UNITED STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K/A
[X] ANNUAL REPORT UNDER SECTION 13 or 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the one year period ended October 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
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51-0102492
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(State or other jurisdiction of
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(I.R.S. Employer Identification
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incorporation or organization)
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Number)
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4 Morris Street
Port 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 [_]
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Accelerated filer [_]
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Non-accelerated filer [_]
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Smaller reporting company
[X]
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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:
The
aggregate market value of the voting stock held by non-affiliates of the
registrant at April 30, 2011, was approximately $75,000.
Common Stock, $.01 par value per share: 4,326,929 outstanding
at September 30, 2012.
CANAL CAPITAL CORPORATION AND SUBSIDIARIES
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2011 ANNUAL REPORT ON FORM 10-K
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TABLE OF CONTENTS
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Page
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PART I
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ITEM 1.
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Business
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1
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ITEM 2
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Properties
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12
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ITEM 3.
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Legal Proceedings
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13
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ITEM 4.
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Mine Safety Disclosures
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13
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PART II
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ITEM 5.
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Market for Registrant's Common Stock and
Related Stockholder Matters
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14
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ITEM 7.
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Management's Discussion and
Analysis of Financial Condition and Results of Operations
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16
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ITEM 8.
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Financial Statements and Supplementary Data
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24
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ITEM 9.
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Changes in and Disagreements
with Accountants on Accounting and Financial Disclosure
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24
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ITEM 9A.
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Controls and Procedures
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25
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ITEM 9B.
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Other Information
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26
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PART
III
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ITEM 10.
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Directors, Executive Officers
and Corporate Governance
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27
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ITEM 11.
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Executive Compensation
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30
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ITEM 12.
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Security Ownership of Certain
Beneficial Owners and Management and Related Stockholder Matters
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32
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ITEM 13.
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Certain Relationships, Related Transactions and
Director Independence
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34
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ITEM 14.
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Principal Accounting Fees and
Services
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35
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PART
IV
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ITEM 15.
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Exhibits, Financial Statement
Schedules
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36
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INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
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F-1
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SIGNATURES
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S-1
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EXHIBITS
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E-1
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i
EXPLANATORY NOTE
The purpose of this Annual Report on Form 10-K for the
period ended October 31, 2011 (the 10-K), is to provide audited financial
statements of Canal Capital Corporation (the Company) that were not provided
by the Company in its original filing of the 10-K on January 23, 2012. Where
indicated, the financial data presented in the 10-K is as of October 31, 2011,
however, the other disclosures have been updated to reflect the Companys
operations as at the date of this filing.
Special Note Regarding 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.
ii
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:
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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;
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SEC are to the United States Securities and Exchange Commission;
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Securities Act are to the Securities Act of 1933, as amended;
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Exchange Act are to the Securities Exchange Act of 1934, as amended; and
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U.S. dollar, USD, US$ and $ are to the legal currency of the
United States.
Canal Capital Corporations fiscal year ends October 31, of
each year. Each reference to a fiscal year in this Annual Report on Form 10K
refers to the fiscal year ending October 31 of the calendar year indicated.
iii
PART I
Item 1. Business
Company Overview
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 the operation of a central public stockyard. Canal also sells
antiquities through independent art dealers and at public art auctions through
its wholly owned subsidiary, Canal Arts Corporation.
At October 31, 2011, Canal's real estate properties are located
in Sioux City, Iowa, South St Paul, Minnesota, St Joseph, Missouri and Omaha,
Nebraska. Canal sold all of the property it owned in Sioux Falls, South Dakota
in September 2010. The properties consist, for the most part, of land and
structures leased to third parties (rail car repair shops, lumber yards and
various other commercial and retail businesses) as well as vacant land available
for development or resale. Canal owns approximately 2 acres of undeveloped land
in Sioux City, Iowa and it operates a central public stockyard located in St.
Joseph, Missouri. Canals stockyard provides 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 offers other
services, such as pure bred and other specialty sales for producer
organizations.
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. As of the date of this
report, the Company has sold its Sioux Falls, South Dakota property (formerly
used in stockyard operations), two of its three remaining rental properties and
its stockyard operations, including the 30 acres of land and the improvements
thereon located in St. Joseph, Missouri. The Companys only remaining real
estate property is a rental property located in Omaha, Nebraska. Management is
unsure if its income from operations combined with its cost-cutting program and
planned reduction of its antiquities art inventory will enable it to finance its
future business activities or fund operating cash requirements. In the interim,
the Company is undertaking efforts to identify alternative business
opportunities for the Company. If for some reason the Company is not able to
identify an acceptable alternative business opportunity within a reasonable
period of time, it may not have sufficient resources to continue meeting its
reporting obligations with the Securities and Exchange Commission or other
obligations which arise from its minimal operations. This in turn would severely
diminish the ability of the Company to explore alternative business
opportunities.
1
History and Corporate Structure
Canal Capital Corporation, incorporated in the state of
Delaware in 1964, commenced business operations through a predecessor in 1936.
Canal was a wholly-owned subsidiary of Canal-Randolph Corporation until June 1,
1984, when Canal-Randolph Corporation distributed to its stockholders all of the
outstanding shares of Canals capital stock under a plan of complete
liquidation.
The following chart reflects our organizational structure as of
the date of this report:
Canal Capital Corporation (Delaware, USA)
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Subsidiaries:
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Omaha Livestock Market, Inc. (Nebraska, USA)
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Sioux Falls Stockyards Company (South Dakota,
USA)
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Canal Arts Corporation (New York, USA)
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All subsidiaries are 100% owned.
Our corporate headquarters are now located in the personal
residence of its Chief Financial Officer at 4 Morris Street, Port Jefferson
Station, New York 11776, United States of America and our telephone number is
(631) 234-0140.
Overview of Our Industries
Stockyards
The stockyard industry is regulated by the Grain Inspection,
Packers and Stockyards Administration, a division of the U.S. Department of
Agriculture. The stockyard industry in the United States provides the smaller
producers of livestock (primarily cattle, swine and sheep) an outlet to sell
their products at public auction or through private treaty. 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 stockyard industry in the Midwest section of the United States is comprised
of hundreds of stockyards and sale barns, some of which are larger than Canal,
vying for the producers business.
Actual marketing transactions at a stockyard are managed for
livestock producers by market agencies and independent commission sales people
to which the livestock are consigned for sale. These market agencies (some of
which are owned and operated by the Company) and independent sales people
receive commissions from the seller upon settlement of a transaction and the
stockyard receives a yardage fee on all livestock using the facility which is
paid within twenty-four hours of the sale. Yardage fees vary depending upon the
type of animal, the extent of services provided by the stockyard, and local
competition. Yardage revenues are not directly dependent upon market prices, but
rather are a function of the volume of livestock handled. In general, stockyard
livestock volume is dependent upon conditions affecting livestock production and
upon the market agencies and independent commission sales people which operate at the stockyard. Stockyard
operations are seasonal, with greater volume generally experienced during the
first and second quarters of each fiscal year, during which periods livestock is
generally brought to market.
2
Real Estate
Canal is involved in the commercial real estate industry in the
Midwest section of the United States. Commercial real estate refers to those
real estate investment goods that can generate benefits in the form of leasing
or rental income as well as from property appreciation. At October 31, 2011
Canals properties located in four Midwest states were, for the most part, on
long term lease agreements or being held for resale. As of the date of this
filing, Canal has one remaining rental property, located in Omaha, Nebraska and
two acres of vacant land that is available for development or resale.
Our Services
At October 31, 2011, Canal engaged 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, was involved in the management, and sale of its real estate
properties and the operation of a central public stockyard. Canal also sells
antiquities through independent art dealers and at public art auctions through
its wholly owned subsidiary, Canal Arts Corporation.
Real Estate Operations
At October 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 consist, for the most part, of land and
structures leased to third parties (a rail car repair shop, a lumber yard and a
fast food retail business) as well as vacant land available for resale. Its
principal real estate operating revenues are derived from lease income on its
three long-term lease agreements and the proceeds from the sale of real estate
properties.
In September 2010, Canal sold approximately 35 acres of land
and the improvements thereon, previously used for stockyard operations located
in Sioux Falls, South Dakota for $2.0 million generating a gain of $1.2 million.
As of the date of this filing, the Company has sold all of its rental
properties, with the exception of one located in Omaha, Nebraska which generates
rental income of approximately $100,000 per year, and two acres of land that is
available for development or resale.
3
Stockyard Operations
At October 31, 2011, Canal operated a central public stockyard
located in St. Joseph, Missouri, and one located in Sioux Falls, South Dakota
(collectively the Stockyards). Public stockyards act much like a securities
exchange, providing markets for all categories of livestock and fulfilling the
economic functions of assembly, grading, and price discovery. The Companys
principal stockyard revenues are derived from a per head charge (yardage
charge) imposed on all livestock consigned for sale at the stockyards and the
sale of feed and bedding.
In December 2009, after extensive efforts to reorganize and
return our Sioux Falls, South Dakota stockyard to profitability, we ceased its
stockyard operations and leased an approximately 10 acre portion of the
property, on a month to month basis, to a group that formerly operated at the
stockyards as an independent commission firm. In September 2010, we sold the
entire Sioux Falls, South Dakota property (approximately 35 acres of land and
improvements) for $2.0 million, which generated a gain of $1.2 million.
In August 2012, we sold our St. Joseph, Missouri stockyard
operation (including approximately 30 acres of land and improvements) for
$500,000 which generated an operating loss of $577,000. This loss was due
primarily to the unrealistically high historical cost at which this property was
carried.
Art Inventory
Canal established its art operations in the late 1980's by
acquiring for resale a significant inventory of antiquities primarily from the
ancient Mediterranean cultures.
At October 31, 2011, Canal was in the process of selling, in an
orderly manner, its remaining art inventory which consisted only of seven pieces
of antiquity art. This was being accomplished primarily through consignment
arrangements with various independent art dealers and through sale at public art
auctions. Canal did not have any art sales in fiscal 2009 or 2010. In the fourth
quarter of fiscal 2011, Canal has sold one piece of its antiquity art for
$12,000 which generated a loss of $8,000. Additionally, at October 31, 2011,
Canal recorded a $70,500 impairment charge to write down its remaining art
inventory to an estimated net realizable value of $10,000.
4
Our Growth Strategy
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. The Company may, as it
has in the past, be forced to sell income producing assets to raise needed cash,
thereby adversely impacting future revenues. In the interim, management is
undertaking efforts to identify alternative business opportunities for the
Company. If for some reason the Company is not able to identify an acceptable
alternative business opportunity within a reasonable period of time, it may not
have sufficient resources to continue meeting its reporting obligations with the
Securities and Exchange Commission or other obligations which arise from its
minimal operations. This in turn would severely diminish the ability of the
Company to explore alternative business opportunities.
Customers
Stockyards
- At October 31, 2011, we had approximately
500 customers at our St. Joseph, Missouri stockyard location all of which were
considered small to medium size livestock producers. At that time there was no
concentration of customers or group of customers who represent 20% or more of
the Companys stockyard revenues as at that date. As of the date of this report,
we have sold our stockyard operations in Sioux Falls, South Dakota and in St.
Joseph, Missouri, and we are no longer involved in the stockyards business.
Real Estate - At October 31, 2011, Canals real estate
properties consisted primarily of three properties (each located in a different
state) subject to long term lease agreements. Accordingly, each tenant
represented approximately 33% of Canals rental revenues. As of the date of this
report, the Company has sold all its rental properties, with the exception of
one located in Omaha, Nebraska and two acres of vacant land that is available
for development or resale.
Art Inventory Held for Sale - Canal attempts to sell its
remaining art inventory through independent art dealers and through sale at
public art auctions. During fiscal year 2011, Canal did not work exclusively
with any specific art dealer.
Sales and Marketing
At October 31, 2011, Canal advertised its stockyard services
through print ads in the regional newspapers and carried on additional marketing
activities through a network of market agencies and commission sales
representatives. Canal has not engaged in such sales and marketing efforts since
August 2012.
5
At October 31, 2011, Canals real estate properties are all on
long term lease agreements with average terms of 10 years. In most cases, these
lease agreements were renewed by the existing tenants and so we did not need to
advertise. The lease on our one remaining real estate property has been renewed
effective October 31, 2012 with an initial term of ten years.
Canal does not do any advertising or marketing on behalf of its
art inventory.
Competition
At October 31, 2011, Canal competed in the area of real estate
development with other regional developers, some of which were substantially
larger and had significantly greater financial resources than Canal. As of the
date of this report, the Companys real estate operations have been
substantially diminished to one property in Omaha, Nebraska which generates only
$100,000 in income.
Prior to August 2012, the Company competed with other regional
public stockyards and sale barns, some of which were substantially larger and
had greater financial resources than the Company. In addition, the Companys
stockyard revenues were dependent on the ability of the market agencies and
independent commission sales people at each of its stockyard locations to
compete within the region. As of the date of this report, the Company is no
longer in the stockyard business.
Canal competes in the sale of its art inventory with investment
groups and other dealers, most of which are substantially larger and have
greater financial resources and staff than Canal.
Employees
At October 31, 2011, Canal employed approximately 30 employees,
and at such time was in material compliance with relevant United States labor
laws. Canal currently employs 5 full time employees, three of which fill the
responsibilities of senior management and accounting with the remaining two in
administrative functions.
Regulation
The stockyard industry is regulated by the Grain Inspection,
Packers and Stockyards Administration, a division of the U.S. Department of
Agriculture. Canals real estate operations are subject to all local and state
zoning laws as well as all U.S. environmental regulations. Canal is currently in
compliance with all such regulation.
6
ITEM 1A. RISK FACTORS
We operate in a highly competitive environment in which there
are numerous factors which can influence our business, financial position or
results of operations and which can also cause the market value of our common
stock to decline. Many of these factors are beyond our control and
therefore, are difficult to predict. The following section sets forth what we
believe to be the principal risks that could affect us, our business or our
industries, and which could result in a material adverse impact on our financial
results or cause the market price of our common stock to fluctuate or
decline.
RISKS RELATED TO OUR BUSINESS
The recent financial crisis could negatively affect our
business, results of operations, and financial condition.
The recent credit crisis and turmoil in the global financial
system may have an impact on our business and our financial condition, and Canal
may face challenges if conditions in the financial markets do not improve.
Canals stockyard customers, tenants and potential purchasers of our art
inventory and real estate property may require access to substantial financing.
If they are not able to obtain adequate financing in a timely manner, our future
revenues could be materially adversely affected. In addition, these economic
conditions also impact levels of consumer spending, which have recently
deteriorated significantly and may remain depressed for the foreseeable future.
