-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, DuzMPJU06paAL56QUjj+6QbMpIvAXnp2puzna4jziXcUHRrQekf5eGya0W9um5+v yrlls+4j/jI6A0DqjVjjrQ== 0000891554-00-001391.txt : 20080626 0000891554-00-001391.hdr.sgml : 20080626 20000515184000 ACCESSION NUMBER: 0000891554-00-001391 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20000331 FILED AS OF DATE: 20000515 DATE AS OF CHANGE: 20080620 FILER: COMPANY DATA: COMPANY CONFORMED NAME: AMERITRANS CAPITAL CORP CENTRAL INDEX KEY: 0001064015 IRS NUMBER: 522102424 FISCAL YEAR END: 0607 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 814-00193 FILM NUMBER: 00636744 BUSINESS ADDRESS: STREET 1: 747 THIRD AVENUE STREET 2: 4TH FLOOR CITY: NEW YORK STATE: NY ZIP: 10017 BUSINESS PHONE: 2123552449 MAIL ADDRESS: STREET 1: 747 THIRD AVENUE STREET 2: 4TH FLOOR CITY: NEW YORK STATE: NY ZIP: 10017 10-Q 1 FORM 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ---------- FORM 10-Q [X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the Quarterly Period Ended March 31, 2000 or [ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the transition period from ____________ to ____________ Commission File Number 0-22153 ---------- AMERITRANS CAPITAL CORPORATION (Exact name of registrant as specified in its charter) Delaware 52-2102424 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 747 Third Avenue Fourth Floor New York, New York 10017 (Address of Registrant's (Zip Code) principal executive office) Registrant's telephone number, including area code: (800) 214-1047 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 [ ] The number of shares of Common Stock, par value $.0001 per share, outstanding as of May 5, 2000: 1,745,600 AMERITRANS CAPITAL CORPORATION FORM 10-Q Table of Contents
PART I. FINANCIAL INFORMATION Item 1. Financial Statements .................................................................. 1 Consolidated Balance Sheets as of March 31, 2000 (unaudited) and June 30, 1999 ................................................... 2 Consolidated Statements of Operations --For the Three Months and Nine Months Ended March 31, 2000 and 1999 (unaudited) ....................... 4 Consolidated Statements of Cash Flows -- For the Nine Months Ended March 31, 2000 and 1999 (unaudited) ................................ 5 Notes to Consolidated Financial Statements ........................................ 7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations ............................................... 15 Signatures .......................................................................... 17
-i- PART I FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS On December 16, 1999, Ameritrans Capital Corporation (the "Company") acquired Elk Associates Funding Corporation ("Elk") in a share-for-share exchange. Prior to the acquisition, Elk had been operating independently and the Company had no operations. The consolidated balance sheet of the Company as of March 31, 2000, the related statements of operations, and cash flows for the nine months ended March 31, 2000 and March 31, 1999 included in Item 1 have been prepared by the Company, without audit, pursuant to the rules and regulations of the Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations. In the opinion of management, the accompanying consolidated financial statements include all adjustments (consisting of normal, recurring adjustments) necessary to summarize fairly the Company's financial position and results of operations. The results of operations for the nine months ended March 31, 2000 are not necessarily indicative of the results of operations for the full year or any other interim period. These financial statements should be read in conjunction with the audited financial statements and notes thereto included in the Elk's Annual Report on Form10-K/A for the fiscal year ended June 30, 1999 as filed with the Commission. AMERITRANS CAPITAL CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS March 31, 2000 (Unaudited) and June 30, 1999 ASSETS
March 31, 2000 June 30, 1999* -------------- ------------- Loans receivable ................................... $ 58,583,357 $ 51,103,932 Less: allowance for loan losses .................... (380,000) (380,000) ------------ ------------ 58,203,357 50,723,932 Cash and cash equivalents .......................... 139,868 542,290 Accrued interest receivable ........................ 802,056 714,626 Assets acquired in satisfaction of loans ........... 612,491 612,491 Receivables from debtors on sales of assets acquired in satisfaction of loans ....................... 754,202 409,939 Equity securities .................................. 728,050 909,386 Furniture, fixtures and leasehold improvements, net 116,318 105,440 Prepaid expenses and other assets .................. 475,860 492,697 ------------ ------------ TOTAL ASSETS ................... $ 61,832,202 $ 54,510,801 ============ ============
