-----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, RSb8dVCqlx7P8KChQAf/S5kV17MCudGdvz7k6FcUAucDrq9aJT/jBu2Q9xZ/VwEP h4p1oLIezgxvkc7ka9yMHA== 0001064015-04-000010.txt : 20080626 0001064015-04-000010.hdr.sgml : 20080626 20041115133950 ACCESSION NUMBER: 0001064015-04-000010 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 20040930 FILED AS OF DATE: 20041115 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 SEC ACT: 1934 Act SEC FILE NUMBER: 814-00193 FILM NUMBER: 041143629 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 form10q2004tinalfinal.txt 10Q U.S. 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 September 30, 2004 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 incorporation (I.R.S. Employer Identification No.) 747 Third Avenue New York, New York 10017 (Address of Registrant's (Zip Code) principal executive office) (800) 214-1047 Registrant's telephone number, including area code Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes /X/ No / / Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act) Yes / / No /X/ The number of shares of Common Stock, par value $.0001 per share, outstanding as of November 12, 2004: 2,035,600 AMERITRANS CAPITAL CORPORATION FORM 10-Q Table of Contents PART I. FINANCIAL INFORMATION Item 1. Consolidated Financial Statements Consolidated Balance Sheets as of September 30, 2004 (unaudited) and June 30, 2004........................................ 1 Consolidated Statements of Operations -- For the Three Months Ended September 30, 2004 and 2003 (unaudited)................ 3 Consolidated Statements of Cash Flows -- For the Three Months Ended September 30, 2004 and 2003 (unaudited) .................................. 4 Notes to Consolidated Financial Statements ............................... 6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations........................................ 10 Item 3. Quantitative and Qualitative Disclosure about Market Risk ........ 14 Item 4. Controls and Procedures........................................... 15 PART II. OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K ................................. 16 Signatures ................................................................ 17 -ii- AMERITRANS CAPITAL CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS September 30, 2004 (Unaudited) and June 30, 2004 ASSETS September 30,2004 June 30, 2004 ------------------------------- Loans receivable $ 48,324,101 $ 49,900,989 Less: unrealized depreciation on loans receivable (585,089) (509,770) ------------- ------------- Loans receivable, net 47,739,012 49,391,219 Cash and cash equivalents 727,863 416,600 Accrued interest receivable, net of unrealized depreciation of $11,500 and 30,500, respectively 787,674 969,912 Assets acquired in satisfaction of loans 1,044,492 1,421,723 Receivables from debtors on sales of assets acquired in satisfaction of loans 33,800 422,158 Equity securites 1,085,311 1,038,617 Furinture, equiptment and leasehold improvements, net 415,823 439,262 Medallions 2,382,201 2,382,201 Prepaid expenses and other assets 713,117 610,214 ---------------- ------------- TOTAL ASSETS $ 54,929,293 $ 57,091,906 ================ =============
The accompanying notes are an integral part of these financial statements. 1 AMERITRANS CAPITAL CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS September 30, 2004 (Unaudited) and June 30, 2004 LIABILITIES AND STOCKHOLDERS' EQUITY September 30, 2004 June 30, 2004 ----------------- --------------- LIABILITIES Debentures payable to SBA $ 12,000,000 $ 12,000,000 Notes payable, banks 26,858,652 28,908,652 Accrued expenses and other liabilities 570,994 578,790 Accrued interest payable 171,924 271,630 Dividend payable 84,375 84,375 ------------------- ------------- TOTAL LIABILITIES 39,685,945 41,843,447 ------------------- ------------- COMMITMENTS AND CONTINGENCIES STOCKHOLDERS' EQUITY Preferred stock 500,000 shares authorized, none issued or outstanding - - 9 3/8% cumulative participating callable preferred stock $.01 par value, $12.00 face value, 500,000 shares authorized; 300,000 shares issued and outstanding 3,600,000 3,600,000 Common stock $.0001 par value: 5,000,000 shares uthorized; 2,045,600 shares issued, 2,035,600 outstanding 205 205 Additional paid-in-capital 13,869,545 13,869,545 Accumulated deficit (1,902,071) (1,902,408) Accumulated other comprehensive loss (245,331) (248,883) ------------------- ------------- 15,313,348 15,318,459 Less: Treasury stock, at cost, 10,000 shares of Common stock (70,000) (70,000) ------------------- ------------- TOTAL STOCKHOLDERS' EQUITY 15,243,348 15,248,459 ------------------- ------------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 54,929,293 $ 57,091,906 =================== =============
The accompanying notes are an integral part of these financial statements. -2- AMERITRANS CAPITAL CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS For the Three Months Ended September 30, 2004 and 2003 (Unaudited) Three Months Ended Three Months Ended September 30, 2004 September 30, 2003 --------------------- ------------------- INVESTMENT INCOME Interest on loans receivable $ 1,129,057 $ 1,390,175 Fees and other income 100,540 51,224 Leasing income 51,537 13,836 ----------------- ----------------- TOTAL INVESTMENT INCOME 1,281,134 1,455,235 ----------------- ----------------- OPERATING EXPENSES Interest 382,156 372,753 Salaries and employee benefits 262,664 246,547 Occupancy costs 49,183 50,063 Professional fees 135,564 112,883 Miscellaneous administrative expenses 245,468 291,086 Loss on assets acquired in satisfaction of loans, net 10,393 29,901 Foreclosure expenses 5,000 209,630 Write off and depreciation on interest and loans receivable 101,518 255,892 --------------- ----------------- TOTAL OPERATING EXPENSES 1,191,946 1,568,755 --------------- ----------------- OPERATING INCOME (LOSS) 89,188 (113,520) --------------- ----------------- OTHER INCOME (EXPENSE) Gain on sale of securities - 5,665 Equity in loss of investee (2,011) - --------------- ----------------- TOTAL OTHER INCOME (expense) (2,011) 5,665 --------------- ----------------- INCOME (LOSS) BEFORE INCOME TAXES 87,177 (107,855) --------------- ----------------- INCOME TAXES 2,465 10,543 --------------- ----------------- NET INCOME (LOSS) $ 84,712 $ (118,398) --------------- ----------------- DIVIDENDS ON PREFERRED STOCK $ (84,375) $ (84,375) --------------- ----------------- NET INCOME (LOSS) AVAILABLE TO COMMON SHAREHOLDERS $ 337 $ (202,773) --------------- ----------------- WEIGHTED AVERAGE SHARES OUTSTANDING - - Basic 2,035,600 2,035,600 ================ ================= - - Diluted 2,035,600 2,035,600 ================ ================= NET INCOME (LOSS) PER COMMON SHARE - - Basic $ 0.00 $ (0.10) ================ ================= - - Diluted $ 0.00 $ (0.10) ================ =================
