---

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 January 31, 2011

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 January 31, 2011 (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 March 14, 2011. Where indicated,
the financial data presented in the 10-Q is as at January 31, 2011, 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 |                                                                                            
|------------------------------------ | -------------------------------------------------------------------------------------------
|                                     |                                                                                            
|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                           | 31                                                                                         

3

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PART I

FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

Consolidated Balance Sheets (Unaudited) 
      January 31, 2011 and October 31, 2010
    5Consolidated Statements of Operations and
      Comprehensive Income (Loss) (Unaudited) for the Three Month Periods ended
      January 31, 2011 and 2010
    7Consolidated Statements of Cash Flows
      (Unaudited) for the Three Month Periods ended January 31, 2011 and 2010
    9Notes to (Unaudited) Consolidated Financial
      Statements
    11


4

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|CANAL CAPITAL CORPORATION & SUBSIDIARIES         
|-------------------------------------------------
|CONSOLIDATED BALANCE SHEETS                      
|JANUARY 31, 2011 (UNAUDITED) AND OCTOBER 31, 2010

|                                                                                                                                                                   |   | JANUARY 31, |  |   | OCTOBER 31, | 
|------------------------------------------------------------------------------------------------------------------------------------------------------------------ | - | ----------- |  | - | ----------- | 
|                                                                                                                                                                   |   | 2011        |  |   | 2010        | 
|ASSETS:                                                                                                                                                            |   |             |  |   |             | 
|CURRENT ASSETS:                                                                                                                                                    |   |             |  |   |             | 
|CASH AND CASH
      EQUIVALENTS                                                                                                                                    | $ | 242,287     |  | $ | 510,361     | 
|RESTRICTED CASH  TRANSIT
      INSURANCE                                                                                                                          |   | 44,926      |  |   | 26,000      | 
|ACCOUNTS
      RECEIVABLE                                                                                                                                          |   | 71,158      |  |   | 163,879     | 
|STOCKYARDS INVENTORY                                                                                                                                               |   | 5,044       |  |   | 14,608      | 
|PREPAID EXPENSES                                                                                                                                                   |   | 29,177      |  |   | 12,461      | 
|TOTAL CURRENT ASSETS                                                                                                                                               |   | 392,592     |  |   | 727,309     | 
|                                                                                                                                                                   |   |             |  |   |             | 
|                                                                                                                                                                   |   |             |  |   |             | 
|NON-CURRENT ASSETS:                                                                                                                                                |   |             |  |   |             | 
|PROPERTY ON OPERATING LEASES, NET
      OF ACCUMULATED DEPRECIATION OF $477,949 AND $472,399 AT JANUARY 31, 2011
      AND OCTOBER 31, 2010, RESPECTIVELY          |   | 1,670,857   |  |   | 1,676,407   | 
|                                                                                                                                                                   |   |             |  |   |             | 
|PROPERTY USED IN STOCKYARD
      OPERATIONS, NET OF ACCUMULATED DEPRECIATION OF $196,957 AND $191,857 AT
      JANUARY 31, 2011 AND OCTOBER 31, 2010, RESPECTIVELY |   | 1,029,572   |  |   | 1,034,672   | 
|                                                                                                                                                                   |   |             |  |   |             | 
|PROPERTY HELD FOR DEVELOPMENT OR
      RESALE                                                                                                                      |   | 52,250      |  |   | 52,250      | 
|                                                                                                                                                                   |   |             |  |   |             | 
|OTHER ASSETS:                                                                                                                                                      |   |             |  |   |             | 
|RESTRICTED CASH 
      LETTER OF CREDIT                                                                                                                           |   | 140,000     |  |   | 140,000     | 
|ART INVENTORY                                                                                                                                                      |   | 100,000     |  |   | 100,000     | 
|                                                                                                                                                                   |   | 240,000     |  |   | 240,000     | 
|                                                                                                                                                                   | $ | 3,385,271   |  | $ | 3,730,638   | 

SEE ACCOMPANYING NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS.