* Restated The accompanying notes are an integral part of these financial statements. -2- AMERITRANS CAPITAL CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS March 31, 2000 (Unaudited) and June 30, 1999 LIABILITIES AND STOCKHOLDERS' EQUITY
March 31, 2000 June 30, 1999* -------------- -------------- LIABILITIES Debentures payable to SBA .......................... $ 8,880,000 $ 8,880,000 Notes payable, banks ............................... 38,600,000 31,000,000 Accrued expenses and other liabilities ............. 443,147 223,458 Accrued interest payable ........................... 403,189 354,918 Dividends payable .................................. 296,752 314,208 ----------- ----------- TOTAL LIABILITIES ............................. 48,623,088 40,772,584 ----------- ----------- COMMITMENTS AND CONTINGENCIES STOCKHOLDER'S EQUITY Common stock, $.0001 par value: 5,000,000 shares authorized; 1,745,600 shares issued and outstanding, 175 175 Additional paid-in-capital ......................... 13,048,429 13,214,558 Restricted capital ................................. -0- 256,916 Retained earnings .................................. 48,756 4,815 Accumulated other comprehensive income ............. 111,754 261,753 ----------- ----------- TOTAL STOCKHOLDERS' EQUITY .................... 13,209,114 13,738,217 ----------- ----------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY .... $61,832,202 $54,510,801 =========== ===========
* Restated The accompanying notes are an integral part of these financial statements. -3-
AMERITRANS CAPITAL CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) For the Three Months and Nine Months Ended March 31, 2000 and 1999 Three Months Ended Three Months Ended Nine Months Ended Nine Months Ended March 31, 2000 March 31, 1999 March 31, 2000 March 31, 1999 ------------------ ------------------ ----------------- ----------------- INVESTMENT INCOME Interest on loans receivable $1,612,746 $1,328,597 $4,519,669 $3,804,341 Fees and other income 118,675 77,424 409,991 296,628 Gain on sales of equity sec 90,748 -0- 166,917 -0- ----------- ----------- ----------- ----------- TOTAL INVESTMENT INCOME 1,822,169 1,406,021 5,096,577 4,100,969 ----------- ----------- ----------- ----------- OPERATING EXPENSES Interest 887,450 612,482 2,433,497 1,804,597 Salaries and employee benefits 202,743 157,218 483,871 431,701 Legal fees 94,495 77,874 332,044 222,135 Miscellaneous administrative expenses 169,809 172,683 607,726 582,690 Loss on assets acquired in satisfaction of loans, net 30,240 5,164 32,175 5,432 Directors' fee 11,625 13,000 31,875 26,250 Bad debt expense 89,080 52,500 170,130 101,465 ----------- ----------- ----------- ----------- TOTAL OPERATING EXPENSES 1,485,442 1,090,921 4,091,318 3,174,270 ----------- ----------- ----------- ----------- OPERATING INCOME 336,727 315,100 1,005,259 926,699 NET INCOME BEFORE INCOME TAXES 336,727 315,100 1,005,259 926,699 INCOME TAXES (Benefit) 6,712 224 18,695 (69) ----------- ----------- ----------- ----------- NET INCOME $330,015 $314,876 $986,564 $926,768 =========== =========== =========== =========== WEIGHTED AVERAGE SHARES OUTSTANDING 1,745,600 1,745,600 1,745,600 1,745,600 =========== =========== =========== =========== NET INCOME PER COMMON SHARE $.1891 $.1803 $.5652 $.5309 =========== =========== =========== ===========
The accompanying notes are an integral part of these financial statements -4- AMERITRANS CAPITAL CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) For the Nine Months Ended March 31, 2000 and 1999
March 31, 2000 March 31, 1999 -------------- -------------- CASH FLOWS FROM OPERATING ACTIVITIES Net income $ 986,564 $ 926,768 ----------- ----------- Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 37,485 28,194 Increase in accrued interest receivable (87,430) (139,100) (Increase) decrease in prepaid expenses and other assets 16,837 (147,540) Increase in accrued expenses and other liabilities 219,689 73,532 Increase (decrease) in accrued interest payable 48,271 (2,872) ----------- ----------- TOTAL ADJUSTMENTS 234,852 (187,786) ----------- ----------- NET CASH PROVIDED BY OPERATING ACTIVITIES 1,221,416 738,982 ----------- ----------- CASH FLOWS FROM INVESTING ACTIVITIES Net change in loans receivable, assets acquired in satisfaction of loans and receivables from debtors on sales of assets acquired in satisfaction of loans (7,823,688) (7,861,661) Purchases (sales) of equity securities 31,337 (267,241) Acquisition of furniture, fixtures and leasehold improvements (48,362) (14,589) ----------- ----------- NET CASH USED IN INVESTING ACTIVITIES (7,840,713) (8,143,491) ----------- ----------- CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from notes payable, banks, net 7,600,000 7,265,000 Dividends paid (960,080) (942,624) Capitalization of restructuring costs (423,045) -0- ----------- ----------- NET CASH PROVIDED BY FINANCING ACTIVITIES $6,216,875 $6,322,376 ----------- -----------
