---

UNITED STATESSECURITIES
AND EXCHANGE COMMISSIONWashington, D.C. 20549

FORM 10-Q/A

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

For the quarterly period ended April 30, 2010

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

For the transition period from __________ to __________

002-96666(Commission File Number)

CANAL CAPITAL CORPORATION(Exact name of registrant as specified in its charter)

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

4 Morris StreetPort Jefferson Station, New York
11776 United States of America*(Address of principal executive
offices)*

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

N/A*(Former name, address and former fiscal year,
if changed since last report)*

Indicate by check mark whether the issuer (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.

Yes [_]       No [X]

Indicate by check mark 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
[_]

Indicate by check mark whether the Registrant is a large
accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller
reporting company. See definition of large accelerated filer, accelerated
filer and smaller reporting company in Rule 12b-2 of the Exchange Act.

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

Indicate by check mark whether the Registrant is a shell
company (as defined in Rule 12b-2 of the Exchange Act).

Yes [_]        No [X]

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 October 15, 2012.

---

EXPLANATORY NOTE

The purpose of this Quarterly Report on Form 10-Q for the
period ended April 30, 2010 (the 10-Q), is to provide financial statements of
Canal Capital Corporation (the Company) that have been reviewed by the
Companys independent public accounting firm that were not provided by the
Company in its original filing of the 10-Q on June 15, 2010. Where indicated,
the financial data presented in the 10-Q is as at April 30, 2010, however, the
other disclosures have been updated to reflect the Companys operations as at
the date of this filing.

2

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CANAL CAPITAL CORPORATION

TABLE OF CONTENTS

|PART I - FINANCIAL
      INFORMATION |                                                                                            
|------------------------------------ | -------------------------------------------------------------------------------------------
|                                     | PAGE                                                                                       
|ITEM 1.                              | INTERIM CONDENSED CONSOLIDATED
      FINANCIAL STATEMENTS                                  
|ITEM 2.                              | MANAGEMENTS DISCUSSION AND ANALYSIS OF
      FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|ITEM 3.                              | QUANTITATIVE AND QUALITATIVE
      DISCLOSURES ABOUT MARKET RISK                           
|ITEM 4.                              | CONTROLS AND PROCEDURES                                                                    
|                                     |                                                                                            
|PART II  OTHER INFORMATION          |                                                                                            
|                                     |                                                                                            
|ITEM 1.                              | LEGAL PROCEEDINGS                                                                          
|ITEM 1A.                             | RISK FACTORS                                                                               
|ITEM 2.                              | UNREGISTERED SALES OF EQUITY SECURITIES AND USE
      OF PROCEEDS                          
|ITEM 3.                              | DEFAULTS UPON SENIOR SECURITIES                                                            
|ITEM 4.                              | MINE SAFETY DISCLOSURES                                                                    
|ITEM 5.                              | OTHER INFORMATION                                                                          
|ITEM 6.                              | EXHIBITS                                                                                   
|SIGNATURES                           | 35                                                                                         

3

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PART I

FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

Consolidated Balance Sheets (Unaudited) 
      April 30, 2010 and October 31, 2009
    5Consolidated Statements of Operations and
      Comprehensive Income (Loss)(Unaudited) for the Six and Three Month Periods
      ended April 30, 2010 and 2009
    7Consolidated Statements of Cash Flows
      (Unaudited) for the Six Month Periods ended April 30, 2010 and 2009
    11Notes to Unaudited Consolidated Financial
      Statements
    13


4

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|CANAL CAPITAL CORPORATION & SUBSIDIARIES       
|-----------------------------------------------
|CONSOLIDATED BALANCE SHEETS                    
|APRIL 30, 2010 (UNAUDITED) AND OCTOBER 31, 2009

|                                                                                                                                                                 |   | APRIL 30, |  |   | OCTOBER 31, | 
|---------------------------------------------------------------------------------------------------------------------------------------------------------------- | - | --------- |  | - | ----------- | 
|                                                                                                                                                                 |   | 2010      |  |   | 2009        | 
|ASSETS:                                                                                                                                                          |   |           |  |   |             | 
|CURRENT ASSETS:                                                                                                                                                  |   |           |  |   |             | 
|CASH AND CASH
      EQUIVALENTS                                                                                                                                  | $ | 118,331   |  | $ | 154,624     | 
|RESTRICTED CASH  TRANSIT
      INSURANCE                                                                                                                        |   | 50,240    |  |   | 30,690      | 
|ACCOUNTS
      RECEIVABLE                                                                                                                                        |   | 292,642   |  |   | 106,425     | 
|STOCKYARDS INVENTORY                                                                                                                                             |   | 22,428    |  |   | 16,586      | 
|PREPAID EXPENSES                                                                                                                                                 |   | 41,501    |  |   | 16,965      | 
|TOTAL CURRENT ASSETS                                                                                                                                             |   | 525,142   |  |   | 325,290     | 
|                                                                                                                                                                 |   |           |  |   |             | 
|                                                                                                                                                                 |   |           |  |   |             | 
|NON-CURRENT ASSETS:                                                                                                                                              |   |           |  |   |             | 
|PROPERTY ON OPERATING LEASES, NET
      OF ACCUMULATED DEPRECIATION OF $461,299 AND $450,199 AT APRIL 30, 2010 AND
      OCTOBER 31, 2009, RESPECTIVELY          |   | 1,687,507 |  |   | 1,358,607   | 
|                                                                                                                                                                 |   |           |  |   |             | 
|PROPERTY USED IN STOCKYARD
      OPERATIONS, NET OF ACCUMULATED DEPRECIATION OF $185,121 AND $178,386 AT
      APRIL 30, 2010 AND OCTOBER 31, 2009, RESPECTIVELY |   | 981,587   |  |   | 988,322     | 
|                                                                                                                                                                 |   |           |  |   |             | 
|PROPERTY HELD FOR DEVELOPMENT OR
      RESALE                                                                                                                    |   | 272,525   |  |   | 272,525     | 
|                                                                                                                                                                 |   |           |  |   |             | 
|OTHER ASSETS:                                                                                                                                                    |   |           |  |   |             | 
|RESTRICTED CASH 
      LETTER OF CREDIT                                                                                                                         |   | 140,000   |  |   | 130,000     | 
|ART INVENTORY                                                                                                                                                    |   | 100,000   |  |   | 100,000     | 
|                                                                                                                                                                 |   | 240,000   |  |   | 230,000     | 
|                                                                                                                                                                 | $ | 3,706,761 |  | $ | 3,174,744   | 

SEE ACCOMPANYING NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS.

5

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|CANAL CAPITAL CORPORATION & SUBSIDIARIES       
|-----------------------------------------------
|CONSOLIDATED BALANCE SHEETS                    
|APRIL 30, 2010 (UNAUDITED) AND OCTOBER 31, 2009