5

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|CANAL CAPITAL CORPORATION & SUBSIDIARIES         
|-------------------------------------------------
|CONSOLIDATED BALANCE SHEETS                      
|JANUARY 31, 2011 (UNAUDITED) AND OCTOBER 31, 2010

|                                                                                                                                                                                                                                                                                                                     |   | JANUARY 31, |   |   | OCTOBER 31, |  
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | - | ----------- | - | - | ----------- | -
|                                                                                                                                                                                                                                                                                                                     |   | 2011        |   |   | 2010        |  
|                                                                                                                                                                                                                                                                                                                     |   |             |   |   |             |  
|LIABILITIES &
      STOCKHOLDERS' EQUITY:                                                                                                                                                                                                                                                                            |   |             |   |   |             |  
|                                                                                                                                                                                                                                                                                                                     |   |             |   |   |             |  
|CURRENT LIABILITIES:                                                                                                                                                                                                                                                                                                 |   |             |   |   |             |  
|ACCOUNTS PAYABLE AND ACCRUED EXPENSES                                                                                                                                                                                                                                                                                | $ | 108,660     |   | $ | 156,827     |  
|LINE
      OF CREDIT  ORDER BUYING                                                                                                                                                                                                                                                                                  |   | 89,000      |   |   | 154,000     |  
|TRANSIT INSURANCE                                                                                                                                                                                                                                                                                                    |   | 44,926      |   |   | 26,000      |  
|                                                                                                                                                                                                                                                                                                                     |   |             |   |   |             |  
|TOTAL CURRENT LIABILITIES                                                                                                                                                                                                                                                                                            |   | 242,586     |   |   | 336,827     |  
|                                                                                                                                                                                                                                                                                                                     |   |             |   |   |             |  
|                                                                                                                                                                                                                                                                                                                     |   |             |   |   |             |  
|NON-CURRENT LIABILITIES:                                                                                                                                                                                                                                                                                             |   |             |   |   |             |  
|LONG-TERM DEBT, RELATED PARTY                                                                                                                                                                                                                                                                                        |   | 847,000     |   |   | 847,000     |  
|LONG-TERM PENSION LIABILITY                                                                                                                                                                                                                                                                                          |   | 723,206     |   |   | 869,676     |  
|SALARIES AND INTEREST PAYABLE  OFFICERS                                                                                                                                                                                                                                                                             |   | 114,675     |   |   | 175,000     |  
|REAL
      ESTATE TAXES PAYABLE                                                                                                                                                                                                                                                                                      |   | 35,682      |   |   | 44,543      |  
|                                                                                                                                                                                                                                                                                                                     |   |             |   |   |             |  
|TOTAL NON-CURRENT LIABILITIES                                                                                                                                                                                                                                                                                        |   | 1,720,563   |   |   | 1,936,219   |  
|                                                                                                                                                                                                                                                                                                                     |   |             |   |   |             |  
|                                                                                                                                                                                                                                                                                                                     |   |             |   |   |             |  
|COMMITMENTS AND CONTINGENCIES                                                                                                                                                                                                                                                                                        |   |             |   |   |             |  
|                                                                                                                                                                                                                                                                                                                     |   |             |   |   |             |  
|STOCKHOLDERS' EQUITY:                                                                                                                                                                                                                                                                                                |   |             |   |   |             |  
|                                                                                                                                                                                                                                                                                                                     |   |             |   |   |             |  
|PREFERRED STOCK,
      $0.01 PAR VALUE: 10,000,000 SHARES AUTHORIZED; 9,102,655 SHARES ISSUED AND
      OUTSTANDING AT JANUARY 31, 2011 AND OCTOBER 31, 2010, RESPECTIVELY AND
      AGGREGATE LIQUIDATION PREFERENCE OF $10 PER SHARE FOR $ 91,026,550 AT
      JANUARY 31, 2011 AND OCTOBER 31, 2010, 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 JANUARY 31, 2011 AND OCTOBER 31, 2010,
      RESPECTIVELY                                                                                                                     |   | 53,138      |   |   | 53,138      |  
|                                                                                                                                                                                                                                                                                                                     |   |             |   |   |             |  
|ADDITIONAL PAID-IN
      CAPITAL                                                                                                                                                                                                                                                                                     |   | 25,526,721  |   |   | 25,526,721  |  
|                                                                                                                                                                                                                                                                                                                     |   |             |   |   |             |  
|ACCUMULATED DEFICIT                                                                                                                                                                                                                                                                                                  |   | (11,377,846 | ) |   | (11,315,376 | )
|                                                                                                                                                                                                                                                                                                                     |   |             |   |   |             |  
|986,865 SHARES OF
      COMMON STOCK HELD IN TREASURY, AT COST                                                                                                                                                                                                                                                       |   | (11,003,545 | ) |   | (11,003,545 | )
|                                                                                                                                                                                                                                                                                                                     |   |             |   |   |             |  
|COMPREHENSIVE
      INCOME:                                                                                                                                                                                                                                                                                          |   |             |   |   |             |  
|PENSION VALUATION RESERVE                                                                                                                                                                                                                                                                                            |   | (1,867,373  | ) |   | (1,894,373  | )
|                                                                                                                                                                                                                                                                                                                     |   |             |   |   |             |  
|                                                                                                                                                                                                                                                                                                                     |   | 1,422,122   |   |   | 1,457,592   |  
|                                                                                                                                                                                                                                                                                                                     |   |             |   |   |             |  
|                                                                                                                                                                                                                                                                                                                     | $ | 3,385,271   |   | $ | 3,730,638   |  

