FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
|X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934 (Fee Required)
For the quarterly period ended JULY 31, 2002
|_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934 (No Fee Required)
For the transition period from____to____
Commission File No. 2-96666
Canal Capital Corporation and Subsidiaries
(Exact name of registrant as specified in its charter)
Delaware 51-0102492
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
717 Fifth Avenue, New York, NY 10022
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (212) 826-6040
NONE
Former name, former address and former fiscal year, if changed since last
report.
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months or for such shorter period that the registrant was
required to file such reports, and (2) has been subject to such filing
requirements for the past 90 days. YES |X| NO |_|
Indicate the number of shares outstanding for each of the issuer's classes of
common stock, as of the latest practical date:
Title of each class Shares outstanding at August 31, 2002
Common stock, $0.01 par value 4,326,929
(This document contains 29 pages)
CANAL CAPITAL CORPORATION AND SUBSIDIARIES
FORM 10-Q JULY 31, 2002
INDEX
The following documents are filed as part of this report:
Accountants' Review Report ................................................ 3
Part I - Financial Information ............................................ 4
Item I. Condensed Financial Statements:
Consolidated Balance Sheets - July 31, 2002
and October 31, 2001 ............................................... 5
Statements of Consolidated Operations and
Comprehensive Income for the Nine and Three Month
Periods ended July 31, 2002 and 2001 ............................... 7
Statements of Consolidated Changes in
Stockholders' Equity for the Nine Month and
One Year Periods ended July 31, 2002 and
October 31, 2001 ................................................... 11
Statements of Consolidated Cash Flows for the
Nine Month Periods ended July 31, 2002 and
2001 ............................................................... 12
Notes to Consolidated Financial Statements .......................... 13
Item II. Management's Discussion and Analysis of
Financial Condition ............................................. 20
Capital Resources and Liquidity ..................................... 21
Other Factors ....................................................... 26
Item III. Quantitative and Qualitative Disclosures
About Market Risk .............................................. 26
Part II - Other Information ............................................... 27
Items 1 through 6 ................................................... 28
Signatures .......................................................... 29
2
ACCOUNTANTS' REVIEW REPORT
To the Stockholders of Canal Capital Corporation:
We have reviewed the consolidated balance sheet of Canal Capital Corporation and
subsidiaries as of July 31, 2002, the related consolidated statements of
operations and comprehensive income for the nine and three month periods ended
July 31, 2002 and the consolidated statements of changes in stockholders' equity
and cash flows for the nine month period ended July 31, 2002. These consolidated
financial statements are the responsibility of the company's management.
We conducted our review in accordance with standards established by the American
Institute of Certified Public Accountants. A review of interim financial
information consists principally of applying analytical procedures to financial
data and making inquiries of persons responsible for financial and accounting
matters. It is substantially less in scope than an audit conducted in accordance
with generally accepted auditing standards, the objective of which is the
expression of an opinion regarding the consolidated financial statements taken
as a whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to the consolidated financial statements for them to be in conformity
with generally accepted accounting principles.
The financial statements have been prepared assuming that the Company will
continue as a going concern. As discussed in Note 1 to the financial statements,
the Company has suffered recurring losses from operations in nine of the last
ten years and is obligated to continue making substantial annual contributions
to its defined benefit pension plan. All of these matters raise substantial
doubt about the Company's ability to continue as a going concern. Management's
plans in regard to these matters are also described in Note 1. 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.
/S/ Todman & Co., CPA's,P.C.
New York, N.Y. ----------------------------
September 12, 2002 TODMAN & CO., CPA's,P.C.
Certified Public Accountants (N.Y.)
3
PART I
FINANCIAL INFORMATION
4
CANAL CAPITAL CORPORATION & SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
JULY 31, 2002 AND OCTOBER 31, 2001
JULY 31, OCTOBER 31,
2002 2001
(UNAUDITED) (AUDITED)
----------- ---------
ASSETS:
CURRENT ASSETS:
CASH AND CASH EQUIVALENTS $ 43,206 $ 13,680
NOTES AND ACCOUNTS RECEIVABLE, NET 128,842 127,771
ART INVENTORY, NET OF A VALUATION ALLOWANCE OF
$1,750,000 AND $1,750,000 AT JULY 31,
2002 AND OCTOBER 31, 2001 250,000 250,000
STOCKYARDS INVENTORY 36,838 16,213
INVESTMENTS 21,392 21,392
PREPAID EXPENSES 47,458 172,625
---------- ----------
TOTAL CURRENT ASSETS 527,736 601,681
---------- ----------
NON-CURRENT ASSETS:
PROPERTY ON OPERATING LEASES, NET OF
ACCUMULATED DEPRECIATION OF $1,258,646
AND $1,300,727 AT JULY 31, 2002 AND
OCTOBER 31, 2001, RESPECTIVELY 3,129,530 3,302,073
---------- ----------
PROPERTY USED IN STOCKYARD OPERATIONS, NET OF
ACCUMULATED DEPRECIATION OF $42,904 AND
$44,340 AT JULY 31, 2002 AND OCTOBER
31, 2001, RESPECTIVELY 1,244,461 1,281,476
---------- ----------
ART INVENTORY NON-CURRENT, NET OF A
VALUATION ALLOWANCE OF $834,150
AND $942,150 AT JULY 31, 2002
AND OCTOBER 31, 2001, RESPECTIVELY 867,137 933,739
---------- ----------
OTHER ASSETS:
