10-Q

U.S. SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

þ   Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act 1934 for the Quarterly Period Ended March 31, 2010

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 of incorporation)	(I.R.S.  Employer Identification No.)
747 Third Avenue, New York, New York 10017
(Address of Registrant’s principal executive office) (Zip Code)
(212) 355-2449
(Registrant’s telephone number, including area code)
N/A
(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 (the “Act”) 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 þ No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company (as defined in Rule 12b-2 of the Act).

¨ Large accelerated filer ¨ Accelerated filer þ Non-accelerated filer (Do not check if a small reporting company.) ¨ Smaller reporting company

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ¨ No þ

The number of shares of registrant’s common stock, par value $.0001 per share, outstanding as of May 17, 2010 was 3,395,583. The number of shares of Registrants 9⅜ cumulative participating redeemable preferred stock outstanding as of May 17, 2010 was 300,000.

AMERITRANS CAPITAL CORPORATION AND SUBSIDIARIES

FORM 10-Q

TABLE OF CONTENTS

		\
PART I. FINANCIAL INFORMATION			3
	ITEM 1.	FINANCIAL STATEMENTS	3
	ITEM 2.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	26
	ITEM 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK	31
	ITEM 4T.	CONTROLS AND PROCEDURES	32
PART II. OTHER INFORMATION			33
	Item 1.	Legal Proceedings	33
	Item 1A.	Risk Factors	33
	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	33
	Item 3.	Default upon Senior Securities	33
	Item 4.	Removed and Reserved	33
	Item 5.	Other Information	33
	Item 6.	Exhibits	33
	Exhibit Index		33
	(a)	Exhibits	33
	SIGNATURES		35

PART I.    FINANCIAL INFORMATION

ITEM 1.   FINANCIAL STATEMENTS

AMERITRANS CAPITAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF ASSETS AND LIABILITIES

ASSETS

		March 31, 2010			June 30, 2009
		(unaudited)
Assets
Investments at fair value (cost of $26,811,944 and $28,769,396, respectively):
Non-controlled/non-affiliated investments	$	22,959,041	$	25,780,451
Non-controlled affiliated investments		11,000		11,000
Controlled affiliated investments		598,682		618,017
Total investments at fair value		23,568,723		26,409,468
Cash and cash equivalents		10,565,843		885,434
Accrued interest receivable		505,067		540,213
Assets acquired in satisfaction of loans		28,325		28,325
Furniture, equipment and leasehold improvements, net		112,529		130,217
Deferred loan costs, net		419,873		146,096
Prepaid expenses and other assets		226,793		146,403
Total assets	$	35,427,153	$	28,286,156

The accompanying notes are an integral part of these consolidated financial statements.

3

AMERITRANS CAPITAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF ASSETS AND LIABILITIES

LIABILITIES AND NET ASSETS

		March 31, 2010		June 30, 2009
Liabilities and Net Assets		(unaudited)
Liabilities:
Debentures payable to SBA	$	21,175,000	$	12,000,000
Notes payable, other		3,000,000		-
Notes payable, banks		370,000		370,000
Accrued expenses and other liabilities		500,251		562,149
Accrued interest payable		73,018		210,165
Dividends payable		84,375		-
Total liabilities		25,202,644		13,142,314
Commitments and contingencies (Notes 2, 3, 4 and 8)
Net Assets:
Preferred stock 9,500,000 shares authorized, none issued or outstanding		-		-
9-3/8% cumulative participating redeemable 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; 45,000,000 shares authorized, 3,405,583 shares issued; 3,395,583 shares outstanding		341		341
Deferred compensation (Note 9)		(822)		(29,166)
Stock options outstanding (Note 9)		191,040		191,040
Additional paid-in capital		21,139,504		21,139,504
Losses and distributions in excess of earnings		(11,392,333)		(7,327,949)
Net unrealized depreciation on investments		(3,243,221)		(2,359,928)
Total		10,294,509		15,213,842
Less:  Treasury stock, at cost, 10,000 shares of common stock		(70,000)		(70,000)
Total net assets		10,224,509		15,143,842
Total liabilities and net assets	$	35,427,153	$	28,286,156
Net asset value per common share (Note 5)	$	1.95	$	3.40

The accompanying notes are an integral part of these consolidated financial statements.