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 THREE MONTHS ENDED JANUARY 31, 2011 AND 2010
|(UNAUDITED)                                         

|                                       |   | 2011     |   |   | 2010     |  
|-------------------------------------- | - | -------- | - | - | -------- | -
|REAL ESTATE OPERATIONS:                |   |          |   |   |          |  
|                                       |   |          |   |   |          |  
|REAL ESTATE REVENUES:                  |   |          |   |   |          |  
|SALE OF REAL ESTATE                    |   | 0        |   |   | 0        |  
|OUTSIDE REAL
      ESTATE RENT         |   | 70,244   |   |   | 72,544   |  
|EXCHANGE BUILDING RENTAL INCOME        |   | 0        |   |   | 3,686    |  
|                                       |   | 70,244   |   |   | 76,230   |  
|                                       |   |          |   |   |          |  
|REAL ESTATE EXPENSES:                  |   |          |   |   |          |  
|COST OF REAL ESTATE SOLD               |   | 0        |   |   | 0        |  
|LABOR, OPERATING
      AND MAINTENANCE |   | 2,330    |   |   | 6,456    |  
|DEPRECIATION AND AMORTIZATION          |   | 5,550    |   |   | 5,550    |  
|TAXES OTHER THAN
      INCOME TAXES    |   | 3,750    |   |   | 5,450    |  
|GENERAL AND ADMINISTRATIVE             |   | 2,550    |   |   | 4,800    |  
|                                       |   | 14,180   |   |   | 22,256   |  
|                                       |   |          |   |   |          |  
|INCOME FROM REAL ESTATE OPERATIONS     |   | 56,064   |   |   | 53,974   |  
|                                       |   |          |   |   |          |  
|                                       |   |          |   |   |          |  
|STOCKYARD OPERATIONS:                  |   |          |   |   |          |  
|                                       |   |          |   |   |          |  
|STOCKYARD REVENUES:                    |   |          |   |   |          |  
|YARD HANDLING AND
      AUCTION        | $ | 506,073  |   | $ | 494,423  |  
|FEED AND BEDDING INCOME                |   | 39,898   |   |   | 27,700   |  
|RENTAL & OTHER
      INCOME            |   | 32,846   |   |   | 136,258  |  
|                                       |   | 578,817  |   |   | 658,381  |  
|                                       |   |          |   |   |          |  
|STOCKYARD EXPENSES:                    |   |          |   |   |          |  
|LABOR AND RELATED
      COSTS          |   | 205,645  |   |   | 264,743  |  
|OTHER OPERATING AND MAINTENANCE        |   | 107,166  |   |   | 140,057  |  
|FEED AND BEDDING
      EXPENSE         |   | 28,806   |   |   | 24,849   |  
|DEPRECIATION AND AMORTIZATION          |   | 5,100    |   |   | 3,368    |  
|TAXES OTHER THAN
      INCOME TAXES    |   | 20,215   |   |   | 39,954   |  
|GENERAL AND ADMINISTRATIVE             |   | 103,601  |   |   | 77,996   |  
|                                       |   | 470,533  |   |   | 550,967  |  
|                                       |   |          |   |   |          |  
|INCOME FROM STOCKYARD OPERATIONS       |   | 108,284  |   |   | 107,414  |  
|                                       |   |          |   |   |          |  
|                                       |   |          |   |   |          |  
|                                       |   |          |   |   |          |  
|GENERAL AND ADMINISTRATIVE EXPENSE     |   | (205,860 | ) |   | (204,946 | )
|                                       |   |          |   |   |          |  
|                                       |   |          |   |   |          |  
|(LOSS) FROM OPERATIONS                 |   | (41,512  | ) |   | (43,558  | )