The accompanying notes are an integral part of these financial statements. -5- AMERITRANS CAPITAL CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED), Continued For the Nine Months Ended March 31, 2000 and 1999 March 31, 2000 March 31, 1999 -------------- -------------- NET (DECREASE) IN CASH AND CASH EQUIVALENTS $(402,422) $(1,082,133) CASH AND CASH EQUIVALENTS - Beginning 542,290 1,755,429 ----------- ----------- CASH AND CASH EQUIVALENTS - Ending $139,868 $673,296 =========== =========== The accompanying notes are an integral part of these financial statements. -6- AMERITRANS CAPITAL CORPORATION AND SUBSIDIARIES NOTES TO FINANCIAL STATEMENTS NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 1 -- Organization and Summary of Significant Accounting Policies Organization and Principal Business Activity Ameritrans Capital Corporation (the "Company"), a Delaware corporation, acquired all of the outstanding shares of Elk Associates Funding Corporation, on December 16, 1999 in a share for share exchange. Prior to the acquisition, Elk had been operating independently and Ameritrans had no operations. Elk Associates Funding Corporation ("Elk"), a New York corporation, is licensed by the Small Business Administration ("SBA") to operate as a Small Business Investment Company ("SBIC") under the Small Business Investment Act of 1958, as amended. Elk has also registered as an investment company under the Investment Company Act of 1940 to make business loans. The Company makes loans to taxi owners to finance the acquisition and operation of the medallion taxi businesses and related assets, and to other small businesses in the New York City, Chicago, Miami, and Boston markets. Loans and the Allowance for Loans Losses Loans are stated at cost, net of participation with other lenders, less an allowance for possible losses. This amount represents the fair value of such loans as determined in good faith by the Board of Directors. The allowance for loan losses is maintained at a level that, in the Board of Directors' judgement, is adequate to absorb losses inherent in the portfolio. The allowance for loan losses is reviewed and adjusted periodically by the Board of Directors on the basis of available information, including the fair value of the collateral held, existing risk of individual credits, past loss experience, the volume, composition and growth of the portfolio, and current and projected economic conditions. Because of the inherent uncertainty in the estimation process, the estimated fair values of the loans may differ significantly from the values that would have been used had a ready market existed for such loans and the differences could be material. As of March 31, 2000 and June 30, 1999 approximately 79% and 79%, respectively, of all loans are collateralized by New York City, Boston, Chicago, and Miami taxicab medallions. Accounting Standard for Impairment of Loans Pursuant to Statement of Financial Accounting Standards ("SFAS") No. 114 as amended by SFAS No. 118, "Accounting by Creditors for Impairment of a Loan -- Income Recognition and Disclosure", a loan is determined to be impaired if it is probable that the contractual amounts due will not be collected in accordance with the terms of the loan. The SFAS generally requires that impaired loans be measured based on the present value of expected future cash flows discounted at the loan's effective interest rate or, as a practical expedient, at the loan's observable market price or the fair value of the collateral if the loan is collateral dependent. As all of the Company's loans are collateral dependent, impairment is measured based on the fair value of the collateral. If the fair value of the impaired loan is less than the recorded investment in the loan (including accrued interest, net of deferred loan fees or costs, and unamortized premium or discount) the Company recognized an impairment by creating a valuation allowance with a corresponding charge to the provision for loan losses. The Company individually evaluates all loans for impairment. 