|                                                                                                                                                                                                                                                                                                                 |   | APRIL 30,   |   |   | OCTOBER 31, |  
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | - | ----------- | - | - | ----------- | -
|                                                                                                                                                                                                                                                                                                                 |   | 2010        |   |   | 2009        |  
|                                                                                                                                                                                                                                                                                                                 |   |             |   |   |             |  
|LIABILITIES & STOCKHOLDERS' EQUITY:                                                                                                                                                                                                                                                                              |   |             |   |   |             |  
|                                                                                                                                                                                                                                                                                                                 |   |             |   |   |             |  
|CURRENT LIABILITIES:                                                                                                                                                                                                                                                                                             |   |             |   |   |             |  
|ACCOUNTS PAYABLE AND ACCRUED
      EXPENSES                                                                                                                                                                                                                                                                      | $ | 111,519     |   | $ | 181,274     |  
|LINE OF CREDIT 
      ORDER BUYING                                                                                                                                                                                                                                                                              |   | 187,000     |   |   | 62,000      |  
|TRANSIT INSURANCE                                                                                                                                                                                                                                                                                                |   | 50,240      |   |   | 30,690      |  
|                                                                                                                                                                                                                                                                                                                 |   |             |   |   |             |  
|TOTAL CURRENT LIABILITIES                                                                                                                                                                                                                                                                                        |   | 348,759     |   |   | 273,964     |  
|                                                                                                                                                                                                                                                                                                                 |   |             |   |   |             |  
|                                                                                                                                                                                                                                                                                                                 |   |             |   |   |             |  
|NON-CURRENT LIABILITIES:                                                                                                                                                                                                                                                                                         |   |             |   |   |             |  
|LONG-TERM DEBT, RELATED PARTY                                                                                                                                                                                                                                                                                    |   | 1,332,000   |   |   | 992,000     |  
|LONG-TERM PENSION
      LIABILITY                                                                                                                                                                                                                                                                                |   | 796,672     |   |   | 796,672     |  
|SALARIES AND INTEREST PAYABLE 
      OFFICERS                                                                                                                                                                                                                                                                   |   | 223,700     |   |   | 0           |  
|REAL ESTATE TAXES
      PAYABLE                                                                                                                                                                                                                                                                                  |   | 179,486     |   |   | 222,791     |  
|                                                                                                                                                                                                                                                                                                                 |   |             |   |   |             |  
|TOTAL NON-CURRENT LIABILITIES                                                                                                                                                                                                                                                                                    |   | 2,531,858   |   |   | 2,011,463   |  
|                                                                                                                                                                                                                                                                                                                 |   |             |   |   |             |  
|                                                                                                                                                                                                                                                                                                                 |   |             |   |   |             |  
|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, 2010 AND OCTOBER 31, 2009, RESPECTIVELY AND AGGREGATE
      LIQUIDATION PREFERENCE OF $10 PER SHARE FOR $ 91,026,550 AT APRIL 30, 2010
      AND OCTOBER 31, 2009, 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, 2010 AND OCTOBER 31, 2009, RESPECTIVELY                                                                                                                         |   | 53,138      |   |   | 53,138      |  
|                                                                                                                                                                                                                                                                                                                 |   |             |   |   |             |  
|ADDITIONAL PAID-IN CAPITAL                                                                                                                                                                                                                                                                                       |   | 25,526,721  |   |   | 25,526,721  |  
|                                                                                                                                                                                                                                                                                                                 |   |             |   |   |             |  
|ACCUMULATED DEFICIT                                                                                                                                                                                                                                                                                              |   | (11,979,212 | ) |   | (11,862,039 | )
|                                                                                                                                                                                                                                                                                                                 |   |             |   |   |             |  
|986,865 SHARES OF COMMON STOCK
      HELD IN TREASURY, AT COST                                                                                                                                                                                                                                                   |   | (11,003,545 | ) |   | (11,003,545 | )
|                                                                                                                                                                                                                                                                                                                 |   |             |   |   |             |  
|COMPREHENSIVE INCOME:                                                                                                                                                                                                                                                                                            |   |             |   |   |             |  
|PENSION VALUATION RESERVE                                                                                                                                                                                                                                                                                        |   | (1,861,985  | ) |   | (1,915,985  | )
|                                                                                                                                                                                                                                                                                                                 |   |             |   |   |             |  
|                                                                                                                                                                                                                                                                                                                 |   | 826,144     |   |   | 889,317     |  
|                                                                                                                                                                                                                                                                                                                 |   |             |   |   |             |  
|                                                                                                                                                                                                                                                                                                                 | $ | 3,706,761   |   | $ | 3,174,744   |  

SEE ACCOMPANYING NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS.

6

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|CANAL CAPITAL CORPORATION & SUBSIDIARIES        
|------------------------------------------------
|CONSOLIDATED STATEMENTS OF OPERATIONS           
|AND COMPREHENSIVE INCOME (LOSS)                 
|FOR THE SIX MONTHS ENDED APRIL 30, 2010 AND 2009
|(UNAUDITED)                                     

|                                       |   | 2010      |   |   | 2009      |  
|-------------------------------------- | - | --------- | - | - | --------- | -
|                                       |   |           |   |   |           |  
|REAL ESTATE OPERATIONS:                |   |           |   |   |           |  
|                                       |   |           |   |   |           |  
|REAL ESTATE
      REVENUES:            |   |           |   |   |           |  
|SALE
      OF REAL ESTATE              |   | 0         |   |   | 262,720   |  
|OUTSIDE REAL ESTATE RENT               |   | 139,814   |   |   | 193,044   |  
|EXCHANGE BUILDING RENTAL INCOME        |   | 7,279     |   |   | 15,387    |  
|                                       |   | 147,093   |   |   | 471,151   |  
|                                       |   |           |   |   |           |  
|REAL ESTATE EXPENSES:                  |   |           |   |   |           |  
|COST
      OF REAL ESTATE SOLD         |   | 0         |   |   | 69,069    |  
|LABOR,
      OPERATING AND MAINTENANCE |   | 13,578    |   |   | 29,630    |  
|DEPRECIATION
      AND AMORTIZATION    |   | 11,100    |   |   | 11,100    |  
|TAXES
      OTHER THAN INCOME TAXES    |   | 11,000    |   |   | 12,300    |  
|GENERAL
      AND ADMINISTRATIVE       |   | 9,616     |   |   | 19,800    |  
|                                       |   | 45,294    |   |   | 141,899   |  
|                                       |   |           |   |   |           |  
|INCOME FROM REAL ESTATE OPERATIONS     |   | 101,799   |   |   | 329,252   |  
|                                       |   |           |   |   |           |  
|                                       |   |           |   |   |           |  
|STOCKYARD OPERATIONS:                  |   |           |   |   |           |  
|                                       |   |           |   |   |           |  
|STOCKYARD REVENUES:                    |   |           |   |   |           |  
|YARD
      HANDLING AND AUCTION        | $ | 1,076,161 |   | $ | 1,479,436 |  
|FEED
      AND BEDDING INCOME          |   | 58,019    |   |   | 115,691   |  
|RENTAL
      & OTHER INCOME            |   | 180,341   |   |   | 89,675    |  
|                                       |   | 1,314,521 |   |   | 1,684,802 |  
|                                       |   |           |   |   |           |  
|STOCKYARD EXPENSES:                    |   |           |   |   |           |  
|LABOR
      AND RELATED COSTS          |   | 464,207   |   |   | 679,897   |  
|OTHER
      OPERATING AND MAINTENANCE  |   | 274,881   |   |   | 405,622   |  
|FEED
      AND BEDDING EXPENSE         |   | 50,299    |   |   | 92,148    |  
|DEPRECIATION
      AND AMORTIZATION    |   | 6,735     |   |   | 9,909     |  
|TAXES
      OTHER THAN INCOME TAXES    |   | 80,386    |   |   | 90,021    |  
|GENERAL
      AND ADMINISTRATIVE       |   | 189,482   |   |   | 223,412   |  
|                                       |   | 1,065,990 |   |   | 1,501,009 |  
|                                       |   |           |   |   |           |  
|INCOME FROM STOCKYARD OPERATIONS       |   | 248,531   |   |   | 183,793   |  
|                                       |   |           |   |   |           |  
|                                       |   |           |   |   |           |  
|                                       |   |           |   |   |           |  
|GENERAL AND ADMINISTRATIVE EXPENSE     |   | (412,854  | ) |   | (449,428  | )
|                                       |   |           |   |   |           |  
|                                       |   |           |   |   |           |  
|(LOSS) INCOME FROM OPERATIONS          |   | (62,524   | ) |   | 63,617    |  

SEE ACCOMPANYING NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS.