Both the real estate and art markets generally decline during recessionary
periods and other periods where disposable income is adversely affected. If
demand for our products fluctuates as a result of economic conditions or
otherwise, our revenue and gross margin could be harmed.
In order to grow at the pace expected by management, we will
require additional capital to support our long-term growth strategies. If we are
unable to obtain additional capital in future years, we may be unable to proceed
with our plans and we may be forced to curtail our operations.
Canals 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 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 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 will be sufficient to
fund operating cash requirements. As of the date of this report, Canal has sold
its Sioux Falls, South Dakota property (used in stockyard operations), two of
its three remaining rental properties and its stockyard operations, including
the 30 acres of land and the improvements thereon located in St. Joseph,
Missouri. 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.
7
We may not be able to identify or fully capitalize on any
appropriate business opportunities.
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.
Our inability to attract tenants would result in an adverse
impact on our business and operations.
Real estate activities in general may involve various degrees
of risk, such as competition for tenants, general market conditions and interest
rates. Furthermore, there can be no assurance that Canal will be successful in
the lease or sale of its real estate properties. As of the date of this report,
Canal has one remaining rental property (located in Omaha, Nebraska which
generates rental income of approximately $100,000 per year), two acres of vacant
land and a small inventory of antiquity art. The lease on our one remaining real
estate property has been renewed effective October 31, 2012 with an initial term
of ten years.
Our inability to attract buyers for our remaining art
inventory would have an adverse impact on results of operations.
Selling art in general involves various degrees of risk.
Canals success in selling its art inventory is dependent at least in part, on
general economic conditions, including supply, demand, international monetary
conditions and inflation. As of the date of this report, Canal has sold one
piece of antiquity art at a small loss. As of October 31, 2011, Canal has
written down its remaining art inventory by approximately $70,000 to an
estimated net realizable value for the remaining six pieces of $10,000. There is
no guarantee that Canal will be able to sell its remaining art inventory.
8
The loss of any key executive or our failure to attract and
retain key personnel could adversely affect our future performance, strategic
plans and other objectives.
The loss or failure to attract and retain key personnel could
significantly impede our future performance, including product development,
strategic plans, marketing and other objectives. Our success depends to a
substantial extent not only on the ability and experience of our senior
management but particularly upon Asher B. Edelman, our Board Chairman, Michael
E. Schultz, our Chief Executive Officer and Reginald Schauder, our Chief
Financial Officer. We do not currently have in place key man life insurance for
these executive officers. To the extent that the services of these officers
would be unavailable to us, we would be required to recruit other persons to
perform the duties performed by them. We may be unable to employ other qualified
persons with the appropriate background and expertise to replace these officers
and directors on terms suitable to us.
We may be exposed to potential risks relating to our
internal controls over financial reporting and our ability to have those
controls attested to by our independent auditors.
As directed by Section 404 of the Sarbanes-Oxley Act of 2002 or
Sox 404, the SEC adopted rules requiring public companies to include a report of
management on the Companys internal controls over financial reporting in their
annual reports, including Form 10-K and a report of our management is included
under Item 9A of this Annual Report on Form 10-K. Our management has determined
that our internal control over financial reporting was ineffective as of October
31, 2009, due, we believe, primarily to the fact that we have limited personnel
and funds available for continuous legal and accounting counsel as it pertains
to our filing requirements with the SEC. As a result, we have not filed audited
financial reports since our annual report on Form 10-K for the fiscal year ended
October 31, 2008. Additionally, in our annual reports on Form 10-K for the
fiscal years ended October 31, 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. We are in the process of curing this deficiency commencing
with the preparation and filing of this annual report in accordance with U.S.
GAAP and SEC disclosure requirements, however, we can provide no assurance that
these efforts will result in our management determination that our internal
controls over financial reporting are effective for any subsequent period.
Failure to achieve and maintain an effective internal control
environment could result in our not being able to accurately report our
financial results, prevent or detect fraud or provide timely and reliable
financial and other information pursuant to the reporting obligations we have as
a public company, which could have a material adverse effect on our business,
financial condition and results of operations. Further, it could cause our
investors to lose confidence in the information we report, which could adversely
affect our stock price. In the event that we cannot remediate any identified
significant deficiencies or material weaknesses in our internal controls in a
timely manner, investors and others may lose confidence in the reliability of
our financial statements.
9
RISKS RELATED TO THE MARKET FOR OUR STOCK
Our common stock is quoted on the grey markets which may
have an unfavorable impact on our stock price and liquidity.
Our common stock was previously quoted on the OTC Bulletin
Board but is now being quoted on the over-the-counter electronic quotation
system maintained by The OTC Markets, LLC, with a yield alert to indicate the
unavailability of recent financial information. We plan to cure our filing
deficiency which we expect will reinstate our common stock to the OTCs fully
reporting company tier. However, we cannot assure you that we will be able to
quickly cure our filing deficiency with the SEC or maintain our status as a
reporting company in the future. The status of our quotation may result in a
less liquid market available to existing and potential stockholders to trade
shares of our common stock, could depress the trading price of our common stock
and could have a long-term adverse impact on our ability to raise capital in the
future.
We may be subject to penny stock regulations and
restrictions and you may have difficulty selling shares of our common stock.
The SEC has adopted regulations which generally define
so-called penny stocks to be an equity security that has a market price less
than $5.00 per share or an exercise price of less than $5.00 per share, subject
to certain exemptions. Our common stock is a penny stock and is subject to
rule 15g-9 under the Exchange Act, or the Penny Stock Rule. This rule imposes
additional sales practice requirements on broker-dealers that sell such
securities to persons other than established customers and accredited
investors (generally, individuals with a net worth in excess of $1,000,000 or
annual incomes exceeding $200,000, or $300,000 together with their spouses). For
transactions covered by Rule 15g-9, a broker-dealer must make a special
suitability determination for the purchaser and have received the purchasers
written consent to the transaction prior to sale. As a result, this rule may
effect the ability of broker-dealers to sell our securities and may affect the
ability of purchasers to sell any of our securities in the secondary market,
thus possibly making it more difficult for us to raise additional capital.
10
For any transaction involving a penny stock, unless exempt, the
rules require delivery, prior to any transaction in penny stock, of a disclosure
schedule prepared by the SEC relating to the penny stock market. Disclosure is
also required to be made about sales commissions payable to both the
broker-dealer and the registered representative and current quotations for the
securities. Finally, monthly statements are required to be sent disclosing
recent price information for the penny stock held in the account and information
on the limited market in penny stock.
There can be no assurance that our common stock will qualify
for exemption from the Penny Stock Rule. In any event, even if our common stock
were exempt from the Penny Stock Rule, we would remain subject to Section
15(b)(6) of the Exchange Act, which gives the SEC the authority to restrict any
person from participating in a distribution of penny stock, if the SEC finds
that such a restriction would be in the public interest.
We do not intend to pay dividends for the foreseeable
future.
For the foreseeable future, we intend to retain any earnings to
support the Companys cash flow, and we do not anticipate paying any cash
dividends on our common stock. Accordingly, investors must be prepared to rely
on sales of their common stock after price appreciation to earn any investment
return, which may never occur. Investors seeking cash dividends should not
purchase our common stock. Any determination to pay dividends in the future will
be made at the discretion of our board of directors and will depend on our
results of operations, financial condition, contractual restrictions,
restrictions imposed by applicable law and other factors our board deems
relevant.
ITEM 1B. UNRESOLVED STAFF COMMENTS
Not applicable
11
ITEM 2. Properties
New York Headquarters - Canals New York operations are now
located in the personal residence of its Chief Financial Officer and consist of
approximately 200 square feet of office space in Port Jefferson Station, New
York.
Canal's real estate properties located in four Midwest states
are primarily associated with its current and former stockyards operations. Each
property consists, for the most part, of land and structures leased to third
parties (meat packing facilities, rail car repair shops, lumber yards and
various other commercial and retail businesses), an Exchange Building
(commercial office space) as well as vacant land available for development or
resale. In addition to selling what was excess stockyard property, the company
entertains any offers to purchase, develop and restructure the real estate
properties currently under operating leases, stockyard operating property and
property held for development or resale in order to support cash flow and to
enhance the value of the existing properties and surrounding real estate. As
landlord, Canal's management responsibilities include leasing, billing, repairs
and maintenance and overseeing the day to day operations of its properties.
Canal's properties at October 31, 2011 include:
|
|
|
|
|
|
|
|
Leased
|
|
|
Held
|
|
|
|
|
|
|
Year
|
|
|
Total
|
|
|
to Third
|
|
|
for
|
|
|
Current
|
|
Location
|
|
Acquired
|
|
|
Acreage(2)
|
|
|
Opertns
|
|
|
Resale
|
|
|
Status(3)
|
|
St. Joseph, MO(1)
|
|
1942
|
|
|
30
|
|
|
0
|
|
|
0
|
|
|
Sold
|
|
S. St. Paul, MN
|
|
1937
|
|
|
1
|
|
|
1
|
|
|
0
|
|
|
Sold
|
|
Sioux City, IA
|
|
1937
|
|
|
8
|
|
|
6
|
|
|
2
|
|
|
Sold
|
|
Omaha, NE
|
|
1976
|
|
|
9
|
|
|
9
|
|
|
0
|
|
|
Leased
|
|
Total
|
|
|
|
|
48
|
|
|
17
|
|
|
2
|
|
|
|
|
NOTES
(1) Canal operates one central public
stockyard.
(2) For information with respect to mortgages and pledges see Note
4.
(3) For information related to property held for development see Note
3(B).
As of the date of this report, Canal has sold its Sioux Falls,
South Dakota property (formerly used in stockyards operations), two of its three
remaining rental properties and its stockyard operations, including the 30 acres
of land and the improvements thereon located in St. Joseph, Missouri. Canal may,
as it has in the past, be forced to sell income producing assets to raised
needed cash, thereby adversely impacting future revenues.
12
ITEM 3. 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
October 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.
ITEM 4. MINE SAFETY DISCLOSURES
Not Applicable
13
PART II
ITEM 5. MARKET FOR REGISTRANTS COMMON EQUITY, RELATED
STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
Market Information
Our common stock was previously quoted on the OTC Bulletin
Board but it is now being quoted on the over-the-counter electronic quotation
system maintained by The OTC Markets, LLC, with a yield alert to indicate the
unavailability of recent financial information. The high and low price ranges of
Canal's common stock for the eight quarters ended October 31, 2011 as reported
on the "pink sheets" were:
|
|
Fiscal 2011
|
|
|
Fiscal 2010
|
|
Quarter Ended
|
|
High
|
|
|
Low
|
|
|
High
|
|
|
Low
|
|
January 31
|
$
|
0.03
|
|
$
|
0.02
|
|
$
|
0.04
|
|
$
|
0.02
|
|
April 30
|
$
|
0.03
|
|
$
|
0.02
|
|
$
|
0.04
|
|
$
|
0.02
|
|
July 31
|
$
|
0.03
|
|
$
|
0.02
|
|
$
|
0.04
|
|
$
|
0.03
|
|
October 31
|
$
|
0.03
|
|
$
|
0.02
|
|
$
|
0.04
|
|
$
|
0.03
|
|
Approximate number of holders of our common stock
As of October 31, 2011, there were approximately 700 holders of
record of our common stock, par value $.01 per share. This number excludes the
shares of our common stock owned by stockholders holding stock under nominee
security position listings.
Dividend Policy
There were no cash dividends paid during the fiscal years ended
October 31, 2011 and 2010. Canal is subject to restrictions on the payment of
cash dividends under certain debt agreements. Any future decisions regarding
dividends will be made by our board of directors. We currently intend to retain
and use any future earnings to support the Companys cash flow and do not anticipate paying any cash dividends in the foreseeable
future. Our board of directors has complete discretion on whether to pay
dividends, subject to the approval of our stockholders. Even if our board of
directors decides to pay dividends, the form, frequency and amount will depend
on our future operations and earnings, capital requirements and surplus, general
financial condition, contractual restrictions and other factors that the board
of directors may deem relevant.
14
Securities Authorized for Issuance Under Equity Compensation
Plans
There were no options outstanding under the Companys equity
compensation plans at October 31, 2011 or 2010.
Recent Sales of Unregistered Securities
We have not sold any equity securities during the fiscal year
ended October 31, 2011 that were not previously disclosed in a quarterly report
on Form 10-Q or a current report on Form 8-K that was filed during the 2011
fiscal year.
Purchases of Equity Securities
No repurchases of our common stock were made during the fourth
quarter of fiscal 2011.
ITEM 6. SELECTED FINANCIAL DATA
Not applicable
15
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The following managements 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 above for certain information concerning those forward-looking
statements. Our financial statements are prepared in U.S. dollars and in
accordance with U.S. GAAP.
Overview of the Companys 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 the operation of a central public stockyard. Canal also sells
antiquities through independent art dealers and at public art auctions through
its wholly owned subsidiary, Canal Arts Corporation.
As of October 31, 2011, Canal's real estate properties are
located in Sioux City, Iowa, South St Paul, Minnesota, St Joseph, Missouri and
Omaha, Nebraska. Canal sold all of the property it owned in Sioux Falls, South
Dakota, in September 2010. The properties consist, for the most part, of land
and structures leased to third parties (rail car repair shops, lumber yards and
various other commercial and retail businesses) as well as vacant land available
for development or resale. Canal owns approximately 2 acres of undeveloped land
in Sioux City, Iowa and it operates a central public stockyard located in St.
Joseph, Missouri. Canals stockyard provides 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 offers other
services, such as pure bred and other specialty sales for producer
organizations.
16
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. As of the date of this
report, the Company has sold its Sioux Falls, South Dakota property (formerly
used in stockyard operations), two of its three remaining rental properties and
its stockyard operations, including the 30 acres of land and the improvements
thereon located in St. Joseph, Missouri. The Companys only remaining real
estate property is a rental property located in Omaha, Nebraska.
As a result of past financial constraints, the Companys
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 the first in a series of corrective filings which
the Company expects to file in order to comply with the SECs request. The
Company expects to be fully compliant on or about March 31, 2013.
Plan or 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.
17
Results of Operations
The following tables set forth certain items in our statement
of operations for the periods indicated:
|
|
Fiscal
Year
Ended
October
31,
|
|
|
|
2011
|
|
|
2010
|
|
|
|
(In Thousands)
|
|
Revenues:
|
|
|
|
|
|
|
Real Estate Revenue
|
$
|
270
|
|
$
|
2,285
|
|
Stockyard Revenue
|
|
1,766
|
|
|
2,003
|
|
Total Revenue
|
|
2,036
|
|
|
4,288
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Costs and Expenses:
|
|
|
|
|
|
|
Real Estate Expenses
|
|
57
|
|
|
849
|
|
Stockyard Expenses
|
|
1,626
|
|
|
1,820
|
|
General and Administrative Expenses
|
|
944
|
|
|
962
|
|
Total Costs and Expenses
|
|
2,627
|
|
|
3,631
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (Loss) from Operations
|
|
(591
|
)
|
|
657
|
|
Other Income
|
|
13
|
|
|
16
|
|
Interest Expense
|
|
(85
|
)
|
|
(126
|
)
|
Other Expenses
|
|
(78
|
)
|
|
0
|
|
|
|
|
|
|
|
|
Net Income (Loss)
|
$
|
(741
|
)
|
$
|
547
|
|
Revenues
At October 31, 2011, Canal's revenues from continuing
operations consist of revenues from its real estate and stockyard operations.