4

AMERITRANS CAPITAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

		For the three months ended				For the nine months ended
		March 31, 2010		March 31, 2009		March 31, 2010		March 31, 2009
Investment income:		(unaudited)		(unaudited)		(unaudited)		(unaudited)
Interest on loans receivable:
Non-controlled/non-affiliated investments	$	467,597	$	597,389	$	1,141,661	$	$  2,806,036
Non-controlled affiliated investments		-		2,937		-		11,042
Controlled affiliated investments		11,314		12,284		34,858		55,833
		478,911		612,610		1,176,519		2,872,911
Fees and other income		7,762		42,767		48,502		212,671
Total investment income		486,673		655,377		1,225,021		3,085,582
Expenses:
Interest		236,513		160,895		583,926		914,269
Salaries and employee benefits		503,725		486,832		1,418,137		1,758,791
Occupancy costs		61,671		61,833		207,525		215,107
Professional fees		256,935		309,988		767,546		1,100,561
Directors fees and expenses		69,750		22,881		119,097		73,359
Advisory Fee		(14,261)		49,907		299,671		99,290
Other administrative expenses		167,933		182,097		473,565		598,835
Total expenses		1,282,266		1,274,433		3,869,467		4,760,212
Net investment loss		(795,593)		(619,056)		(2,644,446)		(1,674,630)
Net realized gains (losses) on investments:
Non-controlled/non-affiliated investments		(392,494)		(51,830)		(1,082,438)		(536,164)
Non-controlled affiliated investments		-		-		-		-
Controlled affiliated investments		-		-		-		8,315
		(392,494)		(51,830)		(1,082,438)		(527,849)
Net unrealized appreciation (depreciation) on investments		272,790		(98,664)		(883,293)		(353,074)
Net realized/unrealized losses on investments		(119,704)		(150,494)		(1,965,731)		(880,923)
Net decrease in net assets from operations		(915,297)		(769,550)		(4,610,177)		(2,555,553)
Distributions to preferred shareholders		(337,500)		(84,375)		(337,500)		(253,125)
Net decrease in net assets from operations available to common shareholders	$	(1,252,797)	$	(853,925)	$	(4,947,677)	$	(2,808,678)
Weighted Average Number of Common Shares Outstanding:
Basic and diluted		3,395,583		3,395,583		3,395,583		3,395,583
Net Decrease in Net Assets from Operations Per Common Share:
Basic and diluted	$	(0.37)	$	(0.25)	$	(1.46)	$	(0.83)

The accompanying notes are an integral part of these consolidated financial statements.

5

AMERITRANS CAPITAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETS

		For the nine months ended
		March 31, 2010		March 31, 2009
		(unaudited)		(unaudited)
Decrease in net assets from operations:
Net investment loss	$	(2,644,446)	$	(1,674,630)
Net realized loss from investments		(1,082,438)		(527,849)
Unrealized depreciation on investments		(883,293)		(353,074)
Net decrease in net assets resulting  from operations		(4,610,177)		(2,555,553)
Shareholder distributions:
Distributions to preferred shareholders		(337,500)		(253,125)
Capital share transactions:
Stock options compensation expense		28,344		59,213
Net decrease in net assets resulting  from capital shares transactions and shareholder distributions		(309,156)		(193,912)
Total decrease in net assets		(4,919,333)		(2,749,465)
Net assets:
Beginning of period		15,143,842		20,798,292
End of period	$	10,224,509	$	18,048,827
Net assets per preferred	$	3,600,000	$	3,600,000
Net assets per common	$	6,624,509	$	14,448,827

The accompanying notes are an integral part of these consolidated financial statements.