The accompanying notes are an integral part of these financial statements. -3- AMERITRANS CAPITAL CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS For the Three Months Ended September 30, 2004 and 2003 (Unaudited) September 30, 2004 September 30, 2003 ------------------ ------------------ CASH FLOWS FROM OPERATING ACTIVITIES Net income (loss) $ 84,712 $ (118,398) ---------------- ---------------- Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: Depreciation and amortization 39,888 25,042 Gain on sale of equity securities - (5,665) Equity in loss of investee 2,011 _ Change in operating assets and liabilities: Changes in unrealized depreciation on loans receivable and accrued interest receivable 56,319 84,800 Accrued interest receivable 201,238 (5,077) Prepaid expenses and other assets (119,352) (130,055) Accrued expenses and other liabilities (7,796) 146,272 Accrued interest payable (99,706) (122,454) --------------- --------------- TOTAL ADJUSTMENTS 72,602 (7,137) --------------- --------------- NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES 157,314 (125,535) --------------- --------------- CASH FLOWS FROM INVESTING ACTIVITIES Loans receivable 1,576,888 922,814 Assets acquired in satisfaction of loans 377,231 - Receivables from debtors on sales of assets acquired in satisfaction of loans 388,358 - Proceeds from sale of equity securities - 25,959 Purchases of equity securities (54,153) (150,600) Capital expenditures - (314,629) -------------- --------------- NET CASH PROVIDED BY INVESTING ACTIVITIES 2,288,324 483,544 -------------- --------------- CASH FLOWS FROM FINANCING ACTIVITIES Proceeds of notes payable, banks 6,310,000 - Repayments of notes payable, banks (8,360,000) (1,750,098) Proceeds from debentures payable, SBA - 5,000,000 Repayments of debentures payable, SBA - (3,720,000) Dividends paid (84,375) (84,375) --------------- --------------- NET CASH (USED IN) FINANCING ACTIVITIES (2,134,375) (554,473) --------------- --------------- NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 311,263 (196,464) CASH AND CASH EQUIVALENTS - Beginning 416,600 498,669 ---------------- ------------------ CASH AND CASH EQUIVALENTS - Ending $ 727,863 $ 302,205 ---------------- ------------------
The accompanying notes are an integral part of these financial statements. -4- AMERITRANS CAPITAL CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued) For the Three Months Ended September 30, 2004 and 2003 (Unaudited) September 30, 2004 September 30, 2003 ------------------ ------------------ SUPPLEMENTAL DISCLOSURES OF NON-CASH INVESTING ACTIVITIES: Unrealized loss on equity securities arising during the period $ (5,448) $ - =============== ================= Reclassification adjustment for gain included in net income $ _ $ (5,665) ================ ================= Acquisition of medallions through foreclosure of loans receivable $ - $ (300,300) ================ =================
The accompanying notes are an integral part of these financial statements. -5- AMERITRANS CAPITAL CORPORATION AND SUBSIDIARIES Notes to Consolidated Financial Statements 1. Organization and Summary of Significant Accounting Policies Financial Statements The consolidated balance sheet of Ameritrans Capital Corporation ("Ameritrans" or the "Company") as of September 30, 2004, and the related statements of operations, and cash flows for the three months ended September 30, 2004 and 2003 included in Item 1 have been prepared by the Company, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (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 three months ended September 30, 2004 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 Company's Annual Report on Form 10-K for the fiscal year ended June 30, 2004 as filed with the Commission. Organization and Principal Business Activity Ameritrans, a Delaware corporation, is a specialty finance company that through its subsidiary, Elk, primarily makes loans to taxi owners to finance the acquisition and operation of taxi medallions and related assets, and to other small businesses in the New York City, Chicago, Miami, and Boston markets. Ameritrans is a regulated investment company under the Internal Revenue Code. 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 is also registered as an investment company under the Investment Company Act of 1940 to make business loans. Basis of Consolidation The consolidated financial statements include the accounts of Ameritrans, Elk, and Elk's wholly owned subsidiaries, EAF Holding Corporation ("EAF"), EAF Enterprises LLC, Medallion Auto Management LLC, EAF Leasing LLC, EAF Leasing II LLC and EAF Leasing III LLC, (collectively referred to as the "Company"). All significant inter-company transactions have been eliminated in consolidation. EAF, which was formed in June 1992 and began operations in December 1993, owns and operates certain real estate assets acquired in satisfaction of defaulted loans by Elk. EAF Enterprises LLC, which was formed in June 2003 and began operations in July 2003, owns, leases and resells medallions acquired in satisfaction of foreclosures by Elk. Medallion Auto Management LLC, which was formed in June 2003 and began operations in July 2003, owns, leases and resells automobiles in conjunction with the medallions owned by EAF Enterprises LLC. EAF Leasing LLC, which was formed in August 2003 and began operations in October 2003, owns and leases medallions acquired in satisfaction of foreclosures by Elk. EAF Leasing II LLC, which was formed in August 2003 and began operations in October 2003, owns and leases medallions acquired in satisfaction of foreclosures by Elk. EAF Leasing III LLC, which was formed in January 2004 and began operations in April 2004, owns and leases medallions acquired in satisfaction of foreclosures by Elk. Ameritrans organized another subsidiary on June 8, 1998, Elk Capital Corporation ("Elk Capital"), which may engage in similar lending and investment activities as its parent. Since its inception, Elk Capital has had no operations. Presentation of Prior Year Data Certain reclassifications have been made to conform prior year data with the current presentation. Income Taxes The Company has elected to be taxed as a Regulated Investment Company ("RIC") under the Internal Revenue Code (the "Code"). A RIC generally is not taxed at the corporate level to the extent its income is distributed to its stockholders. In order to qualify as a RIC, the Company must payout at least 90 percent of its net taxable investment income to its stockholders as well as meet other requirements under the Code. In order to preserve this election for fiscal 2005, the Company intends to make the required distributions to its stockholders. The Company is subject to certain state and local franchise taxes, as well as related minimum filing fees assessed by state taxing authorities. Such taxes and fees are reported as provisions for income taxes and reflected in each of the fiscal years presented. Earnings Per Share Basic earnings per share includes no dilution and is computed by dividing income available to common stockholders by the weighted average number of common shares outstanding for the period. Diluted earnings per share reflect, in periods in which they have a dilutive effect, the effect of common shares issuable upon the exercise of stock options and warrants. The difference between reported basic and diluted weighted average common shares results from the assumption that all dilutive stock options outstanding were exercised. For the years presented, the effect of common stock equivalents has been excluded from the diluted calculation since the effect would be antidilutive. Loan Valuations The Company's loan portfolio is carried at fair value. Since no ready market exists for these loans, the fair value is determined in good faith by the board of directors of the Company (the "Board of Directors"). In determining the fair value, the Board of Directors considers factors such as the financial condition of the borrower, the adequacy of the collateral, individual credit risks, historical loss experience and the relationships between current and projected market rates and portfolio rates of interest and maturities. The fair value of the loans has been determined to approximate cost less unrealized depreciation. Use of Estimates The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make extensive use of 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 fair value of loans receivable and the fair value of financial instruments. 