7 Loans Receivable Loans are placed on nonaccrual status once they become 180 days past due as to principle or interest. In addition, loans that are not fully collateralized and in the process of collection are placed on nonaccrual status when, in the judgement of management, the ultimate collectibility of interest and principle is doubtful. Cash and Cash Equivalents For the purposes of the statement of cash flows, the Company considers all short-term investments with an original maturity of three months or less to be cash equivalents. The Company has cash balances in banks in excess of the maximum amount insured by the FDIC as of March 31, 2000 and June 30, 1999. Income Taxes The Company has elected to be taxed as a Regulated Investment Company under the Internal Revenue Code. A Regulated Investment Company will generally not be taxed at the corporate level to the extent its income is distributed to its stockholders. In order to be taxed as a Regulated Investment Company, the Company must pay at least 90 percent of its net investment company taxable income to its stockholders as well as meet other requirements under the Code. In order to preserve this election for fiscal 2000, the Company intends to make the required distributions to its stockholders in accordance with applicable tax rules. Depreciation and Amortization Depreciation and amortization of furniture, fixtures and leasehold improvements is computed on the straight-line method at rates adequate to allocate the cost of applicable assets over their expected useful lives. Net Income per Share During the year ended June 30, 1998, the Company adopted the provision of Statements of Financial Accounting Standards No. 128 "Earnings per Share" ("SFAS No. 128"). SFAS No. 128 eliminates the presentation of primary and fully dilutive earnings per share ("EPS") and requires presentation of basic and diluted EPS. Basic EPS is computed by dividing income (loss) available to common stockholders by the weighted-average number of common shares outstanding for the period. Diluted EPS is based on the weighted-average number of shares of common stock and common stock equivalents outstanding at year end. At March 31, 2000 and June 30, 1999 the Company had 100,000 options outstanding, of which 30,000 options are considered anti-dilutive and the remaining 70,000 options are dilutive and resulted in common stock equivalents of 5084 shares. Loan Costs Loan costs are included in prepaid expenses and other assets. Amortization of loan costs is computed on the straight-line method over ten (10) years. At March 31, 2000 and June 30, 1999, loan costs amounted to $110,990 and $129,331, respectively, net of accumulated amortization of $132,991 and $114,650, respectively. 8 Assets Acquired in Satisfaction of Loans Assets acquired in satisfaction of loans are carried at estimated fair value less selling costs. Losses incurred at the time of foreclosure are charged to the allowance for loan losses. Subsequent reductions in estimated net realizable value are recorded as losses on assets acquired in satisfaction of loans. Basis of consolidation The consolidated financial statements include the accounts of Ameritrans Capital Corporation ("the Company"), Elk Associates Funding Corporation ("Elk"), EAF Holding Corporation ("EAF"), and Elk Capital Corporation ("Elk Capital"), which are, wholly owned subsidiaries of the Company. All intercompany transactions have been eliminated. Use of Estimates in the Financial Statements The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of 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. Estimates that are particularly susceptible to change relate to the determination of the allowance for loan losses and the fair value of financial instruments. Comprehensive Income During the year ended June 30, 1999, the Company adopted SFAS No. 130 "Reporting Comprehensive Income". SFAS 130 requires the reporting of comprehensive income in addition to net income from operations. Comprehensive income is a more inclusive financial reporting methodology that includes disclosure of certain financial information that historically has not been recognized in the calculation of net income. Stock-Based Compensation In October 1995, SFAS No. 123, "Accounting for Stock-Based Compensation" was issued. SFAS 123 prescribes accounting and reporting standards for all stock-based compensation plans, including employee stock options, restricted stock, employee stock purchase plans and stock appreciation rights. SFAS 123 requires compensation expense to be recorded (i) using the new fair value method or (ii) using the existing accounting rules prescribed by Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees" ("APB25") and related interpretations with pro forma disclosure of what net income and earnings per share would have been had the Company adopted the new fair value method. The Company intends to continue to account for its stock based compensation plans in accordance with the provisions of APB 25. Business Segment During the year ended June 30, 1999, the Company