ~~include~~was ~~exchange~~due primarily ~~buildings~~to ~~(commercial~~the ~~office space)~~$852,000 ~~auction~~sale ~~arenas,~~of ~~scale~~real ~~houses,~~estate ~~veterinary~~in ~~facilities,~~the ~~barns,~~second ~~livestock~~quarter ~~pens~~which generated ~~and~~a ~~loading~~gain ~~docks~~of $346,000.

ACanal ~~schedule~~recognized net income of approximately $144,000 in the three ~~Company’s~~month ~~property~~period ~~used~~ended inApril ~~stockyard~~30, ~~operations~~2012 atas ~~July~~compared 31to a net loss of approximately $66,000 for the same period in fiscal 2011. isThe asincome ~~follows~~in (fiscal 2012 was due primarily to the $852,000's ~~omitted):~~sale of real estate in the second quarter which generated a gain of $346,000.

					Current Year
					(Retirements)
	Historical Cost				Additions						Carrying
Description (1)	Land		Bldgs. & Imprvmts.		Land		Bldgs. & Imprvmts.		Accum. Depr.		Value 07/31/11
30 acres of land in St. Joseph, MO Acquired in 1942	$	400	$	325	$	0	$	37	$	(206)		554

ALiquidity ~~schedule of the Company’s reconciliation of property used in stockyard operations carried for the nine months ended July 31, 2011~~ and ~~the~~Capital ~~year~~Resources ~~ended October 31, 2010 is as follows (000's omitted):~~

	July 31,			October 31,
	2011			2010
Balance at beginning of year	$	533		$	988
Acquisitions and Improvements		37			60
Transfers		0			(502	)
Depreciation		(16	)		(13	)
Balance at end of the period	$	554		$	533

Cash and cash equivalents increased approximately $156,000, from $36,000 at October 31, 2011, to $191,000 at April 30, 2012. At April 30, 2012 the Company’s current assets exceeded current liabilities by approximately $165,000 which was an improvement of approximately $241,000, as compared to October 31, 2011 when the Company’s current liabilities exceeded current assets by approximately $76,000.

~~(1)~~Net ~~Substantially~~cash ~~all~~used ofin ~~Canal’s~~operating ~~real~~activities ~~property~~for isthe ~~pledged~~six months ended April 30, 2012 were $383,000, as ~~collateral~~compared to $327,000 for the same period in fiscal 2011, for a net increase of $56,000. This increase in cash used during the six months ended April 30, 2012 was not significant. During fiscal 2012 the Company repaid $283,000 of its outstanding mortgage notes. Additionally, the Company made payments of interest on the long-term debt ~~obligations~~discussed at “Obligations under Material Contracts” below.

24While the Company is currently operating as a going concern, certain significant factors raise substantial doubt about the Company's ability to continue as a going concern. The Company has suffered recurring losses from operations and is obligated to continue making substantial annual contributions to its defined benefit pension plan. The financial statements do not include any adjustments that might result from the resolution of these uncertainties. Additionally, the accompanying financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.

~~Index~~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 is unsure if 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 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. Canal may, as it has in the past, be forced to sell income producing assets to raise needed cash, thereby, further adversely impacting future revenues. As of the date of this report Canal has sold its Sioux Falls, South Dakota property (formerly used in stockyard operations); two of its three remaining rental properties’ and its stockyard operations (30 acres of land and the improvements thereon) located in St. Joseph, Missouri. The Company’s only remaining real estate property is a rental property located in Omaha, Nebraska.

~~14.~~Obligations ~~PROPERTY~~under ~~HELD~~Material ~~FOR~~Contracts ~~DEVELOPMENT OR RESALE~~

~~Property~~At April 30, 2012, all of the Company’s Long-Term Debt was held by ~~for~~the ~~development~~company’s orChief ~~resale~~Executive ~~consist~~Officer. ofThese ~~approximately~~notes 2pay ~~acres~~interest at a rate of 10% ~~land~~per ~~located~~annum inand come due May 15, 2015. At various times during fiscal 2012 the holder ~~Midwest~~of these notes agreed to defer interest payments. This deferred interest liability accrued additional interest at a rate of ~~undeveloped~~10% ~~land~~per ~~not~~annum, ~~currently~~while outstanding, ~~utilized~~and is repaid as funds became available. Canal has incurred interest expense on these notes of $45,000 and $42,000 for ~~corporate~~the ~~purposes~~fiscal quarters ended April 30, 2012 and ~~not~~2011, respectively. Accrued interest of $84,600 and $84,700 is included in ~~any~~salaries ofand ~~the~~interest ~~present~~payable-officers ~~operating~~at April ~~leases~~30, 2012 and October 31, 2011, respectively. ~~The~~ ~~Company~~These ~~constantly~~notes, ~~evaluates~~among ~~proposals~~other things, ~~received~~prohibit ~~for~~Canal from becoming an investment company, as defined by the Investment ~~purchase~~Company Act of 1940, ~~leasing~~restrict Canal’s ability to pay cash dividends or ~~development~~repurchase stock, and require principal prepayments to be made only out of the ~~this~~proceeds ~~asset~~from the sale of certain assets. ~~The~~ ~~land~~As isof ~~valued~~April at30, ~~cost~~2012, the balance due under these notes was $564,000 all of which ~~does~~was ~~not~~classified ~~exceed~~as long-term debt due to related party. As of the ~~net~~filing ~~realizable~~of ~~value~~this report, the balance due under these notes was $400,000.

A29 ~~schedule of the Company’s property held for development or resale at July 31, 2011 is as follows (000's omitted):~~

Current Year

(Retirements)

Historical Cost

Additions

Carrying

Description (1)

Land

Bldgs. & Imprvmts.