7

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|CANAL CAPITAL CORPORATION & SUBSIDIARIES        
|------------------------------------------------
|CONSOLIDATED STATEMENTS OF OPERATIONS           
|AND COMPREHENSIVE INCOME (LOSS)                 
|FOR THE SIX MONTHS ENDED APRIL 30, 2010 AND 2009
|Continued ...                                   

|                                                           |   | 2010      |   |   | 2009      |  
|---------------------------------------------------------- | - | --------- | - | - | --------- | -
|OTHER (EXPENSE) INCOME:                                    |   |           |   |   |           |  
|INTEREST & OTHER INCOME                                    |   | 230       |   |   | 7,779     |  
|INTEREST EXPENSE                                           |   | (54,879   | ) |   | (63,100   | )
|ART SALES AND OPERATIONS                                   |   | 0         |   |   | (2,400    | )
|                                                           |   | (54,649   | ) |   | (57,721   | )
|                                                           |   |           |   |   |           |  
|(LOSS) INCOME BEFORE PROVISION FOR INCOME
      TAXES      |   | (117,173  | ) |   | 5,896     |  
|PROVISION FOR INCOME TAXES                                 |   | 0         |   |   | 0         |  
|NET (LOSS) INCOME                                          |   | (117,173  | ) |   | 5,896     |  
|                                                           |   |           |   |   |           |  
|OTHER COMPREHENSIVE (LOSS) INCOME:                         |   |           |   |   |           |  
|MINIMUM PENSION LIABILITY ADJUSTMENT                       |   | 54,000    |   |   | 60,000    |  
|COMPREHENSIVE (LOSS) INCOME                                | $ | (63,173   | ) | $ | 65,896    |  
|                                                           |   |           |   |   |           |  
|NET (LOSS) INCOME PER COMMON SHARE BASIC
      AND DILUTED | $ | (0.03     | ) | $ | 0.01      |  
|                                                           |   |           |   |   |           |  
|AVERAGE SHARES OUTSTANDING - BASIC AND
      DILUTED       |   | 4,326,929 |   |   | 4,326,929 |  

SEE ACCOMPANYING NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS.

8

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|CANAL CAPITAL CORPORATION & SUBSIDIARIES          
|--------------------------------------------------
|CONSOLIDATED STATEMENTS OF OPERATIONS             
|AND COMPREHENSIVE INCOME (LOSS)                   
|FOR THE THREE MONTHS ENDED APRIL 30, 2010 AND 2009
|(UNAUDITED)                                       

|                                       |   | 2010     |   |   | 2009     |  
|-------------------------------------- | - | -------- | - | - | -------- | -
|                                       |   |          |   |   |          |  
|REAL ESTATE OPERATIONS:                |   |          |   |   |          |  
|                                       |   |          |   |   |          |  
|REAL ESTATE REVENUES:                  |   |          |   |   |          |  
|SALE OF REAL ESTATE                    |   | 0        |   |   | 262,720  |  
|OUTSIDE REAL
      ESTATE RENT         |   | 67,270   |   |   | 97,045   |  
|EXCHANGE BUILDING RENTAL INCOME        |   | 3,593    |   |   | 7,674    |  
|                                       |   | 70,863   |   |   | 367,439  |  
|                                       |   |          |   |   |          |  
|REAL ESTATE EXPENSES:                  |   |          |   |   |          |  
|COST OF REAL ESTATE SOLD               |   | 0        |   |   | 69,069   |  
|LABOR, OPERATING
      AND MAINTENANCE |   | 7,122    |   |   | 14,464   |  
|DEPRECIATION AND AMORTIZATION          |   | 5,550    |   |   | 5,550    |  
|TAXES OTHER THAN
      INCOME TAXES    |   | 5,550    |   |   | 6,150    |  
|GENERAL AND ADMINISTRATIVE             |   | 4,816    |   |   | 9,900    |  
|                                       |   | 23,038   |   |   | 105,133  |  
|                                       |   |          |   |   |          |  
|INCOME FROM REAL ESTATE OPERATIONS     |   | 47,825   |   |   | 262,306  |  
|                                       |   |          |   |   |          |  
|                                       |   |          |   |   |          |  
|STOCKYARD OPERATIONS:                  |   |          |   |   |          |  
|                                       |   |          |   |   |          |  
|STOCKYARD REVENUES:                    |   |          |   |   |          |  
|YARD HANDLING AND
      AUCTION        | $ | 581,738  |   | $ | 763,564  |  
|FEED AND BEDDING INCOME                |   | 30,319   |   |   | 57,657   |  
|RENTAL & OTHER
      INCOME            |   | 44,083   |   |   | 49,066   |  
|                                       |   | 656,140  |   |   | 870,287  |  
|                                       |   |          |   |   |          |  
|STOCKYARD EXPENSES:                    |   |          |   |   |          |  
|LABOR AND RELATED
      COSTS          |   | 199,464  |   |   | 329,891  |  
|OTHER OPERATING AND MAINTENANCE        |   | 134,824  |   |   | 221,753  |  
|FEED AND BEDDING
      EXPENSE         |   | 25,450   |   |   | 49,271   |  
|DEPRECIATION AND AMORTIZATION          |   | 3,367    |   |   | 4,955    |  
|TAXES OTHER THAN
      INCOME TAXES    |   | 40,432   |   |   | 45,858   |  
|GENERAL AND ADMINISTRATIVE             |   | 111,486  |   |   | 123,249  |  
|                                       |   | 515,023  |   |   | 774,977  |  
|                                       |   |          |   |   |          |  
|INCOME FROM STOCKYARD OPERATIONS       |   | 141,117  |   |   | 95,310   |  
|                                       |   |          |   |   |          |  
|                                       |   |          |   |   |          |  
|                                       |   |          |   |   |          |  
|GENERAL AND ADMINISTRATIVE EXPENSE     |   | (207,908 | ) |   | (224,745 | )
|                                       |   |          |   |   |          |  
|                                       |   |          |   |   |          |  
|(LOSS) INCOME FROM OPERATIONS          |   | (18,966  | ) |   | 132,871  |  

SEE ACCOMPANYING NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS.

9

---

|CANAL CAPITAL CORPORATION & SUBSIDIARIES          
|--------------------------------------------------
|CONSOLIDATED STATEMENTS OF OPERATIONS             
|AND COMPREHENSIVE INCOME (LOSS)                   
|FOR THE THREE MONTHS ENDED APRIL 30, 2010 AND 2009
|Continued ...                                     

|                                                     |   | 2010      |   |   | 2009      |  
|---------------------------------------------------- | - | --------- | - | - | --------- | -
|OTHER (EXPENSE) INCOME:                              |   |           |   |   |           |  
|INTEREST & OTHER INCOME                              |   | 104       |   |   | 7,602     |  
|INTEREST EXPENSE                                     |   | (30,049   | ) |   | (31,550   | )
|ART SALES AND OPERATIONS                             |   | 0         |   |   | (1,200    | )
|                                                     |   | (29,945   | ) |   | (25,148   | )
|                                                     |   |           |   |   |           |  
|(LOSS) INCOME BEFORE PROVISION FOR                   |   |           |   |   |           |  
|INCOME TAXES                                         |   | (48,911   | ) |   | 107,723   |  
|PROVISION FOR INCOME TAXES                           |   | 0         |   |   | 0         |  
|NET (LOSS) INCOME                                    |   | (48,911   | ) |   | 107,723   |  
|                                                     |   |           |   |   |           |  
|OTHER COMPREHENSIVE (LOSS) INCOME:                   |   |           |   |   |           |  
|MINIMUM PENSION
      LIABILITY ADJUSTMENT           |   | 27,000    |   |   | 30,000    |  
|COMPREHENSIVE (LOSS) INCOME                          | $ | (21,911   | ) | $ | 137,723   |  
|                                                     |   |           |   |   |           |  
|NET (LOSS) INCOME PER COMMON SHARE BASIC AND DILUTED | $ | (0.01     | ) | $ | 0.02      |  
|                                                     |   |           |   |   |           |  
|AVERAGE SHARES OUTSTANDING - BASIC AND DILUTED       |   | 4,326,929 |   |   | 4,326,929 |  

SEE ACCOMPANYING NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS.