adopted SFAS No. 131, "Disclosures About Segments of an Enterprise and Related Information", which supersedes SFAS No. 14, "Financial Reporting for Segments of A Business Enterprise". SFAS No. 131 establishes standards for the way the public enterprises report information about operating segments in annual financial statements and requires reporting of selected information about operating segments in interim financial statement regarding products and services, geographic areas and major customers. SFAS No. 131 defines operating segments as components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision maker in deciding how to allocate resources and in assessing performance. The Company has determined that under SFAS No. 131, it operates in one segment of financing services. The Company's customers and operations are within the United States. 9 Loan Sales and Servicing Fee Receivable SFAS No. 125, "Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities" was issued in June 1996. SFAS 125 provides accounting and reporting standards for transfers and servicing of financial assets and extinguishments of liabilities. This statement also provides consistent standards for distinguishing transfers of financial assets that are sales from transfers that are secured borrowings. It requires that liabilities and derivatives incurred or obtained by transferors as part of a transfer of finanical assets be initially measured at fair value. SFAS 125 also requires that servicing assets be measured by allocating the carrying amount between the assets sold and retained interest based on their relative fair values at the date of transfer. Additionally, this statement requires that the servicing assets and liabilities be subsequently measured by (a) amortization in proportion to and over the period of estimated net servicing income or loss and (b) assessment for asset impairment or increased obligation based on their fair values. SFAS 125 also requires the Company's excess servicing rights be measured at fair market value and reclassified as interest only receivables and accounted for in accordance with SFAS No. 115, "Accounting for Certain Investments in Debt and Equity Securities". As required by SFAS 125, the Company adopted in the new requirements effective January 1, 1997. Implementation of SFAS 125 did not have any material impact on the financial statements of the Company. New Accounting Pronouncements In April 1998, Statement of Position ("SOP") 98-5, "Reporting on the Costs of Start-Up Activities" was issued. This SOP provides guidance on the financial reporting of start-up costs and organization costs. It requires the costs of start-up activities and organization costs to be expensed as incurred. The SOP is effective for financial statements for fiscal year beginning after December 15, 1998. The Company does not expect that the adoption of SOP No. 98-5 will have a material impact on its financial statements. In June 1998, SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities" was issued and is required to be adopted in years beginning after June 15, 1999, which has been deferred to June 30, 2000. Management does not anticipate that the adoption of the new statement will have a significant effect on results of operations or the financial position of the Company. 10 NOTE 2 -- Debentures Payable to SBA At March 31, 2000 and June 30, 1999 debentures payable to the SBA consist of subordinated debentures with interest payable semiannually, as follows: Current Effective Principal Issue Date Due Date Interest Rate Amount ---------- -------- ------------- ------ September 1993 September 2003 6.12(1) $1,500,000 September 1993 September 2003 6.12 2,220,000 September 1994 September 2004 8.20 2,690,000 December 1995 December 2005 6.54 1,020,000 June 1996 June 2006 7.71 1,020,000 March 1997 March 2007 7.38(2) 430,000 ---------- $8,880,000 ========== - ---------- (1) Interest rate was 3.12%from inception through September 1998 (2) The Company is also required to pay an additional annual user fee of 1% on this debenture Under the terms of the subordinated debentures, the Company may not repurchase or retire any of its capital stock or make any distributions to its stockholders other than dividends out of retained earnings (as computed in accordance with SBA regulations) without the prior written approval of the SBA. NOTE 3 -- Notes Payable to Banks At March 31, 2000 and June 30, 1999, the Company had loan agreements with three (3) banks for lines of credit aggregating $40,000,000 and $35,000,000, respectively. At March 31, 2000 and June 30, 1999, the Company had $38,600,000 and $31,000,000, respectively, outstanding under these lines. The loans, which mature through June 8, 2000, bear interest based