PROPERTY HELD FOR DEVELOPMENT OR RESALE 568,516 620,416
DEFERRED LEASING AND FINANCING COSTS 15,441 28,118
DEPOSITS AND OTHER 210,902 210,902
---------- ----------
794,859 859,436
---------- ----------
$6,563,723 $6,978,405
========== ==========
5
CANAL CAPITAL CORPORATION & SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
JULY 31, 2002 AND OCTOBER 31, 2001
JULY 31, OCTOBER 31,
2002 2001
(UNAUDITED) (AUDITED)
----------- ------------
LIABILITIES & STOCKHOLDERS' EQUITY:
CURRENT LIABILITIES:
ACCOUNTS PAYABLE AND ACCRUED EXPENSES $ 1,702,332 $ 2,538,229
INCOME TAXES PAYABLE 497 9,857
------------ ------------
TOTAL CURRENT LIABILITIES 1,702,829 2,548,086
------------ ------------
LONG-TERM DEBT, RELATED PARTY 2,667,000 2,667,000
------------ ------------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
PREFERRED STOCK, $0.01 PAR VALUE:
5,000,000 SHARES AUTHORIZED; 5,647,993 AND
4,998,446 SHARES ISSUED AND OUTSTANDING
AT JULY 31, 2002 AND OCTOBER 31, 2001,
RESPECTIVELY AND AGGREGATE LIQUIDATION
PREFERENCE OF $10 PER SHARE FOR $ 56,479,930
AND $49,984,460 AT JULY 31, 2002 AND
OCTOBER 31, 2001, RESPECTIVELY 56,480 49,984
COMMON STOCK, $0.01 PAR VALUE:
10,000,000 SHARES AUTHORIZED; 5,313,794
SHARES ISSUED AND 4,326,929 SHARES OUTSTANDING
AT JULY 31, 2002 AND OCTOBER 31, 2001,
RESPECTIVELY 53,138 53,138
ADDITIONAL PAID-IN CAPITAL 27,916,498 27,848,561
ACCUMULATED DEFICIT (12,663,232) (13,019,374)
986,865 SHARES OF COMMON STOCK
HELD IN TREASURY, AT COST (11,003,545) (11,003,545)
COMPREHENSIVE INCOME:
PENSION VALUATION RESERVE (2,165,445) (2,165,445)
UNREALIZED LOSS ON INVESTMENTS AVAILABLE
FOR SALE 0 0
------------ ------------
2,193,894 1,763,319
------------ ------------
$ 6,563,723 $ 6,978,405
============ ============
6
CANAL CAPITAL CORPORATION & SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS & COMPREHENSIVE INCOME
FOR THE NINE MONTHS ENDED JULY 31, 2002 AND 2001
2002 2001
(UNAUDITED) (UNAUDITED)
---------- ----------
STOCKYARD OPERATIONS:
STOCKYARD REVENUES:
YARD HANDLING AND AUCTION 2,480,161 2,656,555
FEED AND BEDDING INCOME 155,878 198,402
RENTAL INCOME 4,571 3,787
OTHER INCOME 141,282 152,395
---------- ----------
2,781,892 3,011,139
---------- ----------
STOCKYARD EXPENSES:
LABOR AND RELATED COSTS 1,093,552 1,212,767
OTHER OPERATING AND MAINTENANCE 650,007 694,223
FEED AND BEDDING EXPENSE 126,276 153,765
DEPRECIATION AND AMORTIZATION 16,066 14,498
TAXES OTHER THAN INCOME TAXES 171,143 190,332
GENERAL AND ADMINISTRATIVE 291,972 365,431
---------- ----------
2,349,016 2,631,016
---------- ----------
INCOME FROM STOCKYARD OPERATIONS 432,876 380,123
---------- ----------
REAL ESTATE OPERATIONS:
REAL ESTATE REVENUES:
SALE OF REAL ESTATE $ 576,503 $ 72,500
EXCHANGE BUILDING RENTAL INCOME 367,876 317,768
OUTSIDE REAL ESTATE RENT 408,946 438,180
OTHER INCOME 0 1,000
---------- ----------
1,353,325 829,448
---------- ----------
REAL ESTATE EXPENSES:
COST OF REAL ESTATE SOLD 250,452 37,955
LABOR, OPERATING AND MAINTENANCE 348,201 335,897
DEPRECIATION AND AMORTIZATION 98,200 87,032
TAXES OTHER THAN INCOME TAXES 90,900 113,300
GENERAL AND ADMINISTRATIVE 33,633 44,761
---------- ----------
821,386 618,945
---------- ----------
INCOME FROM REAL ESTATE OPERATIONS 531,939 210,503
---------- ----------
7
CANAL CAPITAL CORPORATION & SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS & COMPREHENSIVE INCOME
FOR THE NINE MONTHS ENDED JULY 31, 2002 AND 2001
Continued ...
2002 2001
(UNAUDITED) (UNAUDITED)
----------- -----------
GENERAL AND ADMINISTRATIVE EXPENSE (694,744) (792,180)
----------- -----------
INCOME (LOSS) FROM OPERATIONS 270,071 (201,554)
----------- -----------
OTHER INCOME (EXPENSE):
INTEREST & OTHER INCOME 354,057 143,398
INTEREST EXPENSE (200,025) (190,347)
INCOME (LOSS)FROM ART SALES 6,518 (12,890)
REALIZED GAIN (LOSS) ON INVESTMENTS 0 0
OTHER EXPENSE 0 0
----------- -----------
160,550 (59,839)
----------- -----------
INCOME (LOSS) BEFORE PROVISION FOR
INCOME TAXES 430,621 (261,393)
PROVISION FOR INCOME TAXES 0 0
----------- -----------
NET INCOME (LOSS) 430,621 (261,393)
OTHER COMPREHENSIVE (LOSS) INCOME:
UNREALIZED (LOSS) ON INVESTMENTS
AVAILABLE FOR SALE 0 (44,308)
----------- -----------
COMPREHENSIVE INCOME (LOSS) $ 430,621 $ (305,701)
=========== ===========
INCOME (LOSS) PER COMMON SHARE - BASIC
AND DILUTED $ 0.08 $ (0.11)
=========== ===========
AVERAGE SHARES OUTSTANDING - BASIC
AND DILUTED 4,327,000 4,327,000
=========== ===========
8
CANAL CAPITAL CORPORATION & SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS & COMPREHENSIVE INCOME
FOR THE THREE MONTHS ENDED JULY 31, 2002 AND 2001
2002 2001
(UNAUDITED) (UNAUDITED)
--------- ---------
STOCKYARD OPERATIONS:
STOCKYARD REVENUES:
YARD HANDLING AND AUCTION 574,007 576,674
FEED AND BEDDING INCOME 34,429 46,410
RENTAL INCOME 947 1,157
OTHER INCOME 30,396 31,232
-------- ---------
639,779 655,473
-------- ---------
STOCKYARD EXPENSES:
LABOR AND RELATED COSTS 294,932 333,755
OTHER OPERATING AND MAINTENANCE 161,443 181,090
FEED AND BEDDING EXPENSE 29,514 36,261
DEPRECIATION AND AMORTIZATION 4,259 5,116
TAXES OTHER THAN INCOME TAXES 43,194 57,068
GENERAL AND ADMINISTRATIVE 50,979 73,976
-------- ---------
584,321 687,266
-------- ---------
INCOME FROM STOCKYARD OPERATIONS 55,458 (31,793)
-------- ---------
REAL ESTATE OPERATIONS:
REAL ESTATE REVENUES:
SALE OF REAL ESTATE $387,000 $ 72,500
EXCHANGE BUILDING RENTAL INCOME 118,105 115,847
OUTSIDE REAL ESTATE RENT 137,650 150,747
OTHER INCOME 0 0
-------- ---------
642,755 339,094
-------- ---------
REAL ESTATE EXPENSES:
COST OF REAL ESTATE SOLD 152,616 37,955
LABOR, OPERATING AND MAINTENANCE 116,610 102,893
DEPRECIATION AND AMORTIZATION 31,457 29,563
TAXES OTHER THAN INCOME TAXES 30,300 38,400
GENERAL AND ADMINISTRATIVE 10,648 16,107
-------- ---------
341,631 224,918
-------- ---------
INCOME FROM REAL ESTATE OPERATIONS 301,124 114,176
-------- ---------
9
CANAL CAPITAL CORPORATION & SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS & COMPREHENSIVE INCOME
FOR THE THREE MONTHS ENDED JULY 31, 2002 AND 2001
Continued ...
