-----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, LvkRb1kB3kdjdyke1GW9NhNw6QaljJqhUwI5x+Sv6NxplzI0NaUNKDvITBSEgWlI 8zviFITziLefwt7obUNd4w== 0000891554-00-002192.txt : 20080626 0000891554-00-002192.hdr.sgml : 20080626 20000922153000 ACCESSION NUMBER: 0000891554-00-002192 CONFORMED SUBMISSION TYPE: 10-Q/A PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19991231 FILED AS OF DATE: 20000922 DATE AS OF CHANGE: 20080620 FILER: COMPANY DATA: COMPANY CONFORMED NAME: AMERITRANS CAPITAL CORP CENTRAL INDEX KEY: 0001064015 IRS NUMBER: 522102424 STATE OF INCORPORATION: DE FISCAL YEAR END: 0607 FILING VALUES: FORM TYPE: 10-Q/A SEC ACT: 1934 Act SEC FILE NUMBER: 814-00193 FILM NUMBER: 00727252 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/A 1 form10-qa_23659.txt AMENDMENT NO. 1 TO FORM 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ---------- FORM 10-Q/A [X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the Quarterly Period Ended December 31, 1999 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 - 4th 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 February 14, 2000: 1,745,600 AMERITRANS CAPITAL CORPORATION FORM 10-Q/A In connection with Ameritrans Capital Corporation (the "Company") acquiring all of the outstanding shares of Elk Associates Funding Corporation ("Elk"), on December 16, 1999 in a share for share exchange, the Company adjusted its accounting treatement for legal, accounting and other costs (Recapitalization Costs) associated with this share exchange. As adjusted, such costs are reflected as an expense of the period instead of a charge to additional paid in capital. As a result of this adjustment, the unaudited consolidated balance sheet as of December 31, 1999, the unaudited consolidated statements of operations for the three and six months ended December 31, 1999, the unaudited consolidated statement of cash flows for the six months ended December 31, 1999 and the disclosures in the notes to the unaudited consolidated financial statements have been restated to reflect this adjustment. (Please see Part I, Item 1). In addition, "Managements Discussion and Analysis of Financial Condition and Results of Operations" has been updated to reflect this change. (Please see Part I, Item 2). -i- AMERITRANS CAPITAL CORPORATION FORM 10-Q/A PART I. FINANCIAL INFORMATION Item 1. Financial Statements...................................................... 1 Consolidated Balance Sheets as of December 31, 1999 (unaudited) and June 30, 1999........................................... 2 Consolidated Statements of Operations -- For the Six Months and the Three Months ended December 31, 1999 and 1998 (unaudited)....... 4 Consolidated Statements of Cash Flows -- For the Six Months Ended December 31, 1999 and 1998 (unaudited)..................... 5 Notes to Consolidated Financial Statements................................ 7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations..................................... 14 Signatures.............................................................. 16
PART I FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS On December 16, 1999, the Company acquired 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 December 31, 1999, the related statements of operations, and cash flows for the six months ended December 31, 1999 and December 31, 1998 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 six months ended December 31, 1999 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 Elk's Annual Report on Form 10-K/A for the fiscal year ended June 30, 1999 as filed with the Commission. -1- AMERITRANS CAPITAL CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS December 31, 1999 (Unaudited) and June 30, 1999 ASSETS
December 31, 1999 June 30, 1999* ----------------- -------------- Loans receivable $ 58,029,360 $ 51,103,932 Less: allowance for loan losses (380,000) (380,000) ------------ ------------ 57,649,360 50,723,932 Cash and cash equivalents 767,106 542,290 Accrued interest receivable 858,039 714,626 Assets acquired in satisfaction of loans 612,491 612,491 Receivables from debtors on sales of assets acquired in satisfaction of loans 394,752 409,939 Equity securities 944,146 909,386 Furniture, fixtures and leasehold improvements, net 126,668 105,440 Prepaid expenses and other assets 538,733 492,697 ------------ ------------ TOTAL ASSETS $ 61,891,295 $ 54,510,801 ============ ============
* Restated The accompanying notes are an integral part of these financial statements. -2- AMERITRANS CAPITAL CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS December 31,1999 (Unaudited) and June 30, 1999 LIABILITIES AND STOCKHOLDERS' EQUITY
December 30, 1999 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 262,129 223,458 Accrued interest payable 414,548 354,918 Dividends payable 331,664 314,208 ----------- ----------- TOTAL LIABILITIES 48,488,341 40,772,584 ----------- ----------- COMMITMENTS AND CONTINGENCIES STOCKHOLDERS' EQUITY Common stock, $.0001 par value: 5,000,000 shares authorized; 1,745,600 shares issued and outstanding, 175 175 Additional paid-in-capital 13,471,474 13,214,558 Restricted capital -0- 256,916 Accumulated (deficit) retained earnings (330,448) 4,815 Accumulated other comprehensive income 261,753 261,753 ----------- ----------- TOTAL STOCKHOLDERS' EQUITY 13,402,954 13,738,217 ----------- ----------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $61,891,295 $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 Six Months Ended December 31, 1999 and 1998