on the Company's choice of the lower of either the reserve adjusted LIBOR rate plus 150 basis points or the bank's prime rates including certain fees which make the effective rates range from approximately prime minus 1/4% to prime minus 1/2%. Upon maturity, the Company anticipates extending the lines of credit for another year, as has been the practice in previous years. Pursuant to the terms of the agreements the Company is required to comply with certain terms, covenants and conditions. The Company pledged its loans receivable and other assets as collateral for the above lines of credit and were not required to maintain compensating balances. NOTE 4 -- Preferred Stock Pursuant to a preferred stock repurchase agreement dated November 10, 1994, the Company repurchased all cumulative preferred stock from the SBA for $3.50 per share, or an aggregate $1,915,449. As a condition precedent to the repurchase, the Company granted the SBA a liquidating interest in a newly established restricted capital surplus account. The surplus account is equal to the amount of the net repurchase discount. The initial value of the liquidating interest was $3,557,261, which is being amortized over a 60-month period on a straight- line basis. Should the Company be in default under the repurchase agreement at any time, the liquidating interest will become fixed at the level immediately preceding the event of default and will not decline further until such time as the default is cured or waived. The liquidating interest shall expire on (i) sixty months from the date of the repurchase agreement, or (ii) if any event of default has occurred and such default has been cured or waived, such later date on which the liquidating interest is fully amortized. Should the Company voluntarily or 11 involuntarily liquidate prior to the amortization of the liquidating interest, any assets which are available, after the payment of all debts of the Company, shall be distributed first to the SBA until the fair market value of such assets is equal to the amount of the liquidating interest. Such payment, if any, would be prior in right to any payments made to the Company's stockholders. The amount restricted under this agreement at March 31, 2000 and June 30, 1999 was approximately $-0- and $256,916, respectively. During 1992, the Company authorized the issuance of 752,729 shares of a new Series B cumulative preferred stock with a 4 percent dividend and a $10 par value. All preferred shares are restricted solely for issuance to the SBA. No sales of the Series B preferred shares have occurred to date. On September 30, 1996, Congress passed a law that in effect prevents the SBA from making any further purchase of 4% preferred stock from any specialized small business investment company. In September 1998, the stockholders of the Company approved and in February 1999 the SBA approved an amendment to the Certification of Incorporation of the Company eliminating all of the authorized Series A and Series B preferred stock of the Company. This amendment to the Certificate of Incorporation was filed and became effective on May 21, 1999. NOTE 5 -- Common Stock On December 16, 1999, the company acquired Elk in a share-for-share exchange. There are currently 5,000,000 shares authorized of $.0001 par value common stock. On April 17, 2000, The Company declared a cash dividend of $0.17 per common share, for a total of $296,752 which was paid on May 5, 2000. NOTE 6 -- Income Taxes The provision for income taxes (benefit) for the periods ended March 31, 2000 and June 30, 1999, consists of the following: March 31, 2000 June 30, 1999 --------------- ------------- Federal $2,063 $1,689 State and city 16,632 (2,458) -------- -------- $18,695 $(769) ======== ======== The above provision represents income taxes incurred on undistributed income for the respective years. NOTE 7 -- Commitments and Contingencies Interest Rate Swap On June 8, 1998, the Company entered into a $10,000,000 interest rate Swap transaction with a bank expiring on June 8, 2001. This Swap transaction was entered into to protect the Company from an upward movement in interest rates relating to outstanding bank debt. On October 13, 1998, the Company entered into an additional interest rate Swap transaction with the same bank for $5,000,000 expiring on October 8, 2001. These Swap transaction were entered into to protect the Company from an upward movement in interest rates relating to outstanding bank debt (see Note 6 for terms and effective interest rates). These Swap transaction call for a fixed rate of 5.86% and 4.95%, respectively for the Company if the floating one month LIBOR rate is below the fixed rate then the Company is obligated to pay the bank for the difference in