2002 2001
(UNAUDITED) (UNAUDITED)
----------- -----------
GENERAL AND ADMINISTRATIVE EXPENSE (232,746) (256,800)
----------- -----------
INCOME (LOSS) FROM OPERATIONS 123,836 (174,417)
----------- -----------
OTHER INCOME (EXPENSE):
INTEREST & OTHER INCOME 30,658 83
INTEREST EXPENSE (66,675) (63,900)
(LOSS)FROM ART SALES (5,187) 1,719
REALIZED GAIN (LOSS) ON INVESTMENTS 0 0
OTHER EXPENSE 0 0
----------- -----------
(41,204) (62,098)
----------- -----------
INCOME (LOSS) BEFORE PROVISION FOR
INCOME TAXES 82,632 (236,515)
PROVISION FOR INCOME TAXES 0 0
----------- -----------
NET INCOME (LOSS) 82,632 (236,515)
OTHER COMPREHENSIVE INCOME (LOSS):
UNREALIZED (LOSS) ON INVESTMENTS
AVAILABLE FOR SALE 0 0
----------- -----------
COMPREHENSIVE INCOME (LOSS) $ 82,632 $ (236,515)
=========== ===========
INCOME (LOSS) PER COMMON SHARE - BASIC
AND DILUTED $ 0.01 $ (0.07)
=========== ===========
AVERAGE SHARES OUTSTANDING - BASIC
AND DILUTED 4,327,000 4,327,000
=========== ===========
10
CANAL CAPITAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE NINE MONTHS ENDED JULY 31, 2002 (UNAUDITED)
COMMON STOCK PREFERRED STOCK
NUMBER NUMBER
OF OF
SHARES AMOUNT SHARES AMOUNT
-------------------- ---------------------
BALANCE, OCTOBER 31, 2000 5,313,794 $53,138 4,407,614 $44,076
NET (LOSS) 0 0 0 0
PREFERRED STOCK DIVIDEND 0 0 590,832 5,908
MINIMUM PEN. LIAB. ADJ. 0 0 0 0
-------------------- ---------------------
BALANCE, OCTOBER 31, 2001 5,313,794 $53,138 4,998,446 $49,984
NET INCOME 0 0 0 0
PREFERRED STOCK DIVIDEND 0 0 649,547 6,496
MINIMUM PEN. LIAB. ADJ. 0 0 0 0
-------------------- ---------------------
BALANCE, JULY 31, 2002 5,313,794 $53,138 5,647,993 $56,480
==================== =====================
ADDITIONAL TREASURY
PAID-IN ACCUMULATED COMPREHENSIVE STOCK,
CAPITAL DEFICIT (LOSS)INCOME AT COST
----------- ----------- ------------ ------------
BALANCE, OCTOBER 31, 2000 $27,545,053 ($11,945,307) ($1,969,621) ($11,003,545)
NET (LOSS) 0 (772,547) 0 0
PREFERRED STOCK DIVIDEND 303,508 (301,520) 0 0
MINIMUM PEN. LIAB. ADJ. 0 0 (195,824) 0
----------- ------------ ----------- ------------
BALANCE, OCTOBER 31, 2001 $27,848,561 ($13,019,374) ($2,165,445) ($11,003,545)
NET INCOME 0 430,621 0 0
PREFERRED STOCK DIVIDEND 67,937 (74,479) 0 0
MINIMUM PEN. LIAB. ADJ. 0 0 0 0
----------- ------------ ----------- ------------
BALANCE, JULY 31, 2002 $27,916,498 ($12,663,232) ($2,165,445) ($11,003,545)
=========== ============ =========== ============
11
CANAL CAPITAL CORPORATION & SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED JULY 31, 2002 AND 2001 (UNAUDITED)
2002 2001
--------- ---------
CASH FLOWS FROM OPERATING ACTIVITIES:
NET INCOME (LOSS) $ 430,621 $(261,393)
ADJUSTMENTS TO RECONCILE NET INCOME
(LOSS) TO NET CASH (USED) PROVIDED BY
OPERATING ACTIVITIES:
DEPRECIATION AND AMORTIZATION 121,696 112,105
GAIN ON SALES OF REAL ESTATE (326,051) (34,545)
CHANGES IN ASSETS AND LIABILITIES:
NOTES AND ACCOUNTS RECEIVABLES, NET (1,071) 467,885
ART INVENTORY, NET 66,602 0
PREPAID EXPENSES AND OTHER, NET 73,124 (61,023)
PAYABLES AND ACCRUED EXPENSES, NET (845,257) (132,435)
--------- ---------
NET CASH (USED) PROVIDED BY OPERATING
ACTIVITIES (480,336) 90,594
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
PROCEEDS FROM SALES OF REAL ESTATE 576,503 72,500
CAPITAL EXPENDITURES (66,641) (355,545)
--------- ---------
NET CASH PROVIDED (USED) BY INVESTING
ACTIVITIES 509,862 (283,045)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
PROCEEDS FROM LONG-TERM DEBT-RELATED
PARTIES 0 145,000
REPAYMENT OF SHORT-TERM BORROWINGS 0 0
REPAYMENT OF LONG-TERM DEBT OBLIGATIONS 0 0
--------- ---------
NET CASH (PROVIDED)BY FINANCING ACTIVITIES 0 145,000
--------- ---------
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS 29,526 (47,451)
CASH AND CASH EQUIVALENTS AT BEGN OF YEAR 13,680 87,269
--------- ---------
CASH AND CASH EQUIVALENTS AT END OF YEAR $ 43,206 $ 39,818
========= =========
NOTE: CANAL MADE FEDERAL AND STATE INCOME TAX PAYMENTS OF $9,000 AND $10,000
AND INTEREST PAYMENTS OF $200,000 AND $190,000 IN THE NINE MONTH PERIODS
ENDED JULY 31, 2002 AND 2001, RESPECTIVELY.