6

AMERITRANS CAPITAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

		For the nine months ended
		March 31, 2010		March 31 2009
		(unaudited)		(unaudited)
Cash flows from operating activities:
Net decrease in net assets from operations	$	(4,610,177)	$	(2,555,553)
Adjustments to reconcile net decrease in net assets from operations to net cash provided by (used in) operating activities:
Depreciation and amortization		63,443		53,343
Deferred compensation		28,344		59,213
Net realized losses on investments		1,082,438		527,849
Net unrealized depreciation on investments		883,293		353,074
Portfolio Investments		(2,340,932)		(5,017,838)
Proceeds from principal receipts, sales, maturity of investments		3,215,946		35,162,869
Changes in operating assets and liabilities:
Accrued interest receivable		35,146		(128,382)
Prepaid expenses and other assets		(80,390)		210,389
Accrued expenses and other liabilities		(61,898)		(209,957)
Accrued interest payable		(137,147)		(207,231)
Total adjustments		2,688,243		30,803,329
Net cash provided by (used in) operating activities		(1,921,934)		28,247,776
Cash flows from investing activities:
Purchases of furniture and equipment		(5,288)		(1,689)
Net cash used in investing activities		(5,288)		(1,689)
Cash flows from financing activities:
Repayment of note payable, related parties		-		(100,000)
Proceeds from note payable, banks		-		3,130,000
Proceeds from debentures payable to SBA		9,175,000		-
Proceeds from note payable, other		3,000,000		-
Repayment of notes payable, banks		-		(30,525,697)
Deferred loan cost		(314,244)		-
Dividends paid		(253,125)		(253,125)
Net cash provided by (used in) financing activities		11,607,631		(27,748,822)
Net increase in cash and cash equivalents		9,680,409		497,265
Cash and cash equivalents:
Beginning of period		885,434		665,893
End of period	$	10,565,843	$	1,163,158
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest	$	721,073	$	1,121,501
Supplemental disclosure of non cash investing and financing activities:
Accrued dividend payable	$	84,375	$	-

The accompanying notes are an integral part of these consolidated financial statements.

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AMERITRANS CAPITAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF INVESTMENTS

			Portfolio Valuation as of March 31, 2010 (Unaudited)
Portfolio Company (1)	Investment Investment Rate/Maturity		Principal		Net Cost		Value
Medallion Loans Receivable (0.22%) (5)
Boston Taxicab Medallion Portfolio	2  Medallion Loans 8.19% Weighted Average Rate	$	25,627	$	25,627	$	25,627
Chicago Taxicab Medallions	2 Medallion Loans 7.83% Weighted Average Rate		45,740		45,740		45,740
Florida Taxicab	1 Medallion Loan 9.34% Rate		150,129		150,129		150,129
					221,496		221,496
Commercial Loans Receivable (86.7%) (5)
PPCP Inc. (7) Computer Software	Business Loan 8.0%, due 1/10		36,691		36,691		--
Geronimo ATM Fund LLC (7) ATM Operator	Business Loan 12.0%, due 5/09		146,822		146,822		--
Cleaners of North Beach, LLC Dry Cleaners	Collateralized Business Loan 5.5%, due 6/11		16,536		16,536		16,536
Crown Cleaners of Miami Lakes Dry Cleaners	Collateralized Business Loan 6.0%, due 7/11		2,086		2,086		2,086
Crown Cleaners of Miami Lakes Dry Cleaners	Collateralized Business Loan 6.0%, due 7/11		11,923		11,923		11,923
Andy Fur Dry Cleaning, Inc. (7) Dry Cleaners	Business Loan 11.5%, due 1/10		12,103		12,103		--
Vivas & Associates, Inc. (7) Nail Salon	Business Loan 9.0%, due 1/10		11,985		11,985		--
Monticello Desserts, Inc. Retail Bakery	Collateralized Business Loan 10.5%, due 4/10		31,841		31,841		31,841
Chao Tenga LLC d/b/a AsianChao Retail Fast Food	Collateralized Business Loan 10.5%, due 5/10		10,214		10,214		10,214
Just Salad LLC Retail Food Service	Business Loan 10.0%, due 11/10		300,000		300,000		300,000
E&Y General Construction Co. (7) Construction Services	Senior Real Estate Mortgage 10.5%, due 10/10		870,791		870,791		870,791
Sealmax, Inc. (7) Construction Services	Senior Real Estate Mortgage 12.0%, due 4/11		914,195		914,195		775,000
Pier-Tech, Inc. Specialty Construction Services	Subordinate Real Estate Mortgage – Participation 12.0%, due 9/10		6,351		6,351		6,351
Soundview Broadcasting LLC Television and Broadcasting	Senior Real Estate Mortgage 6.0%, due 9/11		1,896,954		1,896,954		1,896,954
Golden Triangle Enterprises LLC Retail Food Service	Senior Real Estate Mortgage 4.78%, due 12/13		290,471		290,471		290,471
Goldhkin Wholesale Ent. Inc. Retail Gasoline	Senior Real Estate Mortgage 11.5%, due 7/12		586,594		586,594		586,594
Conklin Services & Construction Inc. (7) Specialty Construction and Maintenance	Collateralized Business Loan 11.0%, due 10/08		1,648,181		1,648,181		1,400,954
Mountain View Bar & Grill Inc. (7) Retail Food Service	Collateralized Business Loan    12.0%, due 5/09		406,067		406,067		406,067
J. JG. Associates, Inc. (7) Consumer Receivable Collections	Senior Loan    no stated rate, no maturity		192,736		192,736		87,750
J. JG. Associates, Inc. (7) Consumer Receivable Collections	Senior Loan    no stated rate, no maturity		37,311		37,311		22,960
Car-Matt Real Estate LLC b(7) Real Estate Mortgage	Senior Real Estate Mortgage   12.0%, due 11/08		135,577		135,577		135,577