Canals revenues in 2011 decreased by $2.3 million to $2.0 million as compared
with 2010 revenues of $4.3 million. The fiscal 2011 decrease in revenues is due
primarily to the $2.0 million decrease in sales of real estate, combined with a
$0.3 million decrease in stockyard revenues. The fiscal 2010 decrease in
revenues is due primarily to the $0.6 million decrease in revenues from
stockyard operations offset to a certain extent by the $0.3 million increase in
sales of real estate.
Real estate revenues for 2011 of $0.3 million accounted for
13.3% of the 2011 total revenues as compared to revenues of $2.3 million or
53.3% for 2010. Real estate revenues are comprised of sale of real estate (0.0%
and 87.5%), rentals and other lease income from the rental of vacant land and
certain structures (100.0% and 11.8%) and rental income from commercial office
space in its Exchange Buildings (0.0% and 1.7%) for 2011 and 2010, respectively.
The percentage variations in the year to year comparisons are due primarily to
the $2.0 million decrease in sales of real estate for fiscal 2011.
18
Stockyard revenues for 2011 of $1.8 million accounted for 86.7%
of the 2011 total revenues as compared to revenues of $2.0 million or 46.7% for
2010. Stockyard revenues are comprised of yard handling and auction (87.0% and 82.9%), feed and bedding income (6.0% and 5.0%), rental and
other income (7.0% and 12.1%) for 2011 and 2010, respectively. The 2011 increase
in stockyard revenues as a percent of total revenues is due primarily to the
$2.0 decrease in sales of real estate in fiscal 2011. There were no other
significant percentage variations in the year to year comparisons.
Art Revenues: Art revenues are comprised of the proceeds from
the sale of art. In fiscal 2011 Canal sold one piece of antiquity art for
$12,000 with a cost of $20,000 generating an operating loss of $8,000. There
were no art sales or expenses in fiscal 2010. Additionally, in fiscal 2011 the
Company wrote down its remaining art inventory by $71,000, thereby, reducing the
inventory to its estimated net realizable value. It is the Companys policy to
use the adjusted carrying value for sales, thereby reducing the valuation
reserve proportionately as the inventory is sold.
Expenses
Real estate expenses for 2011 of $0.1 million decreased by $0.7
million (93.3%) from $0.7 million in 2010. Real estate expenses are comprised of
cost of real estate sold (0.0% and 89.3%), labor, operating and maintenance
(16.9% and 2.8%), depreciation and amortization (38.9% and 2.6%), taxes other
than income taxes (26.3% and 2.5%), and general and administrative expenses
(17.9% and 2.5%) for 2011 and 2010, respectively. The percentage variations in
the year to year comparisons of the other real estate operating expenses is due
to the sharp decrease in cost of real estate sold in fiscal 2011.
Stockyard expenses for 2011 of $1.6 million decreased by $0.2
million (10.7%) from $1.8 million in 2010. Stockyard expenses are comprised of
labor and related costs (45.1% and 42.9%), operating and maintenance (26.4% and
27.0%), feed and bedding expense (4.8% and 4.6%), depreciation and amortization
(1.3% and 0.7%), taxes other than income taxes (4.0% and 8.1%) and general and
administrative expenses (18.4% and 16.7%) for 2011 and 2010, respectively. There
were no significant percentage variations in the year to year comparisons.
Art Expenses: Art expenses are comprised of the cost of
inventory sold and selling, general and administrative expenses. In fiscal 2011
Canal sold one piece of antiquity art for $12,000 with a cost of $20,000
generating an operating loss of $8,000. There were no art expenses in fiscal
2010. Additionally, in fiscal 2011 the Company wrote down its remaining art
inventory by $71,000, thereby, reducing the inventory to its estimated net
realizable value.
19
General and Administrative
General and administrative expenses for 2011 of $0.9 million
were virtually unchanged from $0.9 million in 2010. The major components of
general and administrative expenses are officers salaries (48.9% and
53.2%),pension expense (10.5% and 12.1%), insurance expense (8.3% and 8.3%),
office salaries (9.7% and 9.8%), travel expense (1.6% and 3.9%)and legal fees
(2.7% and 2.7%) for 2011 and 2010, respectively. There were no other significant
percentage variations in the year to year comparisons.
Interest Expense
Interest expense for 2011 of $85,000 decreased by $41,000
(32.6%) from $126,000 in 2010. The 2011 decrease is due primarily to the
$145,000 decrease in long-term debt outstanding at the end of fiscal 2010. At
October 31, 2011 the outstanding balance of these notes was $847,000.
At October 31, 2011, all of Canals Long-Term Debt is held by
the companys Chief Executive Officer. These notes pay interest at a rate of 10%
per annum and come due May 15, 2015. Canal has incurred interest expense on
these notes of $85,000 and $126,000 for the years ended October 31, 2011 and
2010, respectively. 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
will be repaid as funds become available in fiscal 2012. As of October 31, 2011,
the balance due under these notes was $847,000, all of which is classified as
long-term debt related party.
Interest and Other Income
Interest and other income of $13,000 for 2011 decreased $3,000
(16.8%) from $16,000 in fiscal 2010. Interest and other income is primarily
comprised of dividend and interest income.
Net Income
Canal recognized a net loss of $0.7 million for 2011 as
compared to the 2010 net income of $0.5 million. After recognition of preferred
stock dividend payments (accrued or paid in additional shares of preferred stock
for each of fiscal 2011 and 2010 of $0 in 2011 and $12,000 in 2010, the results
attributable to common stockholders was virtually unchanged. Canals 2011 net
loss of $0.7 million was due primarily to the lack of real estate sales in
fiscal 2011 as compared to fiscal 2010 when Canal sold a piece of property which
generated operating income of $0.7 million. Canals 2010 net income of $0.5
million was due primarily to the sale of its Sioux Falls, South Dakota property
(thirty acres formerly used in stockyard operations) $2.0 million, generating a
gain of $1.2 million.
20
Liquidity and Capital Resources
Cash and cash equivalents of $36,000 at October 31, 2011
decreased $474,000 from $510,000 at October 31, 2010. Net cash used by
operations in fiscal 2011 was $0.4 million. At October 31, 2011 the Companys
current liabilities exceeded current assets by approximately $0.1 million which
represented a decrease of $0.5 million over October 31, 2010 when current assets
exceeded current liabilities by approximately $0.4 million.
While the Company is currently operating as a going concern,
certain significant factors raise substantial doubt about the Company's ability
to continue as a going concern. The Company has suffered recurring losses from
operations and is obligated to continue making substantial annual contributions
to its defined benefit pension plan. The financial statements do not include any
adjustments that might result from the resolution of these uncertainties.
Additionally, the accompanying financial statements do not include any
adjustments relating to the recoverability and classification of recorded asset
amounts or the amounts and classification of liabilities that might be necessary
should the Company be unable to continue as a going concern.
As discussed above, Canals 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.
Obligations Under Material Contracts
At October 31, 2011, all of the Companys Long-Term Debt is
held by the Companys 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 $85,000 and $126,000 for the years ended October 31,
2011 and 2010, respectively. 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
will be repaid as funds become available in fiscal 2012. These notes, among
other things, prohibit Canal from becoming an investment company as defined by
the Investment Company Act of 1940, restricts Canals ability to pay cash
dividends or repurchase stock, and require principal prepayments to be made only
out of the proceeds from the sale of certain assets. As of October 31, 2011, the
balance due under these notes was $847,000, all of which is classified as
long-term debt-related party. As of the filing of this report, the balance due
under these notes was $400,000.
21
We are currently not party to any other material 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 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.
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.
22
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 3 of the Notes to Consolidated Financial Statements included
elsewhere in this Annual Report.
Revenue Recognition
- Lease and rental revenues are
recognized ratably over the period covered. All real estate leases are accounted
for as operating leases. Revenues from real estate sales are recognized
generally when title to the property passes. Revenues from stockyard operations
which consist primarily of yardage fees (a standard per head charge for each
animal sold through the stockyards) and sale of feed and bedding are recognized
at the time the service is rendered or the feed and bedding are delivered.
Art Inventory
- Inventory of art consisting of
antiquities only as of October 31, 2011 is valued at the lower of cost,
including direct acquisition and restoration expenses, or net realizable value
on a specific identification basis. The nature of art makes it difficult to
determine a replacement value. The most compelling evidence of a value in most
cases is an independent appraisal. For fiscal 2011 the net realizable value of
Canals remaining art inventory has been estimated by management based in part on
the Companys history of art sales in previous years and in part on the results
of the independent appraisals done in previous years. However, because of the
nature of art inventory, such determination is very subjective and, therefore,
the estimated values could differ significantly from the amount ultimately
realized.
Properties and Related Depreciation
-- Properties are
stated at cost less accumulated depreciation. Depreciation is provided on the
straight-line method over the estimated useful lives of the properties. Such
lives are estimated from 35 to 40 years for buildings and from 5 to 20 years for
improvements and equipment.
Property held for Development or Resale
-- Property held
for development or resale consist of approximately 2 acres, located in the
Midwest of undeveloped land, not currently utilized for corporate purposes nor
included in any of the present operating leases. The Company constantly
evaluates proposals received for the purchase, leasing or development of this
asset.
23
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 year ended October 31, 2011, we did not have any
off-balance sheet arrangements.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
MARKET RISK.
Not applicable.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The full text of our audited consolidated financial statements
as of October 31, 2011 and 2010 begins on page F-1 of this report.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE.
None.
24
ITEM 9A. 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 SECs 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 October
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, as
of October 31, 2011, our disclosure controls and procedures were not effective.
Managements Annual Report on Internal Control over
Financial Reporting
Our management is responsible for establishing and maintaining
adequate internal control over financial reporting for the Company. Internal
control over financial reporting refers to the process designed by, or under the
supervision of, our Chief Executive Officer and Chief Financial Officer, and
effected by our Board of Directors, management and other personnel, to provide
reasonable assurance regarding the reliability of our financial reporting and
the preparation of financial statements for external purposes in accordance with
U.S. GAAP, and includes those policies and procedures that:
- pertain to the maintenance of records
that in reasonable detail accurately and fairly reflect the transactions and
dispositions of our assets;
- provide reasonable assurance that
transactions are recorded as necessary to permit preparation of financial
statements in accordance with U.S. GAAP, and that our receipts and expenditures
are being made only in accordance with the authorization of our management and
directors; and
- provide reasonable assurance
regarding prevention or timely detection of unauthorized acquisition use or
disposition of our assets that could have a material effect on the financial
statements.
25
Our management assessed the effectiveness of our internal
control over financial reporting as of October 31, 2011. In making this
assessment, management used a framework set forth in the report entitled
Internal Control - Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission. Based on that evaluation, our
management concluded that our internal control over financial reporting was not
effective, as of October 31, 2011, due, we believe, primarily to the fact that
we have limited personnel and funds available for continuous legal and
accounting counsel as it pertains to our filing requirements with the SEC. As a
result, 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 reports on Form
10-K for the fiscal years ended October 31, 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 Companys
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 annual report on Form 10-K for the fiscal years ended October 31, 2011 and
2010 will be another 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 fiscal years ended October 31, 2011 and 2010, included in this
report, to contain material misstatement.
Because the Company is a smaller reporting company, this annual
report does not include an attestation report of our registered public
accounting firm regarding internal control over financial reporting.
Managements report was not subject to attestation by our registered public
accounting firm.
Changes in Internal Control over Financial Reporting
There were no changes in our internal controls over financial
reporting during the fourth quarter of our fiscal year ended October 31, 2011
that have materially affected, or are reasonably likely to materially affect,
our internal control over financial reporting.
ITEM 9B. OTHER INFORMATION
We have no information to disclose that was required to be
disclosed in a report on Form 8-K during the fourth quarter of fiscal year 2011,
but was not reported.
26
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE
GOVERNANCE
Directors and Executive Officers
The following sets forth the name and position of each of our
current executive officers and directors.
Name
|
Age
|
Position
|
Asher B. Edelman
|
72
|
Chairman of the Board
|
Michael E. Schultz
|
75
|
President, Chief Executive Officer &
Director
|
Reginald Schauder
|
62
|
Chief Financial Officer,
Secretary & Treasurer
|
Asher B. Edelman,
age 72, has been Chairman of the Board
since September 1991 and prior thereto Vice Chairman of the Board and Chairman
of the Executive Committee since February, 1985. Mr. Edelman was a Director,
Vice-Chairman of the Board, and Chairman of the Executive Committee of The
CattleSale Company formerly known as Dynacore Holdings Corporation,
("CattleSale") from March 1985 to December 2003.
Michael E. Schultz,
age 75, has been President and Chief
Executive Officer since September 1991 and a Director since 1985; and had been a
partner in the law firm of Ehrenkranz, Ehrenkranz & Schultz until December
31, 1994.
Reginald Schauder,
age 62, has been Vice President,
Chief Financial Officer and Treasurer since January 1989 and assumed
responsibility as Secretary of the Company in September 1995.
There are no agreements or understandings for any of our
executive officers or directors to resign at the request of another person and
no officer or director is acting on behalf of nor will any of them act at the
direction of any other person.
Directors are elected until their successors are duly elected
and qualified.
27
Qualifications, Attributes, Skills and Experience
Represented on the Board
Mr. Asher B. Edelman and Mr. Michael E. Schultz serve as the
only members of the Board of Directors. We believe that they have the proper
qualifications, attributes, skills and experience that are important to be
represented on the Board as a whole, in light of the Companys current needs and
business priorities and have extensive knowledge of U.S. capital markets.
Family Relationships
There are no family relationships among any of our officers and
directors.