12
CANAL CAPITAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED JULY 31, 2002
(UNAUDITED)
1. NATURE OF BUSINESS
Canal Capital Corporation ("Canal"), 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 Canal's common stock, under a plan of complete
liquidation.
Canal is engaged in two distinct businesses - the management and further
development of its agribusiness related real estate properties located in the
midwest and stockyard operations.
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 in nine of the last ten years and is obligated to continue making
substantial annual contributions to its defined benefit pension plan. The
financial statements do not include any adjustments that might result from the
resolution of these uncertainties. Additionally, the accompanying financial
statements do not include any adjustments relating to the recoverability and
classification of recorded asset amounts or the amounts and classification of
liabilities that might be necessary should the Company be unable to continue as
a going concern.
Canal continues to closely monitor and reduce where possible its operating
expenses and plans to continue to reduce the level of its art inventories to
enhance current cash flows. Management believes that its income from operations
combined with its cost cutting program and planned reduction of its art
inventory will enable it to finance its current business activities. There can,
however, be no assurance that Canal will be able to effectuate its planned art
inventory reductions or that its income from operations combined with its cost
cutting program in itself will be sufficient to fund operating cash
requirements.
13
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
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) Investments Available for Sale -- Canal has an investment in a company
in which it, together with other affiliated entities, comprise a reporting group
for regulatory purposes. It is important to note that it is the group (as
defined) that can exercise influence over this company, not Canal. Accordingly,
this investment does not qualify for consolidation as a method of reporting.
Certain of Canal's officers and directors also serve as officers and/or
directors of this company. This investment (in which Canal's ownership interest
is approximately 1%) is carried at market value and the realized gains or
losses, if any, are recognized in operating results. Any unrealized gains or
losses are reflected in Stockholders Equity.
Investments in Joint Ventures -- Investments in which ownership interest
range from 20% to 50% or less owned joint ventures are accounted for under the
equity method. These joint ventures are not, in the aggregate, material in
relation to the financial position or results of operations of Canal. The
carrying amount of such investments was $101,000 at both July 31, 2002 and
October 31, 2001, and is included in other assets. The operating results of
joint ventures accounted for on the equity method were not material to financial
statement presentation and were therefore included in other income from real
estate operations.
C) Accounting Estimates -- The preparation of financial statements in
conformity with generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amount 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.
D) Comprehensive Income -- Effective for fiscal years beginning after
December 15, 1997, Statement of Financial Accounting Standards No. 130 requires
that comprehensive income and its components, as defined in the statement, be
reported in a financial statement. The only adjustments for each classification
of the comprehensive income was for minimum pension liability and unrealized
(loss) gain on investments available for sale.
E) Reclassification -- Certain prior year amounts have been reclassified to
conform to the current year's presentation.
14
3. INTERIM FINANCIAL STATEMENTS
The interim consolidated financial statements included herein have been
prepared by Canal without audit. In the opinion of Management, the accompanying
unaudited financial statements of Canal contain all adjustments necessary to
present fairly its financial position as of July 31, 2002 and the results of its
operations and its cash flows for the nine month period ended July 31, 2002. All
of the above referenced adjustments were of a normal recurring nature. Certain
information and footnote disclosures normally included in financial statements
prepared in accordance with generally accepted accounting principles have been
condensed or omitted. These financial statements should be read in conjunction
with the consolidated financial statements for the three years ended October 31,
2001 and the notes thereto which are contained in Canal's 2001 Annual Report on
Form 10-K. The results of operations for the period presented is not necessarily
indicative of the results to be expected for the remainder of fiscal 2002.
4. REAL ESTATE OPERATIONS
Canal's real estate properties located in six Midwest states are primarily
associated with its current and former agribusiness related operations. Each
property is adjacent to a stockyards operation (two of which are operated by the
Company) and consist, for the most part, of an Exchange Building (commercial
office space), land and structures leased to third parties (meat packing
facilities, railcar 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 rental income from
its Exchange Buildings, lease income from land and structures leased to various
commercial and retail enterprises and proceeds from the sale of real estate
properties.
Real estate operations resulted in operating income of $532,000 and
$211,000 for the nine month periods ended July 31, 2002 and 2001, respectively.
Additionally, real estate operations contributed $1,353,000 and $829,000 to
Canal's revenues for the nine month periods ended July 31, 2002 and 2001,
respectively.
As of July 31, 2002, there are approximately 129 acres of undeveloped land
owned by Canal adjacent to its stockyard properties. Canal is continuing the
program, which it started several years ago, to develop or sell this property.
15
5. STOCKYARD OPERATIONS SALE AND SUBSEQUENT REPURCHASE
Canal currently operates two public stockyards (formerly subject to the
Master Lease between the Company and United Market Services) located in St.