The accompanying notes are an integral part of these consolidated financial statements.

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AMERITRANS CAPITAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF INVESTMENTS (continued)

		Portfolio Valuation as of March  31, 2010 (Unaudited)
Portfolio Company (1)	Investment Investment Rate/Maturity	Principal	Net Cost	Value
633 Mead Street, LLC (3) First lien mortgage	Senior Real Estate Mortgage 12.0%, due 8/08	215,000	215,000	215,000
CMCA, LLC (3) Consumer Receivable Collections	Collateralized Business Loan 12,0% no stated maturity	106,261	106,261	106,261
CMCA, LLC #2 (3)(7) Consumer Receivable Collections	Collateralized Business Loan 12.0%, no stated maturity	266,621	266,621	266,621
Adiel Homes Inc.(7) Construction Services	Senior Real Estate Mortgage    12.0%, due 1/09	270,000	270,000	270,000
Western Pottery LLC Ceramic Sanitaryware Distributor	Subordinated Business Loan No coupon, due 12/11	361,609	361,609	361,609
PWT Holdings Inc  Water Cooler Distributor	Collateralized Business Loan 12.5%, due 6/10	355,963	355,963	355,963
Greaves-Peters Laundry Systems Inc. Laundromat	Collateralized Business Loan 10.9%, due 10/13	310,530	310,530	310,530
Other Miscellaneous Loans (6)		147,662	147,662	126,668
	Total Commercial Loans		9,599,075	8,864,721
Corporate Loans Receivable (122.07%) (5)
Charlie Brown’s Acquisition Co. (7) Retail Food Service	Term Loan B 10.3%, due 3/12	2,066,347	2,066,347	1,963,030
Resco Products Inc. Diversified Manufacturing	Term Loan, First Lien 8.5%, due 6/13	1,532,292	1,532,292	1,532,292
Alpha Media Group Inc. Publishing	Term Loan, First Lien 12.0%, due 7/13	2,091,764	2,015,242	1,359,647
Centaur LLC (7) Gaming	Term Loan, First Lien    11.3%, due 10/12	1,384,914	1,363,087	1,246,423
Learning Care Group Inc   Private Education	Term Loan, First Lien 8.0%, due 6/15	982,500	952,340	953,025
Hudson Products Holdings Inc.  Diversified Manufacturing	Term Loan, First Lien 8.0%, due 8/15	1,477,500	1,442,286	1,477,500
X-Rite Inc. Process Control Instruments	Term Loan, First Lien 8.0%, due 10/12	1,117,309	1,111,968	1,117,309
BP Metals LLC Diversified Manufacturing	Term Loan, First Lien 10.0%, due 6/13	859,567	859,567	859,567
Education Affiliates Inc.   Private Education	Term Loan, First Lien    8.0%, due 1/15	985,000	966,132	975,150
Fairway Group Holdings Corp.   Diversified Supermarkets	Term Loan, First Lien    12.0%, Due 1/15	997,500	969,171	997,500
	Total Corporate Loans		13,278,432	12,481,443
	Total loans receivable		23,099,003	21,567,660
Life Insurance Settlement Contracts (9.62%) (5)
Life Settlement Contracts	5 life insurance policies, aggregate face value of $17,659,809		2,274,014	984,000

The accompanying notes are an integral part of these consolidated financial statements.