10

---

|CANAL CAPITAL CORPORATION & SUBSIDIARIES        
|------------------------------------------------
|CONSOLIDATED STATEMENTS OF CASH FLOWS           
|FOR THE SIX MONTHS ENDED APRIL 30, 2010 AND 2009
|(UNAUDITED)                                     

|                                                                                                |   | 2010     |   |   | 2009     |  
|----------------------------------------------------------------------------------------------- | - | -------- | - | - | -------- | -
|CASH FLOWS FROM OPERATING ACTIVITIES:                                                           |   |          |   |   |          |  
|NET (LOSS)                                                                                      | $ | (117,173 | ) | $ | 5,896    |  
|ADJUSTMENTS TO RECONCILE NET LOSS TO NET
      CASH (USED IN) PROVIDED BY OPERATING ACTIVITIES: |   |          |   |   |          |  
|DEPRECIATION
      AND AMORTIZATION                                                             |   | 17,835   |   |   | 21,009   |  
|GAIN ON
      SALES OF REAL ESTATE                                                              |   | 0        |   |   | (193,651 | )
|MINIMUM PENSION LIABILITY
      ADJUSTMENT                                                      |   | 54,000   |   |   | 60,000   |  
|                                                                                                |   |          |   |   |          |  
|DECREASE (INCREASE) IN ASSETS                                                                   |   |          |   |   |          |  
|ACCOUNTS
      RECEIVABLE                                                                       |   | (186,217 | ) |   | (94,721  | )
|STOCKYARDS INVENTORY                                                                            |   | (5,842   | ) |   | 2,239    |  
|PREPAID
      EXPENSES                                                                          |   | (24,536  | ) |   | (40,058  | )
|RESTRICTED CASH  LETTER
      OF CREDIT                                                        |   | (10,000  | ) |   | 0        |  
|RESTRICTED CASH  TRANSIT INSURANCE                                                             |   | (19,550  | ) |   | (39,694  | )
|                                                                                                |   |          |   |   |          |  
|INCREASE (DECREASE) IN LIABILITIES:                                                             |   |          |   |   |          |  
|ACCOUNTS PAYABLE AND
      ACCRUED EXPENSES                                                     |   | (69,755  | ) |   | 24,919   |  
|LINE OF
      CREDIT  ORDER BUYING                                                             |   | 125,000  |   |   | 0        |  
|PENSION PLAN PAYABLE                                                                            |   | 0        |   |   | (45,024  | )
|SALARIES
      AND INTEREST PAYABLE - OFFICERS                                                  |   | 223,700  |   |   | 206,100  |  
|REAL ESTATE TAXES PAYABLE                                                                       |   | (43,305  | ) |   | 30,633   |  
|TRANSIT
      INSURANCE                                                                         |   | 19,550   |   |   | 0        |  
|TOTAL
      ADJUSTMENTS                                                                         |   | 80,880   |   |   | (68,248  | )
|NET CASH PROVIDED BY (USED IN) OPERATING
      ACTIVITIES                                       |   | (36,293  | ) |   | (62,352  | )

SEE ACCOMPANYING NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS.

11

---

|CANAL CAPITAL CORPORATION & SUBSIDIARIES        
|------------------------------------------------
|CONSOLIDATED STATEMENTS OF CASH FLOWS           
|FOR THE SIX MONTHS ENDED APRIL 30, 2010 AND 2009
|Continued ...                                   

|                                                             |   | 2010      |   |   | 2009    |  
|------------------------------------------------------------ | - | --------- | - | - | ------- | -
|                                                             |   |           |   |   |         |  
|CASH FLOWS FROM INVESTING ACTIVITIES:                        |   |           |   |   |         |  
|                                                             |   |           |   |   |         |  
|PROCEEDS FROM SALES OF
      REAL ESTATE                     |   | 0         |   |   | 262,720 |  
|COSTS RELATING TO SALES OF REAL ESTATE                       |   | 0         |   |   | (29,810 | )
|CAPITAL EXPENDITURES                                         |   | (340,000  | ) |   | 0       |  
|                                                             |   |           |   |   |         |  
|NET CASH PROVIDED BY INVESTING ACTIVITIES                    |   | (340,000  | ) |   | 232,910 |  
|                                                             |   |           |   |   |         |  
|                                                             |   |           |   |   |         |  
|                                                             |   |           |   |   |         |  
|CASH FLOWS PROVIDED BY (USED) IN FINANCING
      ACTIVITIES: |   |           |   |   |         |  
|                                                             |   |           |   |   |         |  
|PROCEEDS FROM
      LONG-TERM DEBT OBLIGATION                |   | 340,000   |   |   | 0       |  
|REPAYMENT OF LONG-TERM DEBT
      OBLIGATION                 |   | 0         |   |   | 0       |  
|                                                             |   |           |   |   |         |  
|NET CASH PROVIDED BY (USED) IN FINANCING ACTIVITIES          |   | 340,000   |   |   | 0       |  
|                                                             |   |           |   |   |         |  
|                                                             |   |           |   |   |         |  
|NET (DECREASE) INCREASE IN CASH AND CASH
      EQUIVALENTS   |   | (36,293   | ) |   | 170,558 |  
|                                                             |   |           |   |   |         |  
|CASH AND CASH EQUIVALENTS AT BEGN OF YEAR                    |   | 154,624   |   |   | 21,115  |  
|                                                             |   |           |   |   |         |  
|                                                             |   |           |   |   |         |  
|CASH AND CASH EQUIVALENTS AT END OF YEAR                     | $ | 118,331   |   | $ | 191,673 |  
|                                                             |   |           |   |   |         |  
|                                                             |   |           |   |   |         |  
|                                                             |   | APRIL 30, |  
|                                                             |   | 2010      |   |   | 2009    |  
|SUPPLEMENTAL DISCLOSURES OF CASH FLOW
      INFORMATION:     |   |           |   |   |         |  
|                                                             |   |           |   |   |         |  
|CASH PAID DURING THE YEAR FOR:                               |   |           |   |   |         |  
|                                                             |   |           |   |   |         |  
|INTEREST                                                     | $ | 54,879    |   | $ | 63,100  |  
|INCOME TAXES                                                 | $ | 0         |   | $ | 0       |  

SEE ACCOMPANYING NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS.

12

---

CANAL CAPITAL CORPORATION AND SUBSIDIARIES NOTES TO UNAUDITED
CONSOLIDATED FINANCIAL STATEMENTS

|1. | DESCRIPTION OF BUSINESS AND BASIS OF
  PRESENTATION
|-- | ---------------------------------------------------

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

Going Concern - 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s cash flow position has been under significant strain
under 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 antiquities 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 future 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 incoming producing assets to raise
needed cash, thereby, further adversely impacting future revenues. As of the
date of this report Canal had previously 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.

13

---

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

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

Stockyard Operations - Canal currently operates one central
public stockyard located in St. Joseph, Missouri. Canal closed the stockyard it
operated in Sioux Falls, South Dakota in December 2009 (collectively the
Stockyards).

Sioux Falls Stockyard Closure - In December 2009, after
extensive efforts to reorganize and return this stockyard to profitability,
Canal ceased all stockyard operations at its Sioux Falls, South Dakota location.
Canal has listed this property for sale with a local real estate agency. The net
value of this property was transferred to property held for development or
resale as of October 31, 2009.

Public stockyards act much like a securities exchange,
providing markets for all categories of livestock and fulfilling the economic
functions of assembly, grading, and price discovery. The livestock handled by
the Companys stockyards include cattle, hogs, and sheep. Cattle and hogs may
come through the stockyard facilities at two different stages, either as feeder
livestock or slaughter livestock. The Companys stockyards provide all services
and facilities required to operate an independent market for the sale of
livestock, including veterinary services facilities, auction arenas,
auctioneers, weigh masters and 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.