Joseph, Missouri, and Sioux Falls, South Dakota.
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 stockyards
include cattle, hogs and sheep. Cattle and hogs may come through the stockyard
facilities at two different stages, either as feeder livestock or slaughter
livestock. The Company's stockyards provide all services and facilities required
to operate an independent market for the sale of livestock, including veterinary
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.
In fiscal 2001 Canal entered into an option agreement to sell the property
on which the Sioux City Stockyards operates. On March 31, 2002, all stockyard
operations at the Sioux City yards ceased. Subsequently Canal engaged in certain
salvage and demolition operations at this location in preparation for this sale.
The timing of this sale has been significantly delayed due to a reluctance on
the part of the intended primary retailer to be the sole anchor of the
development. The developer holding the option is currently looking for an
acceptable co-anchor for this site. Under the circumstances, it is unlikely that
the sale of this property will be completed in fiscal 2002.
6. ART INVENTORY HELD FOR SALE
Canal has not purchased inventory in several years nor does it currently
have any intention of purchasing additional art inventory in the foreseeable
future. It is the Company's intention to liquidate, in an orderly manner, its
art inventory. Management estimates it may take approximately five years to
dispose of its current art inventory. The Company's ability to dispose of its
art inventory is dependent primarily on general economic conditions and the
competitiveness of the art market itself. Accordingly, there can be no assurance
that Canal will be successful in disposing of its art inventory within the time
frame discussed above.
Antiquities and contemporary art represented 43% ($475,388) and 57%
($641,749) and 46% ($541,990) and 54% ($641,749) of total art inventory at July
31, 2002 and 2001, respectively. Substantially all of the contemporary art
inventory held for resale is comprised of the work of Jules Olitski.
16
The amount recorded as the current portion of art inventory represents
management's estimate of the inventory expected to be sold during the next
twelve months. The Company recorded a valuation allowance against the current
portion of its inventory to reduce it to its estimated net realizable value
based on the history of losses sustained on inventory items sold in the current
and previous years. In fiscal 2002 Canal applied against sales $108,000 of the
valuation allowance against its art inventory, thereby, decreasing the total
valuation allowance to $2,584,150 as of July 31, 2002 as compared to $2,692,150
at October 31, 2001.
The nature of art makes it difficult to determine a replacement value. The
most compelling evidence of a value in most cases is an independent appraisal.
Canal has its art inventory appraised by independent appraisers annually. The
2001 appraisal covered approximately 53% of the inventory value. The appraised
values estimate the current market value of each piece giving consideration to
Canal's practices of engaging in consignment, private and public auction sales.
The net realizable value of the remaining 47% of the inventory was estimated by
management based in part on the Company's history of losses sustained on art
sales in the current and previous years and in part on the results of the
independent appraisals done.
Canal's art sales generated income of $7,000 (net of a decrease in the
valuation allowance of $108,000) as compared to a loss of $13,000 for the nine
month periods ended July 31, 2002 and 2001, respectively.
The Company had approximately $857,000 and $1,012,000 of art inventory (at
original cost) on consignment with third party dealers at July 31, 2002 and
October 31, 2001, respectively.
7. PROPERTY AND EQUIPMENT
Included in property and equipment were the cost of buildings of
approximately $2.5 million at July 31, 2002 and October 31, 2001.
8. PENSION VALUATION RESERVE
The Pension Valuation Reserve represents the excess of additional minimum
pension liability required under the provisions of SFAS No. 87 over the
unrecognized prior service costs of former stockyard employees. Such excess
arose due to the decline in the market value of pension assets available for
pension benefits of former employees, which benefits were frozen at the time the
stockyard operations were sold in 1989. The additional minimum pension liability
will be expensed as actuarial computations of annual pension cost (made in
accordance with SFAS No. 87) recognize the deficiency that exists.
17
9. INVESTMENTS AVAILABLE FOR SALE
At July 31, the investments available for sale consisted of the following:
($ 000's Omitted)
July 31, October 31,
2002 2001
---- ----
Aggregate market value..................... $ 21 $ 21
---- ----
Aggregate carrying value................... $ 21 $ 21
---- ----
Canal has an investment in a company in which it, together with other
affiliated entities, comprise a reporting group for regulatory purposes. It is
important to note that it is the group (as defined) that can exercise influence
over this company, not Canal. Accordingly, this investment does not qualify for
consolidation as a method of reporting. Certain of Canal's officers and
directors also serve as officers and/or directors of this company. This
investment (in which Canal's ownership interest is approximately 1%) is carried
at market value and any unrealized gains or losses are reflected in Stockholders
Equity. The realized gains or losses, if any, are recognized in operating
results.
On May 3, 2000 this company filed for reorganization under Chapter 11 of
the Bankruptcy Code and subsequently emerged in December 2000. This action, in
combination with other factors, has resulted in Canal's determination that the
decline in market value of its investment in this company is permanent, and
accordingly, recognized a realized loss on investments in marketable securities
of approximately $47,000 in fiscal 2001. Management will continue to monitor
this situation closely and take appropriate action if it determines that future
fluctuations in the market value of this investment are other than temporary.
6. BORROWINGS
At July 31, 2002, substantially all of Canal's real properties, the stock
of certain subsidiaries, the investments and a substantial portion of its art
inventories are pledged as collateral for the following obligations:
July 31, October 31,
($ 000's Omitted) 2002 2001
---- ----
Variable rate mortgage notes due
May 15, 2003 - related party .................. $ 2,667 $ 2,667
------- --------
On January 8, 1998, the Company issued $3,700,000 of variable rate mortgage
notes due May 15, 2001. The purchasers of these notes included certain entities
controlled by the Company's Chairman, the Company's Chief
18
Executive Officer and members of their families. These notes carried interest at
the highest of four variable rates, determined on a quarterly basis. These
notes, among other things, prohibits Canal from becoming an investment company
as defined by the Investment Company Act of 1940; requires Canal to maintain
minimum net worth; restricts Canal's ability to pay cash dividends or repurchase
stock; requires principal prepayments to be made only out of the proceeds from
the sale of certain assets, and required the accrual of additional interest (to
be paid at maturity) of approximately three percent per annum.