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AMERITRANS CAPITAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF INVESTMENTS (continued)

		Portfolio Valuation as of March 31, 2010 (Unaudited)
Portfolio Company (1)	Investment Investment Rate/Maturity	Principal		Net Cost		Value
Equity Investments (9.94%) (5)
MBS Serrano, Ltd. Rental Real Estate Limited Partnership	Limited Partnership Interest			50,600		-
MBS Colonnade, Ltd. Rental Real Estate Limited Partnership	Limited Partnership Interest			50,000		12,009
MBS Sage Creek, Ltd. Rental Real Estate Limited Partnership	Limited Partnership Interest			50,000		18,800
MBS Walnut Creek, Ltd. Rental Real Estate Limited Partnership	Limited Partnership Interest			25,000		-
MBS Lodge At Stone Oak, Ltd. Rental Real Estate Limited Partnership	Limited Partnership Interest			60,000		30,896
238 W. 108 Realty LLC (2) Residential Real Estate Development	5% LLC Interest			100,000		11,000
Asset Recovery & Management, LLC (3) Consumer Receivable Collections	30.0% LLC Interest			6,000		6,000
633 Mead Street, LLC (3) Real Estate Development	40% LLC Interest			800		800
CMCA, LLC (3) Consumer Receivable Collections	30% LLC Interest			4,000		4,000
Soha Terrace II LLC Real Estate Development	4.2% LLC Interest			700,000		918,295
Fusion Telecommunications Internet Telephony	69,736 Shares of Common Stock			367,027		9,763
EraGen Biosciences Analytic Compounds	17,000 shares of Common Stock			25,500		5,500
Alpha Media Group Inc.     Publishing	1,040 Shares of Common Stock 139 Shares of Preferred Stock			-		-
	Total equity investments			1,438,927		1,017,063
	Total investments		$	26,811,944	$	23,568,723

(1)   Unless otherwise noted, all investments are collateral for the Notes payable, banks (see Note 6 to the consolidated financial statements).

(2)   As defined in the Investment Company Act of 1940, we are an affiliate of this portfolio company because, as of March 31, 2010, we own 5% or more of the portfolio company’s outstanding voting securities.

(3)   As defined in the Investment Company Act of 1940, we maintain “control” of this portfolio company because we own more than 25% of the portfolio company’s outstanding voting securities.

(4)   The Company restructured this investment (see Note 2 to the consolidated financial statements for more details).

(5)   Percentage of net assets.

(6)   Other small balance loans.

(7)   Loan receivable is on non-accrual status and therefore is considered non-income producing.

The accompanying notes are an integral part of these consolidated financial statements.

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AMERITRANS CAPITAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF INVESTMENTS