Land

Bldgs. & Imprvmts.

Accum. Depr.

Value 07/31/11

2 acres of land

in Sioux City, IA Acquired in 1937

N/A

We are currently not party to any other material agreements, other than employment agreements, that impose any payment obligation, whether in cash or securities, on the Company now or in the future.

ARecent ~~schedule~~Accounting ofPronouncements ~~the Company’s reconciliation of property held for development or resale carried for the nine months ended July 31, 2011 and the year ended October 31, 2010 is as follows (000's omitted):~~

	July 31,		October 31,
	2011		2010
Balance at beginning of year	$	53	$	273
Acquisitions and Improvements		0		0
Cost of property sold		0		0
Reclassification of property		0		(220	)
Balance at end of the period	$	53	$	53

In May 2011, the FASB issued ASU 2011-04, “Fair Value Measurement (Topic 820): Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs" (“ASU 2011-04”). This update amends ASC Topic 820, “Fair Value Measurement and Disclosure.” ASU 2011-04 clarifies the application of certain existing fair value measurement guidance and expands the disclosures for fair value measurements that are estimated using significant unobservable (Level 3) inputs. ASU 2011-04 is effective for annual and interim reporting periods beginning on or after December 15, 2011, which means that it will be effective for our fiscal quarter beginning January 1, 2012. The new guidance is to be adopted prospectively and early adoption is not permitted. We do not believe that adoption of ASU 2011-04 will have a significant impact on our financial position, results of operations or cash flows.

On June 16, 2011, the FASB issued ASU No. 2011-05, “Comprehensive Income (1Topic 220): ~~Substantially~~Presentation ~~all~~of Comprehensive Income” (“ASU 2011-05”). This update amends ASC Topic 220, “Comprehensive Income” to provide that total comprehensive income will be reported in one continuous statement or two separate but consecutive statements of ~~Canal’s~~financial ~~real~~performance. ~~property~~Presentation of total comprehensive income in the statement of stockholders' equity or the footnotes will no longer be allowed. The calculation of net income and basic and diluted net income per share will not be affected. ASU 2011-005 is ~~pledged~~effective asfor fiscal ~~collateral~~ years, and interim periods within those years, beginning on or after December 15, 2011, which means that it will be effective for ~~its~~our ~~debt~~fiscal ~~obligations~~year beginning July 1, 2012. Retrospective adoption is required and early adoption is permitted. We do not believe that adoption of ASU 2011-05 will have a significant impact on our financial position, results of operations or cash flows.

2530

~~Index~~Critical Accounting Policies and Estimates

15Our consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States. These ~~PENSION~~generally ~~VALUATION~~accepted ~~RESERVE~~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.

~~The~~Management ~~Pension~~believes ~~Valuation~~the ~~Reserve~~following ~~represents~~critical ~~the~~accounting ~~excess~~policies impact ofour ~~additional~~most ~~minimum~~difficult, ~~pension~~subjective ~~liability~~and ~~required~~complex ~~under~~judgments ~~the~~used ~~provisions~~in ofthe preparation ~~Statement~~ of ~~Financial~~our ~~Accounting~~consolidated ~~Standards~~financial ~~(“SFAS”)~~statements, ~~No.~~often 87as ~~amended~~a byresult ~~SFAS~~of ~~158~~the need ~~over~~to ~~the~~make ~~unrecognized~~estimates ~~prior~~about ~~service~~the ~~costs~~effect of ~~former~~matters ~~stockyard~~that ~~employees~~are inherently uncertain. ~~Such~~ ~~excess~~For ~~arose~~a ~~due~~further todiscussion ~~the decline in the market value~~ of ~~pension~~these ~~assets~~and ~~available~~other ~~for pension~~accounting ~~benefits of former employees~~policies, please ~~which~~see ~~benefits~~Note ~~were~~2 ~~frozen~~of at the ~~time~~Notes ~~the~~to ~~stockyard~~Consolidated ~~operations~~Financial ~~were~~Statements ~~sold~~included elsewhere in ~~1989. The~~this ~~additional~~Annual ~~minimum pension liability will be expensed as actuarial computations of annual pension cost recognize the deficiency that exists~~Report.

Long-Lived Assets -- The ~~components~~Company reviews the impairment of long-lived ~~net~~assets ~~periodic~~whenever ~~benefit~~events ~~cost~~or ~~are~~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 ~~follows:~~the amount by which the carrying amount of the asset exceeds the fair value of the asset.

	Six Months Ended
	7/31/11			7/31/10
Service cost		6,000			6,000
Interest cost		78,000			78,000
Expected return on plan assets		(84,000	)		(84,000	)
Amortization of prior service cost		0			0
Recognized net actuarial loss		90,000			90,000
Net periodic benefit cost		90,000			90,000

Seasonality

~~For~~Our ~~the~~operations ~~nine~~and ~~months~~operating ~~ended~~cash ~~July~~flows 31were subject to seasonal variations. Stockyard operations were seasonal, ~~2011~~with ~~amounts~~greater ~~have~~volume generally ~~been~~experienced ~~estimated~~during the first and second quarters of each fiscal year during which periods livestock is generally brought to market. As of the date of this report, ~~actual~~the ~~amounts~~Company ~~will~~is beno ~~based~~longer onin the ~~discount~~stockyard ~~rate~~business and ~~assets~~therefore its ~~available~~operations atand ~~year~~operating ~~end~~cash flows are no longer subject to seasonal variations.

~~The~~Off-Balance ~~Company’s~~Sheet ~~required~~Arrangements contribution to its pension plan for fiscal 2011 is approximately $172,000. A $155,000 contribution has been made to date and the Company expects to make the full required contribution before the end of the fiscal year.