Involvement in Certain Legal Proceedings
To the best of our knowledge, none of our directors or
executive officers has, during the past ten years:
- been convicted in a criminal
proceeding or been subject to a pending criminal proceeding (excluding traffic
violations and other minor offenses);
- had any bankruptcy petition filed by
or against the business or property of the person, or of any partnership,
corporation or business association of which he was a general partner or
executive officer, either at the time of the bankruptcy filing or within two
years prior to that time;
- been subject to any order, judgment,
or decree not subsequently reversed, suspended or vacated, of any court of
competent jurisdiction or federal or state authority, permanently or temporarily
enjoining, barring, suspending or otherwise limiting, his involvement in any
type of business, securities, futures, commodities, investment, banking, savings
and loan, or insurance activities, or to be associated with persons engaged in
any such activity;
- been found by a court of competent
jurisdiction in a civil action or by the Securities and Exchange Commission or
the Commodity Futures Trading Commission to have violated a federal or state
securities or commodities law, and the judgment has not been reversed,
suspended, or vacated;
28
- been the subject of, or a party to,
any federal or state judicial or administrative order, judgment, decree, or
finding, not subsequently reversed, suspended or vacated (not including any
settlement of a civil proceeding among private litigants), relating to an
alleged violation of any federal or state securities or commodities law or
regulation, any law or regulation respecting financial institutions or
insurance companies including, but not limited to, a temporary or permanent
injunction, order of disgorgement or restitution, civil money penalty or
temporary or permanent cease-and-desist order, or removal or prohibition order,
or any law or regulation prohibiting mail or wire fraud or fraud in connection
with any business entity; or
- been the subject of, or a party to,
any sanction or order, not subsequently reversed, suspended or vacated, of any
self-regulatory organization (as defined in Section 3(a)(26) of the Exchange Act
(15 U.S.C. 78c(a)(26))), any registered entity (as defined in Section 1(a)(29)
of the Commodity Exchange Act (7 U.S.C. 1(a)(29))), or any equivalent exchange,
association, entity or organization that has disciplinary authority over its
members or persons associated with a member.
Except as set forth in our discussion below in Item 13,
Certain Relationships and Related Transactions, and Director Independence -
Transactions with Related Persons, none of our directors, director nominees or
executive officers have been involved in any transactions with us or any of our
directors, executive officers, affiliates or associates which are required to be
disclosed pursuant to the rules and regulations of the SEC.
Board Composition and Committees
Our board of directors currently consists of two members Asher
B. Edelman and Michael E. Schultz. Mr. Edelman serves on our board of directors
as an independent director as defined by Rule 5605(a)(2) of the NASDAQ Listing
Rules. Due to the limited number of directors, the creation of numerous
independent committees is not feasible. During fiscal 2011, the Board of
Directors held one meeting.
Section 16(A) Beneficial Ownership Reporting Compliance
Under U.S. securities laws, directors, certain executive
officers and persons holding more than 10% of our common stock must report their
initial ownership of the common stock, and any changes in that ownership, to the
SEC. The SEC has designated specific due dates for these reports. As at October
31, 2011, all of our officers and directors had submitted their required
reports.
29
Code of Ethics and Conduct
Our Board of Directors has adopted a written Code of Business
Ethics and Conduct that applies to all of our directors, officers and employees,
including our principal executive officer, principal financial officer and
principal accounting officer. A copy of the Code of Business Conduct and Ethics is filed at Exhibit 14.1 hereto and incorporated by reference
herein.
ITEM 11. EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE - Fiscal Years Ended October 31,
2011 and 2010
The following table summarizes the compensation of the
Company's Chief Executive Officer and the other two executive officers of the
Company whose salary for fiscal 2011 exceeded $100,000.
Name and Principal
|
|
|
|
|
|
|
Position
|
|
Year
|
|
|
Salary
|
|
|
|
|
|
|
|
|
Michael E. Schultz
|
|
2011
|
|
$
|
175,000
|
|
President and Chief Executive Officer
|
|
2010
|
|
$
|
175,000
|
|
|
|
|
|
|
|
|
Asher B. Edelman
|
|
2011
|
|
$
|
175,000
|
|
Chairman of the Board and Executive
Committee
|
|
2010
|
|
$
|
175,000
|
|
|
|
|
|
|
|
|
Reginald Schauder
|
|
2011
|
|
$
|
136,000
|
|
Vice President, Chief Financial Officer Treasurer and
Secretary
|
|
2010
|
|
$
|
136,000
|
|
Employment Agreements
None
In order to improve the Companys cash flow, Messrs. Edelman
and Schultz each agreed to defer receipt of their annual salaries effective
November 1, 2009. Additionally, effective November 1, 2010 Mr. Schauder agreed
to defer receipt for $24,000 of his annual salary. These amounts are accrued by
the Company with payments made from time to time as cash becomes available to
the Company. Additionally, Mr. Schultz has deferred interest and other
reimbursable expenses during the year. At October 31, 2011, the total liability
under these agreements was approximately $459,000.
30
Retirement Plans
The Canal Capital Corporation Retirement Plan (the "Retirement
Plan") provides benefits to eligible employees of the Company and its
subsidiaries and affiliates. Directors who are not employees are not eligible to
participate in the Retirement Plan. The Retirement Plan is administered by the
Company.
All Company contributions under the Retirement Plan were
deposited with an insurance company and invested in a group annuity contract
through May 30, 1985. Thereafter, all Company contributions have been held in
trust under a Trust Agreement between the Company and the Executive Committee of
the Board of Directors, as trustee. Contributions to the Retirement Plan are
determined on an actuarial basis, without individual allocation.
In October 1991, each of three executive officers of the
Company voluntarily withdrew from participation in the Retirement Plan. As a
result of prior service, Messrs. Edelman and Schauder have deferred monthly
accumulated benefits of approximately $1,900 and $600, respectively, as of
October 31, 2011. Mr. Schultz has no benefit under the Retirement Plan. For
further information on the Retirement Plan (see Note 17).
Outstanding Equity Awards at Fiscal Year End
The Company maintains an option plan for the benefit of
directors of the Company -- the 1985 Directors' Stock Option Plan (the "1985
Plan"), which was approved by the stockholders of the Company on March 12, 1986.
Pursuant to the 1985 Plan, a maximum of 264,000 shares of common stock, $0.01
par value per share, of the Company have been reserved for issuance to directors
and members of the Executive Committee of the Company and its subsidiaries.
Options granted under the 1985 Plan are non-qualified stock
options and have an exercise price equal to 100% of fair market value of the
shares on the date of grant. The options may be exercised no earlier than one
year from the date of grant and no later than ten years after the date of grant.
Under the 1985 Plan, options covering 22,000 shares are automatically granted to
each new director upon the effective date of his election to office and options
covering 5,500 shares are automatically granted to each new member of the
Executive Committee upon the effective date of his appointment to office.
During the 2011 fiscal year, no options under the 1985 plan
were granted and no options previously granted were exercised. At October 31,
2011, there were no options outstanding under the 1985 Plan.
COMPENSATION OF DIRECTORS
Except with respect to the options granted under the 1985 Plan
(if any) as discussed above, directors who are not officers of the Company (if
any) do not receive cash compensation for service as Directors. Directors are
reimbursed for expenses incurred in attending Board and Committee meetings,
including those for travel, food and lodging. There have been no expense
reimbursements made in the past two years.
31
Compensation Committee - Interlocks and Insider
Participation
The Board of Directors (comprised of Asher B. Edelman, Chairman
of the Board and Chairman of the Executive Committee, Michael E. Schultz,
President and Chief Executive Officer) determines the compensation of the Chief
Executive Officer and the Company's other executive officers and administers the
Company's 1984 Employees Stock Option Plan and 1985 Directors Stock Option Plan.
In connection with the Company's investment activities, if any, the Executive Committee of the Board of Directors, through Mr. Edelman, has
the authority to invest funds of the Company in securities of other companies.
At October 31, 2011, the Company had no such investments.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT AND RELATED STOCKHOLDER MATTERS
Security Ownership of Certain Beneficial Owners and
Management
The following table sets forth information regarding beneficial
ownership of our common stock as of October 15,2012 (i) by each person who is
known by us to beneficially own more than 5% of our common stock;(ii) by each of
our officers and directors; and (iii) by all of our officers and directors as a
group. Unless otherwise specified, the address of each of the persons set forth
below is in care of Canal Capital Corporation, 4 Morris Street, Port Jefferson
Station, New York 11776;
|
|
No. of Common
Shares
|
|
|
Percent of Class
|
|
Name - Office, If Any
|
|
Beneficially
owned (1)
|
|
|
of Common Stock(2)
|
|
|
|
|
|
|
|
|
Asher B. Edelman
|
|
1,909,605
|
(3)
|
|
44.13%
|
|
Chairman and Director
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Michael E. Schultz
|
|
58,835
|
(4)
|
|
1.36%
|
|
Chief Executive Officer and
Director
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reginald Schauder
|
|
100
|
|
|
*
|
|
Chief Financial Officer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
William G. Walters
|
|
234,440
|
(5)
|
|
5.42%
|
|
|
|
|
|
|
|
|
Timothy D. ODonnell
|
|
347,126
|
(6)
|
|
8.02%
|
|
*Less than 1 %
(1) Beneficial ownership is determined in accordance with the
rules of the SEC and generally includes voting or investment power with respect
to securities.
32
(2) A total of 4,326,929 shares of our common stock are
considered to be outstanding pursuant to SEC Rule 13d-3(d)(1) as of October 15,
2012. For each beneficial owner above, any options exercisable within 60 days
have been included in the denominator.
(3) The number reported herein for Mr. Edelman includes 31,300
shares held in Mr. Edelman's retirement plan, 1,017,220 shares owned by A.B.
Edelman Limited Partnership ("Edelman Limited Partnership"), of which
Mr. Edelman is the sole general partner, 590,186 shares of common stock owned by
the Edelman Family Partnership, L.P. (Edelman Family Partnership), of which
Mr. Edelman is the general partner, 43,830 shares of common stock owned by
Edelman Value Partners, L.P. (Value Partners), of which Mr. Edelman is the
sole stockholder of the general partner, 26,620 shares of common stock held by
Canal Capital Corporation Retirement Plan (Canal Retirement Plan), of which
Mr. Edelman serves as a trustee, 8,400 shares owned by Aile Blanche, Inc., of
which Mr. Edelman is the sole stockholder and 3,399 shares owned by Felicitas
Partners, L.P. ("Felicitas"), the general partner of which is Citas Partners
("Citas") of which Mr. Edelman is the controlling general partner. Edelman
Limited Partnership has the sole power to vote and dispose of the shares owned
by it, which power is exercisable by Mr. Edelman as the sole general partner of
Edelman Limited Partnership. Edelman Family Partnership has the sole power to
vote and dispose of the shares owned by it, which power is exercisable by Mr.
Edelman as the general partner. Value Partners has shared power to vote and
dispose of the shares owned by it. The power to dispose of such shares is
exercisable by A. B. Edelman Management Company, Inc., a corporation controlled
by Mr. Edelman as the sole stockholder. Canal Retirement Plan has the sole power
to vote and dispose of the shares owned by it, which power is exercisable by Mr.
Edelman as trustee. Aile Blanche, Inc. has the sole power to vote and dispose of
the shares owned by it, which power is exercisable by Mr. Edelman as President.
Felicitas has the sole power to vote and dispose of the shares owned by it,
which power is exercisable by Mr. Edelman as the controlling general partner of
Citas. Additionally, the number reported herein for Mr. Edelman includes 188,650
shares of common stock held in three Uniform Gifts to Minors Act accounts for
the benefit of Mr. Edelman's children of which Mr. Edelman is the custodian.
(4) The number reported herein for Mr. Schultz excludes 26,620
shares of common stock held by the Canal Capital Corporation Retirement Plan of
which Mr. Schultz serves as a trustee, as to which Mr. Schultz expressly
disclaims beneficial ownership.
(5) The number reported herein for Mr. Walters includes 117,220
shares owned by Mr. Walters, 117,220 shares owned by Whale Securities Co., L.P.,
of which Mr. Walters is Chief Executive Officer. Mr. Walters has sole power to
vote and dispose of the shares described herein.
(6) Represents 347,126 shares owned directly.
33
Changes in Control
There are no arrangements known to us, including any pledge by
any person of our securities, the operation of which may at a subsequent date
result in a change in control of the Company.
Securities Authorized for Issuance under Equity Compensation
Plans
None
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND
DIRECTOR INDEPENDENCE.
Transactions with Related Persons
Except as set forth below, none of our directors, director
nominees or executive officers has been involved in any transactions with us or
any of our directors, executive officers, affiliates or associates (other than
compensation described under Item 11, Executive Compensation) since the
beginning of our 2011 fiscal year which were required to be disclosed pursuant
to the rules and regulations of the SEC.
At October 31, 2011, all of Canals Long-Term Debt is held by
the companys Chief Executive Officer. These notes pay interest at a rate of 10%
per annum and come due May 15, 2015. Canal has incurred interest expense on
these notes of $85,000 and $126,000 for the years ended October 31, 2011 and
2010, respectively. 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
will be repaid as funds became available in fiscal 2012. As of October 31, 2011,
the balance due under these notes was $847,000 all of which is classified as
long-term debt related party.
In April 2012, the Company sold 6 acres of land and the
improvements thereon located in Sioux City, Iowa to the Companys Chief
Executive Officer, Michael E. Schultz, for $852,000 generating a gain of
$346,000.
34
Promoters and Certain Control Persons
We did not have any promoters at any time during the past five
fiscal years.
Director Independence
Mr. Asher B. Edelman serves on our board of directors as an
independent director as defined by Rule 5605(a)(2) of the NASDAQ Listing
Rules.
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
Independent Registered Public Accounting Firms Fees
Canal did not employ the services of outside accountants at any
time during fiscal 2011 or 2010.
Pre-Approval Policies and Procedures
Under the Sarbanes-Oxley Act of 2002, all audit and non-audit
services performed by our auditors must be approved in advance by our Board of
Directors to assure that such services do not impair the auditors independence
from us. In accordance with its policies and procedures, our Board of Directors
pre-approved the audit service as of and for the year end October 31, 2011.
Effective as of April 18, 2012, Todman combined its practice
with that of Raich Ende Malter & Co. LLP and the combined practice now
operates under the name Raich Ende Malter & Co. LLP (REM). The Companys
Board of Directors has engaged REM to serve as the Companys independent
registered public accounting firm.
35
PART IV
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES.
Financial Statements and Schedules
The Financial Statements are provided commencing at page F-1 to
this annual report on Form 10-K. Financial statement schedules have been omitted
since they are either not required, not applicable, or the information is
otherwise included.