2. Medallions During the prior year ended June 30, 2004, Elk transferred Chicago medallions obtained from defaulted and foreclosed loans to certain newly formed wholly-owned subsidiaries. The subsidiaries borrowed funds in the amount of $2,382,201 from Elk to complete the purchases of the medallions and gained title by paying related transfer fees and satisfying outstanding liens with Elk and the city of Chicago. The subsidiaries lease medallions owned in the Chicago market under weekly and long-term ooperating lease terms. The weekly medallion leases, including automobiles, are with individuals and automatically renew each week, up to a maximum period of 157 weeks, but may be terminated by the lessee at the conclusion of any weekly period. The weekly leases also include an option for the lessee to purchase either the medallion or automobile, at an amount defined in the agreement, at any time throughout the term of the lease, with credit given for a portion of the lease payments towards the purchase price. As of September 30, 2004 and June 30, 2004, no purchase options have been exercised. The long-term medallion leases are with taxi cab companies expiring December 31, 2005 through February 28, 2006, and may be cancelled by either party with forty-five days' advance written notice. Leasing income under all medallion and taxi cab leases for the quarter ended September 30, 2004 was $51,537. 3. Debentures Payable to SBA At September 30, 2004 and June 30, 2004 debentures payable to the SBA consist of subordinated debentures with interest payable semiannually, as follows: Effective Interest 9/30/04 and 6/30/04 Issue Date Due Date Rate Principal Amount ---------- -------- --------- ------------------ July 2002 September 2012 4.67%(1) $ 2,050,000 December 2002 March 2013 4.63%(1) $ 3,000,000 September 2003 March 2014 4.12%(1) $ 5,000,000 February 2004 March 2014 4.12%(1) $ 1,950,000 ------------------ $ 12,000,000 ================== (1) Elk is required to pay an additional annual user fee of 0.866% on these debentures. Under the terms of the subordinated debentures, Elk 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. SBA Commitment In January 2002 the Company and the SBA entered into an agreement whereby the SBA committed to reserve debentures in the amount of $12,000,000 to be issued by the Company on or prior to September 30, 2006. A 2% leverage fee will be deducted pro rata as the commitment proceeds are drawn down. A $120,000 non-refundable fee was paid by Elk at the time of obtaining the $12,000,000 commitment. In February 2004, Elk made the final draw down under this commitment. 4. Notes Payable to Banks At September 30, 2004 and June 30, 2004 Elk had loan agreements with three banks for lines of credit aggregating $40,000,000. At September 30, 2004 and June 30, 2004, Elk had $26,858,652 and $28,908,652 respectively, outstanding under these lines. The loans, which mature at various dates between December 31, 2004 and January 3, 2005, bear interest at the lower of either the reserve adjusted LIBOR rate plus 1.5% or the banks' prime rates minus 0.5%. Upon maturity, Elk anticipates extending these lines of credit for another year, as has been its practice in previous years. Pursuant to the terms of the agreements the Company is required to comply with certain covenants and conditions, as defined in the agreements. The Company has pledged its loans receivable and other assets as collateral for the above lines of credit. 5. Commitments and Contingencies Interest Rate Swaps On February 11, 2003, Elk entered into an interest rate Swap transaction for $5,000,000 with a bank expiring February 11, 2005. Elk entered into this Swap transaction to protect the Company from an upward movement in interest rates relating to outstanding bank debt. The Swap transaction provides for a fixed rate of 3.56% for Elk. If the floating one month LIBOR rate is below the fixed rate, Elk is obligated to pay the bank for the difference in rates. If the one-month LIBOR rate is above the fixed rate, the bank is obligated to pay Elk for the differences in rates. 6. Other Matters Quarterly Dividend The Company's Board of Directors declared a dividend of $0.28125 per share or $84,375 on September 21, 2004 on the Company's 9 3/8% Cumulative Participating Preferred Stock (the "Participating Preferred Stock") for the period July 1, 2004 through September 30, 2004, which was paid on October 15, 2004 to all holders of the Participating Preferred Stock of record as of September 30, 2004. 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 10-Q and the Company's Annual Report on Form 10-K for the year ended June 30, 2004. Critical Accounting Policies The preparation of the Company's consolidated financial statements in comformity with generally accepted accounting principles requires management to use judgment in making estimates and assumptions that affect amounts reported and disclosed in the financial statements and related notes. Significant estimates made by the Company include valuation of loans and equity investments, evaluation of the recoverability of various receivables and the assessment of litigation and other contingencies. The Company's ability to collect receivables and recover the value of its loans depends on a number of factors, including financial conditions and its ability to enforce provisions of its contracts in the event of disputes, through litigation if necessary. Although the Company believes that estimates and assumptions used in determining the recorded amounts of net assets and liabilities at September 30, 2004, are reasonable, actual results could differ materially from the estimated amounts recorded in the Company's financial statements. Our critical accounting policies are those applicable to the valuation of loans receivable and various investments, as discussed below: Valuation of Loans and Debt Securities. For loans and debt securities, fair value generally approximates cost less unrealized depreciation. Overall financial condition of the borrower, the adequacy of the collateral, individual credit risks, historical loss experience and other factors are criteria considered in the determination of fair value. Equity Securities. The fair value of publicly traded corporate equity securities is based on quoted market prices. Privately held corporate equity securities are recorded at the lower of cost or fair value. For these non- quoted investments, the Company reviews the financial performance of the privately held companies in which the investments are maintained. If and when a determination is made that a decline in fair value below the cost basis is other than temporary, the related investment is written down to its estimated fair value. 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 unrealized depreciation on loans receivable. Subsequent reductions in estimated net realizable value are recorded as losses on assets acquired in satisfaction of loans. General Ameritrans acquired Elk on December 16, 1999 in a share for share exchange. 