14

---

|2. | RESTATEMENT AND RECLASSIFICATIONS
|-- | ---------------------------------

The Company has restated its previously issued Consolidated
Financial Statements to correct the recording of the gain on sale of property
and other errors. The Company has also reclassified its recording of past
preferred stock dividends as an adjustment to accumulated deficit.

The following tables summarize the corrections on each of the
affected financial statement line items for each period presented:

|                              |   | As Previously |   |   | Restatement |   |   |             |  
|----------------------------- | - | ------------- | - | - | ----------- | - | - | ----------- | -
|                              |   | Reported      |   |   | Adjusted    |   |   | As Restated |  
|Consolidated Balance Sheet    |   |               |   |   |             |   |   |             |  
|                              |   |               |   |   |             |   |   |             |  
|ACCOUNTS RECEIVABLE           | $ | 258,919       |   | $ | 33,723      |   | $ | 292,642     |  
|PROPERTY ON OPERATING LEASES  |   | 1,402,507     |   |   | 285,000     |   |   | 1,687,507   |  
|                              |   |               |   |   |             |   |   |             |  
|ACCOUNTS PAYABLE & ACCR. EXP. |   | 341,201       |   |   | (229,682    | ) |   | 111,519     |  
|LINE OF CREDIT - ORDER BUYING |   | 0             |   |   | 187,000     |   |   | 187,000     |  
|TRANSIT INSURANCE             |   | 0             |   |   | 50,240      |   |   | 50,240      |  
|ACCRUED PROFESSIONAL FEES     |   | 19,558        |   |   | (19,558     | ) |   | 0           |  
|PREFERRED STOCK DIV. PAYABLE  |   | 193,735       |   |   | (193,735    | ) |   | 0           |  
|INCOME TAXES PAYABLE          |   | 10,000        |   |   | (10,000     | ) |   | 0           |  
|REAL ESTATE TAXES PAYABLE     |   | 98,420        |   |   | 81,066      |   |   | 179,486     |  
|ADDITIONAL PAID-IN CAPITAL    |   | 28,322,341    |   |   | (2,795,620  | ) |   | 25,526,721  |  
|ACCUMULATED DEFICIT           |   | (15,228,224   | ) |   | 3,249,012   |   |   | (11,979,212 | )

Consd. Stmt. Of Operations

|GENERAL & ADMIN. EXPENSE |  | 419,854 |  |  | (7,000 | ) |  | 412,854 | 
|------------------------ |  | ------- |  |  | ------ | - |  | ------- | 

15

---

|3. | SUMMARY OF SIGNIFICANT ACCOUNTING
  POLICIES
|-- | --------------------------------------------

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

B) Recent Accounting Pronouncements - In January 2010, the
FASB issued ASU 2010-06, Fair Value Measurements and Disclosures (Topic 820)
Improving Disclosures about Fair Value Measurements (ASU 2010-06"). ASU
2010-06 requires reporting entities to provide information about movements of
assets among Levels 1 and 2 of the three-tier fair value hierarchy established
by ASC 820. The guidance is effective for any fiscal year that begins after
December 15, 2010 and should be used for quarterly and annual filings. We do not
believe that adoption of ASU 2010-06 will have a significant impact on our
financial position, results of operations or cash flows.

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. 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 2011-05, Comprehensive
Income (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.

16

---

|4. | INTERIM FINANCIAL STATEMENTS
|-- | ----------------------------

The interim consolidated financial statements included herein
have 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, 2010 and the results of its operations and its cash flows for the six
month period ended April 30, 2010. 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, 2009 and the notes
thereto which are contained in Canals 2009 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 2010.

|5. | STOCK OPTION PLAN
|-- | -----------------

Under Canal's 1984 Employee and 1985 Directors Stock Option
Plans, $550,000 and 264,000 shares, respectively, of Canal's common stock have
been reserved for option grants. The purchase price of shares subject to each
option granted, under the Employee and Directors Plans, will not be less than
85% and 100%, respectively, of their fair market value at the date of grant.
Options granted under both plans are exercisable for 10 years from the date of
grant, but no option will be exercisable earlier than one year from the date of
grant. Under the Employee Plan, stock appreciation rights may be granted in
connection with stock options, either at the time of grant of the options or at
any time thereafter. No stock appreciation rights have been granted under this
plan. There were no exercisable options outstanding under either of these plans
at April 30, 2010 or 2009.

|6. | RESTRICTED CASH
|-- | ---------------

Letter of Credit - This is a $140,000 deposit with Mercantile
Bank to secure bonds 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.

Transit Insurance - Transit insurance covers livestock for the
period that they are physically at the stockyards and under the care of
stockyard personnel. This self insurance program is funded by a per head charge
on all livestock received at the stockyard. The restricted cash - transit
insurance balances of approximately $50,000 and $31,000 at April 30, 2010 and
October 31, 2009, respectively, represents the excess of per head fees charged
over actual payments made for livestock that was injured or died while at the
stockyards.

17

---

|7. | RELATED PARTY DEBT
|-- | ------------------

The Companys mortgage notes (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, 2010, the balance due under these notes
was $1,332,000, all of which is classified as long-term debt-related party.
Canal has incurred interest expense on these notes of approximately $55,000 and
$63,000 for the six month periods ended April 30, 2010 and 2009, respectively.

At April 30, 2010, substantially all of Canal's real
properties, the stock of certain subsidiaries, the investments and a substantial
portion of its art inventories are pledged as collateral for the following
obligations:

|                                       |   | Apr. 31, |  |   | October 31, | 
|-------------------------------------- | - | -------- |  | - | ----------- | 
|($ 000's Omitted)                      |   | 2010     |  |   | 2009        | 
|Variable rate mortgage notes
      due |   |          |  |   |             | 
|May 15, 2015 -
      related party     | $ | 1,332    |  | $ | 992         | 
|Less -- current maturities             |   | 0        |  |   | 0           | 
|Long-term debt                         | $ | 1,332    |  | $ | 992         | 

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.

The outstanding balances on this credit line were $187,000 and
$62,000 at April 30, 2010 and October 31, 2009, respectively.

|8. | ART INVENTORY
|-- | -------------

Antiquities art valued at $100,000 represented 100% of total
art inventory at both April 30, 2010 and October 31, 2009. 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, 2010 the
valuation allowance is approximately $396,000.

18

---

|9. | INCOME TAXES
|-- | ------------

At April 30, 2010, the Company has net operating loss carry
forwards of approximately $11,500,000 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.

|10. | LEASE COMMITMENTS
|--- | -----------------

Canals corporate headquarters are now located in the personal
residence of its Chief Financial Officer.

There are no operating leases that have initial or remaining
non-cancellable terms in excess of one year as of April 30, 2010. Accordingly,
Canal has no future minimum payments due over the next five years.

|11. | MINIMUM FUTURE RENTALS ON OPERATING
  LEASES
|--- | --------------------------------------------

Minimum future rentals consist primarily of rental income from
leased land and structures, Exchange Building rents (commercial office space)
and other rental activities, all of which are accounted for as operating leases.
The estimated minimum future rentals on operating leases are $275,000, $270,000,
$210,000, $110,000 and $110,000 for fiscal years 2010, 2011, 2012, 2013 and
2014, respectively.

|12. | PROPERTY USED IN STOCKYARD
OPERATIONS
|--- | -------------------------------------

A schedule of the Companys property used in stockyard
operations at April 30, 2010 is as follows (000's omitted):

Current Year(Retirements)Historical Cost
    
    
    Additions
    
    
    
    
    
    CarryingBldgs. &
    
    
    
    
    
    Bldgs. &
    
    
    Accum.
    