On July 29, 1999 the above Notes were amended to extend the maturity date
to May 15, 2003; to fix the interest rate at 10% per annum; to agree that the
additional interest due to the holders of the notes shall become current and be
treated as principal due under the notes; and to have certain of the holders
loan the Company $525,000 in additional financing, the proceeds of which was
used to repay in full certain of the other holders of the notes. As a result,
the notes are now held in total by the Company's Chief Executive Officer and
members of his family.
On January 10, 2000, the above Notes were further amended to have holders
loan the Company $1,725,000 in additional financing, the proceeds of which was
used to repay in full all of the Company's outstanding non related party
long-term debt.
The Company has negotiated an additional three year extension to May 31,
2006 of the Notes with the holders on essentially the same terms and conditions
outlined above. This extension will be finalized by year end and accordingly,
the balance due as of July 31, 2002 under these Notes of $2,667,000 is
classified as long-term debt related party.
The scheduled maturities and sinking fund requirements of long-term debt
during the next five years are $2,667,000 due May 15, 2003.
19
ITEM II. MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE RESULTS OF OPERATIONS AND
FINANCIAL CONDITION FOR THE NINE MONTHS ENDED JULY 31, 2002
Results of Operations - General
While the Company is currently operating as a going concern, certain
significant factors raise substantial doubt about the Company's ability to
continue as a going concern. The Company has suffered recurring losses from
operations in nine of the last ten years and is obligated to continue making
substantial annual contributions to its defined benefit pension plan. The
financial statements do not include any adjustments that might result from the
resolution of these uncertainties. Additionally, the accompanying financial
statements do not include any adjustments relating to the recoverability and
classification of recorded asset amounts or the amounts and classification of
liabilities that might be necessary should the Company be unable to continue as
a going concern.
Canal recognized net income of $431,000 for the nine month period ended
July 31, 2002 as compared to a net loss of $261,000 for the same period in
fiscal 2001. After recognition of an unrealized loss on investments held for
sale of $0 and $44,000 for the nine month periods ended July 31, 2002 and 2001,
respectively, the Company recognized comprehensive income of $431,000 and a
comprehensive loss of $306,000 for the nine month periods ended July 31, 2002
and 2001, respectively. Further, after recognition of preferred stock dividend
payments of $74,000 and $226,000 for the nine month periods ended July 31, 2002
and 2001, respectively, the Company recognized net income applicable to common
stockholders of $357,000 ($0.08 per common share) and a net loss applicable to
common stockholders of $487,000 ($0.11 per common share) for the nine month
periods ended July 31, 2002 and 2001, respectively. Included in the 2002 results
is other income of approximately $350,000 received by Canal as a demutualization
compensation payment from an insurance company, from which, Canal had purchased
annuity contracts in the early 1980's for certain of its retired stockyards
employees. Included in the 2001 results is other income of approximately
$143,000 comprised primarily of a damage award Canal received in connection with
its lawsuit against a meat packing company in South St. Paul, Minnesota which
was subsequently fully reserved at year end due to the financial instability of
the debtor.
Canal's revenues from continuing operations consist of revenues from its
real estate and stockyards operations. Total revenues increased by $295,000 or
7.7% to $4,135,000 for the nine month period ended July 31, 2002, as compared to
revenues of $3,841,000 for the same period in fiscal 2001. The fiscal 2002
increase in revenues is due primarily to a $504,000 increase in revenue from the
sales of real estate which was offset to a certain extent by softer than
anticipated stockyard revenues.
20
Capital Resources and Liquidity
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 in nine of the last ten years 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.
On January 8, 1998, the Company issued $3,700,000 of variable rate mortgage
notes due May 15, 2001. The purchasers of these notes included certain entities
controlled by the Company's Chairman, the Company's Chief Executive Officer and
members of their families. The notes carried interest at the highest of four
variable rates, determined on a quarterly basis. 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 Canal's ability to pay cash dividends or repurchase stock; require
principal prepayments to be made only out of the proceeds from the sale of
certain assets, and required the accrual of additional interest (to be paid at
maturity) of approximately three percent per annum.
On July 29, 1999 the above notes were amended to extend the maturity date
to May 15, 2003; to fix the interest rate at 10% per annum; to agree that the
additional interest due to the holders of the notes shall become current and be
treated as principal due under the notes; and to have certain of the holders
loan the Company $525,000 in additional financing, the proceeds of which was
used to repay in full certain of the holders of the notes. As a result, the
notes are now held in total by the Company's Chief Executive Officer and members
of his family.
On January 10, 2000, the above notes were further amended to have the
noteholders loan the Company $1,725,000 in additional financing, the proceeds of
which was used to repay in full all of the Company's outstanding non related
party long-term debt.
The Company has negotiated an additional three year extension to May 31,
2006 of the Notes with the holders on essentially the same terms and conditions
outlined above. This extension will be finalized by year end and accordingly,
the balance due as of July 31, 2002 under these Notes of $2,667,000 is
classified as long-term debt related party.
21
Cash and cash equivalents of $43,000 at July 31, 2002 increased $29,000
from $14,000 at October 31, 2001. Net cash used by operations in fiscal 2002 was
$480,000. At July 31, 2002 and October 31, 2001, the Company's current
liabilities exceeded current assets by $1.2 million and $1.9 million,
respectively. Substantially all of the funds received by Canal from the sale of
real estate and as demutualization compensation payments were used to pay down
its accounts payable and accrued expenses. The only required principal
repayments under Canal's debt agreements for fiscal 2002 will be from the
proceeds, if any, of the sale of certain assets.
Canal's cash flow position has been under significant strain for the past
year. Canal continues to closely monitor and reduce where possible its operating
expenses and plans to continue to reduce the level of its art inventories to
enhance current cash flows. Management believes that its income from operations
combined with its cost cutting program and planned reduction of its art
inventory will enable it to finance its current business activities. There can,
however, be no assurance that Canal will be able to effectuate its planned art
inventory reductions or that its income from operations combined with its cost
cutting program in itself will be sufficient to fund operating cash
requirements.