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. Both Ameritrans and Elk are registered as an investment company under the Investment Company Act of 1940. Elk makes loans and investments to businesses that qualify under SBA regulations for funding under the Small Business Investment Act of 1958, as amended. Elk's primary lending activity is to originate and service loans collateralized by New York City, Boston, Chicago and Miami taxicab medallions. Elk also makes loans and investments in other diversified businesses. At September 30, 2004, 73% of Elk's loan portfolio consisted of loans secured by taxi medallions and 27% consisted of loans to other diversified businesses. From inception through April 2002, Ameritrans' only activities have been the operations of Elk. In May 2002, Ameritrans made its first loans to businesses using the proceeds raised from a public offering, which was completed in April 2002. Elk created two additional wholly owned subsidiaries, EAF Enterprises LLC and Medallion Auto Management LLC, in June 2003. Beginning July 2003, EAF Enterprises LLC took title to five of Elk's foreclosure medallions and leased them to individual operators and Medallion Auto Management LLC purchased vehicles to lease with the medallions. The taxi operators have the option to purchase both the medallions and vehicles. Elk set up two more wholly owned subsidiaries, EAF Leasing LLC and EAF Leasing II LLC, in August 2003. Starting October 2003, EAF Leasing LLC and EAF Leasing II LLC acquired fourteen and thirteen medallions, respectively, in satisfaction of foreclosures from Elk and leased them to corporate operators. Elk created another wholly owned subsidiary, EAF Leasing III LLC, in January 2004. Commencing in April 2004, EAF Leasing III LLC acquired eight medallions in satisfaction of foreclosures from Elk and leased them to a corporate operator. Results of Operations for the Quarter Ended September 30, 2004 and 2003 Total Investment Income The Company's investment income for the period ended September 30, 2004 decreased $174,101 or 12% to $1,281,134 as compared with the comparable period ended September 30, 2003. This decrease was mainly due to the impact of lower average interest rates charged on new and modified loans as well as lower outstanding loans receivable. The decrease in interest income was offset by an increase in other fees of $49,316, primarily due to an increase in origination fees, and increase in leasing income of $37,701. Operating Expenses Interest expense for the quarter ended September 30, 2004 increased $9,403 or 3% to $382,156 when compared to the quarter ended September 30, 2003. This reflects the impact of higher interest charged on outstanding bank borrowings, offset, at least partially, by lower average outstanding borrowings. Salaries and employee benefits increased $16,117 or 7% when compared with the similar quarter in the prior year. These increases reflect the increases from the officers' employment agreements. Professional fees increased $22,681 or 20% when compared with the similar quarter in the prior year. Foreclosure expenses decreased $211,904 and write off and depreciation of interest and loans receivable decreased $154,374 or 60% when compared with the similar quarter in the prior year. Both of these decreases reflect the reduction of foreclosures of the Chicago medallion loans. Other administrative expenses decreased $38,344 or 13% when compared with the similar quarter in the prior year. This decrease relates primarily to the reduction in Chicago service fees and computer expense offset by increases in commissions and depreciation. Net Income (Loss) Net income increased from a net loss of $118,398 in the period ended September 30, 2003 to a net income of $84,712 in the period ended September 30, 2004. The increase in net income for the period was attributable primarily to fewer write-downs of the Chicago loan portfolio and related foreclosure expenses, which were partially offset by increases in interest, salaries and professional fees. Dividends of Participating Preferred Stock for the quarter amounted to $84,375 in each of the quarters ended September 30, 2004 and 2003. Balance Sheet and Reserves Total assets decreased by $2,162,613 as of September 30, 2004 when compared to total assets as of June 30, 2004. This decrease was due to lower outstanding loans receivable, reductions in assets acquired in satisfaction of loans and receivable from debtors on sales of assets acquired in satisfaction of loans due to payoffs and receipt of settlement proceeds, partially offset by an increase in equity securities and prepaid expenses and other assets. In addition, Elk reduced its short-term bank borrowings by $2,050,000, net of proceeds. Liquidity and Capital Resources The Company has funded its operations through private and public placements of its securities, bank financing, the issuance to the SBA of its subordinated long-term debentures, loan amortization and prepayments. As a RIC, we distribute at least 90% of our investment company taxable income. Consequently, we primarily rely upon external sources of funds to finance growth. On April 24, 2002, Ameritrans completed a public offering of 300,000 units, consisting of one share of Common Stock, one share of 9 3/8% cumulative participating redeemable Preferred Stock, face value $12.00, and one redeemable Warrant exercisable into one share of Common Stock. The gross proceeds from the sale were $5,700,000 less offering expenses of $1,704,399. A portion of the proceeds was used temporarily to reduce bank and SBA indebtedness. Ameritrans also used part of the proceeds to start its own loan portfolio. At September 30, 2004, 69% of Elk's indebtedness was represented by indebtedness to its banks and 31% by debentures issued to the SBA with fixed rates of interest plus user fees resulting in rates ranging from 4.99% to 5.54%. Elk currently may borrow up to $40,000,000 under its existing lines of credit, subject to limitations imposed by its borrowing base agreement with its banks and the SBA, the statutory and regulatory limitations imposed by the SBA and the availability of funds. In addition, during January 2002, the Company and the SBA entered into an agreement whereby the SBA committed to reserve debentures in the amount of $12,000,000 to be issued to the Company on or prior to September 30, 2006. In July and December 2002, new debentures payable to the SBA were drawn from the reserved pool of $12,000,000 in the amount of $2,050,000 and $3,000,000, respectively. The interim interest rates assigned were 2.351 % and 1.927%, respectively. The fixed rates of 4.67% and 4.628% were determined on the pooling dates of September 25, 2002 and March 26, 2003, respectively. On September 15, 2003 and February 17, 2004, two new debentures payable to the SBA were drawn in the amount of $5,000,000 and $1,950,000, respectively. Interim interest rates assigned were 1.682% and 1.595%, respectively, subsequently adjusted to the long term fixed rate of 4.12% on the pooling date of March 24, 2004. In addition to the fixed rates, there is an additional annual SBA user fee on each debenture of 0.87% per annum making the rates 5.54%, 5.498% and 4.99% before applicable amortization of points and fees. The draw down in February 2004 was the final draw from the $12,000,000 commitment. Loan amortization and prepayments also provide a source of funding for Elk. Prepayments on loans are influenced significantly by general interest rates, economic conditions and competition. Like Elk, Ameritrans will distribute at least 90% of its investment company taxable income and, accordingly, will continue to rely upon external sources of funds to finance growth. In order to provide the funds necessary for expansion, management expects to raise additional capital and to incur, from time to time, additional bank indebtedness and (if deemed necessary) to obtain SBA loans. There can be no assurances that such additional financing will be available on acceptable terms. New Accounting Standards In March 2004, the FASB issued the exposure draft "Share- Based Payment." The proposed statement would require all equity-based awards to employees to be recognized in the Consolidated Statement of Operations based on their fair value for fiscal years beginning after December 15, 2004. The new standard, if accepted in its present form, would apply to all awards granted, modified or settled after the effective date. The Company believes the adoption of this proposed statement will not have a material effect on its consolidated financial position and results of operations. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the Commission's rules and forms, and that such information is accumulated and communicated to our management to allow timely decisions regarding required disclosure based closely on the definition of "disclosure controls and procedures" in Rule 13a-15(e) promulgated under the Exchange Act. In designing and evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures. The Company's business activities contain elements of risk. The Company considers the principal types of risk to be fluctuations in interest rates and portfolio valuations. The Company considers the management of risk essential to conducting its businesses. Accordingly, the Company's risk management systems and procedures are designed to identify and analyze the Company's risks, to set appropriate policies and limits and to continually monitor these risks and limits by means of reliable administrative and information systems and other policies and programs. The Company values its portfolio of loans and investments at fair value as determined in good faith by the Company's Board of Directors in accordance with the Company's valuation policy. Unlike certain lending institutions, the Company is not permitted to establish reserves for loan losses. Instead, the Company must value each individual investment and portfolio loan on a quarterly basis. The Company records unrealized depreciation on investments and loans when it believes that an asset has been impaired and full collection is unlikely. Without a readily ascertainable market value, the estimated value of the Company's portfolio of investments and loans may differ significantly from the values that would be placed on the portfolio if there existed a ready market for the investments and loans. The Company adjusts the valuation of the portfolio of loans and investments quarterly to reflect the Board of Directors' estimate of the current fair value of each investment and loan in the portfolio. Any changes in estimated fair value of loans are recorded in the Company's blance sheet as unrealized depreciation on lonas receivable and also in the Company's statement of operations as write-off and depreciation on loans receivable. Any changes in estimated fair value of investments are recorded in the Company's blance sheets as accumulated other comprehensive loss. In addition, the illiquidity of our investments and loan portfolio may adversely affect our ability to dispose of investments or loans at times when it may be advantageous for us to liquidate such investments or loans. Also, if we were required to liquidate some or all of these items in the portfolio, the proceeds of such liquidation may be significantly less than the current value of such investments or loans. Because we borrow money to make loans and investments, our net operating income is dependent upon the difference between the rate at which we borrow funds and the rate at which we loan and invest these funds. As a result, there can be no assurance that a significant change in market interest rates will not have a material adverse effect on our interest income. As interest rates rise, our interest costs increase, decreasing the net interest rate spread we receive and thereby adversely affect our profitability. Although we intend to continue to manage our interest rate risk through asset and liability management, including the use of interest rate swaps, general rises in interest rates will tend to reduce our interest rate spread in the short term. ITEM 4. CONTROLS AND PROCEDURES The Company maintains disclosure controls and procedures that are designed to ensure that information required to be declosed in our periodic reports filed pursuant to the rules promulgated under the Exchange Act are recorded, processed, summarized, and reported within the periods specified in the Commissions's rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer (also acting as Chief Financial Officer), to allow timely decisions regarding required disclosure. As of the end of the period covered by this report, we carried out an evalution, under the supervision and with the participation of our management, including our Chief Executive Officer (also acting as Chief Financial Officer), of the effectiveness of the design and operation of our disclosure controls and procedures as defined in Rules 13a- 15(e) and 15d-15(e) of the Exchange Act. Based on that evaluation, the Company concluded that, as of the end of the period covered by this report, our disclosure controls and procedures are effective in timely communicating the material information required to be included in our periodic SEC filings. There were no changes to our internal controls over financial reporting that occurred during our most recently completed fiscal quarter that materially affected, or is reasonably likely to materially affect our internal control over financial reporting. PART II. OTHER INFORMATION ITEM 6-- Exhibits and Reports on Form 8-K (a) Exhibits 10.1 Letter Agreement between Israel Discount Bank of New York and Elk dated October 27, 2004 extending line of credit. 10.2 Promissory Note dated November 1, 2004 between Ameritrans and Bank Leumi USA and Letter Agreement dated November 1, 2004 between aforementioned parties. 31.1 Certification of the Chief Executive and Chief Financial Officer of the Company pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. 32.1 Certification of the Chief Executive and Chief Financial Officer of the Company pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. (b) Reports on Form 8-K None 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: November 15, 2004 By: /s/ Gary C. Granoff -------------------- Gary C. Granoff Chief Financial Officer (Principal Financial Officer and Chief Accounting Officer) EX-10 2 exhibit101november.txt 10.1 Exhibit 10.1 October 27, 2004 Mr. Gary Granoff Elk Associates Funding Corp. 747 Third Avenue New York, NY 10017 Dear Gary: We are pleased to confirm that we hold available a line of credit for Elk Associates Funding Corp. in the amount of $16,000,000. Credit availability under this line is subject to the receipt of and continuing satisfaction with current financial and other information which current information is to be furnished by you to the Bank as we may, from time to time, require. The line of credit expires on December 31, 2004. As in the past, the line of credit may be withdrawn at the Bank's sole discretion at any time. If you have any questions, please call me. Very truly yours, /s/ Robert J. Fainelli Robert J. Fainelli First Vice President ISRAEL DISCOUNT BANK OF NEW YORK o MEMBER FDIC 511 FIFTH AVE. NEW YORK, NY 10017-4997 o TEL: (212) 551-8500 EX-10 3 november2004promnote.txt 10.2 Exhibit 10.2 November 1, 2004 Elk Associates Funding Corporation ("Borrower") 747 Third Avenue, 4th Floor New York, New York 10017 Attn: Mr. Gary Granoff, President Dear Mr. Granoff: Reference is made to promissory note dated November 1, 2004 in the principal amount of $8,000,000. You have agreed that for good and valuable consideration including but not limited to the extension and increase of credit accommodations to Borrower, in the amount of $8,000,000, that letter agreement dated January 20, 1998 shall continue to be in full force and effect with respect to credit accommodations now or in the future outstanding to Borrower. You have agreed that the first paragraph of such letter is modified to provide as follows: "In order to induce you to make and/or continue loans for the account of the undersigned pursuant