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 THREE MONTHS ENDED JANUARY 31, 2011 AND 2010
|Continued ...                                       

|                                                      |   | 2011      |   |   | 2010      |  
|----------------------------------------------------- | - | --------- | - | - | --------- | -
|OTHER (EXPENSE) INCOME:                               |   |           |   |   |           |  
|INTEREST & OTHER INCOME                               |   | 217       |   |   | 126       |  
|INTEREST EXPENSE                                      |   | (21,175   | ) |   | (24,830   | )
|ART SALES AND OPERATIONS                              |   | 0         |   |   | 0         |  
|                                                      |   | (20,958   | ) |   | (24,704   | )
|                                                      |   |           |   |   |           |  
|(LOSS) INCOME BEFORE PROVISION FOR INCOME
      TAXES |   | (62,470   | ) |   | (68,262   | )
|PROVISION FOR INCOME TAXES                            |   | 0         |   |   | 0         |  
|NET INCOME                                            |   | (62,470   | ) |   | (68,262   | )
|                                                      |   |           |   |   |           |  
|OTHER COMPREHENSIVE (LOSS) INCOME:                    |   |           |   |   |           |  
|MINIMUM PENSION LIABILITY
      ADJUSTMENT            |   | 27,000    |   |   | 27,000    |  
|COMPREHENSIVE (LOSS)                                  | $ | (35,470   | ) | $ | (41,262   | )
|                                                      |   |           |   |   |           |  
|NET (LOSS) 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.

8

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|CANAL CAPITAL CORPORATION & SUBSIDIARIES            
|----------------------------------------------------
|CONSOLIDATED STATEMENTS OF CASH FLOWS               
|FOR THE THREE MONTHS ENDED JANUARY 31, 2011 AND 2010
|(UNAUDITED)                                         

|                                                                                                |   | 2011     |   |   | 2010     |  
|----------------------------------------------------------------------------------------------- | - | -------- | - | - | -------- | -
|CASH FLOWS FROM OPERATING ACTIVITIES:                                                           |   |          |   |   |          |  
|NET (LOSS)                                                                                      | $ | (62,470  | ) | $ | (68,262  | )
|ADJUSTMENTS TO RECONCILE NET LOSS TO NET
      CASH (USED IN) PROVIDED BY OPERATING ACTIVITIES: |   |          |   |   |          |  
|DEPRECIATION AND AMORTIZATION                                                                   |   | 10,650   |   |   | 8,918    |  
|GAIN ON SALES OF REAL ESTATE                                                                    |   | 0        |   |   | 0        |  
|MINIMUM PENSION
      LIABILITY ADJUSTMENT                                                      |   | 27,000   |   |   | 27,000   |  
|                                                                                                |   |          |   |   |          |  
|DECREASE (INCREASE) IN ASSETS                                                                   |   |          |   |   |          |  
|ACCOUNTS RECEIVABLE                                                                             |   | 92,721   |   |   | (159,932 | )
|STOCKYARDS
      INVENTORY                                                                      |   | 9,564    |   |   | 13,736   |  
|PREPAID EXPENSES                                                                                |   | (16,716  | ) |   | (15,659  | )
|RESTRICTED CASH 
      LETTER OF CREDIT                                                        |   | 0        |   |   | 0        |  
|RESTRICTED CASH  TRANSIT INSURANCE                                                             |   | (18,926  | ) |   | (10,220  | )
|                                                                                                |   |          |   |   |          |  
|INCREASE (DECREASE) IN LIABILITIES:                                                             |   |          |   |   |          |  
|ACCOUNTS PAYABLE
      AND ACCRUED EXPENSES                                                     |   | (48,167  | ) |   | (18,299  | )
|LINE OF CREDIT  ORDER BUYING                                                                   |   | (65,000  | ) |   | 25,000   |  
|PENSION PLAN
      PAYABLE                                                                      |   | (146,470 | ) |   | 0        |  
|SALARIES AND INTEREST PAYABLE - OFFICERS                                                        |   | (60,325  | ) |   | 110,720  |  
|REAL ESTATE TAXES
      PAYABLE                                                                 |   | (8,861   | ) |   | 27,286   |  
|TRANSIT INSURANCE                                                                               |   | 18,926   |   |   | 10,220   |  
|TOTAL ADJUSTMENTS                                                                               |   | (205,604 | ) |   | 18,770   |  
|NET CASH PROVIDED BY (USED IN) OPERATING
      ACTIVITIES                                       |   | (268,074 | ) |   | (49,492  | )

SEE ACCOMPANYING NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS.