rates. When the one-month LIBOR rate is above the fixed rate then the bank is obligated to pay the Company for the differences in rates. On January 18, 2000, the Company entered into an additional interest rate swap transaction for $10,000,000, with a 12 bank expiring January 8, 2001. This swap transaction calls for a fixed rate of 6.57% plus 150 basis points or an effective rate of 8.07% Interest Rate Cap At March 20, 1997, the Company was a party to one $5 million notional interest rate cap. This cap, which expired on March 20, 1999, was purchased by the Company to protect it from the impact of upward movements in interest rates related to its outstanding bank debt. The cap provided interest rate protection on the event that the three-month LIBOR rate exceeded 6.75 percent. The premium paid for the purchase of this cap was amortized over its life and recorded as an adjustment to interest expense. Payments received under this cap would be credited to interest expense. Loan commitments At March 31, 2000 and June 30, 1999, the Company had commitments to make loans totaling approximately $1,505,000 and $4,058,000, at interest rate ranging from 8.25% to 18%. NOTE 8 -- Fair Value of Financial Instruments The following disclosures represent the Company's best estimate of the fair value of financial instruments, determined on a basis consistent with requirements of Statement of Financial Accounting Standards, "SFAS" No. 107, "Disclosure about Fair Value of Financial Instruments". The estimated fair values of the Company's financial instruments are derived using estimation techniques based on various subjective factors including discount rates. Such estimates may not necessarily be indicative of the net realizable or liquidation values of these instruments. Fair values typically fluctuate in response to changes in market or credit conditions. Additionally, valuations are presented as of a specific point in time and may not be relevant in relation to the future earnings potential of the Company. Accordingly, the estimates presented herein are not necessarily indicative of the amounts the Company will realize in a current market exchange. The use of different market assumptions and/or estimation methodologies may have a material effect on the estimated fair value amounts. Loans Receivable -- The fair value of loans is estimated at cost net of the allowance for loan losses. The Company believes that the rates of these loans approximate current market rates. Equity Securities -- The Company's equity securities as of March 31, 2000 consist of investments in corporations who own and operate Chicago Taxicab Medallions (44%), a dry cleaner (5%), Miami Taxicab Medallions (5%) a Telecommunications Company (37%), and an eyewear Internet company (9%). Debentures Payable to Small Business Administration -- The fair value of debentures as of March 31, 2000 and June 30, 1999 was approximately $8,989,000, and were estimated by discounting the expected future cash flows using the current rate at which the SBA has extended similar debentures to the Company. The fair value of financial instruments that are short-term or reprice frequently and have a history of negligible credit losses is considered to approximate their carrying value. Those instruments include balances recorded in the following captions: ASSETS LIABILITIES Cash Notes payable, banks Accrued interest receivable Accrued interest payable Assets acquired in satisfaction of loans receivables from debtors on sales of assets acquired in satisfaction of loans 13 NOTE 9 -- Subsequent Event On May 4, 2000, the company executed an Agreement and Plan of Merger with Medallion Financial Corporation ("Medallion"), pursuant to which the Company will merge into and with a wholly-owned subsidiary of Medallion (the "Transaction"). The Transaction, which is structured to qualify as a "pooling-of-interests" for accounting purposes, is subject to the approval of the shareholders of the Company, the satisfactory completion of due diligence by Medallion by July 4, 2000, approval of certain lenders, as well as the receipt of certain approvals from the U.S. Small Business Administration, the U.S. Department of Justice and the Federal Trade Commission and other customary closing conditions. Subject to the foregoing conditions, the Transaction is expected to close in the fourth quarter of 2000. The Transaction is structured as a tax-free exchange of shares of common stock of Medallion for each share of common stock of the Company. At Medallion's closing common stock price of $16.50 on May 3, 2000, the Transaction would be valued at approximately $17,000,000. 