			Portfolio Valuation as of June 30, 2009
Portfolio Company (1)	Investment Investment Rate/Maturity		Principal		Net Cost		Value
Medallion Loans Receivable (2.36%) (5)
Boston Taxicab Medallion Portfolio	2  Medallion Loans 8.19% Weighted Average Rate	$	26,173	$	26,173	$	26,173
Chicago Taxicab Medallions	3 Medallion Loans 7.83% Weighted Average Rate		84,309		84,309		84,309
Florida Taxicab	2 Medallion Loans 9.34% Weighted Average Rate		252,129		252,129		246,218
					362,611		356,700
Commercial Loans Receivable (74.57%) (5)
A Lot of Cars LLC (7) Black Car Leasing	Collateralized Business Loan 7.0%, due 6/09		75,050		75,050		75,050
PPCP Inc. Computer Software	Business Loan 8.0%, due 7/08		14,272		14,272		-
PPCP Inc. Computer Software	Business Loan 8.0%, due 7/08		16,499		16,499		-
Geronimo ATM Fund LLC ATM Operator	Business Loan 12.0%, due 5/09		146,822		146,822		-
Cleaners of North Beach, LLC Dry Cleaners	Collateralized Business Loan 5.5%, due 5/11		24,454		24,454		24,454
Crown Cleaners of Miami Lakes Dry Cleaners	Collateralized Business Loan 6.0%, due 7/11		3,072		3,072		3,072
Crown Cleaners of Miami Lakes Dry Cleaners	Collateralized Business Loan 6.0%, due 7/11		19,262		19,262		19,262
City Brite Cleaners Inc. Dry Cleaners	Collateralized Business Loan 11.0%, due 7/09		665		665		665
Andy Fur Dry Cleaning, Inc. Dry Cleaners	Business Loan 14.5%, due 1/10		12,103		12,103		-
Vivas & Associates, Inc. Nail Salon	Business Loan 9.0%, due 1/10		12,185		12,185		-
PPCP, Inc. Computer Software	Business Loan 8.0%, due 1/10		5,965		5,965		-
Monticello Desserts, Inc. Retail Bakery	Collateralized Business Loan 14.0%, due 4/10		53,237		53,237		53,237
Chao Tenga LLC d/b/a AsianChao Retail Fast Food	Collateralized Business Loan 15.5%, due 5/10		98,481		98,481		98,481
Just Salad LLC Retail Food Service	Business Loan 10.0%, due 10/10		320,925		320,925		320,925
Mi Tren Greenlawn, Inc . (7)    Retail Fast Food	Subordinate Real Estate Mortgage 13.75%, due 2/11		54,616		54,616		54,616
E&Y General Construction Co. Construction Services	Senior Real Estate Mortgage 10.5%, due 10/10		870,791		870,791		870,791
Lifehouse-Golden Acres Prop. Assisted Living Facility	Senior Real Estate Mortgage –    Participation 11.0%, due 2/09		770,840		770,840		770,840
Sealmax, Inc. (7) Construction Services	Senior Real Estate Mortgage 12.0%, due 4/11		437,230		437,230		437,230
Sealmax, Inc. (7) Construction Services	Senior Real Estate Mortgage 12.0%, due 4/11		325,000		325,000		325,000
Pier-Tech, Inc. Specialty Construction Services	Subordinate Real Estate Mortgage – Participation 12.0%, due 8/10		173,140		173,140		173,140
Soundview Broadcasting LLC Television and Broadcasting	Senior Real Estate Mortgage 7.75%, due 9/11		1,939,947		1,939,947		1,939,947
Golden Triangle Enterprises LLC Retail Food Service	Senior Real Estate Mortgage 7.01%, due 12/13		331,473		331,473		331,473
Goldhkin Wholesale Ent. Inc. Retail Gasoline	Senior Real Estate Mortgage 10.25%, due 7/12		632,414		632,414		632,414
Sealmax, Inc. Construction Services	Subordinate Real Estate Mortgage 12.0%, due 4/11		155,561		155,561		155,561
Conklin Services & Construction Inc. (7) Specialty Construction and Maintenance	Collateralized Business Loan    12%, due 10/08		1,713,280		1,713,280		1,463,280

The accompanying notes are an integral part of these consolidated financial statements.

11

AMERITRANS CAPITAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF INVESTMENTS (continued)