    
    ValueDescription (1)
    
    Land
    
    
    Imprvmts.
    
    
    Land
    
    
    Imprvmts.
    
    
    Depr.
    
    
    04/30/1030 acres of land in St.
      Joseph, MO Acquired in 1942
    $
    902
    
    $
    265
    
    $
    0
    
    $
    0
    
    $
    (185
    )
    $
    982


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

19

---

|13. | PROPERTY ON OPERATING LEASES
|--- | ----------------------------

A schedule of the Companys property on operating leases at
April 30, 2010 is as follows (000's omitted):

Current Year(RetirementsHistorical Cost
    
    
    Additions
    
    
    
    
    
    CarryingBldgs. &
    
    
    
    
    
    Bldgs. &
    
    
    Accum.
    
    
    ValueDescription (1)
    
    Land
    
    
    Imprvmts.
    
    
    Land
    
    
    Imprvmts.
    
    
    Depr.
    
    
    04/30/10New York office Leasehold
      assets
    $
    0
    
    $
    8
    
    $
    0
    
    $
    0
    
    $
    (8
    )
    $
    09 acres of land in Omaha, NE
      Acquired in 1976
    
    1,150
    
    
    21
    
    
    0
    
    
    0
    
    
    (17
    )
    
    1,1543 acres of land in S. St.
      Paul, MN Acquired in 1937
    
    10
    
    
    485
    
    
    0
    
    
    0
    
    
    (437
    )
    
    584 acres of land in Sioux
      City, IA Acquired in 1937
    
    135
    
    
    0
    
    
    340
    
    
    0
    
    
    0
    
    
    475$
    1,295
    
    $
    514
    
    $
    340
    
    $
    0
    
    $
    (462
    )
    $
    1,687


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

|14. | PROPERTY HELD FOR DEVELOPMENT OR
RESALE
|--- | ---------------------------------------

A schedule of the Companys property held for development or
resale at April 30, 2010 is as follows (000's omitted):

|Description                           |   | Land | 
|------------------------------------- | - | ---- | 
|                                      |   |      | 
|02 acres of land Sioux City,
      IA | $ | 53   | 
|35 acres of land Sioux Falls, SD      |   | 220  | 
|                                      | $ | 273  | 

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

20

---

|15. | PENSION VALUATION RESERVE
|--- | -------------------------

The Pension Valuation Reserve represents the excess of
additional minimum pension liability required under the provisions of Statement
of Financial Accounting Standards (SFAS) No. 87 amended by SFAS 158 over the
unrecognized prior service costs of former stockyard employees. Such excess
arose due to the decline in the market value of pension assets available for
pension benefits of former employees, which benefits were frozen at the time the
stockyard operations were sold in 1989. The additional minimum pension liability
will be expensed as actuarial computations of annual pension cost recognize the
deficiency that exists.

The components of net periodic benefit cost are as follows:

|                                   |  | Six Months |   |  | Ended   |  
|---------------------------------- |  | ---------- | - |  | ------- | -
|                                   |  | 4/30/10    |   |  | 4/30/09 |  
|                                   |  |            |   |  |         |  
|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  |  

For the six months ended April 30, 2010, amounts have been
estimated, actual amounts will be based on the discount rate and assets
available at year end.

The Companys required contribution to its pension plan for
fiscal 2010 is approximately $59,000. No contribution has been made to date.
However, the Company expects to make the full required contribution before the
end of the fiscal year.

|16. | 401(k) PLAN
|--- | -----------

The Company has a defined contribution 401(k) plan covering
substantially all of its full time stockyard employees. The plan provides for
employee contributions and 401(k) matching contributions of up to 2 1⁄2% of the
employees annual salary by the Company. The Company made 401(k) matching
contributions of approximately $5,000 and $10,000 for each of the six month
periods ended April 30, 2010 and 2009.

21

---

|17. | LEGAL PROCEEDINGS
|--- | -----------------

From 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.

Environmental Protection Agency

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. The EPA investigation is in its preliminary stages and
the Company intends to vigorously defend any liability for remediation. At April
30, 2010, the liability for remediation, if any, was not estimatable and
therefore no accrual has been recorded in the financial statements.

We 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.

22

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|18. | RELATED PARTY TRANSACTIONS
|--- | --------------------------

At April 30, 2010, all of Canals Long-Term Debt is held by the
companys Chief Executive Officer. These notes which pay interest at a rate of
10% per annum and come due May 15, 2015. Canal has incurred interest expense on
these notes of approximately $55,000 and $63,000 for the six month periods ended
April 30, 2010 and 2009, respectively. At various times during period the holder
of these notes agrees to defer interest payments. This deferred interest
liability accrues additional interest at a rate of 10% per annum, while
outstanding and is repaid as funds become available. As of April 30, 2010, the
balance due under these notes was $1,332,000 all of which is classified as
long-term debt related party.

|19. | SUBSEQUENT EVENTS
|--- | -----------------

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) located in St. Joseph, Missouri for $500,000
generating a loss of $577,000.

23

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ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.

The following managements discussion and analysis should be
read in conjunction with our financial statements and the notes thereto and the
other financial information appearing elsewhere in this report. In addition to
historical information, the following discussion contains certain
forward-looking information. See Special Note Regarding Forward Looking
Statements below for certain information concerning those forward looking
statements. Our financial statements are prepared in U.S. dollars and in
accordance with U.S. GAAP.

Special Note Regarding Our Financial Statements and
Forward-looking Statements

In 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. Additional disclosures regarding factors that could cause our
results and performance to differ from results or anticipated performance are
discussed in Item 1A, Risk Factors included herein.

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.

Use of Terms

Except as otherwise indicated by the context, all references in
this report to:

- Canal Capital, the Company, we, us, and our, are to Canal
  Capital Corporation and its subsidiaries, Omaha Livestock Market, Inc., Sioux
  Falls Stockyards Company and Canal Arts Corporation;
- SEC are to the United States Securities and Exchange Commission;
- Securities Act are to the Securities Act of 1933, as amended;
- Exchange Act are to the Securities Exchange Act of 1934, as amended; and
- U.S. dollar, USD, US$ and $ are to the legal currency of the
  United States.

24

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Canal Capital Corporations fiscal year ends on October 31, of
each calendar year. 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.

Overview of the Companys Business

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, 2010, 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 properties consisted, for the most
part, of an Exchange Building (commercial office space), 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. Canal owned approximately 37 acres of undeveloped land in
Sioux 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.

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) located in St. 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.

As a result of past financial constraints, the Companys
financial statements for the fiscal years ended October 31, 2011, 2010 and 2009,
and for the interim fiscal quarters have not been 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 this is another in a series of corrective filings which the
Company expects to file in order to comply with the SECs request. The Company
expects to be fully compliant on or about March 31, 2013.

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, 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 attractiveness of the Company to another
operating company and the Companys ability to consummate a business
combination.

25

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Plan of Operations

We are undertaking efforts to identify appropriate business
opportunities for our Company. If for some reason the Company is not able to
identify an acceptable 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.

Even if we are able to identify business opportunities that our
Board deems appropriate, we cannot assure you that such a strategy will provide
you with a positive return on your investment, and may in fact result in a
substantial decrease in the value of your stock. In addition, if the Board
identifies a business opportunity that it deems appropriate, there is no
guarantee that the Company could raise the additional capital or get the needed
financing to pursue the business opportunity. These factors will substantially
increase the uncertainty, and thus the risk, of investing in our shares.