Exhibits
The following exhibits are filed as part of this report or
incorporated by reference:
Exhibit No.
|
Description
|
3.1
|
Restated Certificate of
Incorporation (filed as Exhibit 3(a) to the Registrant's Registration
Statement on Form 10 filed with the Securities and Exchange Commission on
May 3, 1984 (the "Form 10") and incorporated herein by reference).
|
3.2
|
Bylaws (filed as Exhibit 3(b) to the
Registrant's Registration Statement on Form 10 and incorporated herein by
reference).
|
3.3
|
Certificate of Amendment of the
Restated Certificate of Incorporation dated September 22, 1988 (filed as
Exhibit 3(c) to the Registrant's Form 10-K filed January 29, 1989 and
incorporated herein by reference).
|
10.1
|
1984 Stock Option Plan (1) (see Exhibit A
included in the Registrant's Proxy Statement dated January 31, 1985,
relating to the annual meeting of stockholders held March 18, 1985, which
exhibit is incorporated herein by reference).
|
10.2
|
Form of Incentive Stock Option
Agreement (filed as Exhibit 10(b) to the Registrant's Form 10-K filed
January 31, 1986 and incorporated herein by reference).
|
10.3
|
1985 Directors' Stock Option Plan (1) (See
Exhibit A included in the Registrant's Proxy Statement dated January 31,
1986, relating to the annual meeting of stockholders held March 12, 1986,
which exhibit is incorporated herein by reference).
|
36
Exhibit No.
|
Description
|
10.4
|
Form of Directors' Stock Option Agreement (filed as
Exhibit 10(ab) to the Registrant's Form 10-K filed January 29, 1986 and
incorporated herein by reference).
|
10.5
|
Stock Pledge and Security Agreement dated January 8, 1998
by and between Canal Capital Corporation, SY Trading Corporation and CCC
Lending Corporation (filed as Exhibit 10 (ai) to the Registrants Form
10-K filed January 30, 1998 and incorporated herein by reference).
|
10.6
|
Security Agreement dated January 8, 1998 by and between
Canal Capital Corporation, Canal Galleries Corporation, Canal Arts
Corporation and CCC Lending Corporation (filed as Exhibit 10 (an) to the
Registrants Form 10-K filed January 30, 1998 and incorporated herein by
reference).
|
10.7
|
$1,000,000 Promissory Note dated January 8, 1998 by and
between Michael E. Schultz and Canal Capital Corporation (filed as Exhibit
10 (ao) to the Registrants Form 10-K filed January 30, 1998 and
incorporated herein by reference).
|
10.8
|
$242,000 Promissory Note dated January 8, 1998 by and
between Michael E. Schultz Defined Benefit Trust and Canal Capital
Corporation (filed as Exhibit 10 (ap) to the Registrants Form 10-K filed
January 30, 1998 and incorporated herein by reference).
|
10.9
|
$229,000 Promissory Note dated January 8, 1998 by and
between Lora K. Schultz and Canal Capital Corporation (filed as Exhibit 10
(aq) to the Registrants Form 10-K filed January 30, 1998 and incorporated
herein by reference).
|
14.1
|
Code of Business Conduct and Ethics (filed as Exhibit
14.1 to the Registrants Form 10-K filed October 25, 2012 and incorporated
herein by reference).
|
21*
|
Subsidiaries of the registrant.
|
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*
|
Certification of Chief Executive Officer Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002
|
32.2*
|
Certification of Chief Financial Officer Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002
|
* Filed herein
37
INVESTOR INFORMATION
Annual Meeting
|
|
Corporate Headquarters
|
|
|
|
The Annual Meeting of Shareholders of Canal Capital
Corporation will be held in our offices at 4 Morris Street, Port Jefferson
Station NY, 11776 on a date to be announced.
|
|
4 Morris Street, Port Jefferson Station, NY
11776
|
|
|
|
|
|
Stock Certificates
|
|
|
|
The Board of Directors of Canal Capital Corporation urges
all shareholders to vote their shares in person or by proxy and thus
participate in the decisions that will be made at the annual meeting.
|
|
Inquiries regarding change of name or address,
or to replace lost certificates should be made directly to American Stock
Transfer and Trust Co., 59 Maiden Lane, New York, NY 10007 or telephone
(718) 921-8200
|
|
|
|
Stock Listing
|
|
Auditors
|
|
|
|
Canal Capital Corporation common stock listed on the
over-the-counter market through the pink sheets.
|
|
Raich Ende Malter & Co. LLP
90 Merrick Avenue - STE 802
East Meadow, NY 11554
|
|
|
|
Investment Analyst Inquiries
|
|
General Counsel
|
|
|
|
Analyst inquiries are welcome.
|
|
Proskauer Rose LLP
|
|
|
1585 Broadway
|
|
|
|
Phone or write: Michael E. Schultz,
|
|
New York, NY 10036
|
President at (631) 234-0140
|
|
(212) 969-3000
|
38
CANAL CAPITAL CORPORATION AND SUBSIDIARIES
|
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS FOR
THE
|
YEARS ENDED OCTOBER 31, 2011 AND 2010
|
The following documents are filed as part of this report:
(a) 1. Financial Statements --
Report of Independent Registered Public
Accounting Firm
|
F-2
|
|
|
Consolidated Balance Sheets as of October
31, 2011 and 2010
|
F-3
|
|
|
Consolidated Statements of Operations and
Comprehensive (Loss) Income for the years ended October 31, 2011 and 2010
|
F-5
|
|
|
Consolidated Statements of Stockholders'
Equity for the years ended October 31, 2011 and 2010
|
F-7
|
|
|
Consolidated Statements of Cash Flows for
the years ended October 31, 2011 and 2010
|
F-8
|
|
|
Notes to Consolidated Financial Statements
|
F-10
|
F-1
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To Board of Directors and Stockholders of
Canal Capital
Corporation:
Port Jefferson Station, NY
We have audited the accompanying balance sheets of Canal
Capital Corporation (the Company) as of October 31, 2011 and 2010, and the
related statements of operations, changes in stockholders' equity, and cash
flows for the years ended October 31, 2011 and 2010. The Companys management is
responsible for these financial statements. Our responsibility is to express an
opinion on these financial statements based on our audit.
We conducted our audits in accordance with the standards of the
Public Company Accounting Oversight Board (United States) . Those standards
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. The Company
is not required to have, nor were we engaged to perform, an audit of its
internal control over financial reporting. Our audit included consideration of
internal control over financial reporting as a basis for designing audit
procedures that are appropriate in the circumstances, but not for the purpose of
expressing an opinion on the effectiveness of the Companys internal control
over financial reporting. Accordingly, we express no such opinion. An audit also
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the financial position of Canal
Capital Corporation as of October 31, 2011 and 2010, and the results of its
operations and its cash flows for the years then ended in conformity with
accounting principles generally accepted in the United States of America.
RAICH ENDE MALTER & CO. LLP
New York, New York
October 30, 2012
F-2
CANAL CAPITAL CORPORATION & SUBSIDIARIES
|
CONSOLIDATED BALANCE SHEETS
|
|
|
October 31,
|
|
|
|
2011
|
|
|
2010
|
|
ASSETS
|
|
|
|
|
|
|
CURRENT ASSETS:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH AND CASH EQUIVALENTS
|
$
|
35,514
|
|
$
|
510,361
|
|
RESTRICTED CASH - TRANSIT
INSURANCE
|
|
35,484
|
|
|
26,000
|
|
NOTES AND ACCOUNTS RECEIVABLE
|
|
120,300
|
|
|
163,879
|
|
STOCKYARDS INVENTORY
|
|
20,749
|
|
|
14,608
|
|
PREPAID EXPENSES
|
|
13,948
|
|
|
12,461
|
|
TOTAL
CURRENT ASSETS
|
|
225,995
|
|
|
727,309
|
|
|
|
|
|
|
|
|
NON-CURRENT ASSETS:
|
|
|
|
|
|
|
PROPERTY ON OPERATING LEASES, NET OF
ACCUMULATED DEPRECIATION OF $ 494,599 AND $ 472,399 AT OCTOBER 31, 2011
AND 2010, RESPECTIVELY
|
|
1,668,008
|
|
|
1,676,407
|
|
|
|
|
|
|
|
|
PROPERTY USED IN STOCKYARD OPERATIONS,
NET OF ACCUMULATED DEPRECIATION OF $ 212,257 AND $ 191,857 AT OCTOBER 31,
2011 AND 2010, RESPECTIVELY
|
|
1,072,267
|
|
|
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
|
|
10,000
|
|
|
100,000
|
|
|
|
150,000
|
|
|
240,000
|
|
TOTAL ASSETS
|
$
|
3,168,520
|
|
$
|
3,730,638
|
|
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS.
F-3
CANAL CAPITAL CORPORATION & SUBSIDIARIES
|
CONSOLIDATED BALANCE SHEETS
|
|
|
October 31,
|
|
|
|
2011
|
|
|
2010
|
|
LIABILITIES & STOCKHOLDERS' (DEFICIT)
EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CURRENT LIABILITIES:
|
|
|
|
|
|
|
ACCOUNTS PAYABLE AND ACCRUED EXPENSES
|
$
|
160,370
|
|
$
|
156,461
|
|
LINE OF CREDIT - ORDER
BUYING
|
|
106,395
|
|
|
154,366
|
|
TRANSIT INSURANCE
|
|
35,484
|
|
|
26,000
|
|
|
|
|
|
|
|
|
TOTAL CURRENT LIABILITIES
|
|
302,249
|
|
|
336,827
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NON-CURRENT LIABILITIES:
|
|
|
|
|
|
|
LONG-TERM DEBT, RELATED PARTY
|
|
847,000
|
|
|
847,000
|
|
LONG-TERM PENSION
LIABILITY
|
|
812,820
|
|
|
869,676
|
|
SALARIES AND INTEREST PAYABLE - OFFICERS
|
|
458,700
|
|
|
175,000
|
|
REAL ESTATE TAXES PAYABLE
|
|
56,200
|
|
|
44,543
|
|
|
|
|
|
|
|
|
TOTAL NON-CURRENT LIABILITIES
|
|
2,174,720
|
|
|
1,936,219
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
COMMITMENTS AND CONTINGENCIES (NOTE 12)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
STOCKHOLDERS' (DEFICIT) EQUITY:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PREFERRED STOCK, $0.01 PAR VALUE:
10,000,000 SHARES AUTHORIZED; 9,102,655 AND 9,102,655 SHARES ISSUED AND
OUTSTANDING AT OCTOBER 31, 2011 AND 2010, RESPECTIVELY AND AGGREGATE
LIQUIDATION PREFERENCE OF $10.00 PER SHARE FOR $ 91,026,550 AND $
91,026,550 AT OCTOBER 31, 2011 AND 2010, RESPECTIVELY
|
|
91,027
|
|
|
91,027
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
COMMON STOCK, $0.01 PAR
VALUE: 10,000,000 SHARES AUTHORIZED; 5,313,794 SHARES ISSUED &
4,326,929 SHARES OUTSTANDING AT OCTOBER 31, 2011 AND 2010, RESPECTIVELY
|
|
53,138
|
|
|
53,138
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ADDITIONAL PAID-IN CAPITAL
|
|
25,526,721
|
|
|
25,526,721
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ACCUMULATED DEFICIT
|
|
(12,056,664
|
)
|
|
(11,315,376
|
)
|
|
|
|
|
|
|
|
986,865 SHARES OF COMMON STOCK HELD IN
TREASURY, AT COST
|
|
(11,003,545
|
)
|
|
(11,003,545
|
)
|
|
|
|
|
|
|
|
COMPREHENSIVE INCOME
(LOSS):
|
|
|
|
|
|
|
PENSION VALUATION
RESERVE
|
|
(1,919,126
|
)
|
|
(1,894,373
|
)
|
|
|
|
|
|
|
|
|
|
691,551
|
|
|
1,457,592
|
|
|
|
|
|
|
|
|
TOTAL LIABILITIES AND STOCKHOLDERS (DEFICIT) EQUITY
|
$
|
3,168,520
|
|
$
|
3,730,638
|
|
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS.
F-4
CANAL CAPITAL CORPORATION & SUBSIDIARIES
|
CONSOLIDATED STATEMENTS OF OPERATIONS AND
|
COMPREHENSIVE (LOSS) INCOME
|
|
|
October 31,
|
|
|
|
|
|
|
|
|
|
|
2011
|
|
|
2010
|
|
|
|
|
|
|
|
|
REAL ESTATE OPERATIONS:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
REAL ESTATE REVENUES:
|
|
|
|
|
|
|
SALE OF REAL ESTATE
|
$
|
0
|
|
$
|
2,000,000
|
|
REAL
ESTATE RENTAL
|
|
269,826
|
|
|
274,862
|
|
EXCHANGE BUILDING
RENTAL
|
|
0
|
|
|
10,414
|
|
|
|
269,826
|
|
|
2,285,276
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
REAL ESTATE EXPENSES:
|
|
|
|
|
|
|
COST OF
REAL ESTATE SOLD
|
|
0
|
|
|
758,408
|
|
LABOR, OPERATING AND
MAINTENANCE
|
|
9,625
|
|
|
24,526
|
|
DEPRECIATION AND
AMORTIZATION
|
|
22,200
|
|
|
22,200
|
|
TAXES OTHER THAN INCOME
TAXES
|
|
15,000
|
|
|
21,600
|
|
GENERAL
AND ADMINISTRATIVE
|
|
10,200
|
|
|
21,961
|
|
|
|
57,025
|
|
|
848,965
|
|
|
|
|
|
|
|
|
INCOME FROM REAL ESTATE OPERATIONS
|
|
212,801
|
|
|
1,436,581
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
STOCKYARD OPERATIONS:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
STOCKYARD REVENUES:
|
|
|
|
|
|
|
YARD HANDLING AND
AUCTION
|
|
1,537,051
|
|
|
1,660,843
|
|
FEED
AND BEDDING INCOME
|
|
105,095
|
|
|
99,974
|
|
RENTAL & OTHER
INCOME
|
|
123,654
|
|
|
242,014
|
|
|
|
1,765,800
|
|
|
2,002,831
|
|
|
|
|
|
|
|
|
STOCKYARD EXPENSES:
|
|
|
|
|
|
|
LABOR AND RELATED COSTS
|
|
733,085
|
|
|
781,058
|
|
OTHER
OPERATING AND MAINTENANCE
|
|
429,382
|
|
|
492,031
|
|
FEED AND BEDDING
EXPENSE
|
|
78,764
|
|
|
84,545
|
|
DEPRECIATION AND
AMORTIZATION
|
|
20,400
|
|
|
13,470
|
|
TAXES OTHER THAN INCOME
TAXES
|
|
64,553
|
|
|
146,014
|
|
GENERAL
AND ADMINISTRATIVE
|
|
299,486
|
|
|
303,472
|
|
|
|
1,625,670
|
|
|
1,820,590
|
|
|
|
|
|
|
|
|
INCOME FROM STOCKYARD OPERATIONS
|
|
140,130
|
|
|
182,241
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GENERAL AND ADMINISTRATIVE EXPENSE
|
|
(943,989
|
)
|
|
(962,131
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INCOME (LOSS) FROM OPERATIONS
|
|
(591,058
|
)
|
|
656,691
|
|
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
F-5
CANAL CAPITAL CORPORATION & SUBSIDIARIES
|
CONSOLIDATED STATEMENTS OF OPERATIONS AND
|
COMPREHENSIVE (LOSS) INCOME
|
Continued ...