to Promissory Note (Grid) dated November 1, 2004 as such note is hereafter modified, extended, renewed or replaced with other notes, the Borrower will, and will cause each affiliate and subsidiary (to the extent applicable) to:" Please confirm your agreement to the foregoing by signing and returning a copy of this letter to the undersigned. Very truly yours, BANK LEUMI USA By: /s/ Iris Schechter -------------------------- Iris Schechter, Vice President Consented and Agreed to: ELK ASSOCIATES FUNDING CORPORATION By: /s/ Gary Granoff ----------------------- Gary Granoff, President By: /s/ Margaret Chance ---------------------------------- Margaret Chance, Vice President and Secretary "THIS NOTE SUPERSEDES AND REPLACES THAT CERTAIN PROMISSORY NOTE (GRID) DATED February 2, 2004 IN THE ORIGINAL PRINCIPAL AMOUNT OF $8,000,000.00." PROMISSORY NOTE (GRID) New York, N.Y. November 1, 2004 $8,000,000 For Value Received, ELK ASSOCIATES FUNDING CORP. promises to pay to the order of BANK LEUMI USA (the "Bank"), at its offices at 579 Fifth Avenue, New York, New York, the principal sum of Eight Million Dollars ("Maximum Principal Amount") or, if less, the aggregate unpaid principal sum of all loans made by the Bank, in its sole discretion, to the maker of this Note from time to time. The principal sum of each such loan shall be payable January 3, 2005. Within the limits of the Maximum Principal Amount, the maker may borrow, prepay, and reborrow in the manner provided herein. Each loan shall bear interest (from the date of such loan), at the option of the maker, at a rate per annum which shall be equal to (a) the rate of interest designated by the Bank, and in effect from time to time, as its "Reference Rate" minus 1/2% per annum, adjusted when said Reference Rate changes (the maker acknowledges that the Reference Rate may not necessarily represent the lowest rate of interest charged by the Bank to customers) or (b) 1 1/2% per annum above the Libor Rate (Reserve Adjusted)* for a one, two or three month term, as elected by the maker and calculated by the Bank, in the manner hereinafter provided, but in no event in excess of the maximum rate permitted by applicable law; provided, that in the event the Bank shall have determined that by reason of circumstances affecting the Libor Rate (Reserve Adjusted) adequate and reasonable means do not exist for ascertaining the Libor Rate (Reserve Adjusted) for any Interest Period, the applicable rate of interest during such Interest Period shall be equal to its Reference Rate minus 1/2% per annum adjusted when said Reference Rate changes, but in no event in excess of the maximum rate permitted by law; further provided that if, at the end of any Interest Period, the maker has failed to timely notify the Bank of its election of the choice of interest rate for or length of the next Interest Period, then the interest rate in effect thereafter shall be at the Libor Rate (Reserve Adjusted) plus 1 1/2% per annum for an Interest Period the length of which shall be the same length as the immediately preceding Interest Period unless such Interest Period would end after the stated maturity date of this Note, in which case the Interest Period shall be of a duration equal to the next longest Interest Period which would end prior to such scheduled maturity date, provided further that no Libor Rate (Reserve Adjusted)-based loan shall be made less than one month before the stated maturity date of this Note, or after the occurrence and continuance of an Event of Default or an event which, upon notice, passage of time or both would constitute an Event of Default. - ---------- * "Libor Rate" means, relative to any Interest Period (hereinafter defined) for loans made pursuant to this Note and which bear interest at the "Libor Rate (Reserve Adjusted)", the rate of interest per annum determined by the Bank to be the arithmetic mean (rounded upward to the next 1/16th of 1%) of the rates of interest per annum at which dollar deposits in the approximate amount of the amount of the loan to be made or continued hereunder by the Bank and having a maturity comparable to such Interest Period would be offered to the Bank in the London Interbank market at its request at approximately 11:00 a.m. (London time) two Business Days prior to the commencement of such Interest Period. "Libor Reserve Percentage" means, relative to any Interest Period for loans hereunder, the percentage (expressed as a decimal, rounded upward to the next 1/100th of 1%) in effect on such day (whether or not applicable to the Bank) under the regulations issued from time to time by the Federal Reserve System Board for determining the maximum reserve requirement (including any emergency, supplemental or other marginal reserve requirement) with respect to Eurocurrency funding (currently referred to as a "Eurocurrency Liabilities" in Regulation D of the Federal Reserve System Board). "Libor Rate (Reserve Adjusted)" means, relative to any loan to be made or continued hereunder for any Interest Period, the rate of interest per annum (rounded upwards to the next 1/16th of 1%) determined by the Bank as follows: Libor Rate Libor Rate = --------------------------------- (Reserve Adjusted) 1.00 - Libor Reserve Percentage Interest hereunder shall be payable on the last day of each Interest Period and at maturity (whether by acceleration or otherwise). The term "Interest Period" as used in this Note shall mean a period of one, two or three month(s), as elected by the maker by written or facsimile notice to the Bank given not later than 12:00 noon three Business Days prior to the commencement of an Interest Period. No Interest Period shall extend beyond the stated maturity date of this Note. The initial Interest Period for this Note shall begin on the day of the initial draw down under the Note, and each subsequent Interest Period shall begin on the last day of the immediately preceding Interest Period. The Bank shall give notice to the maker of the interest rate determined for each Interest Period as provided herein, and such notice shall be conclusive and binding upon the maker for all purposes absent manifest error. The maker shall pay to the Bank to compensate it for any loss, cost or expense that the Bank determines is attributable to any prepayment of a loan made by the Bank to the maker using the Libor Rate (Reserve Adjusted). Such compensation shall include an amount equal to the excess (if any) of (i) the amount of interest that otherwise would have accrued on the principal amount so prepaid for the period from the date of such prepayment to the last day of the then current Interest Period for such loan at the applicable rate of interest for such loan provided herein over (ii) the amount of interest that otherwise would have accrued to such principal amount at a rate per annum equal to the interest component of the amount the Bank would have bid in The London Interbank market for dollar deposits of leading banks in amounts comparable to such principal amount and with maturities comparable to such period (as reasonably determined by the Bank). The term "Business Day" shall mean any day of the year on which the Bank is open for business (as required or permitted by law or otherwise) and on which dealings in the U.S. dollar deposits are carried on in London, England. If any law, treaty, rule, regulation or determination of a court or governmental authority or any change therein or in the interpretation or application thereof (each, a "Change in Law") shall make it unlawful for the Bank to make Libor Rate (Reserve Adjusted)-based loans, or to maintain interest rates based on Libor, then in the former event, any obligation of the Bank contained herein or in any agreement