2002 COMPARED TO 2001
Stockyard Revenues
Stockyard revenues for the nine months ended July 31, 2002 of $2,782,000
accounted for 67.3% of the fiscal 2002 revenues as compared to stockyard
revenues of $3,011,000 or 78.4% for the same period in fiscal 2001. Stockyard
revenues are comprised of yard handling and auction (89.2% and 88.2%), feed and
bedding income (5.6% and 6.6%), rental income (0.1% and 0.1%) and other income
(5.1% and 5.1%) for the nine month periods ended July 31, 2002 and 2001,
respectively. There were not significant percentage variations in the year to
year comparisons.
Stockyard revenues for the three months ended July 31, 2002 of $640,000
accounted for 49.9% of the fiscal 2002 revenues as compared to stockyard
revenues of $655,000 or 65.9% for the same period in fiscal 2001. Stockyard
revenues are comprised of yard handling and auction (89.7% and 88.0%), feed and
bedding income (5.4% and 7.1%), rental income (0.1% and 0.1%) and other income
(4.8% and 4.8%) for the three month periods ended July 31, 2002 and 2001,
respectively. There were not significant percentage variations in the year to
year comparisons.
22
Stockyard Expenses
Stockyard expenses for the nine months ended July 31, 2002 of $2,349,000
decreased by $282,000 (10.1%) from stockyard expenses of $2,631,000 for the same
period in fiscal 2001. Stockyard expenses are comprised of labor and related
costs (46.6% and 46.1%), other operating and maintenance (27.6% and 26.4%), feed
and bedding expense (5.4% and 5.8%), depreciation and amortization (0.6% and
0.6%), taxes other than income taxes (7.3% and 7.2%) and general and
administrative expense (12.4% and 13.9%) for the nine month periods ended July
31, 2002 and 2001, respectively. There were no significant percentage variations
in the year to year comparisons.
Stockyard expenses for the three months ended July 31, 2002 of $584,000
decreased by $103,000 (15.0%) from stockyard expenses of $687,000 for the same
period in fiscal 2001. Stockyard expenses are comprised of labor and related
costs (50.5% and 48.6%), other operating and maintenance (27.6% and 26.4%), feed
and bedding expense (5.1% and 5.3%), depreciation and amortization (0.7% and
0.7%), taxes other than income taxes (7.4% and 8.3%) and general and
administrative expense (8.7% and 10.7%) for the three month periods ended July
31, 2002 and 2001, respectively. There were no significant percentage variations
in the year to year comparisons.
In fiscal 2001, Canal entered into an option agreement to sell the property
on which the Sioux City Stockyards operates. On March 31, 2002, all stockyard
operations at the Sioux City yards ceased. Subsequently Canal engaged in certain
salvage and demolition operations at this location in preparation for this sale.
The timing of this sale has been significantly delayed due to a reluctance on
the part of the intended primary retailer to be the sole anchor of the
development. The developer holding the option is currently looking for an
acceptable co-anchor for this site. Under the circumstances, it is unlikely that
the sale of this property will be completed in fiscal 2002. The Company
anticipates that the sale of this property could still be completed in the
fourth quarter of fiscal 2002.
Real Estate Revenues
Real estate revenues for the nine months ended July 31, 2002 of $1,353,000
accounted for 32.7% of the fiscal 2002 revenues as compared to real estate
revenues of $829,000 or 21.5% for the same period in fiscal 2001. Real estate
revenues are comprised of sale of real estate (42.6% and 8.7%), rental income
from commercial office space in its Exchange Buildings (27.2% and 38.3%),
rentals and other lease income from the rental of vacant land and certain
structures (30.2% and 52.8%) and other income (0.0% and 0.2%) for the nine
months ended July 31, 2002 and 2001, respectively. The percentage variations in
the year to year comparisons are due primarily to increased sales of real estate
for fiscal 2002.
Real estate revenues for the three months ended July 31, 2002 of $643,000
accounted for 50.1% of the fiscal 2002 revenues as compared to real estate
revenues of $339,000 or 33.3% for the same period in fiscal 2001.
23
Real estate revenues are comprised of sale of real estate (60.2% and 21.4%),
rental income from commercial office space in its Exchange Buildings (18.4% and
34.2%), rentals and other lease income from the rental of vacant land and
certain structures (21.4% and 44.4%) and other income (0.0% and 0.0%) for the
three months ended July 31, 2002 and 2001, respectively. The percentage
variations in the year to year comparisons are due primarily to increased sales
of real estate for fiscal 2002.
Real Estate Expenses
Real estate expenses for the nine months ended July 31, 2002 of $821,000
increased by $202,000 (32.7%) from real estate expenses of $619,000 for the same
period in fiscal 2001. Real estate expenses are comprised of the cost of real
estate sold (30.5% and 6.1%), labor, operating and maintenance (42.4% and
54.3%), depreciation and amortization (11.9% and 14.1%), taxes other than income
taxes (11.1% and 18.3%) and general and administrative and other expenses (4.1%
and 7.2%) for the nine months ended July 31, 2002 and 2001, respectively. The
percentage variations in the year to year comparisons are due primarily to the
increased cost of real estate sold for fiscal 2002.
Real estate expenses for the three months ended July 31, 2002 of $342,000
increased by $117,000 (51.2%) from real estate expenses of $225,000 for the same
period in fiscal 2001. Real estate expenses are comprised of the cost of real
estate sold (44.7% and 16.8%), labor, operating and maintenance (34.1% and
45.8%), depreciation and amortization (9.2% and 13.1%), taxes other than income
taxes (8.9% and 17.1%) and general and administrative and other expenses (3.1%
and 7.2%) for the three months ended July 31, 2002 and 2001, respectively. The
percentage variations in the year to year comparisons are due primarily to the
increased cost of real estate sold for fiscal 2002.
General and Administrative
General and administrative expenses for the nine months ended July 31, 2002
of $695,000 decreased by $97,000 (12.3%) from expenses of $792,000 for the same
period in fiscal 2001. The major components of general and administrative
expenses are officers salaries (49.5% and 43.4%), rent (7.8% and 8.6%), legal
and professional fees (0.8% and 5.8%), insurance (14.7% and 10.2%) and office
salaries (8.1% and 11.2%) for the nine month periods ended July 31, 2002 and
2001, respectively. The percentage variations in the year to year comparisons
are due primarily to the sharp decrease in legal and professional fees for
fiscal 2002.