~~16.~~For ~~401(k)~~the ~~PLAN~~six months ended April 30, 2012, we did not have any off-balance sheet arrangements.

~~The~~ITEM ~~Company has a defined contribution 401(k) plan covering substantially all of its full time stockyard employees~~3. ~~The~~ ~~plan~~QUANTITATIVE ~~provides~~AND ~~for~~QUALITATIVE ~~employee~~DISCLOSURES ~~contributions~~ABOUT ~~and~~MARKET 401(k) matching contributions of up to 2 ½% of the employee’s annual salary by the Company. The Company made 401(k) matching contributions of approximately $8,000 for each of the nine month periods ended July 31, 2011 and 2010.RISK

26Not Applicable

~~Index~~31

17ITEM 4. ~~RELATED~~CONTROLS ~~PARTY~~AND ~~TRANSACTIONS~~PROCEDURES

~~Interest~~Evaluation ~~Expense Related Party - At July 31, 2011, all~~ of ~~Canal’s~~Disclosure ~~Long-Term~~Controls ~~Debt is held by the company’s Chief Executive Officer. These notes pay interest at a rate of 10% per annum~~ and ~~come~~Procedures due May 15, 2012. Canal has incurred interest expense on these notes of $64,000 and $88,000 and for the nine month periods ended July 31, 2011 and 2010, respectively. At various times during fiscal 2011 and 2010 the holder of these notes agreed to defer interest payments due him to help Canal with its cash flow. All deferred interest liability for fiscal 2011 and 2010 plus accrued interest at a rate of 10% per annum, will be repaid as funds become available. As of July 31, 2011, the balance due under these notes was $847,000 all of which is classified as long-term debt related party.

18We maintain disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act) that are designed to ensure that information that would be required to be disclosed in Exchange Act Reports is recorded, processed, summarized and reported within the time period specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including to our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. ~~LITIGATION~~

~~Canal~~As ~~and~~required ~~its~~by ~~subsidiaries~~Rule ~~are~~13a-15 ~~from~~under ~~time~~the toExchange ~~time~~Act, ~~involved~~our management, inincluding ~~litigation~~our ~~incidental~~Chief toExecutive ~~their~~Officer, ~~normal~~Mr. ~~business~~Michael ~~activities~~E. Schultz, ~~none~~and Chief ofFinancial ~~which~~Officer, inMr. Reginald Schauder, evaluated the ~~opinion~~effectiveness of the ~~management,~~design ~~will~~and ~~have~~operation aof ~~material~~our ~~adverse~~disclosure ~~effect~~controls onand ~~the~~procedures ~~consolidated~~as ~~financial~~of ~~condition~~April 30, 2012. Based upon, and ~~operations~~as of the ~~Company.~~date ~~Canal~~of ~~was~~this ~~not~~evaluation, aMessrs. ~~party~~Schultz toand Schauder ~~any~~determined ~~ongoing~~that ~~litigation~~because atof ~~July~~the 31material weaknesses described below, ~~2011. The~~our disclosure ~~following~~controls ~~situation~~and ~~did~~procedures ~~arise~~were innot ~~fiscal~~effective. ~~2005:~~

~~Environmental~~Our ~~Protection~~management ~~Agency~~concluded -that ~~Special~~our ~~Notice~~internal ~~Letter~~control over financial reporting was not effective, as of October 31, 2009 through the period covered by this report, as we had limited accounting personnel and funds available for ~~Investigation~~ continuous legal and accounting advice as it pertained to our filing requirements with the SEC. Furthermore, ~~Portland~~since its annual report for the fiscal year ended October 31, ~~Oregon~~2008, ~~Property~~the Company submitted its annual and quarterly financial statements in filings to the SEC without the benefit of the audit, and review, as applicable by an independent public accounting firm. Additionally, in our annual and quarterly reports on Forms 10-K and 10-Q for our fiscal years 2009, 2010 and 2011 there was a lack of adequate controls over the recording of gains on sales of properties and other transactions that constituted a material weakness in internal control over financial reporting.

In ~~1989,~~an ~~the~~effort ~~Company sold its 48 acre Portland, Oregon stockyard~~ to ~~Oregon~~remediate ~~Waste~~this ~~Systems,~~material ~~Inc. On September 29~~weakness, ~~2003,~~our management ~~the~~has ~~United~~appointed ~~States~~qualified ~~Environmental~~personnel ~~Agency~~and ~~(EPA)~~has ~~placed~~engaged ~~a 4.2 acre portion of that property on~~ the ~~National~~Company’s auditors ~~Priorities List pursuant~~ to ~~the~~conduct ~~Comprehensive~~reviews ~~Environmental Response Compensation~~ and ~~Liability Act (CERCLA)~~audits, ~~commonly known~~ as ~~the Superfund Act. In a letter from the EPA dated June 27~~applicable, ~~2005 the Company, along with approximately 13 other parties, including the current owner and operator~~ of ~~the~~its ~~site,~~financial statements ~~was notified that it might be liable to perform or pay~~ for the ~~remediation~~non-compliant ~~of environmental contamination found on and around the site~~periods. ~~Since~~ ~~the~~Accordingly, ~~receipt of~~ the ~~letter,~~nine ~~the~~reports ~~Company~~outlined above ~~has~~were ~~been~~appropriately inamended ~~periodic~~and ~~communications~~filed with the ~~other~~SEC ~~parties~~on ~~who~~October ~~received a similar letter with respect to what action~~30, ~~collectively or individually, should be taken in response to the EPA assertion of liability~~2012. ~~The~~ The Company ~~believes~~expects that the ~~remediation~~filing of ~~contamination~~this ofquarterly ~~the~~report ~~site~~on isForm ~~properly~~10-Q for the six ~~responsibility~~months ofended ~~other~~April ~~parties~~30, ~~that~~2012 ~~have occupied~~ and ~~used~~2011 itwill ~~for~~be ~~waste~~a ~~recycling~~further ~~purposes~~step ~~since~~in ~~1961,~~curing ~~although~~this deficiency ~~under~~with ~~CERCLA~~ the ~~EPA~~SEC. isOur ~~able~~management todoes ~~assert~~not ~~joint~~believe ~~and~~that ~~several~~this ~~liability~~material weakness ~~against~~had ~~all~~a ~~parties~~material ~~who~~effect ~~ever~~on ~~owned~~our orfinancial ~~operated~~condition ~~the site~~ or ~~generated~~results of operations or ~~transported~~caused ~~wastes~~our tofinancial ~~it.~~statements ~~This~~as ~~investigation~~of ~~is in its preliminary stages~~ and ~~the Company intends to vigorously defend any liability~~ for ~~remediation. At July 31, 2011,~~ the ~~liability~~six ~~for~~months ~~remediation,~~ended April ~~if any~~30, is2012 ~~not estimatable~~ and ~~therefore~~2011, noincluded ~~accrual~~in ~~has~~this ~~been recorded~~report into ~~the~~contain ~~financial~~a ~~statements~~material misstatement.