Three Months Ended Three Months Ended Six Months Ended Six Months Ended December 31, 1999 December 31, 1998 December 31, 1999 December 31, 1998 ----------------- ----------------- ----------------- ----------------- INVESTMENT INCOME Interest on loans receivable $ 1,502,653 $ 1,258,639 $ 2,906,923 $ 2,475,744 Fees and other income 176,755 87,642 291,316 219,204 Gain on sales of equity security 76,169 -0- 76,169 -0- ----------- ----------- ----------- ----------- TOTAL INVESTMENT INCOME 1,755,577 1,346,281 3,274,408 2,694,948 ----------- ----------- ----------- ----------- OPERATING EXPENSES Interest 818,863 617,983 1,546,047 1,192,115 Salaries and employee benefits 136,119 136,030 281,128 274,483 Legal fees 142,581 51,926 237,549 144,261 Miscellaneous administrative expenses 241,241 216,485 437,917 410,007 Loss on assets acquired in satisfaction of loans, net 1,876 (1,547) 1,935 268 Directors' fee 5,250 4,500 20,250 13,250 Bad debt expense 81,050 19,890 81,050 48,965 Recapitalization Costs 345,941 345,941 ----------- ----------- ----------- ----------- TOTAL OPERATING EXPENSES 1,772,921 1,045,267 2,951,817 2,083,349 ----------- ----------- ----------- ----------- OPERATING (LOSS) INCOME (17,344) 301,014 322,591 611,599 ----------- ----------- ----------- ----------- (LOSS) INCOME BEFORE INCOME TAXES (17,344) 301,014 322,591 611,599 INCOME TAXES (BENEFIT) 8,772 (5,656) 11,983 (293) ----------- ----------- ----------- ----------- NET (LOSS) INCOME $ (26,116) $ 306,670 $ 310,608 $ 611,892 =========== =========== =========== =========== WEIGHTED AVERAGE SHARES OUTSTANDING - - Basic 1,745,600 1,745,600 1,745,600 1,745,600 =========== =========== =========== =========== - - Diluted 1,745,600 1,745,600 1,746,572 1,745,600 =========== =========== =========== =========== NET (LOSS) INCOME PER COMMON SHARE - - Basic $ (.0150) $ .1757 $ .1779 $ .3505 =========== =========== =========== =========== - - Diluted $ (.0150) $ .1757 $ .1778 $ .3505 =========== =========== =========== ===========
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 Six Months Ended December 31, 1999 and 1998
December 31, 1999 December 31, 1998 ----------------- ----------------- CASH FLOWS FROM OPERATING ACTIVITIES Net income $ 310,608 $ 611,892 ----------- ----------- Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 24,985 18,375 Increase in accrued interest receivable (143,413) (82,454) Increase in prepaid expenses and other assets (46,036) (136,715) Increase in accrued expenses and other liabilities 38,671 59,272 Increase in accrued interest payable 59,630 75,113 ----------- ----------- TOTAL ADJUSTMENTS (66,163) (66,409) ----------- ----------- NET CASH PROVIDED BY OPERATING ACTIVITIES 244,445 545,483 ----------- ----------- 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 (6,910,242) (6,286,934) Purchases (sales) of equity securities - net (34,760) (195,947) Acquisition of furniture, fixtures and leasehold improvements (46,211) (11,134) ----------- ----------- NET CASH USED IN INVESTING ACTIVITIES (6,991,213) (6,494,015) ----------- ----------- CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from notes payable, banks, net 7,600,000 5,565,000 Dividends paid (628,416) (628,416) ----------- ----------- NET CASH PROVIDED BY FINANCING ACTIVITIES $ 6,971,584 $ 4,936,584 ----------- -----------
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 Six Months Ended December 31, 1999 and 1998
December 31, 1999 December 31, 1998 ----------------- ----------------- NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS $ 224,816 $(1,011,948) CASH AND CASH EQUIVALENTS - Beginning 542,290 1,755,429 ----------- ----------- CASH AND CASH EQUIVALENTS - Ending $ 767,106 $ 743,481 =========== ===========
The accompanying notes are an integral part of these financial statements. -6- AMERITRANS CAPITAL CORPORATION AND SUBSIDIARIES 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 ("Elk"), on December 16, 1999 in a share for share exchange. Prior to the acquisition, Elk had been operating independently and the Company had no operations. The company is registered with the United States Securities and Exchange Commission as a Business Development Company under the Investment Company Act of 1940. Elk 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 a Business Development 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 December 31, 1999 and June 30, 1999 approximately 80% 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 evaluates all loans individually for impairment. -7- Loans Receivable Loans are placed on nonaccrual status once they become 180 days past due as to principal 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 principal 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 December 31, 1999 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. Common stock equivalents have been excluded from the weighted-average shares for 1998 and for the three months ended December 31, 1999, as inclusion is anti-dilutive. At December 31, 1999, the Company had 122,224 options outstanding. For the six months ended December 31, 1999, 52,225 of these options are considered anti-dilutive and the remaining 70,000 options are dilutive and resulted in common stock equivalents of 972 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 December 31, 1999 and June 30, 1999, loan costs amounted to $117,104 and $129,331, respectively, net of accumulated amortization of $126,877 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 the Company, Elk and EAF Holding