9

---

|CANAL CAPITAL CORPORATION & SUBSIDIARIES            
|----------------------------------------------------
|CONSOLIDATED STATEMENTS OF CASH FLOWS               
|FOR THE THREE MONTHS ENDED JANUARY 31, 2011 AND 2010
|Continued ...                                       

|                                                             |   | 2011        |   |   | 2010    |  
|------------------------------------------------------------ | - | ----------- | - | - | ------- | -
|                                                             |   |             |   |   |         |  
|CASH FLOWS FROM INVESTING ACTIVITIES:                        |   |             |   |   |         |  
|                                                             |   |             |   |   |         |  
|PROCEEDS FROM
      SALES OF REAL ESTATE                     |   | 0           |   |   | 0       |  
|COSTS RELATING TO SALES OF REAL ESTATE                       |   | 0           |   |   | 0       |  
|CAPITAL EXPENDITURES                                         |   | 0           |   |   | 0       |  
|                                                             |   |             |   |   |         |  
|NET CASH PROVIDED BY INVESTING ACTIVITIES                    |   | 0           |   |   | 0       |  
|                                                             |   |             |   |   |         |  
|CASH FLOWS PROVIDED BY (USED) IN FINANCING
      ACTIVITIES: |   |             |   |   |         |  
|                                                             |   |             |   |   |         |  
|PROCEEDS FROM
      LONG-TERM DEBT OBLIGATION                |   | 0           |   |   | 0       |  
|REPAYMENT OF LONG-TERM DEBT
      OBLIGATION                 |   | 0           |   |   | 0       |  
|                                                             |   |             |   |   |         |  
|NET CASH PROVIDED BY (USED) IN FINANCING ACTIVITIES          |   | 0           |   |   | 0       |  
|                                                             |   |             |   |   |         |  
|NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS         |   | (268,074    | ) |   | (49,492 | )
|                                                             |   |             |   |   |         |  
|CASH AND CASH EQUIVALENTS AT BEGN OF YEAR                    |   | 510,361     |   |   | 154,624 |  
|                                                             |   |             |   |   |         |  
|CASH AND CASH EQUIVALENTS AT END OF YEAR                     | $ | 242,287     |   | $ | 105,132 |  
|                                                             |   |             |   |   |         |  
|                                                             |   | JANUARY 31, |  
|                                                             |   | 2011        |   |   | 2010    |  
|SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:           |   |             |   |   |         |  
|                                                             |   |             |   |   |         |  
|CASH PAID DURING THE YEAR FOR:                               |   |             |   |   |         |  
|                                                             |   |             |   |   |         |  
|INTEREST                                                     | $ | 21,175      |   | $ | 24,830  |  
|INCOME TAXES                                                 | $ | 0           |   | $ | 0       |  

SEE ACCOMPANYING NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS.

10

---

|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.

11

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

Real Estate Operations - Canal's real estate properties are
located in Sioux City, Iowa, South St Paul, Minnesota, St Joseph, Missouri and
Omaha, Nebraska. 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.
In September 2010, Canal sold approximately 35 acres of land previously used in
stockyard operations located in Sioux Falls, South Dakota for $2.0 million
generating a gain of 1.2 million.

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

12

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|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           | $ | 46,158        |   | $ | 25,000      |   | $ | 71,158      |  
|PROPERTY ON OPERATING LEASES  |   | 1,385,857     |   |   | 285,000     |   |   | 1,670,857   |  
|PROPERTY USED IN STKY. OPER.  |   | 527,572       |   |   | 502,000     |   |   | 1,029,572   |  
|                              |   |               |   |   |             |   |   |             |  
|                              |   |               |   |   |             |   |   |             |  
|ACCOUNTS PAYABLE & ACCR. EXP. |   | 203,588       |   |   | (94,928     | ) |   | 108,660     |  
|ACCRUED PROFESSIONAL FEES     |   | 50,998        |   |   | (50,998     | ) |   | 0           |  
|LINE OF CREDIT - ORDER BUYING |   | 0             |   |   | 89,000      |   |   | 89,000      |  
|TRANSIT INSURANCE             |   | 0             |   |   | 44,926      |   |   | 44,926      |  
|INCOME TAXES PAYABLE          |   | 10,000        |   |   | (10,000     | ) |   | 0           |  
|PREFERRED STOCK DIV. PAYABLE  |   | 187,550       |   |   | (187,500    | ) |   | 0           |  
|                              |   |               |   |   |             |   |   |             |  
|ADDITIONAL PAID-IN CAPITAL    |   | 28,322,341    |   |   | (2,795,620  | ) |   | 25,526,721  |  
|ACCUMULATED DEFICIT           |   | (15,195,016   | ) |   | 3,817,170   |   |   | (11,377,846 | )

13

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|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.