27Changes in Internal Control over Financial Reporting

~~Index~~There were no changes in our internal controls over financial reporting during the six month period ended April 30, 2012 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

~~ITEM~~32 ~~II. MANAGEMENT'S DISCUSSION AND ANALYSIS OF THERESULTS OF OPERATIONS AND FINANCIAL CONDITION FOR THE NINE MONTHS ENDED JULY 31, 2011~~

AsPART aII. ~~Stockholder~~OTHER ofINFORMATION Canal Capital Corporation you should be aware that due to financial constraints Canal’s fiscal 2011 and 2010 Financial Statements are being presented in this Form 10-Q without benefit of independent audit or review.

~~You~~Item 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 report1. ~~This~~ ~~report~~LEGAL 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”.PROCEEDINGS

~~Company~~From ~~Overview~~time to time, we may become involved in various lawsuits and legal proceedings which arise in the ordinary course of business. However, litigation is subject to inherent uncertainties, and an adverse result in these or other matters may arise from time to time that may harm our business.

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

~~Canal~~In is1989, ~~engaged~~the inCompany ~~two~~sold ~~distinct~~its ~~businesses~~48 --acre ~~real~~Portland, ~~estate~~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 ~~stockyard~~Liability ~~operations~~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.

~~Real~~Since ~~Estate~~the ~~Operations~~receipt -of ~~Canal's~~the ~~real~~letter, ~~estate~~the ~~properties~~Company ~~are~~has ~~located~~been in periodic ~~Sioux~~communications ~~City,~~with ~~Iowa,~~the ~~South~~other Stparties ~~Paul,~~who ~~Minnesota,~~received Sta ~~Joseph,~~similar ~~Missouri,~~letter with ~~Omaha,~~respect ~~Nebraska~~to ~~and~~what ~~Sioux Falls~~action, ~~South~~collectively ~~Dakota. The~~or ~~properties consist~~individually, ~~for the most part,~~should ofbe ~~land~~taken ~~and~~in response ~~structures leased~~ to ~~third~~the ~~parties~~EPA ~~(rail~~assertion ~~car~~of ~~repair~~liability. ~~shops,~~The ~~lumber~~Company ~~yards~~believes ~~and~~that ~~various~~the remediation ~~other~~of ~~commercial~~contamination ~~and~~of ~~retail~~the ~~businesses)~~site asis ~~well~~properly asthe ~~vacant~~responsibility ~~land~~of ~~available~~other parties ~~for~~that ~~development~~have oroccupied ~~resale. Its~~and ~~principal~~used ~~real~~it ~~estate~~for ~~operating~~waste ~~revenues~~recycling ~~are~~purposes ~~derived~~since ~~from~~1961, although ~~lease income~~under ~~from~~CERCLA ~~land~~the ~~and~~EPA ~~structures~~is ~~leased~~able to ~~various~~assert ~~commercial~~joint and ~~retail~~several ~~enterprises and proceeds from the~~liability ~~sale~~against ofall ~~real~~parties ~~estate~~who ~~properties.~~ever Inowned ~~addition~~or tooperated ~~selling what was excess stockyard property,~~ the ~~company~~site ~~entertains~~or ~~any~~generated ~~offers~~or transported wastes to ~~purchase,~~it. ~~develop~~The ~~and~~EPA ~~restructure~~investigation ~~real~~is ~~estate~~in ~~lots surrounding~~ its ~~existing~~preliminary ~~operating~~stages ~~lease~~and the ~~properties,~~Company ~~stockyard~~intends ~~operating~~to ~~properties~~vigorously ~~and~~defend ~~properties~~any ~~held~~liability for ~~development~~remediation. orAt ~~resale~~April 30, in2012, ~~order~~the toliability ~~enhance~~for ~~the~~remediation, ~~value~~if ofany, ~~the~~was ~~existing~~not ~~properties~~estimable and ~~surrounding~~therefore no ~~real~~accrual ~~estate.~~has ~~See~~been ~~"Real~~recorded ~~Estate~~in ~~Operations"~~the financial statements.

28We are currently not aware of any other legal proceedings or claims that we believe will have a material adverse affect on our business, financial condition or operating results.