		Portfolio Valuation as of June 30, 2009
Portfolio Company (1)	Investment Investment Rate/Maturity	Principal	Net Cost	Value
Conklin Services & Construction Inc. Dem Note Specialty Construction and Maintenance (7)	Collateralized Business Loan    11%, no maturity	43,488	43,488	43,488
Conklin Services & Construction Inc. Dem Note Specialty Construction and Maintenance (7)	Collateralized Business Loan    11%, no maturity	12,424	12,424	12,424
Mountain View Bar & Grill Inc. Retail Food Service	Collateralized Business Loan 12.0%, due 5/09	412,500	412,500	412,500
J. JG. Associates, Inc. (7) Consumer Receivable Collections	Senior Loan no stated rate, no maturity	202,736	202,736	90,750
J. JG. Associates, Inc. (7) Consumer Receivable Collections	Senior Loan no stated rate, no maturity	38,731	38,731	23,260
Natural Person (7) Real Estate Mortgage	Senior Real Estate Mortgage 12.0%, due 11/08	665,000	665,000	470,000
Lifehouse – Golden Acres Prop. Assisted Living Facility	Senior Real Estate Mortgage –    Participation 11.0%, due 7/08	137,640	137,640	137,640
Car-Matt Real Estate LLC Real Estate Mortgage	Senior Real Estate Mortgage 12.0%, due 11/08	135,577	135,577	135,577
633 Mead Street, LLC (3) First lien mortgage	Senior Real Estate Mortgage 12.0%, due 8/08	215,000	215,000	215,000
CMCA, LLC (3) Consumer Receivable Collections	Collateralized Business Loan 12%, no stated maturity	285,956	285,956	285,956
CMCA, LLC #2 (3) Consumer Receivable Collections	Collateralized Business Loan 12%, no stated maturity	106,261	106,261	106,261
Adiel Homes Inc. Construction Services	Senior Real Estate Mortgage 12%, due 1/09	250,000	250,000	250,000
Western Pottery LLC (2) Ceramic Sanitaryware Distributor	Subordinated Business Loan 5.0%, due 7/08	53,575	53,575	53,575
Western Pottery LLC (2) Ceramic Sanitaryware Distributor	Subordinated Business Loan 3.25%, due 10/08	107,142	107,142	107,142
Western Pottery LLC (2) Ceramic Sanitaryware Distributor	Subordinated Business Loan 5.0%, due 11/08	107,142	107,142	107,142
Western Pottery LLC (2) Ceramic Sanitaryware Distributor	Subordinated Business Loan 5.0%, due 3/09	56,250	56,250	56,250
Western Pottery LLC (2) Ceramic Sanitaryware Distributor	Subordinated Business Loan 5.0%, due 6/09	37,500	37,500	37,500
PWT Holdings Inc  Water Cooler Distributor	Collateralized Business Loan 12.5%, due 6/10	508,159	508,159	508,159
Greaves-Peters Laundry Systems Inc. Laundromat	Collateralized Business Loan 10.9%, due 9/13	352,922	352,922	352,922
Other Miscellaneous Loans (6)		159,143	159,143	138,148
	Total Commercial Loans		12,094,430	11,293,132
Corporate Loans Receivable (80.52%) (5)
Charlie Brown’s Acquisition Co. Retail Food Service	Term Loan B 6.67%, due 10/13	2,035,447	2,035,447	2,035,447
Resco Products Inc. Diversified Manufacturing	Term Loan, First Lien 5.95%, due 6/13	1,697,130	1,697,130	1,697,130
Alpha Media Group Inc. Publishing	Term Loan, First Lien 5.75%, due 8/14	1,845,791	1,845,791	1,935,172
Centaur LLC Gaming	Term Loan, First Lien 6.7%, due 10/12	1,356,931	1,356,931	1,384,913
Learning Care Group Inc   Private Education	Term Loan, First Lien 8.4%, due 6/15	955,556	955,556	990,000
Hudson Products Holdings Inc.  Diversified Manufacturing	Term Loan, First Lien 8.9%, due 8/15	1,448,715	1,448,715	1,488,751
X-Rite Inc. Process Control Instruments	Term Loan, First Lien 7.95%, due 10/12	1,244,210	1,244,210	1,251,051
BP Metals LLC Diversified Manufacturing	Term Loan, First Lien 8.76%, due 6/13	911,224	911,224	911,224
Test Center LLC Data Collection Services	Term Loan, First Lien 5.45%, due 10/13	512,935	512,935	499,567
	Total Corporate Loans		12,007,939	12,193,255
	Total loans receivable		24,464,980	23,843,087

The accompanying notes are an integral part of these consolidated financial statements.