14

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|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
January 31, 2011 and the results of its operations and its cash flows for the
three month period ended January 31, 2011. 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, 2010 and the notes
thereto which are contained in Canals 2010 Annual Report on Form 10-K. The
results of operations for the period presented is not necessarily indicative of
the results to be expected for the remainder of fiscal 2011.

|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 January 31, 2011 or 2010.

|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 $45,000 and $26,000 at January 31, 2011 and
October 31, 2010, respectively, represents the excess of per head fees charged
over actual payments made for livestock that was injured or died while at the
stockyards.

15

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|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 January 31, 2011, the balance due under these
notes was 847,000, all of which is classified as long-term debt-related party.
Canal has incurred interest expense on these notes of $21,000 and $25,000 for
the three month periods ended January 31, 2011 and 2010, respectively.

At January 31, 2011, 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:

|                                                                    |   | Jan. 31, |  |   | October 31, | 
|------------------------------------------------------------------- | - | -------- |  | - | ----------- | 
|($ 000's Omitted)                                                   |   | 2011     |  |   | 2010        | 
|Variable rate mortgage notes due May 15,
      2015 - related party | $ | 847      |  | $ | 847         | 
|Less -- current maturities                                          |   | 0        |  |   | 0           | 
|Long-term debt                                                      | $ | 847      |  | $ | 847         | 

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 $89,000 and
$154,000 at January 31, 2011 and October 31, 2010, respectively.

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

Antiquities art valued at $100,000 represented 100% of total
art inventory at both January 31, 2011 and October 31, 2010. 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 January 31,
2011 the valuation allowance is approximately $396,000.

16

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

At January 31, 2011, the Company has net operating loss carry
forwards of approximately $12,200,000 that expire through 2030. For financial
statement purposes, a valuation allowance has been provided to offset the net
deferred tax assets due to the cumulative net operating losses incurred during
recent years. The valuation 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 January 31, 2011. 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 $270,000, $210,000,
$110,000, $110,000 and $110,000 for fiscal years 2011, 2012, 2013, 2014 and
2015, respectively.

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

A schedule of the Companys property used in stockyard
operations at January 31, 2011 is as follows (000's omitted):

Current Year(Retirements)Historical Cost
    
    
    Additions
    
    
    
    
    
    CarryingBldgs. &
    
    
    
    
    
    Bldgs. &
    
    
    Accum.
    
    
    ValueDescription (1)
    
    Land
    
    
    Imprvmts.
    
    
    Land
    
    
    Imprvmts.
    
    
    Depr.
    
    
    01/31/1130 acres of land in St. Joseph, MO Acquired
      in 1942
    $
    902
    
    $
    325
    
    $
    0
    
    $
    0
    
    $
    (197
    )
    $
    1,030


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

17

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

A schedule of the Companys property on operating leases at
January 31, 2011 is as follows (000's omitted):

Current Year(RetirementsHistorical Cost
    
    
    Additions
    
    
    
    
    
    CarryingBldgs. &
    
    
    
    
    
    Bldgs. &
    
    
    Accum.
    
    
    ValueDescription (1)
    
    Land
    
    
    Imprvmts.
    
    
    Land
    
    
    Imprvmts.
    
    
    Depr.
    