14 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The information contained in this section should be used in conjunction with the consolidated Financial Statements and Notes therewith appearing in this report Form 10Q and the Company's Annual Report for the year ended June 30, 1999. General The Company is licensed by the Small Business Administration (SBA) to operate as a Small Business Investment Company (SBIC) under the Small Business Investment Act of 1958, as amended. The Company has also registered as an investment company under the Investment Company Act of 1940. The Company primarily makes loans and investments to persons who qualify under SBA regulation as socially or economically disadvantaged and loans and investments to entities which are at least 50% owned by such persons. The Company also makes loans and investments to persons who qualify under SBA regulation as "non-disadvantaged". The Company's primary lending activity is to originate and service loans collateralized by New York City, Boston, Chicago and Miami Taxicab Medallions. The Company also makes loans and investments in other diversified businesses. Results of Operations For the Nine Months ended March 31, 2000 and 1999 Total investment income The Company's investment income for the nine months ended March 31, 2000 increased to $5,096,577 from $4,100,967 (23.5%) for the nine month period ended March 31, 2000 and March 31, 1999. This increase was mainly due to an increase in the loan portfolio during the period. The portfolio increased from $49,303,758 as of March 31, 1999 to $58,583,357 as of March 31, 2000, as part of the Company's strategy to maximize shareholder rate of return by use of bank debt. In addition, there was a gain on the sale of equity securities which amounted to $166,917. Operating Expenses Interest expense for the nine month period ended March 31, 2000 increased $628,900 ($2,433,497 from $1,804,597) over the similar period ended March 31, 1999. This increase was mainly due to increased bank borrowings for the period and by higher interest rates for the period ended March 31, 2000. Other operating expenses increased $288,148 when compared with the similar period ended March 31, 1999. This increase was mainly due to an increase in non-related legal fees generated from an increased investment in the Chicago Medallion Market (this amount is offset by additional origination fee income). In addition, the payroll costs and bad debts increased $52,170 and $68,665, when compared with the prior period, respectively. Results of Operations For the Three Months ended March 31, 2000 and 1999 Total investment income The Company's investment income for the three months ended March 31, 2000 increased to $1,822,169 from $1,406,021 or (29.5%) while compared with the three month period ending March 31, 1999. This increase was mainly due to an increase in the loan portfolio during the fiscal year. The portfolio increased from $49,303,758 as of March 31, 1999 to $58,583,357 as of March 31, 2000, as part of the Company's strategy to maximize shareholder rate of return by use of bank debt. In addition, there was a gain on the sale of equity securities which amounted to $90,748. Operating Expenses Interest expense for the three month period ended March 31, 2000 increased $274,968 ($887,450 from $612,482) over the similar period ended March 31, 1999. This increase was mainly due to increased bank borrowings for the period and by higher interest rates for the period ended March 31,2000. Other operating expenses increased $119,553 when compared with the similar period ended March 31, 1999. This increase was due to a increase in bad debt expenses which was $89,080 as of March 31, 2000 versus $52,500 for the similar period ended March 31, 1999. In addition, the payroll costs and losses on assets acquired increased 45,525 and $25,076 respectively during the period. 15 Balance Sheet and Reserves Total assets increased $7,321,401 as of March 31, 2000 when compared with the balance sheet as of June 30, 1999. This increase was due to management's decision to expand its portfolio in the Chicago Medallion Market plus increases in the diversified loan portfolio. This expansion was financed by additional bank debt of $7,600,000, during the nine month period. 16 AMERITRANS CAPITAL CORPORATION SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. AMERITRANS CAPITAL CORPORATION Date: May 15, 2000 By: /s/ Gary C. Granoff ------------------- Gary C. Granoff Chief Financial Officer (Principal Financial Officer and Chief Accounting Officer) 17 EX-27 2 FINANCIAL DATA SCHEDULE
5 9-MOS JUN-30-2000 JUL-01-1999 MAR-31-1999 139,868 0 58,583,357 (380,000) 0 0 420,038 303,720 61,832,202 48,623,088 0 0 0 13,209,114 0 61,832,202 0 5,096,577 0 0 1,657,821 0 2,433,497 1,005,259 18,695 986,564 0 0 0 986,564 .565 .565
-----END PRIVACY-ENHANCED MESSAGE-----