Results of Operations

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

|                                    |   | Six Months Ended April
      30, |  
|----------------------------------- | - | -------------------------------- | -
|                                    |   | 2010                             |  
|                                    |   | (In Thousands)                   |  
|Revenues:                           |   |                                  |  
|Real Estate Revenue                 | $ | 147                              |  
|Stockyard Revenue                   |   | 1,315                            |  
|Total Revenue                       |   | 1,462                            |  
|                                    |   |                                  |  
|                                    |   |                                  |  
|Costs and Expenses:                 |   |                                  |  
|                                    |   |                                  |  
|Real Estate Expenses                |   | 45                               |  
|Stockyard Expenses                  |   | 1,066                            |  
|General and Administrative Expenses |   | 413                              |  
|Total Costs and Expenses            |   | 1,524                            |  
|                                    |   |                                  |  
|                                    |   |                                  |  
|(Loss) Income from Operations       |   | (62                              | )
|Other Income                        |   | 0                                |  
|Interest Expense                    |   | (55                              | )
|Other Expenses                      |   | 0                                |  
|                                    |   |                                  |  
|Net (Loss) Income                   | $ | (117                             | )

26

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Revenues

Canal's revenues from continuing operations consist of revenues
from its real estate and stockyard operations. Revenues for the six month period
ended April 30, 2010 decreased by $694,000 to $1,462,000 as compared with
$2,156,000 for the same period in fiscal 2009. The fiscal 2010 decrease in
revenues is due primarily to the closure of the Sioux Falls stockyard operation
in the fourth quarter of fiscal 2009 combined with a decrease of approximately
$263,000 in sale of real estate.

Revenues for the three month period ended April 30, 2010
decreased by $510,000 to $727,000 as compared with $1,237,000 for the same
period in fiscal 2009. The fiscal 2010 decrease in revenues is due primarily to
the closure of the Sioux Falls stockyard operation in the fourth quarter of
fiscal 2009 combined with a decrease of approximately $263,000 in sale of real
estate.

Real Estate Revenues: Real estate revenues for the six months
ended April 30, 2010 of $147,000 accounted for 10.1% of the fiscal 2010 revenues
as compared to real estate revenues of $471,000 or 21.9% for the same period in
fiscal 2009. Real estate revenues are comprised of sale of real estate (0.0% and
55.8%), rentals and other lease income from the rental of vacant land and
certain structures (95.1% and 41.0%) and rental income from commercial office
space in its Exchange Building (4.9% and 3.2%) for the six months ended April
30, 2010 and 2009, respectively. The percentage variations in the year to year
comparisons are due primarily to the significant decrease in the sale of real
estate during the first six months of fiscal 2010.

Real estate revenues for the three months ended April
30, 2010 of $71,000 accounted for 9.7% of the fiscal 2010 revenues as compared
to real estate revenues of $367,000 or 29.7% for the same period in fiscal 2009.
Real estate revenues are comprised of sale of real estate (0.0% and 71.5%),
rentals and other lease income from the rental of vacant land and certain
structures (94.9% and 26.4%) and rental income from commercial office space in
its Exchange Building (5.1% and 2.1%) for the three months ended April 30, 2010
and 2009, respectively. The percentage variations in the year to year
comparisons are due primarily to the significant decrease in the sale of real
estate during the fiscal 2010.

Stockyard Revenues: Stockyard revenues for the six months ended
April 30, 2010 of $1,315,000 accounted for 89.9% of the fiscal 2010 revenues as
compared to stockyard revenues of $1,685,000 or 78.1% for the same period in
fiscal 2009. The 2010 decrease in stockyard revenues was due primarily to the
closing of the Sioux Falls stockyard operations in the fourth quarter of fiscal
2009. Stockyard revenues are comprised of yard handling and auction (81.9% and
87.8%), feed and bedding income (4.4% and 6.9%) and rental and other income
(13.7% and 5.3%) for the six month periods ended April 30, 2010 and 2009,
respectively. The 2010 percentage variations in the year to year comparisons are
due primarily to the closing of the Sioux Falls stockyard operations as
discussed above.

Stockyard revenues for the three months ended April 30, 2010 of
$656,000 accounted for 90.3% of the fiscal 2010 revenues as compared to
stockyard revenues of $870,000 or 70.3% for the same period in fiscal 2009. The
2010 decrease in stockyard revenues was due primarily to the closing of the
Sioux Falls stockyard operations in the fourth quarter of fiscal 2009. Stockyard
revenues are comprised of yard handling and auction (88.7% and 87.7%), feed and
bedding income (4.6% and 6.6%) and rental and other income (6.7% and 5.7%) for
the three month periods ended April 30, 2010 and 2009, respectively. The 2010
percentage variations in the year to year comparisons are due primarily to the
closing of the Sioux Falls stockyard operations as discussed above.

27

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Art Revenues: Canal had no art sales in the six month periods
ended April 30, 2010 or 2009. Art revenues, if any, are comprised of the
proceeds from the sale of antiquities art. Art expenses were $0 and $2,400 for
the six month periods ended April 30, 2010 and 2009, respectively. 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.

Canal had no art sales in the three month periods ended April
30, 2010 or 2009. Art revenues, if any, are comprised of the proceeds from the
sale of antiquities art. Art expenses were $0 and $1,200 for the three month
periods ended April 30, 2010 and 2009, respectively. 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.

Expenses

Real Estate Expenses: Real estate expenses for the six months
ended April 30, 2010 of $45,000 decreased by $97,000 (68.1%) from real estate
expenses of $142,000 for the same period in fiscal 2009. The decrease in real
estate expenses is consistent with the 2010 decrease in real estate revenues.
Real estate expenses are comprised of the cost of real estate sold (0.0% and
48.7%), labor, operating and maintenance (30.0% and 20.9%), depreciation and
amortization (24.5% and 7.8%), taxes other than income taxes (24.3% and 8.7%)
and general and administrative expenses (21.2% and 13.9%) for the six months
ended April 30, 2010 and 2009, respectively. The percentage variations in the
year to year comparisons are consistent with the decrease in real estate
revenues discussed above.

Real estate expenses for the three months ended April 30, 2010
of $23,000 decreased by $82,000 (78.1%) from real estate expenses of $105,000
for the same period in fiscal 2009. The decrease in real estate expenses is
consistent with the 2010 decrease in real estate revenues. Real estate expenses
are comprised of the cost of real estate sold (0.0% and 65.7%), labor, operating
and maintenance (30.9% and 13.8%), depreciation and amortization (24.1% and
5.3%), taxes other than income taxes (24.1% and 5.8%) and general and
administrative expenses (20.9% and 9.4%) for the three months ended April 30,
2010 and 2009, respectively. The percentage variations in the year to year
comparisons are consistent with the decrease in real estate revenues discussed
above.

Stockyard Expenses: Stockyard expenses for the six months ended
April 30, 2010 of $1,066,000 decreased by $435,000 (29.0%) from stockyard
expenses of $1,501,000 for the same period in fiscal 2009. The decrease in
stockyard expenses is consistent with the 2010 decrease in stockyard revenues.
Stockyard expenses are comprised of labor and related costs (43.5% and 45.3%),
other operating and maintenance (25.8% and 27.0%), feed and bedding expense
(4.7% and 6.1%), depreciation and amortization (0.6% and 0.7%), taxes other than
income taxes (7.5% and 6.0%) and general and administrative expense (17.9% and
14.9%) for the six month periods ended April 30, 2010 and 2009, respectively.
There were no significant percentage variations in the year to year comparisons.

Stockyard expenses for the three months ended April 30, 2010 of
$515,000 decreased by $260,000 (33.5%) from stockyard expenses of $775,000 for
the same period in fiscal 2009. The decrease in stockyard expenses is consistent
with the 2010 decrease in stockyard revenues. Stockyard expenses are comprised
of labor and related costs (38.7% and 42.6%), other operating and maintenance
(26.2% and 28.6%), feed and bedding expense (4.9% and 6.4%), depreciation and
amortization (0.7% and 0.6%), taxes other than income taxes (7.9% and 5.9%) and
general and administrative expense (21.6% and 15.9%) for the three month periods
ended April 30, 2010 and 2009, respectively. There were no significant
percentage variations in the year to year comparisons.