Corporation ("EAF") 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 fiscals year beginning after December 15, 1998. SOP No. 98-5 will not 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 December 31, 1999 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 December 31, 1999 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 December 31, 1999 and June 30, 1999, the Company had $38,600,000 and $31,000,000, respectively, outstanding under these lines. The loans, which mature through April 10, 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. Under the repurchase agreement the liquidating interest would become fixed at the level immediately preceding the event of default and would 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 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 -11- made to the Company's stockholders. The amount restricted under this agreement at December 31, 1999 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. For the year ended June 30, 1998, Elk completed the sale, as part of a private placement offering, of 462,000 shares of common stock. Total proceeds from the sale of common stock amounted to $2,888,000, net of direct related expenses of $115,000. On January 13, 2000, The Company declared a cash dividend of $0.19 per common share, for a total of $331,664 which was paid on January 27, 2000. NOTE 6 -- Income Taxes The provision for income taxes (benefit) for the periods ended December 31, 1999 and June 30, 1999, consists of the following: December 31, 1999 June 30, 1999 ----------------- ------------- Federal $ 2,063 $ 1,689 State and city 9,920 (2,458) -------- ------- $ 11,983 $ (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 15, 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 transactions were entered into to protect the Company from an upward movement in interest rates relating to outstanding bank debt (see Note 3 for terms and effective interest rates). These Swap transactions call for a fixed rate of 5.86% and 4.95%, respectively, plus 1.5 basis points, making the effective rate 7.36% and 6.45%, 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. -12- 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 December 31, 1999 and June 30, 1999, the Company had commitments to make loans totaling approximately $1,463,000 and $4,058,000, at interest rates 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 December 31, 1999 consist of investments in corporations who own and operate Chicago Taxicab Medallions (61%), a dry cleaner (3%), Miami Taxicab Medallions (7%) a Telecommunications Company (24%), and an eyewear Internet company (5%). Debentures Payable to Small Business Administration -- The fair value of debentures as of December 31, 1999 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 NOTE 9 -- Accounting Adjustments In connection with the Company acquiring all of the outstanding shares of Elk on December 16, 1999 in a share for share exchange, the Company adjusted its accounting treatment for the legal, accounting and other costs ("Recapitalization costs") associated with the share exchange. As adjusted such costs are reflected as an expense of the period instead of a charge to additional paid in capital. The adjustment was made to properly account for the nature of costs incurred in the share for share exchange. The adjustment resulted in a decrease of $.1982 basic, $.1981 diluted and $.1982 basic and diluted earnings per share for the three and six months ended December 31, 1999, respectively. Retained earnings as of December 31, 1999 was reduced by $345,941. The unaudited consolidated balance sheet as of December 31, 1999, the unaudited consolidated statements of operations for the three and six months ended December 31, 1999, and the unaudited consolidated statement of cash flows for the six months ended December 31, 1999, have been restated to reflect this adjustment. No restatement of prior periods financial statements were required. -13- NOTE 10 -- Subsequent Events On January 18, 2000, the Company entered into an additional interest rate swap transaction for $10,000,000 with a 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%. 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 Elk's Annual Report on Forms 10-KSB for the year ended June 30, 1999. General Ameritrans acquired Elk on December 16, 1999 in a share-for-share exchange. As of December 31, 1999 Ameritrans had no separate operations. Elk 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 Regulations 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 Six Months ended December 31, 1999 and 1998. Total Investment Income. The Company's investment income for the six months ended December 31, 1999 increased to $3,274,408 from $2,694,948 or (21.5%) for the six months as compared with the six months ended December 31, 1998, respectively. This increase was mainly due to an increase in the loan portfolio during the period. The portfolio increased from $47,673,884 as of December 31, 1998 to $58,029,361 as of December 31, 1999, 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 $76,169. Operating Expenses Interest expenses for the six month period ended December 31, 1999 increased $353,932 ($1,546,047 from $1,192,115) over the similar period ended December 31, 1998. This increase was mainly due to increased bank borrowings for the period, and due to higher interest rates during the period ended December 31, 1999. Other operating expenses for the six months ended September 30, 1999 increased $514,536 when compared with the similar period ended December 31, 1998. This increase was mainly due to increases in non-related legal fees generated from an increase in the Chicago Medallion Market. This amount is offset by additional origination fee income. During the period ended December 31, 1999 the Company in conjunction with its share for share exchange with Elk incurred legal, professional and filing costs which amounts have been written off in the amount of $349,941. These costs are one time non-operating expenditures in connection with the merger. Results of Operations For the Three Months ended December 31, 1999 and 1998 Total investment income. The Company's investment income for the three months ended December 31, 1999 increased to $1,755,577 from $1,346,281 or by $409,296 or (30.5%) for the three month period ended December 31, 1999 and December 31, 1998. This increase was mainly due to an increase in the loan porfolio during the fiscal year. The portfolio increased from $47,673,884 as of December 31, 1998 to $58,029,361 as of December 31, 1999, as part of the Company's strategy to maximize shareholder rate of return by use of bank debt. Operating Expenses Interest expense for the three month period ended December 31, 1999 increased $200,880 ($818,863 from $617,983) over the similar period ended December 31, 1998. This increase was mainly due to increased bank borrowings for the period. Other operating expenses increased $526,704 when compared with the similar three month period ended December 31, 1998. This increase was mainly due to a increase in non-related legal fees incurred consistent with the increase of investments in the Chicago Medallion market, as discussed above. This is offset by additional origination fee income. In addition, bad debts increased $61,160 when compared with the similar period. During the period ended December 31, 1999 the Company in conjunction with its share for share exchange with Elk incurred legal, professional and filing costs which amounts have been written off in the amount of $349,941. These costs are one time non-operating expenditures in connection with the merger. Balance Sheet and Reserves Total assets increased $7,726,435 as of December 31, 1999 when compared with total assets 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 in the six month period. -14- Year 2000 Compliance Prior to January 1, 2000, the Company had taken steps to address and prevent problems in connection with the year 2000 ("Y2K"). Such problems were expected to occur due to the inability of systems to properly recognize and process date-sensitive information relating to the Y2K and beyond. Y2K issues could have affected the Company's information technology systems ("IT") and informationtion technology systems ("Non-IT"). The Company's main business operation is the operation of Elk. The Company is a Small Business Investment Company licensed by the Small Business Administration and as such, most of its business is making loans and investments to small business concerns. The following are the IT systems that the Company utilizes: The Company uses a computer program to track its receivable loans ("Loan Track"). To address Y2K, more than 18 months ago, the Company engaged the consultant who originally developed Loan Track for the Company, to test, upgrade and certify Loan Track as Y2K compliant. The consultant completed all of such tasks and the Y2K-compliant Loan Track program is now in use in the Company's regular operations. The Company also utilizes the standard Peachtree accounting system for general in-house accounting functions. The version of peachtree, currently in use by the Company, has been upgraded to be Y2K compliant. The Company also utilizes other industry-wide programs such as Windows 95 and Word Perfect. The current versions are Y2K-compliant. In addition, during the past twelve months and at the present, the Company has been replacing or upgrading its computer hardware with equipment that has Y2K readiness. The Company does not believe that it faces material Y2K issues with respect to its Non-IT systems. Costs in connection with Y2K compliance have been (i) to review and upgrade existing IT systems, (ii) to analyze Y2K readiness of its banks and customers and (iii) to analyze Non-It Y2K compliance. To date, such costs, have aggregated approximately $10,000 and for the most part have been for IT review and upgrades. Such costs are being treated as expenses. The Company spent approximately $25,000 to replace certain hardware during the fiscal year ending June 30, 1999 and spent an additional $35,000 during the six months ended December 31, 1999. The Company has not experienced any Y2K difficulties subsequent to January 1, 2000 and its information technology systems are presently functioning properly and running in a routine manner. The cost of such replacements will be capitalized and depreciated over a five year period. -15- 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: September 22, 2000 By: /s/ Gary C. Granoff ------------------- Gary C. Granoff Chief Financial Officer (Principal Financial Officer and Chief Accounting Officer) AMERITRANS CAPITAL CORPORATION -16- EX-27 2 0002.txt FINANCIAL DATA SCHEDULE
5 6-MOS JUN-30-2000 JUL-01-1999 DEC-31-1999 767,106 58,029,360 0 (380,000) 0 0 417,888 291,220 61,891,295 48,488,341 0 0 0 13,402,954 0 61,891,295 0 3,274,408 0 0 1,405,770 0 1,546,047 322,591 11,983 310,608 0 0 0 310,608 .178 .178
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