~~Index~~33

~~Stockyard~~ITEM ~~Operations~~1A. -RISK ~~Canal~~FACTORS ~~currently~~– ~~operates~~Not ~~one central public stockyard located in St. Joseph, Missouri.~~applicable

~~Sioux~~ITEM 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 location2. InUNREGISTERED ~~September~~SALES ~~2010,Canal~~OF ~~sold~~EQUITY ~~approximately~~SECURITIES 37AND ~~acres~~USE ofOF ~~land~~PROCEEDS ~~previously~~- ~~used in stockyard operations located in Sioux Falls, South Dakota for $2.0 million generating operating income of $0.7 million.~~None

~~Public~~ITEM ~~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~~3. ~~The~~ ~~Company’s~~DEFAULTS ~~principal~~UPON ~~stockyard~~SENIOR ~~revenues~~SECURITIES ~~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”.~~None

~~Real~~ITEM ~~Estate~~4. ~~Operations~~MINE SAFETY DISCLOSURES – Not applicable

~~Real~~ITEM ~~estate operations resulted in operating income of $160,000 and $147,000 for the nine month periods ended July 31, 2011 and 2010, respectively~~5. ~~There~~OTHER were no real estate sales in the first nine months of fiscal 2011 or 2010. Additionally, real estate operations contributed $203,000 and $217,000 to Canal’s revenues for the nine month periods ended July 31, 2011 and 2010, respectively.INFORMATION

AsWe ofhave ~~July~~no ~~31,~~information ~~2011, there are approximately 2 acres of undeveloped land owned by Canal adjacent~~ to ~~its~~disclose ~~stockyard~~that ~~properties. In addition to selling what~~ was ~~excess~~required ~~stockyard property, the company entertains any offers~~ to ~~purchase,~~be disclosed ~~develop~~in ~~and~~a ~~restructure~~report ~~real~~on ~~estate~~Form ~~lots~~8-K ~~surrounding~~during ~~its~~our ~~existing~~first ~~operating~~quarter ~~lease~~ended ~~properties~~January 31, 2012, ~~stockyard~~but ~~operating~~was ~~properties~~not ~~and properties held for development or resale in order to enhance the value of the existing properties and surrounding real estate~~reported.

~~Risk~~ITEM ~~- Real estate activities in general may involve various degrees of risk, such as the ability to collect receivables, competition for tenants, general market conditions and interest rates~~6. ~~Furthermore,~~ ~~there can be no assurance that Canal will be successful in the development, lease or sale of its real estate properties.~~EXHIBITS

~~Competition~~The -following ~~Canal~~exhibits ~~competes~~are infiled ~~the~~as ~~area~~part of ~~real~~this ~~estate~~report ~~development~~or incorporated ~~with~~by ~~other~~reference: ~~regional developers, some of which are substantially larger and have significantly greater financial resources than Canal.~~

EXHIBIT No.	Description
31.1	Certifications of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2	Certifications of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1	Certifications of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2	Certifications of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101*	Interactive data files pursuant to Rule 405 of Regulation S-T.

~~Index~~ *Filed with this Form 10-Q for Canal Capital Corporation. Pursuant to Rule 406T of Regulation S-T, the interactive data files on Exhibit 101 hereto are deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, or for purposes of Section 18 of the Securities Act of 1934, as amended, and otherwise are not subject to liability under those sections.

~~Stockyard~~34 ~~Operations~~

~~Stockyard~~SIGNATURES ~~Operations - Canal currently operates one central public stockyard located in St. Joseph, Missouri.~~

~~Public~~Pursuant ~~stockyards~~to ~~act much like a securities exchange, providing markets for all categories of livestock and fulfilling~~ the ~~economic~~requirements ~~functions~~ of ~~assembly, grading, and price discovery. The livestock handled by~~ the ~~Company’s~~Securities ~~stockyards~~Exchange ~~include~~Act ~~cattle~~of 1934, ~~hogs, and sheep. Cattle and hogs may come through~~ the ~~stockyard~~Registrant ~~facilities~~has atduly ~~two~~caused ~~different~~this ~~stages,~~report ~~either as feeder livestock or slaughter livestock. The Company’s stockyards provide all services and facilities required~~ to ~~operate~~be ansigned ~~independent~~on ~~market~~its ~~for~~behalf ~~the sale of livestock, including veterinary facilities,~~by ~~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~~undersigned, ~~advertising,~~hereunto ~~and~~duly ~~personal solicitation of producers~~authorized.

~~Actual~~Dated: ~~marketing~~November 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 animal28, ~~the~~2012 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.

InCANAL ~~addition~~CAPITAL toCORPORATION ~~market~~By: ~~agencies~~/S/ ~~and~~Michael ~~independent commission sales people the St~~E. ~~Joseph~~Schultz ~~stockyards~~Michael ~~has solicitation operations of its own which account for approximately 50% of its livestock volume annually~~E. ~~Canal~~Schultz ~~intends~~President ~~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~~Chief ~~commission~~Executive ~~sales~~Officer ~~people~~(Principal inExecutive ~~various~~Officer) ~~ways, including~~By: ~~developing~~/S/ ~~solicitation~~Reginald ~~operations~~Schauder ofReginald ~~its~~Schauder ~~own;~~Vice ~~direct~~President-Finance, ~~public~~Secretary ~~relations; advertising~~ and ~~personal~~Treasurer ~~solicitation~~(Principal ofFinancial ~~producers on behalf of the stockyards; providing additional services at the stockyards to attract sellers~~ and ~~buyers;~~Accounting ~~and providing incentives to market agencies and independent commission sales people for increased business.~~Officer)

3035

Index

Stockyard operations resulted in operating income of $152,000 and $214,000 for the nine month periods ended July 31, 2011 and 2010, respectively. Additionally, stockyard operations contributed $1,431,000 and $1,648,000 to Canal’s revenues for the nine month periods ended July 31, 2011 and 2010, respectively.

