Canal Capital Corp - Quarterly Report (10-Q)

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

|X| QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) of
THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended July 31, 2008

|_| TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number 002-96666

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

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

490 WHEELER ROAD SUITE 185 HAUPPAUGE, NY 11788
(Address of principal executive offices) (Zip Code)

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

Securities registered pursuant to Section 12(b) of the Act: None

Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $.01 par value

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

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

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of "accelerated filer and large accelerated filer" in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer |_| Accelerated filer |_| Non-accelerated filer |X|

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes |_| No |X|

The number of shares of Common Stock, $.01 par value, outstanding at August 31, 2008 was 4,326,929.

CANAL CAPITAL CORPORATION AND SUBSIDIARIES
FORM 10-Q JULY 31, 2008

INDEX

The following documents are filed as part of this report:

Part I - Financial Information ............................................ 3

Item I. Condensed Financial Statements:

 Consolidated Balance Sheets - July 31, 2008
 and October 31, 2007 ............................................... 4

 Consolidated Statements of Operations and
 Comprehensive Income (Loss) for the Nine Month
 Periods ended July 31, 2008 and 2007 ............................... 6

 Consolidated Statements of Changes in Stockholders'
 Equity for the One Year and Nine Month Periods
 ended October 31, 2007 and July 31, 2008 ........................... 10

 Consolidated Statements of Cash Flows for the
 Nine Month Periods ended July 31, 2008 and 2007 .................... 11

 Notes to Consolidated Financial Statements ........................... 13

Item II. Management's Discussion and Analysis of Financial Condition ...... 29

 Liquidity and Capital Resources ...................................... 38

 Other Factors ........................................................ 40

Item III. Quantitative and Qualitative Disclosures About Market Risk ...... 40

Item IV. Controls and Procedures ......................................... 41

Part II Other Information ............................................... 42

 Items 1 through 6 .................................................... 43

 Signatures and Certifications ........................................ 44

PART I

FINANCIAL INFORMATION

CANAL CAPITAL CORPORATION & SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
JULY 31, 2008 AND OCTOBER 31, 2007

 JULY 31, OCTOBER 31,
 2008 2007
 (UNAUDITED) (AUDITED)
 ------------- -------------
ASSETS:

CURRENT ASSETS:

 CASH AND CASH EQUIVALENTS $ 16,414 $ 27,925

 MORTGAGE NOTE RECEIVABLE 0 1,600,000

 NOTES AND ACCOUNTS RECEIVABLE, NET OF AN
 ALLOWANCE FOR DOUBTFUL ACCOUNTS OF $ZERO AT
 BOTH JULY 31, 2008 AND OCTOBER 31, 2007, 147,142 75,879

 ART INVENTORY, NET OF A VALUATION ALLOWANCE
 OF $396,522 AT JULY 31, 2008 AND
 OCTOBER 31, 2007 100,000 100,000

 STOCKYARDS INVENTORY 23,901 16,761

 PREPAID EXPENSES 33,375 28,839
 ------------- -------------

 TOTAL CURRENT ASSETS 320,832 1,849,404
 ------------- -------------

NON-CURRENT ASSETS:

 PROPERTY ON OPERATING LEASES, NET OF
 ACCUMULATED DEPRECIATION OF $422,449
 AND $405,799 AT JULY 31, 2008 AND
 OCTOBER 31, 2007, RESPECTIVELY 1,651,357 1,741,007
 ------------- -------------

 PROPERTY USED IN STOCKYARD OPERATIONS, NET OF
 ACCUMULATED DEPRECIATION OF $225,733 AND
 $210,872 AT JULY 31, 2008 AND OCTOBER
 31, 2007, RESPECTIVELY 1,099,975 1,079,843
 ------------- -------------

OTHER ASSETS:

 PROPERTY HELD FOR DEVELOPMENT OR RESALE 91,510 91,510
 RESTRICTED CASH - TRANSIT INSURANCE 32,232 44,952
 DEPOSITS AND OTHER ASSETS 2,700 2,700
 ------------- -------------

 126,442 139,162
 ------------- -------------

 $ 3,198,606 $ 4,809,416
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