of the Bank to make available such unlawful Libor Rate (Reserve Adjusted)-based loans shall immediately be cancelled, and in the latter event, any such unlawful Libor Rate (Reserve Adjusted)-based loans then outstanding shall be converted, at the Bank's option, so that interest on the outstanding principal balance subject hereto is determined in relation to the Reference Rate as hereinabove provided; provided however, that if any such Change in Law shall permit any Libor Rate (Reserve Adjusted)-based loans to remain in effect until the expiration of the Interest Period applicable thereto, then such permitted Libor Rate (Reserve Adjusted)-based loans shall continue in effect until the expiration of such Interest Period. Upon the occurrence of any of the foregoing events, maker shall pay to the Bank immediately upon demand such amounts as may be necessary to compensate the Bank for any fines, fees, charges, penalties or other costs incurred or payable by the Bank as a result thereof and which are attributable to any Libor Rate (Reserve Adjusted) options made available to maker hereunder, and any reasonable allocation made by the Bank among its operations shall be conclusive and binding upon maker. If any Change in Law or compliance by the Bank with any request or directive (whether or not having the force of law) from any central bank or other governmental authority shall: (A) subject the Bank to any tax, duty or other charge with respect to any Libor Rate (Reserve Adjusted) options, or change the basis of taxation of payments to the Bank of principal, interest, fees or any other amount payable hereunder (except for changes in the rate of tax on the overall net income of the Bank); or (B) impose, modify or hold applicable any reserve, special deposit, compulsory loan or similar requirement against assets held by, deposits or other liabilities in or for the account of, advances or loans by, or any other acquisition of funds by any office of the Bank; or (C) impose on the Bank any other condition; and the result of any of the foregoing is to increase the cost to the Bank of making, renewing or maintaining any Libor Rate (Reserve Adjusted)-based loan hereunder and/or to reduce any amount receivable by the Bank in connection therewith, then in any such case, maker shall pay to the Bank immediately upon demand such amounts as may be necessary to compensate the Bank for any additional costs incurred by the Bank and/or reductions received by the Bank which are attributable to such Libor Rate (Reserve Adjusted)-based loan. In determining which costs incurred by the Bank and/or reductions in amounts received by the Bank -2- are attributable to any Libor Rate (Reserve Adjusted)-based loan made to maker hereunder, any reasonable allocation made by the Bank among its operations shall be conclusive and binding upon maker. The Bank is hereby authorized to enter on the schedule attached hereto the amount of each loan and each payment of principal thereon, without any further authorization on the part of the maker or any endorser or guarantor of this Note, but the Bank's failure to make such entry shall not limit or otherwise affect the obligations of the maker or any endorser or guarantor of this Note. In the event that any Liabilities (as hereinafter defined) of maker to the Bank are due at any time that the Bank receives a payment from maker on account of this Note or any such other Liabilities of maker, the Bank may apply such payments to amounts due under this Note or any such other Liabilities in such manner as the Bank, in its discretion, elects, regardless of any instructions from maker to the contrary. The maker and each endorser and guarantor of this Note acknowledge and agree that the use of this form of Note is for their convenience, and there is no obligation on the part of the Bank to make loans to the maker whatsoever. Interest shall be computed on the basis of a 360-day year. Each maker or endorser authorizes (but shall not require) the Bank to debit any account maintained by the maker or endorser with the Bank, at any date on which the payment of principal or of interest on any of the Liabilities is due, in an amount equal to any unpaid portion of such payment. If the time for payment of principal of or interest on any of the Liabilities or any other money payable hereunder or with respect to any of the Liabilities becomes due on a day on which the Bank's offices are closed (as required or permitted by law or otherwise), such payment shall be made on the next succeeding business day, and such extension shall be included in computing interest in connection with such payment. All payments by any maker or endorser of this Note on account of principal, interest or fees hereunder shall be made in lawful money of the United States of America, in immediately available funds. All Property (as hereinafter defined) held by the Bank shall be subject to a security interest in favor of the Bank or holder hereof as security for any and all Liabilities. The term "Property" shall mean the balance of every deposit account of the maker with the Bank or any of the Bank's nominees or agents and all other obligations of the Bank or any of its nominees or agents to the maker, whether now existing or hereafter arising, and all other personal property of the maker (including without limitation all money, accounts, general intangibles, goods, instruments, documents and chattel paper) which, or evidence of which, are now or at any time in the future shall come into the possession or under the control of or be in transit to the Bank or any of its nominees or agents for any purpose, whether or not accepted for the purposes for which it was delivered. The term "Liabilities" shall mean the indebtedness evidenced by this Note and all other indebtedness, liabilities and obligations of any kind of the maker (or any partnership or other group of which the maker is a member) to (a) the Bank, (b) any group of which the Bank is a member, or (c) any other person if the Bank has a participation or other interest in such indebtedness, liabilities or obligations, whether (i) for the Bank's own account or as agent for others, (ii) acquired directly or indirectly by the Bank from the maker or others, (iii) absolute or contingent, joint or several, secured or unsecured, liquidated or unliquidated, due or not due, contractual or tortious, now existing or hereafter arising, or (iv) incurred by the maker as principal, surety, endorser, guarantor or otherwise, and including without limitation all expenses, including attorneys' fees, incurred by the Bank in connection with any indebtedness, liabilities or obligations or any of the Property (including any sale or other disposition of the Property). Upon the happening, with respect to any maker, endorser or guarantor of this Note or any assets of any such maker, endorser or guarantor, of any of the following events (each an "Event of Default"): death of the maker, endorser or guarantor or any member of the maker, endorser or guarantor (if a partnership); the failure to furnish the Bank with any requested information or failing to permit inspection of books or records by the Bank or any of its agents; the making of any misrepresentation to the Bank in obtaining credit for any of them; dissolution (if a corporation or partnership); the making of a mortgage or pledge; the commencement of a foreclosure proceeding; default in the payment of principal or interest on this Note or in the payment of any other obligation of any said maker, endorser or guarantor held by the Bank or holder hereof or in the performance or observance of any covenant or agreement contained in the instrument evidencing such obligation; default