|
|
|
October 31,
|
|
|
|
2011
|
|
|
2010
|
|
OTHER (EXPENSES) INCOME:
|
|
|
|
|
|
|
INTEREST AND OTHER INCOME
|
|
13,090
|
|
|
15,738
|
|
INTEREST
EXPENSE-RELATED PARTY
|
|
(84,700
|
)
|
|
(125,766
|
)
|
IMPAIRMENT AND LOSS FROM ART SALE
|
|
(78,620
|
)
|
|
0
|
|
|
|
(150,230
|
)
|
|
(110,028
|
)
|
|
|
|
|
|
|
|
INCOME (LOSS) BEFORE PROVISION FOR INCOME
TAXES
|
|
(741,288
|
)
|
|
546,663
|
|
(BENEFIT) PROVISION FOR INCOME TAXES
|
|
0
|
|
|
0
|
|
NET INCOME (LOSS)
|
|
(741,288
|
)
|
|
546,663
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OTHER COMPREHENSIVE (LOSS) INCOME:
|
|
|
|
|
|
|
MINIMUM
PENSION LIABILITY ADJUSTMENT
|
|
(24,753
|
)
|
|
21,612
|
|
COMPREHENSIVE INCOME (LOSS)
|
$
|
(766,041
|
)
|
$
|
568,275
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET INCOME (LOSS) PER COMMON SHARE:
|
|
|
|
|
|
|
- BASIC
|
$
|
(0.17
|
)
|
$
|
0.14
|
|
- DILUTED
|
$
|
(0.17
|
)
|
$
|
0.14
|
|
WEIGHTED AVERAGE NUMBER OF SHARES:
|
|
|
|
|
|
|
- BASIC
|
|
4,326,929
|
|
|
4,326,929
|
|
- DILUTED
|
|
4,326,929
|
|
|
4,326,929
|
|
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
F-6
CANAL CAPITAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
|
YEARS ENDED OCTOBER 31, 2011 AND 2010
|
|
|
COMMON STOCK
|
|
|
PREFERRED STOCK
|
|
|
|
NUMBER
|
|
|
|
|
|
NUMBER
|
|
|
|
|
|
|
OF
|
|
|
|
|
|
OF
|
|
|
|
|
|
|
SHARES
|
|
|
AMOUNT
|
|
|
SHARES
|
|
|
AMOUNT
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BALANCE, OCTOBER 31, 2009
|
|
5,313,794
|
|
$
|
53,138
|
|
|
9,102,655
|
|
$
|
91,027
|
|
NET INCOME
|
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
DISTRIBUTION
|
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
MINIMUM PEN. LIAB. ADJ.
|
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BALANCE, OCTOBER 31, 2010
|
|
5,313,794
|
|
$
|
53,138
|
|
|
9,102,655
|
|
$
|
91,027
|
|
NET LOSS
|
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
MINIMUM PEN. LIAB. ADJ.
|
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
BALANCE, OCTOBER 31, 2011
|
|
5,313,794
|
|
$
|
53,138
|
|
|
9,102,655
|
|
$
|
91,027
|
|
|
|
ADDITIONAL
|
|
|
|
|
|
|
|
|
TREASURY STOCK,
|
|
|
|
PAID-IN
|
|
|
ACCUMULATED
|
|
|
COMPREHENSIVE
|
|
|
AT COST
|
|
|
|
CAPITAL
|
|
|
DEFICIT
|
|
|
(LOSS)INCOME
|
|
|
986,865 SHARES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BALANCE, OCTOBER 31, 2009
|
$
|
25,526,721
|
|
|
($11,862,039
|
)
|
|
($1,915,985
|
)
|
|
($11,003,545
|
)
|
NET INCOME
|
|
0
|
|
|
546,663
|
|
|
0
|
|
|
0
|
|
MINIMUM PEN. LIAB. ADJ.
|
|
0
|
|
|
0
|
|
|
21,612
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BALANCE, OCTOBER 31, 2010
|
$
|
25,526,721
|
|
|
($11,315,376
|
)
|
|
($1,894,373
|
)
|
|
($11,003,545
|
)
|
NET LOSS
|
|
0
|
|
|
(741,288
|
)
|
|
0
|
|
|
0
|
|
MINIMUM PEN. LIAB. ADJ.
|
|
0
|
|
|
0
|
|
|
(24,753
|
)
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BALANCE, OCTOBER 31, 2011
|
$
|
25,526,721
|
|
|
($12,056,664
|
)
|
|
($1,919,126
|
)
|
|
($11,003,545
|
)
|
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENT
F-7
CANAL CAPITAL CORPORATION & SUBSIDIARIES
|
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
|
|
OCTOBER 31,
|
|
|
|
|
|
|
|
|
|
|
2011
|
|
|
2010
|
|
CASH FLOWS FROM OPERATING ACTIVITIES:
|
|
|
|
|
|
|
NET INCOME (LOSS)
|
$
|
(741,288
|
)
|
$
|
546,663
|
|
ADJUSTMENTS TO RECONCILE NET
INCOME (LOSS) TO NET CASH (USED) BY OPERATING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
DEPRECIATION
AND AMORTIZATION
|
|
42,600
|
|
|
35,670
|
|
LOSS ON SALES OF ART
|
|
78,620
|
|
|
0
|
|
GAIN ON
SALES OF REAL ESTATE
|
|
0
|
|
|
(1,241,592
|
)
|
MINIMUM PENSION
LIABILITY ADJUSTMENT
|
|
(24,753
|
)
|
|
21,612
|
|
|
|
|
|
|
|
|
DECREASE (INCREASE) IN ASSETS:
|
|
|
|
|
|
|
NOTES
AND ACCOUNTS RECEIVABLE
|
|
43,579
|
|
|
(57,454
|
)
|
STOCKYARDS INVENTORY
|
|
(6,141
|
)
|
|
1,978
|
|
PREPAID
EXPENSES
|
|
(1,487
|
)
|
|
4,504
|
|
RESTRICTED CASH -
LETTER OF CREDIT
|
|
0
|
|
|
(10,000
|
)
|
RESTRICTED CASH -
TRANSIT INSURANCE
|
|
(9,484
|
)
|
|
4,690
|
|
DEPOSITS AND OTHER
|
|
0
|
|
|
0
|
|
|
|
|
|
|
|
|
INCREASE (DECREASE) IN LIABILITIES:
|
|
|
|
|
|
|
ACCOUNTS PAYABLE AND
ACCRUED EXPENSES
|
|
3,909
|
|
|
(24,813
|
)
|
LINE OF CREDIT - ORDER
BUYING
|
|
(47,971
|
)
|
|
92,366
|
|
PENSION
PLAN PAYABLE
|
|
(56,856
|
)
|
|
73,004
|
|
SALARIES AND INTEREST
PAYABLE - OFFICERS
|
|
283,700
|
|
|
175,000
|
|
REAL
ESTATE TAXES PAYABLE
|
|
11,657
|
|
|
(178,248
|
)
|
TRANSIT INSURANCE
|
|
9,484
|
|
|
(4,690
|
)
|
|
|
|
|
|
|
|
TOTAL
ADJUSTMENTS
|
|
326,857
|
|
|
(1,107,973
|
)
|
|
|
|
|
|
|
|
NET CASH USED BY OPERATING ACTIVITIES
|
|
(414,431
|
)
|
|
(561,310
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM INVESTING ACTIVITIES:
|
|
|
|
|
|
|
PROCEEDS FROM SALES OF REAL ESTATE
|
|
0
|
|
|
2,000,000
|
|
PROCEEDS FROM SALES OF
ART
|
|
11,380
|
|
|
0
|
|
COSTS RELATING TO SALES OF REAL ESTATE
|
|
0
|
|
|
(537,953
|
)
|
COSTS RELATING TO SALES
OF ART
|
|
0
|
|
|
0
|
|
CAPITAL EXPENDITURES
|
|
(71,796
|
)
|
|
(400,000
|
)
|
|
|
|
|
|
|
|
NET CASH (USED) PROVIDED BY INVESTING
ACTIVITIES
|
|
(60,416
|
)
|
|
1,062,047
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM FINANCING ACTIVITIES:
|
|
|
|
|
|
|
REPAYMENT OF LONG-TERM DEBT
OBLIGATIONS
|
|
0
|
|
|
(145,000
|
)
|
|
|
|
|
|
|
|
NET (DECREASE ) INCREASE IN CASH AND CASH
EQUIVALENTS
|
|
(474,847
|
)
|
|
355,737
|
|
CASH AND CASH EQUIVALENTS AT BEGN OF YEAR
|
|
510,361
|
|
|
154,624
|
|
|
|
|
|
|
|
|
CASH AND CASH EQUIVALENTS AT END OF YEAR
|
$
|
35,514
|
|
$
|
510,361
|
|
|
|
|
|
|
|
|
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
|
|
|
|
|
|
|
INTEREST EXPENSE
|
$
|
84,700
|
|
$
|
125,766
|
|
SEE ACCOMPANYING NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS.
F-8
CANAL CAPITAL CORPORATION AND SUBSIDIARIES
|
NOTES TO 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.
Canals 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 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.
F-9
CANAL CAPITAL CORPORATION AND SUBSIDIARIES
|
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|
Canal is engaged in two distinct businesses - real estate and
stockyard operations.
Real Estate Operations - Canal's real estate properties are
located in Sioux City, Iowa, South St Paul, Minnesota, St Joseph, Missouri and
Omaha, Nebraska. Canal sold all of the property it owned in Sioux Falls, South
Dakota, in September 2010. The properties consist, for the most part, of land
and structures leased to third parties (rail car repair shops, lumber yards and
various other commercial and retail businesses) as well as vacant land available
for development or resale. Its principal real estate operating revenues are
derived from lease income from land and structures leased to various commercial
and retail enterprises, 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 our Sioux Falls, South Dakota
stockyard to profitability, we ceased its stockyard operations and leased an
approximately 10 acre portion of the property, on a month to month basis, to a
group that formerly operated at the stockyards as an independent commission
firm. In September 2010, we sold the entire Sioux Falls, South Dakota property
(approximately 35 acres of land and improvements) for $2.0 million, which
generated 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 Companys 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 Companys stockyards provide all services
and facilities required to operate an independent market for the sale of
livestock, including veterinary facilities, auction arenas, auctioneers, weigh
masters and scales, feed and bedding, and security personnel. In addition, the
stockyards provide other services including pure bred and other specialty sales
for producer organizations. The Company promotes its stockyard business through
public relations efforts, advertising, and personal solicitation of producers.
F-10
CANAL CAPITAL CORPORATION AND SUBSIDIARIES
|
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|
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
|
|
|
Adjustment
|
|
|
As
Restated
|
|
Consolidated Balance
Sheet
|
|
|
|
|
|
|
|
|
|
ACCOUNTS RECEIVABLE
|
$
|
82,585
|
|
$
|
37,715
|
|
$
|
120,300
|
|
PROPERTY ON
OPERATING LEASES
|
|
1,383,008
|
|
|
285,000
|
|
|
1,688,008
|
|
PROPERTY USED IN STKY. OPER.
|
|
570,267
|
|
|
502,000
|
|
|
1,072,267
|
|
ART INVENTORY
|
|
80,500
|
|
|
(70,500
|
)
|
|
10,000
|
|
|
|
|
|
|
|
|
|
|
|
ACCOUNTS PAYABLE
& ACCR. EXP.
|
|
351,765
|
|
|
(191,395
|
)
|
|
160,370
|
|
ACCRUED PROFESSIONAL FEES
|
|
24,000
|
|
|
(24,000
|
)
|
|
0
|
|
LINE OF CREDIT -
ORDER BUYING
|
|
0
|
|
|
106,395
|
|
|
106,395
|
|
INCOME TAXES PAYABLE
|
|
10,000
|
|
|
(10,000
|
)
|
|
0
|
|
PREFERRED STOCK
DIV. PAYABLE
|
|
169,550
|
|
|
(169,550
|
)
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
ADDITIONAL
PAID-IN CAPITAL
|
|
28,322,341
|
|
|
(2,795,620
|
)
|
|
25,526,721
|
|
ACCUMULATED DEFICIT
|
|
(15,895,049
|
)
|
|
3,838,385
|
|
|
(12,056,664
|
)
|
|
|
|
|
|
|
|
|
|
|
Consd. Stmt. Of Operations
|
|
|
|
|
|
|
|
|
|
GENERAL &
ADMIN. EXPENSE
|
|
968,989
|
|
|
(25,000
|
)
|
|
943,989
|
|
INTEREST & OTHER INCOME
|
|
(375
|
)
|
|
(12,715
|
)
|
|
(13,090
|
)
|
IMPAIRMENT AND
LOSS FROM
|
|
|
|
|
|
|
|
|
|
ART SALE
|
|
8,120
|
|
|
70,500
|
|
|
78,620
|
|
F-11
CANAL CAPITAL CORPORATION AND SUBSIDIARIES
|
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|
3.
|
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND
ESTIMATES
|
A) Principles of Consolidation -- The consolidated financial
statements include the accounts of Canal Capital Corporation ("Canal") and its
wholly-owned subsidiaries (the Company). All material intercompany balances
and transactions have been eliminated in consolidation.
B) Properties and Related Depreciation -- Properties are stated
at cost less accumulated depreciation. Depreciation is provided on the
straight-line method over the estimated useful lives of the properties. Such
lives are estimated from 35 to 40 years for buildings and from 5 to 20 years for
improvements and equipment.
Property held for Development or Resale -- Property held for
development or resale consists of approximately 2 acres located in the midwest
of undeveloped land not currently utilized for corporate purposes nor included
in any of the present operating leases. The Company constantly evaluates
proposals received for the purchase, leasing or development of this asset. The
land is valued at cost which does not exceed the net realizable value.
Long-Lived Assets The Company reviews the impairment of
long-lived assets whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. The Company considers
historical performance and future estimated results in its evaluation of
potential impairment and then compares the carrying amount of the assets to the
estimated future cash flows expected to result from the use of the asset. The
measurement of the loss, if any, will be calculated as the amount by which the
carrying amount of the asset exceeds the fair value of the asset.
Expenditures for maintenance and repairs are charged to
operations as incurred. Significant renewals and betterments are capitalized.
When properties are sold or otherwise disposed of, the cost and related
accumulated depreciation are removed from the accounts and any gain or loss is
reflected in current income.