General and administrative expenses for the three months ended July 31,
2002 of $233,000 decreased by $24,000 (9.3%) from expenses of $257,000 for
24
the same period in fiscal 2001. The major components of general and
administrative expenses are officers salaries (49.3% and 44.7%), rent (3.7% and
8.7%), legal and professional fees (0.8% and 6.0%), insurance (14.6% and 10.5%)
and office salaries (8.1% and 10.6%) for the three month periods ended July 31,
2002 and 2001, respectively. The percentage variations in the year to year
comparisons are due primarily to the sharp decrease in legal and professional
fees for fiscal 2002.
Interest Expense
Interest expense for the nine months ended July 31, 2002 of $200,000
increased by $10,000 (5.1%) from interest expense of $190,000 for the same
period in fiscal 2001. The 2001 increase is due primarily to a modest increase
in the outstanding debt. Interest rates on Canal's variable rate mortgage notes
have remained unchanged for the past 12 months. At July 31, 2002 the outstanding
balance of these notes was $2,667,000.
Interest and Other Income
Interest and other income for the nine months ended July 31, 2002 of
$354,000 increased $211,000 (146.9%) from interest and other income of $143,000
for the same period in fiscal 2001. Included in the 2002 results is other income
of approximately $350,000 received by Canal as a demutalization compensation
payment from an insurance company that Canal had purchased annuity contracts
from in the early 1980's for certain of its retired stockyard employees.
Included in the 2001 results is other income of approximately $130,000 comprised
primarily of a damage award Canal received in connection with its lawsuit
against a meat packing company in South St. Paul, Minnesota which was
subsequently fully reserved at year end due to the financial instability of the
debtor.
Income (Loss) from Art Sales
Income from art sales for the nine months ended July 31, 2002 of $6,000
increased by $19,000 from a loss of $13,000 for the same period in fiscal 2001.
Art revenues are comprised of the proceeds from the sale of antiquities and
contemporary art. Canal recognized revenues of $90,000 and $24,000 for the nine
month periods ended July 31, 2002 and 2001, respectively. Art expenses are
comprised of the cost of inventory sold and selling, general and administrative
expenses. Canal incurred cost of inventory sold of $67,000 and $13,000 (net of a
valuation allowance of $108,000 and $36,000) as well as selling, general and
administrative expenses of $18,000 and $24,000 for the nine month periods ended
July 31, 2002 and 2001, respectively. It is the Company's policy to use the
adjusted carrying value for sales, thereby reducing the valuation reserve
proportionately as the inventory is sold.
25
Other Factors
Some of the statements in this Form 10-Q, as well as statements by the
Company in periodic press releases, oral statements made by the Company's
officials to analysts and stockholders in the course of presentations about the
Company and conference calls following earning releases, constitute
"forward-looking statements" within the meaning of the Private Securities
Litigation Reform Act of 1995. Such forward-looking statements involved known
and unknown risks, uncertainties and other factors that may cause the actual
results, performance or achievements of the Company to be materially different
from any future results, performance or achievements expressed or implied by the
forward-looking statements.
ITEM III. Quantitative and Qualitative Disclosures About Market Risk
The Securities and Exchange Commission's rule related to market risk disclosure
requires that we describe and quantify our potential losses from market risk
sensitive instruments attributable to reasonably possible market changes. Market
risk sensitive instruments include all financial or commodity instruments and
other financial instruments (such as investments and debt) that are sensitive to
future changes in interest rates, currency exchange rates, commodity prices or
other market factors. We are not exposed to market risks from changes in foreign
currency, exchange rates or commodity prices. As of July 31, 2001, we do not
hold derivative financial instruments nor do we hold securities for trading or
speculative purposes. Under our current policies, we do not use interest rate
derivative instruments to manage our exposure to interest rate changes.
26
PART II
OTHER INFORMATION
27
Item 1: Legal Proceedings:
See Item 3 of Canal's October 31, 2001 Form 10-K.
Item 2 and 3:
Not applicable.
Item 4: Submission of Matters to a Vote of Security Holders:
None.
Item 5: Other Information:
None.
Item 6: Exhibits and Reports on Form 8-K:
(A) Not applicable.
(B) The Company filed a Form 8-K on August 5, 2002 in which the Company
entered into an amended letter of intent with AEI Environmental Inc.
on July 22, 2002 to extend the time frame for negotiating the
purchase of certain business interests owned by AEI that are
involved in the sale of livestock on the internet.
The Company is still in the process of negotiations in this
transaction.
28
SIGNATURES
Pursuant to the requirement of the Securities Exchange Act of 1934, the
registrant had duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Canal Capital Corporation
-------------------------
Registrant
/s/ Michael E. Schultz
----------------------
Michael E. Schultz
Chief Executive Officer &
President
/s/ Reginald Schauder
---------------------
Reginald Schauder
Vice President-Finance &
Chief Financial Officer
Date: September 13, 2002
29
CERTIFICATIONS
I, Michael E. Schultz, certify that:
1) I reviewed this quarterly report on From 10-Q of Canal Capital
Corporation ("Registrant");
2) Based on my knowledge, this quarterly report does not contain any
untrue statements of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect to
the period covered by this quarterly report;
3) Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and
cash flows of the Registrant as of, and for, the periods presented in
this quarterly report.
/s/ Michael E. Schultz
----------------------
Michael E. Schultz
Chief Executive Officer &
President
Date: September 13, 2002
30
CERTIFICATIONS
I, Reginald Schauder, certify that:
1) I reviewed this quarterly report on From 10-Q of Canal Capital
Corporation ("Registrant");
2) Based on my knowledge, this quarterly report does not contain any
untrue statements of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect to
the period covered by this quarterly report;
3) Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and
cash flows of the Registrant as of, and for, the periods presented in
this quarterly report.
/s/ Reginald Schauder
---------------------
Reginald Schauder
Vice President-Finance &
Chief Financial Officer
Date: September 13, 2002
31