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

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

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

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

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

Index

Revenue Recognition –- Lease and rental revenues are recognized ratably over the period covered. All real estate leases are accounted for as operating leases. Revenues from the sale of real estate are recognized at the time the sale has been consummated on the full accrual method wherein the seller has transferred to the buyer the usual risks and rewards of ownership in a transaction that is in substance a sale and does not have a substantial continuing involvement with the property; the seller’s receivable is not subject to future subordination and the buyer’s initial and continuing investments are adequate to demonstrate a commitment to pay for the property. Revenues from stockyard operations which consist primarily of yardage fees (a standard per head charge for each animal sold through the stockyards) and sale of feed and bedding are recognized at the time the service is rendered or the feed and bedding are delivered.

Art Inventory Held for Sale -- The nature of art makes it difficult to determine a replacement value. The most compelling evidence of a value in most cases is an independent appraisal. Canal has had varying percentages of its art inventory appraised by independent appraisers in previous years. For fiscal 2011 the net realizable value of Canals remaining art inventory has been estimated by management based in part on the Company’s history of art sales in the current and previous years and in part on the results of the independent appraisals done in previous years.

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

Property held for Development or Resale -- Property held for development or resale consist of approximately 2 acres located in the Midwest of undeveloped land not currently utilized for corporate purposes nor included in any of the present operating leases. The Company constantly evaluates proposals received for the purchase, leasing or development of this asset. The land is valued at cost which does not exceed the net realizable value.

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

Index

Results of Operations

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

	Nine Months Ended July 31,
	2011			2010
	(In Thousands)
Revenues:
Real Estate Revenues	$	203		$	217
Stockyard Revenues		1,431			1,648
Total Revenues		1,634			1,865
Costs and Expenses:
Real Estate Expenses		43			70
Stockyard Expenses		1,279			1,433
General and Administrative Expenses		619			628
Total Costs and Expenses		1,941			2,131
(Loss) Income from Operations		(307.00	)		(266.00	)
Other Income		0			0
Other Expenses		(63.00	)		(88.00	)
Net (Loss) Income	$	(307	)	$	(354	)

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

Canal recognized a net loss of approximately $370,000 in the first nine months of fiscal 2011 as compared to a net loss of $354,000 for the same period in fiscal 2010. After recognition of accrued preferred stock dividends of $54,000 and $54,000 in 2011 and 2010, respectively, the results attributable to common stockholders were a net loss of 424,000 in 2011 and a net loss of 408,000 in 2010.

Canal's revenues from continuing operations consist of revenues from its real estate and stockyard operations. Revenues for the first nine months of fiscal 2011 decreased by $231,000 to $1,634,000 as compared with 2010 revenues of $1,865,000. The fiscal 2011 decrease in revenues is due primarily to a $217,000 decrease in stockyard revenues as a result of the closing of the Sioux Falls Stockyards in the first quarter of fiscal 2010 combined with a $14,000 decrease in real estate revenues in the first nine months of fiscal 2011.

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COMPARISON OF FISCAL PERIODS ENDED JULY 31, 2011 AND 2010

Real Estate Revenues

Real estate revenues for the nine months ended July 31, 2011 of $203,000 accounted for 12.4% of the fiscal 2011 revenues as compared to real estate revenues of $217,000 or 11.6% for the same period in fiscal 2010. Real estate revenues are comprised of sale of real estate (0.0% and 0.0%), rentals and other lease income from the rental of vacant land and certain structures (100.0% and 93.3%) and rental income from commercial office space in its Exchange Buildings (0.0% and 6.7%) for the nine months ended July 31, 2011 and 2010, respectively. The percentage variations in the year to year comparisons are due primarily to the elimination of rental income from the Sioux Falls, South Dakota Exchange Building which was closed in September 2010.

Real estate revenues for the three months ended July 31, 2011 of $66,000 accounted for 20.3% of the fiscal 2011 revenues as compared to real estate revenues of $70,000 or 17.3% for the same period in fiscal 2010. Real estate revenues are comprised of sale of real estate (0.0% and 0.0%), rentals and other lease income from the rental of vacant land and certain structures (100.0% and 96.5%) and rental income from commercial office space in its Exchange Buildings (0.0% and 3.5%) for the three months ended July 31, 2011 and 2010, respectively. The percentage variations in the year to year comparisons are due primarily to the elimination of rental income from the Sioux Falls, South Dakota Exchange Building which was closed in September 2010.

Real Estate Expenses

Real estate expenses for the nine months ended July 31, 2011 of $43,000 decreased by $27,000 (38.7%) from real estate expenses of $70,000 for the same period in fiscal 2010. The decrease in real estate expenses is consistent with the 2011 decrease in real estate revenues. Real estate expenses are comprised of the cost of real estate sold (0.0% and 0.0%), labor, operating and maintenance (16.5% and 27.9%), depreciation and amortization (39.1% and 24.0%), taxes other than income taxes (26.4% and 23.8%) and general and administrative expenses (18.0% and 24.3%) for the nine months ended July 31, 2011 and 2010, respectively. The percentage variations in the year to year comparisons are the result of the fiscal 2011 decreases in all but depreciation expense.

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Real estate expenses for the three months ended July 31, 2011 of $14,000 decreased by $10,000 (40.5%) from real estate expenses of $24,000 for the same period in fiscal 2010. The decrease in real estate expenses is consistent with the 2011 decrease in real estate revenues. Real estate expenses are comprised of the cost of real estate sold (0.0% and 0.0%), labor, operating and maintenance (17.4% and 23.9%), depreciation and amortization (38.7% and 23.0%), taxes other than income taxes (26.1% and 23.0%) and general and administrative expenses (17.8% and 30.1%) for the three months ended July 31, 2011 and 2010, respectively. The percentage variations in the year to year comparisons are the result of the fiscal 2011 decreases in all but depreciation expense.