C) Income Taxes -- Canal and its subsidiaries file a
consolidated Federal income tax return. The Company accounts for income taxes
under the liability method. Under this method, deferred tax assets and
liabilities are determined based on differences between financial reporting and
tax bases of assets and liabilities.
The Company follows the uncertainty in income taxes guidance,
which clarifies the accounting for uncertainty in income taxes recognized in the
Companys financial statements and prescribes a recognition threshold and
measurement attribute for the financial statement recognition and measurement of
a tax position taken or expected to be taken in a tax return. It also provides
guidance on derecognition and measurement of a tax position taken or expected to
be taken in a tax return.
F-12
CANAL CAPITAL CORPORATION AND SUBSIDIARIES
|
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|
The Company files income tax returns in several jurisdictions.
The Companys tax returns remain subject to examination, by major jurisdiction,
as follows:
|
Federal
|
2011 and beyond
|
|
New York State
|
2011 and beyond
|
|
Minnesota State
|
2011 and beyond
|
|
Missouri State
|
2011 and beyond
|
|
Nebraska State
|
2011 and beyond
|
|
Iowa State
|
2011 and beyond
|
D) Accounting Estimates -- The preparation of financial
statements in conformity with accounting principles generally accepted in the
United States requires management to make estimates and assumptions that affect
the reported amounts of assets and liabilities and disclosure of contingent
assets and liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period. Actual results
could differ from those estimates.
E) Art Inventory Held for Sale - Inventory of art consisting of
antiquities is valued at the lower of cost, including direct acquisition and
restoration expenses, or net realizable value on a specific identification
basis. The nature of art makes it difficult to determine a replacement value.
The most compelling evidence of a value in most cases is an independent
appraisal. For fiscal 2011 the net realizable value of Canals remaining art
inventory has been estimated by management based in part on the Companys
history of art sales in previous years and in part on the results of the
independent appraisals done in previous years. However, because of the nature of
art inventory, such determination is very subjective and, therefore, the
estimated values could differ significantly from the amount ultimately realized.
F) Stockyard Inventory - Inventory is stated at the lower of
cost or market. Cost is determined using the first-in, first-out method.
G) Revenue Recognition - Lease and rental revenues are
recognized ratably over the period covered. All real estate leases are accounted
for as operating leases. Revenues from real estate sales are recognized
generally when title to the property passes. Revenues from stockyard operations
which consist primarily of yardage fees (a standard per head charge for each
animal sold through the stockyards) and sale of feed and bedding are recognized
at the time the service is rendered or the feed and bedding are delivered.
Other Income (Expense) Items -- Art sales are recognized using
the specific identification method, when the piece is shipped to the purchaser.
H) Comprehensive Income (Loss) -- The Companys only
adjustments for each classification of the comprehensive income was for minimum
pension liability.
F-13
CANAL CAPITAL CORPORATION AND SUBSIDIARIES
|
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
|
I) Statements of Cash Flows -- The company considers all
short-term investments with a maturity of three months or less to be cash
equivalents.
J) 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.
K) 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.
F-14
CANAL CAPITAL CORPORATION AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
The Companys mortgage notes (originally issued in 1998) are
due May 15, 2015 and are held entirely by the Companys Chief Executive Officer.
These notes currently 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; restrict Canals ability to pay cash dividends or repurchase stock
and require principal prepayments to be made only out of the proceeds from the
sale of certain assets. As of October 31, 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 approximately $85,000 and
$126,000 for the years ended October 31, 2011, and 2010, respectively.
At October 31, 2011, substantially all of Canal's real
properties, the stock of certain subsidiaries and its art inventories are
pledged as collateral for the following obligations:
|
|
October 31,
|
|
|
|
2011
|
|
|
2010
|
|
|
|
|
|
|
|
|
Mortgage notes due May 15, 2015 - related
party (see Note 18)
|
$
|
847,000
|
|
$
|
847,000
|
|
The Company has a line of credit with HNB Bank in the amount of
$250,000. This credit line is used in the Companys 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 $106,000 and
$154,000 at October 31, 2011 and 2010, respectively.
F-15
CANAL CAPITAL CORPORATION AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
Significant components of the Companys deferred
asset/(liability) as of October 31, 2011 and 2010 include differences in
depreciation methods, inventory valuation allowance and net operating loss
carryforward:
|
|
2011
|
|
|
2010
|
|
Total Gross Deferred Tax
assets
|
$
|
3,368,000
|
|
$
|
4,179,000
|
|
Less - Valuation Allowance
|
|
(3,368,000
|
)
|
|
(4,179,000
|
)
|
Net Deferred Tax Assets
|
$
|
0
|
|
$
|
0
|
|
Total Gross Deferred Tax Liability
|
$
|
0
|
|
$
|
0
|
|
Net Deferred Tax Asset
(Liability)
|
$
|
0
|
|
$
|
0
|
|
Actual income tax (benefit) expense differs from the expected
tax expense computed by applying the U.S. federal corporate tax rate of 34% to
income(loss) before income taxes as follows:
|
|
2011
|
|
|
2010
|
|
|
|
|
|
|
|
|
Computed Expected Tax
(Benefit)Expense
|
$
|
(228,000
|
)
|
$
|
(201,000
|
)
|
Change in Valuation Allowance
|
|
228,000
|
|
|
201,000
|
|
Other
|
|
0
|
|
|
0
|
|
|
|
|
|
|
|
|
|
$
|
0
|
|
$
|
0
|
|
At October 31, 2011, the Company has net operating loss
carryforwards of approximately $9,116,000 that expire through 2031. 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. Such allowance increased (decreased) by approximately
$(222,000)and $(609,000) during the years ended October 31, 2011 and 2010,
respectively. 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. F-16
|
CANAL CAPITAL CORPORATION AND SUBSIDIARIES
|
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
|
Under Canal's 1984 Employee and 1985 Directors Stock Option
Plans, 550,000 and 264,000 shares, respectively, of Canal's common stock have
been reserved for option grants. The purchase price of shares subject to each
option granted, under the Employee and Directors Plans, will not be less than
85% and 100%, respectively, of their fair market value at the date of grant.
Options granted under both plans are exercisable for 10 years from the date of
grant, but no option will be exercisable earlier than one year from the date of
grant. Under the Employee Plan, stock appreciation rights may be granted in
connection with stock options, either at the time of grant of the options or at
any time thereafter. No stock appreciation rights have been granted under this
plan. There were no options outstanding under either of these plans at October
31, 2011 or 2010.
7.
|
ART INVENTORY HELD FOR SALE
|
Antiquities art represented 100% of total art inventory at both
October 31, 2011 and 2010, respectively. The Company has recorded a valuation
allowance of $416,000 and $396,000 against its inventory to reduce it, to
reflect managements estimate, of its net realizable value at October 31, 2011
and 2010, respectively, based on the history of losses sustained on inventory
items sold in the current and previous years. During fiscal 2011, Canal sold one
piece of antiquity art for $12,000 generating a loss of $8,000 and recorded a
$70,500 impairment charge. There were no art sales in fiscal 2010.
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 October 31, 2011 balance in
restricted cash- transit insurance of approximately $35,000 represents the
excess of per head fees charged over actual payments made for livestock that was
injured or died while at the stockyards.
Letter of Credit - This is a $140,000 deposit with HNB to
secure a Letter of Credit issued by the bank for bonds issued in relation to the
St. Joseph Stockyards clearing operation. This deposit is maintained in an
interest bearing account.
F-17
|
CANAL CAPITAL CORPORATION AND SUBSIDIARIES
|
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
|
9.
|
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 $210,000, $110,000,
$110,000, $110,000 and $110,000 for fiscal years 2013, 2014, 2015, 2016 and
2017, respectively.
10.
|
FINANCIAL INFORMATION FOR BUSINESS
SEGMENTS
|
Canal is engaged in two distinct businesses -- real estate and
stockyard operations.
The following summary presents segment information relating to
these lines of business except for the respective revenues, operating income and
the reconciliation of operating income with pre-tax income which information is
presented on Canal's income statement.
|
|
October 31,
|
|
|
|
2011
|
|
|
2010
|
|
Identifiable assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real estate
|
$
|
1,720,000
|
|
$
|
2,005,000
|
|
Stockyard
operations
|
|
1,363,000
|
|
|
1,654,000
|
|
Corporate
|
|
86,000
|
|
|
112,000
|
|
|
|
|
|
|
|
|
|
$
|
3,169,000
|
|
$
|
3,731,000
|
|
|
|
2011
|
|
|
2010
|
|
Capital expenditures:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real estate
|
$
|
14,000
|
|
$
|
340,000
|
|
Stockyard
operations
|
|
58,000
|
|
|
60,000
|
|
Corporate
|
|
0
|
|
|
0
|
|
|
$
|
72,000
|
|
$
|
400,000
|
|
Income from real estate operations includes gains on sales of
real estate of $0 and $1,242,000 in 2011 and 2010, respectively.
F-18
|
CANAL CAPITAL CORPORATION AND SUBSIDIARIES
|
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
|
11.
|
EARNINGS (LOSS) PER COMMON SHARE AND DIVIDENDS
PAID
|
During each of the fiscal years ended October 31, 2011 and
2010, the Company had no options outstanding. There were no dividends declared
on common stock during the years ended October 31, 2011 and 2010. There were no
dividends declared on preferred stock during the years ended October 31, 2011
and 2010.
Basic earnings (loss) per share are computed by dividing
earnings (loss) available to common stockholders by the weighted average number
of common share outstanding during the period. Diluted earnings (loss) per share
reflect per share amounts that would have resulted if dilutive potential common
stock had been reported in the financial statements.
Basic and diluted earnings (losses) available to common
stockholders at October 31, 2011 and 2010 were:
|
|
For the Year Ended October 31, 2011
|
|
|
|
Income
|
|
|
Shares
|
|
|
Per-share
|
|
|
|
(Numerator)
|
|
|
(Denominator)
|
|
|
Amount
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
$
|
(741,000
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less preferred stock dividends
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss) available to common stock-
holders-diluted earnings per share
|
$
|
(741,000
|
)
|
|
4,327,000
|
|
$
|
(0.17
|
)
|
|
|
For the Year Ended October 31, 2010
|
|
|
|
Income
|
|
|
Shares
|
|
|
Per-share
|
|
|
|
(Numerator)
|
|
|
(Denominator)
|
|
|
Amount
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
$
|
547,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less preferred stock
dividends
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss) available to common
stock- holders-diluted earnings per share
|
$
|
547,000
|
|
|
4,327,000
|
|
$
|
0.13
|
|
F-19
|
CANAL CAPITAL CORPORATION AND SUBSIDIARIES
|
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
|
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 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
October 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.
13.
|
Property Held for Development or
Resale
|
A schedule of the Companys property held for development or
resale at October 31, 2011 is as follows (000's omitted):
Description (1)
|
|
Land
|
|
|
|
|
|
2 acres of land in Sioux
City, Ia Acquired in 1937 - Historical cost
|
$
|
53
|
|
Substantially all of Canals real
property is pledged as collateral for its related party debt obligations (see
note 4).
F-20
|
CANAL CAPITAL CORPORATION AND SUBSIDIARIES
|
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
|
14.
|
Property on Operating Leases
|
A schedule of the Companys property on operating leases at
October 31, 2011 is as follows (000's omitted):
|
|
|
|
|
Current Year
|
|
|
|
|
|
|
|
|
|
|
|
|
(Retirements
|
|
|
|
|
|
|
|
|
|
Historical Cost
|
|
|
Additions
|
|
|
|
|
|
Carrying
|
|
|
|
|
|
|
Bldgs. &
|
|
|
|
|
|
Bldgs. &
|
|
|
Accum.
|
|
|
Value
|
|
Description (1)
|
|
Land
|
|
|
Imprvmts.
|
|
|
Land
|
|
|
Imprvmts.
|
|
|
Depr.
|
|
|
10/31/11
|
|
New York office Various
leasehold improvements
|
$
|
0
|
|
$
|
8
|
|
$
|
0
|
|
$
|
0
|
|
$
|
(8
|
)
|
$
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9 acres of land in Omaha, NE
Acquired in 1976
|
|
1,150
|
|
|
21
|
|
|
0
|
|
|
14
|
|
|
(20
|
)
|
|
1,165
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1 acre of land in S. St.
Paul, MN Acquired in 1937
|
|
10
|
|
|
485
|
|
|
0
|
|
|
0
|
|
|
(467
|
)
|
|
28
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6 acres of land in Sioux
City, IA Acquired in 1937
|
|
475
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
475
|
|
|
$
|
1,635
|
|
$
|
514
|
|
$
|
0
|
|
$
|
14
|
|
$
|
(495
|
)
|
$
|
1,668
|
|
Substantially all of Canals real property is pledged as
collateral for its related party debt obligations (see note 4).
15.
|
Property used in Stockyard
Operations
|
A schedule of the Companys property used in stockyard
operations at October 31, 2011 is as follows (000's omitted):
|
|
|
|
|
Current Year
|
|
|
|
|
|
|
|
|
|
|
|
|
(Retirements)
|
|
|
|
|
|
|
|
|
|
Historical Cost
|
|
|
Additions
|
|
|
|
|
|
Carrying
|
|
|
|
|
|
|
Bldgs. &
|
|
|
|
|
|
Bldgs. &
|
|
|
Accum.
|
|
|
Value
|
|
Description (1)
|
|
Land
|
|
|
Imprvmts.
|
|
|
Land
|
|
|
Imprvmts.
|
|
|
Depr.
|
|
|
10/31/11
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
30 acres of land in St.
Joseph, MO Acquired in 1942
|
$
|
902
|
|
$
|
325
|
|
$
|
0
|
|
$
|
58
|
|
$
|
(213
|
)
|
$
|
1,072
|
|
Substantially all of Canals real property is pledged as
collateral for its related party debt obligations (see note 4).
F-21
CANAL CAPITAL CORPORATION AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
16.
|
PREFERRED STOCK ISSUANCE
|
On October 15, 1986 Canal exchanged 986,865 shares of its $1.30
Exchangeable Preferred Stock ("the Preferred Stock") for a like amount of its
outstanding common stock. Since the exchange, the Company has issued an
additional 9,108,015 shares in the form of stock dividends and in October 2003
the Company, repurchased for retirement, 992,225 shares (from an affiliate) at
$0.10 per share resulting in a total outstanding at October 31, 2011 of
9,102,655. All of the Preferred Stock has a par value of $0.01 per share and a
liquidation preference of $10 per share. The Preferred Stock is subject to
optional redemption, in exchange for Canal's 13% Subordinated Notes, by Canal,
in whole or in part at any time on or after September 30, 1988 at the redemption
price of $10 per share. Dividends on the Preferred Stock accrue at an annual
rate of $1.30 per share and are cumulative. Dividends are payable quarterly in
cash or in Preferred Stock at Canal's option. To date, dividends paid in
additional stock have resulted in the issuance of 9,108,015 shares which were
recorded at their fair value at the time of issuance.