in the payment of principal of or interest on any indebtedness for borrowed money owed to any other person or entity (including any such indebtedness in the nature of a lease) or default -3- in the performance or observance of the terms of any instrument pursuant to which such indebtedness was created or is secured, the effect of which default is to cause or permit any hoder of any such indebtedness to cause the same to become due prior to its stated maturity (and whether or not such default is waived by the holder thereof); a change in the financial condition or affairs of any of them which in the opinion of the Bank or subsequent holder hereof materially reduces his, their or its ability to pay all of his their or its obligations; the suspension of business; the making of an assignment for the benefit of creditors, or appointment of a trustee, receiver or liquidator for the maker, endorser or guarantor or for any of his, its or their property, or the commencement of any proceedings by the maker, endorser or guarantor under any bankruptcy, reorganization, arrangement of debt, insolvency, readjustment of debt, receivership, liquidation or dissolution law or statute (including, if the maker, endorser or guarantor is a partnership, its dissolution pursuant to any agreement or statute), or the commencement of any such proceedings without the consent of the maker, endorser or guarantor, as the case may be, and such proceedings shall continue undischarged for a period of 30 days; the sending of notice of an intended bulk sale; the entry of judgments or any attachment, levy or execution against any of his, their or its properties shall not be released, discharged dismissed, stayed or fully bonded for a period of 30 days or more after its entry, issue or levy, as the case may be; or the issuance of a warrant of distraint or assertion of a lien for unpaid taxes, this Note, if not then due or payable on demand, shall become due and payable immediately without demand or notice and all other debts or obligations of the makers and endorsers hereof to the Bank or holder hereof, whether due or not due and whether direct or contingent and however evidenced, shall, at the option of the Bank or holder hereof, also become due and payable immediately without demand or notice. After this Note becomes due, at stated maturity or on acceleration, any unpaid balance hereof shall bear interest from the date it becomes due until paid at a rate per annum 3% above the rate borne by this Note when it becomes due or, if such rate shall not be lawful with respect to the undersigned, then at the highest lawful rate. The liability of any party to commercial paper held by the Bank or holder hereof, other than the makers and endorsers hereof, shall remain unaffected hereby and such parties shall remain liable thereon in accordance with the original tenor thereof. Each maker and endorser agrees that if an attorney is retained to enforce or collect this Note or any other obligations by reason of non-payment of this Note when due or made due hereunder, a reasonable attorneys' fee shall be paid in addition, which fees shall be computed as follows: 15% of the principal, interest and all other sums due and owing to the payee or holder or the reasonable value of the attorneys' services, whichever is greater. This Note shall be governed by the laws of the State of New York and shall be binding upon the maker and each endorser and the maker's and each endorser's heirs, administrators, successors and assigns. The maker and each endorser hereby irrevocably consent to the jurisdiction of any New York State or Federal court located in New York City over any action or proceeding arising out of any dispute between the maker and each endorser and the Bank, and the maker further irrevocably consents to the service of process in any such action or proceeding by the mailing of a copy of such process to the maker at the address set forth below. In the event of litigation between the Bank and the maker over any matter connected with this Note or resulting from the transactions hereunder, the right to a trial by jury is hereby waived by the Bank and the maker. The maker also waives the right to interpose any set-off or counterclaim of any nature. The Bank or any holder may accept late payments, or partial payments, even though marked "payment in full" or containing words of similar import or other conditions, without waiving any of its rights. No amendment, modification or waiver of any provision of this Note nor consent to any departure by maker therefrom shall be effective, irrespective of any course of dealing, unless the same shall be in writing and signed by the Bank, and then such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given. The rights and remedies of the Bank provided for hereunder (including but not limited to the right to accelerate Liabilities of maker and to realize on any security for any such Liabilities) are cumulative with the rights and remedies of the Bank available under any other instrument or agreement or under applicable law. The undersigned, if more than one, shall be jointly and severally liable hereunder. ELK ASSOCIATES FUNDING CORPORATION By: /s/ Gary Granoff ------------------------------ Gary Granoff, President By: /s/ Margaret Chance ------------------------------ Margaret Chance, Vice President and secretary (Address) 747 Third Avenue New York, New York 10017 Value Received -4- EX-31 4 nov04exhibit311.txt 31.1 EXHIBIT 31.1 CERTIFICATION UNDER SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 DISCLOSURE IN THE REGISTRANT'S QUARTERLY REPORT I, Gary C. Granoff, President, Chief Executive Officer, and Chief Financial Officer of Ameritrans Capital Corporation, certify that: 1. I have reviewed this quarterly report on Form 10-Q of Ameritrans Capital Corporation (the "report"); 2. Based on my knowledge, this report does not contain any untrue statement 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 the report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operation, and cash flows of the registrant as of, and for, the periods presented in the report. 4. I am responsible for establishing and maintaining disclosure controls and procedures(as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to me by others within those entities, particularly during the period in which this report is being prepared; (b) Designed such internal control over financial reporting, or caused such internal controls over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; (c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures,as of the end of the period covered by this report based on such evaluation; and (d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the board of directors (or persons performing the equivalent functions): (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Dated: November 15, 2004 /s/ GARY C. GRANOFF -------------------------------------- GARY C. GRANOFF PRESIDENT, CHIEF EXECUTIVE OFFICER AND CHIEF FINANCIAL OFFICER EX-32 5 novo4exhibit321.txt 32.1 EXHIBIT 32.1 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Quarterly Report of Ameritrans Capital Corporation (the "Company") on Form 10-Q for the quarter ended March 31, 2004, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Gary C. Granoff, President, Chief Executive Officer, and Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that: 1. The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and 2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. /s/ GARY C. GRANOFF - ---------------------------------------------- GARY C. GRANOFF PRESIDENT, CHIEF EXECUTIVE OFFICER, AND CHIEF FINANCIAL OFFICER November 15, 2004 -----END PRIVACY-ENHANCED MESSAGE-----