    
    01/31/11New York office Leasehold
      assets
    $
    0
    
    $
    8
    
    $
    0
    
    $
    0
    
    $
    (8
    )
    $
    09 acres of land in Omaha, NE
      Acquired in 1976
    
    1,150
    
    
    21
    
    
    0
    
    
    0
    
    
    (18
    )
    
    1,1533 acres of land in S. St.
      Paul, MN Acquired in 1937
    
    10
    
    
    485
    
    
    0
    
    
    0
    
    
    (452
    )
    
    434 acres of land in Sioux
      City, IA Acquired in 1937
    
    475
    
    
    0
    
    
    0
    
    
    0
    
    
    0
    
    
    475$
    1,635
    
    $
    514
    
    $
    0
    
    $
    0
    
    $
    (478
    )
    $
    1,671


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 January 31, 2011 is as follows (000's omitted):

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

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

18

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|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:

|                                   |  | Three Months Ended |  
|---------------------------------- |  | ------------------ | -
|                                   |  | 1/31/11            |  
|                                   |  |                    |  
|Service cost                       |  | 2,000              |  
|Interest cost                      |  | 26,000             |  
|Expected return on plan assets     |  | (28,000            | )
|Amortization of prior service cost |  | 0                  |  
|Recognized net actuarial loss      |  | 30,000             |  
|Net periodic benefit cost          |  | 30,000             |  

For the three months ended January 31, 2011, 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 2011 is approximately $172,000. A $147,000 contribution has been made to
date and the Company expects to make the full required contribution before the
end of the fiscal year.

|16. | 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 $3,000 for each of the three month periods ended
January 31, 2011 and 2010.

19

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|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
January 31, 2011, 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.

20

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

At January 31, 2011, 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 $21,000 and $25,000 for the three month periods ended January
31, 2011 and 2010, 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 January 31, 2011, the balance due under
these notes was $847,000 all of which is classified as long-term debt related
party.

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

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.

21

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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.

22

---

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 January 31, 2011, Canal's real estate properties were
located in Sioux City, Iowa, South St Paul, Minnesota, St Joseph, Missouri and
Omaha, Nebraska. 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 2 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.

23

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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:

|                                    |   | Three Months Ended
      January 31, |  
|----------------------------------- | - | ------------------------------------ | -
|                                    |   | 2011                                 |  
|                                    |   | (In Thousands)                       |  
|Revenues:                           |   |                                      |  
|Real Estate Revenue                 | $ | 70                                   |  
|Stockyard Revenue                   |   | 579                                  |  
|Total Revenue                       |   | 649                                  |  
|                                    |   |                                      |  
|                                    |   |                                      |  
|Costs and Expenses:                 |   |                                      |  
|                                    |   |                                      |  
|Real Estate Expenses                |   | 14                                   |  
|Stockyard Expenses                  |   | 470                                  |  
|General and Administrative Expenses |   | 206                                  |  
|Total Costs and Expenses            |   | 690                                  |  
|                                    |   |                                      |  
|                                    |   |                                      |  
|(Loss) Income from Operations       |   | (41                                  | )
|Other Income                        |   | 0                                    |  
|Interest Expense                    |   | (21                                  | )
|Other Expenses                      |   | 0                                    |  
|                                    |   |                                      |  
|Net (Loss) Income                   | $ | (62                                  | )

24

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Revenues

Canal's revenues from continuing operations consist of revenues
from its real estate and stockyard operations. Revenues for the first three
months of fiscal 2011 decreased by $86,000 to $649,000 as compared with 2010
revenues of $735,000. The fiscal 2011 decrease in revenues is due primarily to
the closure of the Sioux Falls stockyard operation in the fourth quarter of
fiscal 2009.

Real Estate Revenues: Real estate revenues for the three months
ended January 31, 2011 of $70,000 accounted for 10.8% of the fiscal 2011
revenues as compared to real estate revenues of $76,000 or 10.4% for the same
period in fiscal 2010. Real estate revenues are comprised of sale of real estate
(0.0% and 0.0%), rentals and other lease income from the rental of vacant land
and certain structures (100.0% and 88.9%) and rental income from commercial
office space in its Exchange Building (0.0% and 11.1%) for the three months
ended January 31, 2011 and 2010, respectively. The percentage variations in the
year to year comparisons are due primarily to the elimination of rental income
from the Sioux Falls, South Dakota Exchange Building which was closed in
September 2010.

Stockyard Revenues: Stockyard revenues for the three months
ended January 31, 2011 of $579,000 accounted for 89.2% of the fiscal 2011
revenues as compared to stockyard revenues of $658,000 or 89.6% for the same
period in fiscal 2010. The 2011 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
(87.4% and 75.1%), feed and bedding income (6.9% and 4.2%) and rental and other
income (5.7% and 20.7%) for the three month periods ended January 31, 2011 and
2010, respectively. The 2011 percentage variations in the year to year
comparisons are due primarily to the closing of the Sioux Falls stockyard
operations as discussed above.