Canal is restricted from paying cash dividends by certain of
its debt agreements (See Note 5). The last cash dividend paid on Canal's
preferred stock was in September 1989. The last dividend payment (which was paid
in additional stock) was for the quarter ended June 30, 2006. The dividend
payable from July 1, 2006 through October 31, 2011 has been accrued but not
paid. Additionally, the dividends payable through December 31, 2011 have been
accrued but not paid. This results in the Company being in arrears on its
quarterly dividends for eighteen full quarters.
Whenever quarterly dividends payable on the Preferred Stock are
in arrears in the aggregate amount at least equal to six full quarterly
dividends (which need not be consecutive), the number of directors constituting
the Board of Directors of Canal shall be increased by two and the holders of the
Preferred Stock shall have, in addition to the rights set forth above, the
special right, voting separately as a single class, to elect two directors of
Canal to fill such newly created directorships at the next succeeding annual
meeting of shareholders (and at each succeeding annual meeting of shareholders
thereafter until such cumulative dividends have been paid in full). The date of
the next annual stockholders meeting has not yet been determined.
VOTING RIGHTS - The holders of the Preferred Stock shall not
have any voting rights except that the following actions must be approved by
holders of 66 2/3% of the shares of Preferred Stock, voting as a class: (I) any
amendment to the Certificate of Incorporation of Canal which would materially
alter the relative rights and preferences of the Preferred Stock so as to
adversely affect the holders thereof; and (ii) issuance of securities of any
class of Canal's capital stock ranking prior (as to dividends or upon
liquidation, dissolution or winding up) to the Preferred Stock. The holders of the
Preferred Stock shall be entitled to specific enforcement of the foregoing
covenants and to injunctive relief against any violation thereof.
F-22
|
CANAL CAPITAL CORPORATION AND SUBSIDIARIES
|
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
|
Canal has a defined benefit pension plan covering substantially
all of its salaried employees (the "Plan"). The benefits are based on years of
service and the employee's compensation earned each year. The Company's funding
policy is to contribute the amount that can be deducted for federal income tax
purposes. Accordingly, the Company has made contributions of approximately
$183,000 for fiscal 2011 and $22,000 for fiscal 2010. Contributions are intended
to provide not only for benefits attributed to service to date, but also for
those expected to be earned in the future. Assets of the plan were invested in
U.S. Government securities, common stocks and antiquities. The Company uses an
October 31 measurement date for its pension plan.
The following tables set forth the benefit obligations, fair
value of plan assets, funded status, and amounts recognized in the Company's
consolidated balance sheets at October 31, 2011 and 2010.
|
|
Plan Year
|
|
($ 000's
Omitted)
|
|
2011
|
|
|
2010
|
|
|
|
|
|
|
|
|
Benefit obligation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Benefit obligation at
beginning of year
|
$
|
1,927
|
|
$
|
1,819
|
|
Service cost
|
|
11
|
|
|
9
|
|
Interest cost
|
|
86
|
|
|
96
|
|
Plan participants contributions
|
|
0
|
|
|
0
|
|
Amendments
|
|
0
|
|
|
0
|
|
Actuarial (gain) loss
|
|
64
|
|
|
127
|
|
Benefits paid
|
|
(106
|
)
|
|
(124
|
)
|
|
|
|
|
|
|
|
Benefit obligation at end of
year
|
$
|
1,982
|
|
$
|
1,927
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Plan
assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value of plan assets at beginning of
year
|
$
|
1,057
|
|
$
|
1,022
|
|
Actual return on plan assets
|
|
36
|
|
|
137
|
|
Employer contribution
|
|
183
|
|
|
22
|
|
Plan participants
contributions
|
|
0
|
|
|
0
|
|
Benefits paid
|
|
(106
|
)
|
|
(124
|
)
|
|
|
|
|
|
|
|
Fair value of plan assets at end of year
|
$
|
1,170
|
|
$
|
1,057
|
|
F-23
|
CANAL CAPITAL CORPORATION AND SUBSIDIARIES
|
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
|
|
|
Plan Year
|
|
($ 000's Omitted)
|
|
2011
|
|
|
2010
|
|
Net Amount Recognized
|
|
|
|
|
|
|
Funded Status
|
$
|
(813
|
)
|
$
|
(870
|
)
|
|
|
|
|
|
|
|
Amounts Recognized in the Consolidated
Balance Sheets as of October 31,
|
|
|
|
|
|
|
Current Liabilities
|
$
|
0
|
|
$
|
0
|
|
Non-current Liabilities
|
|
(813
|
)
|
|
(870
|
)
|
Net Amount Recognized
|
$
|
(813
|
)
|
$
|
(870
|
)
|
|
|
|
|
|
|
|
Amounts Recognized in
Accumulated Other
Comprehensive Income as of October
31,
|
|
|
|
|
|
|
Net Loss
|
$
|
1,919
|
|
$
|
1,894
|
|
|
|
|
|
|
|
|
Information for Pension Plans With an
Accumulated
Benefit Obligation in Excess of Plan Assets
|
|
|
|
|
|
|
Projected Benefit Obligation
|
$
|
1,982
|
|
$
|
1,927
|
|
Accumulated Benefit Obligation
|
|
1,968
|
|
|
1,917
|
|
Fair Value of Plan Assets
|
|
1,170
|
|
|
1,057
|
|
|
|
|
|
|
|
|
Components of Net Periodic
Benefit Cost
|
|
|
|
|
|
|
Service Cost
|
$
|
11
|
|
$
|
9
|
|
Interest Cost
|
|
86
|
|
|
96
|
|
Expected
Return on Plan Assets
|
|
(99
|
)
|
|
(82
|
)
|
Amortization of Prior Service
Costs
|
|
0
|
|
|
0
|
|
Amortization of Net Loss or (Gain)
|
|
103
|
|
|
93
|
|
Net Periodic Benefit Cost
|
$
|
101
|
|
$
|
116
|
|
F-24
|
CANAL CAPITAL CORPORATION AND SUBSIDIARIES
|
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
|
|
|
Plan Year
|
|
($ 000's Omitted)
|
|
2011
|
|
|
2010
|
|
|
|
|
|
|
|
|
Additional Information
|
|
|
|
|
|
|
Decrease in Minimum Liability Included in
Other Comprehensive Income, Net of $0 Recognized due to FAS 158 for change
in Accrued Benefit Cost and Funded Status
|
$
|
0
|
|
$
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-Average
Assumptions
Used to Determine
Benefit
Obligations at
October 31
|
|
|
|
|
|
|
Discount Rate
|
|
4.85%
|
|
|
4.65%
|
|
Rate of Compensation Increase
|
|
2.50%
|
|
|
2.50%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-Average Assumptions
Used
to Determine
Net Periodic Benefit Cost for the Years Ended
October
31
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Discount Rate
|
|
4.65%
|
|
|
5.50%
|
|
Expected Return on Plan
Assets
|
|
8.00%
|
|
|
8.00%
|
|
Rate of Compensation Increase
|
|
2.50%
|
|
|
4.00%
|
|
The expected long-term rate of return for the plans total
assets is based on the expected return of each of the above categories, weighted
based on the median of the target allocation for each class. Equity securities
are expected to return 10% to 11% over the long-term, while cash and fixed
income is expected to return between 4% to 6%. Based on historical experience,
the company expects that the plans asset managers will provide a modest (0.5%
to 1.0% per annum) premium to their respective market benchmark indices.
F-25
|
CANAL CAPITAL CORPORATION AND SUBSIDIARIES
|
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
|
Plan Assets
The companys pension plan weighted-average asset allocations
at October 31, 2011 and 2010, by asset category are as follows:
|
|
Plan Year
|
|
|
|
2011
|
|
|
2010
|
|
Asset Category
|
|
|
|
|
|
|
Equity Securities*
|
|
86.0%
|
|
|
82.0%
|
|
Debt Securities
|
|
0.0%
|
|
|
11.0%
|
|
Real Estate
|
|
0.0%
|
|
|
0.0%
|
|
Other
|
|
14.0%
|
|
|
7.0%
|
|
|
|
|
|
|
|
|
Total
|
|
100.0%
|
|
|
100.0%
|
|
* Includes Canal Capital Corporation common stock in the
amounts of approximately $1,000 (0.0%) at both October 31, 2011 and 2010,
respectively.
The policy as established by the pension plan trustees, is to
provide for growth of capital with a moderate level of volatility by investing
assets per the established target allocations. The assets will be reallocated
from time to time to meet the target allocations. The investment policy will be
reviewed on a regular basis, to determine if the established policies should be
changed.
Cash Flows & Contributions
The company expects to contribute approximately $182,000 to its
pension plan in fiscal 2012.
Estimated Future Benefit Payments
The following benefit payments, which reflect expected future
service, as appropriate, are expected to be paid for the fiscal years ending:
2012
|
$
|
133,000
|
|
2013
|
|
139,000
|
|
2014
|
|
155,000
|
|
2015
|
|
159,000
|
|
2016
|
|
158,000
|
|
2017 through 2021
|
|
741,000
|
|
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 ½% of the
employees annual salary by the Company. The Company made 401(k) matching
contributions of approximately $10,000 and $11,000 for each of fiscal 2011 and
2010, respectively.
F-26
|
CANAL CAPITAL CORPORATION AND SUBSIDIARIES
|
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
|
18.
|
RELATED PARTY TRANSACTIONS
|
At October 31, 2011, all of Canals Long-Term Debt is held by
the companys Chief Executive Officer. After year end management negotiated a
three year extension of 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 $85,000 and $126,000 for the years ended October 31, 2011 and 2010,
respectively. At various times during fiscal 2011 certain holders of these notes
agreed to defer interest payments. This deferred interest liability accrued
additional interest at a rate of 10% per annum, while outstanding and will be
repaid as funds become available in fiscal 2012. As of October 31, 2011, the
balance due under these notes was $847,000 all of which is classified as
long-term debt related party.
In April 2012, Canal sold 6 acres of land and the improvements
thereon located in Sioux City, Iowa to the companys Chief Executive Officer,
Michael E. Schultz for $852,000 generating operating income 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 operating
income 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 an operating loss of $577,000.
F-27
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the Registrant has duly caused this report to
be signed on its behalf by the undersigned, thereunto duly authorized, on the
30th day of October, 2012.
CANAL CAPITAL CORPORATION
By:
/S/ Michael E. Schultz
Michael E.
Schultz
President and
Chief
Executive
Officer
(Principal Executive
Officer)
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons on behalf of
the Registrant and in the capacities and on the dates indicated.
Signature
|
Title
|
Date
|
|
|
|
|
|
|
|
President and Chief
|
|
/S/ Michael E. Schultz
|
Executive Officer and Director
|
|
Michael E. Schultz
|
(Principal Executive Officer)
|
October 30, 2012
|
|
|
|
|
Vice President-Finance
|
|
|
Secretary and Treasurer
|
|
/S/ Reginald Schauder
|
(Principal Financial and
|
|
Reginald Schauder
|
Accounting Officer)
|
October 30, 2012
|
|
|
|
|
|
|
/S/ Asher B. Edelman
|
Chairman of the Board
|
|
Asher B. Edelman
|
and Director
|
October 30, 2012
|
S-1
EXHIBIT INDEX
Exhibit No.
|
Description
|
3.1
|
Restated Certificate of
Incorporation (filed as Exhibit 3(a) to the Registrant's Registration
Statement on Form 10 filed with the Securities and Exchange Commission on
May 3, 1984 (the "Form 10") and incorporated herein by reference).
|
3.2
|
Bylaws (filed as Exhibit 3(b) to the
Registrant's Registration Statement on Form 10 and incorporated herein by
reference).
|
3.3
|
Certificate of Amendment of the
Restated Certificate of Incorporation dated September 22, 1988 (filed as
Exhibit 3(c) to the Registrant's Form 10-K filed January 29, 1989 and
incorporated herein by reference).
|
10.1
|
1984 Stock Option Plan (1) (see Exhibit A
included in the Registrant's Proxy Statement dated January 31, 1985,
relating to the annual meeting of stockholders held March 18, 1985, which
exhibit is incorporated herein by reference).
|
10.2
|
Form of Incentive Stock Option
Agreement (filed as Exhibit 10(b) to the Registrant's Form 10-K filed
January 31, 1986 and incorporated herein by reference).
|
10.3
|
1985 Directors' Stock Option Plan (1) (See
Exhibit A included in the Registrant's Proxy Statement dated January 31,
1986, relating to the annual meeting of stockholders held March 12, 1986,
which exhibit is incorporated herein by reference).
|
E-1
EXHIBIT INDEX (CONTINUED)
Exhibit No.
|
Description
|
10.4
|
Form of Directors' Stock Option Agreement (filed as
Exhibit 10(ab) to the Registrant's Form 10-K filed January 29, 1986 and
incorporated herein by reference).
|
10.5
|
Stock Pledge and Security Agreement dated January 8, 1998
by and between Canal Capital Corporation, SY Trading Corporation and CCC
Lending Corporation (filed as Exhibit 10 (ai) to the Registrants Form
10-K filed January 30, 1998 and incorporated herein by reference).
|
10.6
|
Security Agreement dated January 8, 1998 by and between
Canal Capital Corporation, Canal Galleries Corporation, Canal Arts
Corporation and CCC Lending Corporation (filed as Exhibit 10 (an) to the
Registrants Form 10-K filed January 30, 1998 and incorporated herein by
reference).
|
10.7
|
$1,000,000 Promissory Note dated January 8, 1998 by and
between Michael E. Schultz and Canal Capital Corporation (filed as Exhibit
10 (ao) to the Registrants Form 10-K filed January 30, 1998 and
incorporated herein by reference).
|
10.8
|
$242,000 Promissory Note dated January 8, 1998 by and
between Michael E. Schultz Defined Benefit Trust and Canal Capital
Corporation (filed as Exhibit 10 (ap) to the Registrants Form 10-K filed
January 30, 1998 and incorporated herein by reference).
|
10.9
|
$229,000 Promissory Note dated January 8, 1998 by and
between Lora K. Schultz and Canal Capital Corporation (filed as Exhibit 10
(aq) to the Registrants Form 10-K filed January 30, 1998 and incorporated
herein by reference).
|
14.1
|
Code of Business Conduct and Ethics (filed as Exhibit
14.1 to the Registrants Form 10-K filed October 25, 2012 and incorporated
herein by reference).
|
21*
|
Subsidiaries of the registrant.
|
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*
|
Certification of Chief Executive Officer Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002
|
32.2*
|
Certification of Chief Financial Officer Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002
|
* Filed herein
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