Stockyard Revenues

Stockyard revenues for the nine months ended July 31, 2011 of $1,431,000 accounted for 87.6% of the fiscal 2011 revenues as compared to stockyard revenues of $1,648,000 or 88.4% for the same period in fiscal 2010. The 2011 decrease in stockyard revenues was due primarily to the closing of the Sioux Falls Stockyards in the first quarter of fiscal 2010. Stockyard revenues are comprised of yard handling and auction (87.7% and 82.1%), feed and bedding income (5.8% and 4.8%) and rental and other income (6.5% and 13.1%) for the nine month periods ended July 31, 2011 and 2010, respectively. The 2010 percentage variations in the year to year comparisons are due primarily to the closing of the Sioux Falls Stockyards in the first quarter of fiscal 2010 as discussed above.

Stockyard revenues for the three months ended July 31, 2011 of $260,000 accounted for 79.7% of the fiscal 2011 revenues as compared to stockyard revenues of $333,000 or 82.7% for the same period in fiscal 2010. The 2011 decrease in stockyard revenues was due primarily to the closing of the Sioux Falls Stockyards in the first quarter of fiscal 2010. Stockyard revenues are comprised of yard handling and auction (83.2% and 83.2%), feed and bedding income (6.2% and 6.6%) and rental and other income (10.6% and 10.2%) for the three month periods ended July 31, 2011 and 2010, respectively. The 2010 percentage variations in the year to year comparisons are due primarily to the closing of the Sioux Falls Stockyards in the first quarter of fiscal 2010 as discussed above.

Stockyard Expenses

Stockyard expenses for the nine months ended July 31, 2011 of $1,279,000 decreased by $154,000 (10.7%) from stockyard expenses of $1,433,000 for the same period in fiscal 2010. Stockyard expenses are comprised of labor and related costs (43.9% and 42.6%), other operating and maintenance (26.0% and 27.0%), feed and bedding expense (5.2% and 4.6%), depreciation and amortization (1.2% and 0.7%), taxes other than income taxes (4.4% and 8.1%) and general and administrative expense (19.3% and 17.0%) for the nine month periods ended July 31, 2011 and 2010, respectively. There were no significant percentage variations in the year to year comparisons.

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Stockyard expenses for the three months ended July 31, 2011 of $326,000 decreased by $41,000 (11.1%) from stockyard expenses of $367,000 for the same period in fiscal 2010. Stockyard expenses are comprised of labor and related costs (46.2% and 39.7%), other operating and maintenance (28.4% and 30.4%), feed and bedding expense (5.0% and 4.3%), depreciation and amortization (1.6% and 0.9%), taxes other than income taxes (5.1% and 9.8%) and general and administrative expense (13.7% and 14.9%) for the three month periods ended July 31, 2011 and 2010, respectively. There were no significant percentage variations in the year to year comparisons.

General and Administrative

General and administrative expenses for the nine months ended July 31, 2011 of $620,000 decreased by $8,000 (1.3%) as compared to $628,000 for the same period in fiscal 2010. The major components of general and administrative expenses are officers salaries (57.4% and 56.6%), pension expense (13.1% and 12.9%), insurance expense (6.7% and 6.6%), office salaries (11.4% and 11.2%), travel expense (2.2% and 2.8%) and professional fees (1.7% and 2.9%) for the nine month periods ended July 31, 2011 and 2010, respectively. The percentage variations in the year to year comparisons are due primarily to the sharp decreases in both travel and professional fees expenses in fiscal 2011.

General and administrative expenses for the three months ended July 31, 2011 of $205,000 decreased by $3,000 (1.2%) as compared to $208,000 for the same period in fiscal 2010. The major components of general and administrative expenses are officers salaries (58.4% and 56.5%), pension expense (13.3% and 12.9%), insurance expense (6.8% and 6.6%), office salaries (11.6% and 11.2%), travel expense (2.2% and 2.9%) and professional fees (1.5% and 2.9%) for the three month periods ended July 31, 2011 and 2010, respectively. The percentage variations in the year to year comparisons are due primarily to the sharp decreases in both travel and professional fees expenses in fiscal 2011.

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Interest Expense

Interest expense for the nine months ended July 31, 2011 of $64,000 decreased by $24,000 (28.0%) from $88,000 for the same period in fiscal 2010. The 2011 decrease is due primarily to Canal’s $485,000 partial repayment of this debt in fiscal 2010. The principal balance outstanding at July 31, 2011 of $847,000 is classified as long-term debt-related party.

(Expense) Income from Art Sales & Operations

There were no other expense from art sales & operations for the nine month periods ended July 31, 2011 and 2010, respectively. Canal had no art sales in the first nine months of fiscal 2011 or fiscal 2010. Art revenues, if any, are comprised of the proceeds from the sale of antiquities art. Art expenses are comprised of the cost of inventory sold and selling, general and administrative expenses. It is the Company’s policy to use the adjusted carrying value for sales, thereby reducing the valuation reserve proportionately as the inventory is sold.

Liquidity and Capital Resources

As a Stockholder of Canal Capital Corporation you should be aware that due to financial constraints Canal’s fiscal 2011 and 2010 Financial Statements are being presented in this Form 10-Q without benefit of independent audit or review.

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 there solution of these uncertainties. Additionally, the accompanying financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.

The Company’s variable rate mortgage notes (originally issued in 1998 and amended several times since then) are due May 15, 2012 and are held entirely by the Company’s Chief Executive Officer. These notes carry interest at the rate of ten percent per annum.