Art Revenues: Canal had no art sales in the first three months
of fiscal 2011 or fiscal 2010. Art revenues, if any, are comprised of the
proceeds from the sale of antiquities art. There were no art expenses for the
three month periods ended January 31, 2011 and 2010, 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 three months
ended January 31, 2011 of $14,000 decreased by $8,000 (36.3%) from real estate
expenses of $22,000 for the same period in fiscal 2010. The decrease in real
estate expenses is consistent with the 2011 decrease in real estate revenues.
Real estate expenses are comprised of the cost of real estate sold (0.0% and
0.0%), labor, operating and maintenance (16.4% and 29.0%), depreciation and
amortization (39.1% and 24.9%), taxes other than income taxes (26.5% and 24.5%)
and general and administrative expenses (18.0% and 21.6%) for the three months
ended January 31, 2011 and 2010, respectively. There were no significant
percentage variations in the year to year comparisons.

Stockyard Expenses: Stockyard expenses for the three months
ended January 31, 2011 of $471,000 decreased by $80,000 (14.6%) from stockyard
expenses of $551,000 for the same period in fiscal 2010. The decrease in
stockyard expenses is consistent with the 2011 decrease in stockyard revenues.
Stockyard expenses are comprised of labor and related costs (43.7% and 48.1%),
other operating and maintenance (22.8% and 25.4%), feed and bedding expense
(6.1% and 4.5%), depreciation and amortization (1.1% and 0.6%), taxes other than
income taxes (4.3% and 7.3%) and general and administrative expense (22.0% and
14.2%) for the three month periods ended January 31, 2011 and 2010,
respectively. There were no significant percentage variations in the year to
year comparisons.

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General and Administrative

General and administrative expenses for the three months ended
January 31, 2011 of $206,000 increased by $1,000 (0.5%) as compared to $205,000
for the same period in fiscal 2010. The major components of general and
administrative expenses are officers salaries (57.6% and 55.9%), pension expense
(13.1% and 12.7%), insurance expense (6.7% and 6.5%), office salaries (11.4% and
11.1%), travel expense (1.7% and 3.3%) and professional fees (1.5% and 2.8%) for
the three month periods ended January 31, 2011 and 2010, respectively. There
were no significant percentage variations in the year to year comparisons.

Interest Expense

Interest expense for the three months ended January 31, 2011 of
$21,000 decreased by $4,000 (14.7%) from $25,000 for the same period in fiscal
2010. The 2011 decrease is due primarily to Canals $485,000 partial repayment
of its long-term debt in fiscal 2010. The principal balance outstanding at
January 31, 2011 of $847,000 is classified as long-term debt-related party.

Net (Loss) Income

Canal recognized a net loss of approximately $62,000 in the
first three months of fiscal 2011 as compared to a net loss of $68,000 for the
same period in fiscal 2010. The decrease in the fiscal 2011 net loss was due
primarily to the closure of the Sioux Falls stockyards operations in the fourth
quarter of fiscal 2010, which was operating at a deficit.

Liquidity and Capital Resources

Cash and cash equivalents decreased $268,000, from $510,000 at
October 31, 2010, to $242,000 at January 31, 2011. At January 31, 2011 the
Companys current assets exceeded current liabilities by approximately $150,000
as compared to October 31, 2010 when the Companys current assets exceeded
current liabilities by approximately $390,000.

Net cash used in operating activities for the three
months ended January 31, 2011 were $268,000, as compared to $49,000 for the same
period in fiscal 2010, for a net increase of $219,000. This increase in cash
used during the first fiscal quarter of 2011 was mainly due the sharp decrease
in outstanding liabilities in the first quarter of fiscal 2011. The Company did
not engage in any financing and investment activities, except with respect to
its payment 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.

26

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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 January 31, 2011, 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
2011 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 $21,000 and $25,000 for the fiscal quarters
ended January 31, 2011 and 2010, 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 January 31, 2011, the balance
due under these notes was $847,000 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.

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.

27

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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.

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 quarter ended January 31, 2011, we did not have any
off-balance sheet arrangements.

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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
MARKET RISK

Not Applicable

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 January
31, 2011. 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 three months ended January 31, 2011
and 2010 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 three months ended January 31, 2011 and 2010,
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 first fiscal quarter ended January 31, 2011 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
January 31, 2011, 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.

30

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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 our first quarter ended January 31,
2011, 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)

32

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