28

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General and Administrative

General and administrative expenses for the six months ended
April 30, 2010 of $413,000 decreased by $37,000 (6.6%) as compared to $450,000
for the same period in fiscal 2009. The major components of general and
administrative expenses are officers salaries (56.4% and 52.7%), pension expense
(12.9% and 13.4%), insurance expense (6.6% and 5.9%), office salaries (11.2% and
10.5%), travel expense (3.3% and 4.3%) and professional fees (2.9% and 3.2%) for
the six month periods ended April 30, 2010 and 2009, respectively. There were no
significant percentage variations in the year to year comparisons.

General and administrative expenses for the three months ended
April 30, 2010 of $208,000 decreased by $17,000 (7.5%) as compared to $225,000
for the same period in fiscal 2009. The major components of general and
administrative expenses are officers salaries (57.0% and 52.7%), pension expense
(13.0% and 13.3%), insurance expense (6.6% and 5.9%), office salaries (11.3% and
10.5%), travel expense (2.4% and 4.5%) and professional fees (2.9% and 3.2%) for
the three month periods ended April 30, 2010 and 2009, respectively. There were
no significant percentage variations in the year to year comparisons.

Interest Expense

Interest expense for the six months ended April 30, 2010 of
$55,000 decreased by $8,000 (13.0%) from $63,000 for the same period in fiscal
2009. The 2010 decrease is due primarily to Canals $300,000 partial repayment
of its long-term debt in fiscal 2009. The principal balance outstanding at April
30, 2010 of $992,000 is classified as long-term debt-related party.

Interest expense for the three months ended April 30, 2010 of
$30,000 decreased by $2,000 (4.8%) from $32,000 for the same period in fiscal
2009. The 2010 decrease is due primarily to Canals $300,000 partial repayment
of its long-term debt in fiscal 2009. The principal balance outstanding at April
30, 2010 of $992,000 is classified as long-term debt-related party.

Net (Loss) Income

Canal recognized a net loss of approximately $117,000 in the
six month period ended April 30, 2010 as compared to net income of approximately
$6,000 for the same period in fiscal 2009. The income in fiscal 2009 was due
primarily to the approximately $263,000 sale of real estate generating operating
income of approximately $194,000.

Canal recognized a net loss of approximately $42,000 in the
three month period ended April 30, 2010 as compared to net income of
approximately $108,000 for the same period in fiscal 2009. The income in fiscal
2009 was due primarily to the approximately $263,000 sale of real estate
generating operating income of approximately $194,000.

29

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Liquidity and Capital Resources

Cash and cash equivalents decreased approximately $36,000, from
$155,000 at October 31, 2009, to $118,000 at April 30, 2010. At April 30, 2010
the Companys current assets exceeded current liabilities by approximately
$176,000 which was an improvement, as compared to October 31, 2009 when the
Companys current assets exceeded current liabilities by approximately
$51,000.

Net cash used in operating activities for the six months
ended April 30, 2010 were $36,000, as compared to $62,000 for the same period in
fiscal 2009, for a net decrease of $26,000. This decrease in cash used during
the six months ended April 30, 2010 was not significant. During fiscal 2010 the
Company invested $340,000 in capital expenditures and increased its long-tern
debt by $340,000. Additionally, the Company made payments of interest on the
long-term debt discussed at Obligations under Material Contracts below.

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.

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.

Obligations under Material Contracts

At April 30, 2010, all of the Companys Long-Term Debt is held
by the companys Chief Executive Officer. These notes pay interest at a rate of
10% per annum and come due May 15, 2015. At various times during fiscal 2009 the
holder of these notes agreed to defer interest payments. This deferred interest
liability accrued additional interest at a rate of 10% per annum, while
outstanding, and is repaid as funds became available. Canal has incurred
interest expense on these notes of $25,000 and $32,000 for the fiscal quarters ended April 30, 2010 and 2009, respectively. These notes, among
other things, prohibit Canal from becoming an investment company as defined by
the Investment Company Act of 1940, restrict 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, 2010, the
balance due under these notes was $1,332,000 all of which was classified as
long-term debt due to related party. As of the filing of this report, the
balance due under these notes was $400,000.

30

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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.

Recent Accounting Pronouncements

In January 2010, the FASB issued ASU 2010-06, Fair Value
Measurements and Disclosures (Topic 820)  Improving Disclosures about Fair
Value Measurements (ASU 2010-06). ASU 2010-06 requires reporting entities to
provide information about movements of assets among Levels 1 and 2 of the
three-tier fair value hierarchy established by ASC 820. The guidance is
effective for any fiscal year that begins after December 15, 2010 and should be
used for quarterly and annual filings. We are currently evaluating the impact on
our financial statements of adopting the amendments in ASU 2010-06 and cannot
estimate the impact of adoption at this time.

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 (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 2011-005 is effective for
fiscal years, and interim periods within those years, beginning on or after
December 15, 2011, which means that it will be effective for our fiscal 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.

31

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Critical Accounting Policies and Estimates

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

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

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.

Seasonality

Our operations and operating cash flows were subject to
seasonal variations. Stockyard operations were seasonal, with greater volume
generally experienced 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, the Company is no longer in the stockyard business and therefore
its operations and operating cash flows are no longer subject to seasonal
variations.

Off-Balance Sheet Arrangements

For the six months ended April 30, 2010, we did not have any
off-balance sheet arrangements.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
MARKET RISK

Not Applicable

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ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

We 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.

As required by Rule 13a-15 under the Exchange Act, our
management, including our Chief Executive Officer, Mr. Michael E. Schultz, and
Chief Financial Officer, Mr. Reginald Schauder, evaluated the effectiveness of
the design and operation of our disclosure controls and procedures as of April
30, 2010. Based upon, and as of the date of this evaluation, Messrs. Schultz and
Schauder determined that because of the material weaknesses described below, our
disclosure controls and procedures were not effective.

Our management concluded that our internal 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 continuous legal and accounting advice as it pertained to our
filing requirements with the SEC. Furthermore, since its annual report for the
fiscal year ended October 31, 2008, 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 an effort to remediate this material weakness, our
management has appointed qualified personnel and has engaged the Companys
auditors to conduct reviews and audits, as applicable, of its financial
statements for the non-compliant periods. The Company expects that the filing of
this quarterly report on Form 10-Q for the six months ended April 30, 2010 and
2009 will be a further step in curing this deficiency with the SEC. Our
management does not believe that this material weakness had a material effect on
our financial condition or results of operations or caused our financial
statements as of and for the six months ended April 30, 2010 and 2009,included
in this report to contain a material misstatement.

Changes in Internal Control over Financial Reporting

There were no changes in our internal controls over financial
reporting during the six month period ended April 30, 2010 that have materially
affected, or are reasonably likely to materially affect, our internal control
over financial reporting.

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PART II. OTHER INFORMATION

Item 1. LEGAL PROCEEDINGS

From 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.

Environmental Protection Agency

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. The EPA investigation is in its preliminary stages and
the Company intends to vigorously defend any liability for remediation. At April
30, 2010, the liability for remediation, if any, was not estimatable and
therefore no accrual has been recorded in the financial statements.

We 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.

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ITEM 1A. RISK FACTORS

Not applicable

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF
PROCEEDS

None

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable

ITEM 5. OTHER INFORMATION

We have no information to disclose that was required to be
disclosed in a report on Form 8-K during the six month period ended April 30,
2010, but was not reported.

ITEM 6. EXHIBITS

The following exhibits are filed as part of this report or
incorporated by reference:

|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.    

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on its behalf by
the undersigned, hereunto duly authorized.

Dated: October 30, 2012

CANAL CAPITAL CORPORATION

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

By: /S/ Reginald
Schauder       Reginald
Schauder        Vice
President-Finance,        Secretary and
Treasurer        (Principal Financial
and         Accounting Officer)

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