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These notes, among other things, prohibit Canal from becoming an investment company as this is defined by the Investment Company Act of 1940;restricts Canal’s ability to pay cash dividends or repurchase stock and require principal prepayments to be made only out of the proceeds from the sale of certain assets. Accordingly, as of July 31, 2011, 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 $78,000 at July 31, 2011 decreased $432,000 from $510,000 at October 31, 2010. Net cash used in operating activities in fiscal 2011 was $381,000. Substantially all of the net proceeds from the sales of real estate or art, if any, will be used in operating activities or to reduce debt. During fiscal 2011 the balance of Canal’s liabilities decreased by a total of $118,000.

At July 31, 2011 the Company’s current assets exceed current liabilities by approximately $0.6 million as compared to October 31, 2010 when the Company’s current assets exceeded current liabilities by $0.3 million. The only required principal repayments under Canal's debt agreements for fiscal 2011 will be from the proceeds (if any) of the sale of certain assets.

As discussed above, Canal’s cash flow position has been under significant strain for the past several years. Canal continues to closely monitor and reduce where possible its operating expenses and plans to continue its program to develop or sell the property it holds for development or resale as well as to reduce the level of its art inventories to enhance current cash flows. Management believes that its income from operations combined with its cost cutting program and planned reduction of its art inventory will enable it to finance its current business activities. There can, however, be no assurance that Canal will be able to effectuate its planned art inventory reductions or that its income from operations combined with its cost cutting program in itself will be sufficient to fund operating cash requirements.

Other Factors

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

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ITEM III. Quantitative and Qualitative Disclosures About Market Risk

The Securities and Exchange Commission’s rule related to market risk disclosure requires that we describe and quantify our potential losses from market risk sensitive instruments attributable to reasonably possible market changes. Market risk sensitive instruments include all financial or commodity instruments and other financial instruments (such as investments and debt) that are sensitive to future changes in interest rates, currency exchange rates, commodity prices or other market factors. We are not exposed to market risks from changes in foreign currency, exchange rates or commodity prices. As of July 31, 2011, we do not hold derivative financial instruments nor do we hold securities for trading or speculative purposes. Under our current policies, we do not use interest rate derivative instruments to manage our exposure to interest rate changes.

At July 31, 2011, the following long-term debt-related party financial instruments are sensitive to changes in interest rates by expected maturity dates:

As of	Fixed rate		Average		Fair
JULY 31,	($ US)		Interest Rate		Value
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: it is not practicable to estimate the fair value of the related party debt.

ITEM IV. Controls and Procedures

Our management, which includes our Chief Executive Officer and Chief Financial Officer, has conducted an evaluation of the effectiveness of our disclosure controls and procedures (as defined in Rule 13(a)-14(c) promulgated under the Securities Exchange Act of 1934) as of July 31, 2011 (“the Evaluation Date”) within 45 days prior to the filing date of this report. Based upon that evaluation our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures are effective for timely gathering, analyzing and disclosing the information we are required to disclose in our reports filed under the Securities Exchange Act of 1934, as amended. There have been no significant changes made in our internal controls or other factors that could significantly effect our internal controls subsequent to the Evaluation Date.

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PART II

OTHER INFORMATION

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Item 1: Legal Proceedings:

Also see Item 3 of Canal’s October 31, 2010 Form 10-K.

Canal and its subsidiaries are from time to time involved in litigation incidental to their normal business activities, none of which, in the opinion of management, will have a material adverse effect on the consolidated financial condition and operations of the Company. Canal was not a party to any ongoing litigation at July 31, 2011.

The following situation did arise in fiscal 2005:

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

In 1989, the Company sold its 48 acre Portland, Oregon stockyard to Oregon Waste Systems, Inc. On September 29, 2003, the United States Environmental Agency (EPA) placed a 4.2 acre portion of that property on the National Priorities List pursuant to the Comprehensive Environmental Response Compensation and Liability Act (CERCLA), commonly known as the Superfund Act. In a letter from the EPA dated June 27, 2005 the Company, along with approximately 13 other parties, including the current owner and operator of the site, was notified that it might be liable to perform or pay for the remediation of environmental contamination found on and around the site. Since the receipt of the letter, the Company has been in periodic communications with the other parties who received a similar letter with respect to what action, collectively or individually, should be taken in response to the EPA assertion of liability. The Company believes that the remediation of contamination of the site is properly the responsibility of other parties that have occupied and used it for waste recycling purposes since 1961, although under CERCLA the EPA is able to assert joint and several liability against all parties who ever owned or operated the site or generated or transported wastes to it. This investigation is in its preliminary stages and the Company intends to vigorously defend any liability for remediation. At July 31, 2011, the liability for remediation, if any, is not estimatable and therefore no accrual has been recorded in the financial statements.

Item 2 and 3: Not applicable.

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

Item 5: Other Information: None.

Item 6: Exhibits and Reports on Form 8-K: (A) Not applicable.

(B) None

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, on the 12th day of September, 2011.

CANAL CAPITAL CORPORATION Date By: /s/ Michael E. Schultz Michael E. Schultz President and Chief Executive Officer (Principal Executive Officer)

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

Signature	Title	Date
	President and Chief
/S/ Michael E. Schultz	Executive Officer and Director
Michael E. Schultz	(Principal Executive Officer)	September 12, 2011
	Vice President-Finance
	Secretary and Treasurer
/S/ Reginald Schauder	(Principal Financial and
Reginald Schauder	Accounting Officer)	September 12, 2011
/S/ Asher B. Edelman	Chairman of the Board
Asher B. Edelman	and Director	September 12, 2011

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