12

AMERITRANS CAPITAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF INVESTMENTS (continued)

		Portfolio Valuation as of June 30, 2009
Portfolio Company (1)	Investment Investment Rate/Maturity	Principal		Net Cost		Value
Life Insurance Settlement Contracts (11.65%) (5)
Vibrant Capital Corp. (J.V. #1) (4)	7 life insurance policies, aggregate face value of $30,750,000			2,859,489		1,764,081
Equity Investments (5.30%) (5)
MBS Steeplecrest, Ltd. Rental Real Estate Limited Partnership	Limited Partnership Interest			-		-
MBS Huntwick, Ltd. Rental Real Estate Limited Partnership	Limited Partnership Interest			-		-
MBS Cranbrook Ltd. Rental Real Estate Limited Partnership	Limited Partnership Interest			-		-
MBS Serrano, Ltd. Rental Real Estate Limited Partnership	Limited Partnership Interest			50,600		-
MBS Colonnade, Ltd. Rental Real Estate Limited Partnership	Limited Partnership Interest			50,000		-
MBS Briar Meadows, Ltd. Rental Real Estate Limited Partnership	Limited Partnership Interest			-		-
MBS Indian Hollow, Ltd. Rental Real Estate Limited Partnership	Limited Partnership Interest			-		-
MBS Sage Creek, Ltd. Rental Real Estate Limited Partnership	Limited Partnership Interest			50,000		27,558
MBS Walnut Creek, Ltd. Rental Real Estate Limited Partnership	Limited Partnership Interest			25,000		7,480
MBS Lodge At Stone Oak, Ltd. Rental Real Estate Limited Partnership	Limited Partnership Interest			60,000		30,896
238 W. 108 Realty LLC (2) Residential Real Estate Development	5% LLC Interest			106,000		11,000
Asset Recovery & Management, LLC (3) Consumer Receivable Collections	30.0% LLC Interest			6,000		6,000
633 Mead Street, LLC (3) Real Estate Development	40% LLC Interest			800		800
CMCA, LLC (3) Consumer Receivable Collections	30% LLC Interest			4,000		4,000
Soha Terrace II LLC Real Estate Development	4.2% LLC Interest			700,000		700,000
Fusion Telecommunications Internet Telephony	69,736 Shares of Common Stock			367,027		9,066
EraGen Biosciences Analytic Compounds	17,000 shares of Common Stock			25,500		5,500
	Total equity investments			1,444,927		802,300
	Total investments		$	28,769,396	$	26,409,468

(1)   Unless otherwise noted, all investments as collateral for the Notes payable, banks (see Note 6 to the consolidated financial statements).

(2)   As defined in the Investment Company Act of 1940, we are an affiliate of this portfolio company because, as of June 30, 2009, we own 5% or more of the portfolio company’s outstanding voting securities.

(3)   As defined in the Investment Company Act of 1940, we maintain “control” of this portfolio company because we own more than 25% of the portfolio company’s outstanding voting securities.

(4)   The Company receives interest at a rate of 12% per annum pursuant to an agreement with another company (see Note 2 to the consolidated financial statements for more details).

(5)   Percentage of net assets.

(6)   Other small balance loans.

(7)   Loan receivable is on non-accrual status and therefore is considered non-income producing.

The accompanying notes are an integral part of these consolidated financial statements.

13

AMERITRANS CAPITAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Information at and for the three months and nine months ended March 31, 2010 and 2009 are unaudited

1.   Organization and Summary of Significant Accounting Policies

Financial Statements

The consolidated statement of assets and liabilities of Ameritrans Capital Corporation (“Ameritrans”, the “Company”, “our”, “us”, or “we”) as of March 31, 2010, and the related consolidated statements of operations, statement of changes in net assets, and cash flows for the three and nine month periods ended March 31, 2010 and 2009, 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 accounting principles generally accepted in the United States have been condensed or omitted pursuant to such rules and regulations. In the opinion of management and the board of directors of the Company (“Management” and “Board of Directors”), the accompanying consolidated financial statemen ts 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 and nine month periods ended March 31, 2010, 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, 2009, as filed with the Commission.

Organization and Principal Business Activity

Ameritrans Capital Corporation is a Delaware closed-end investment company formed in 1998, which, among other activities, makes loans and investments with the goal of generating both current income and capital appreciation.  Through our subsidiary, Elk Associates Funding Corporation (“Elk”), we make loans to finance the acquisition and operation of small businesses as permitted by the U.S. Small Business Administration (the “SBA”).  Ameritrans also makes loans to and invests in opportunities that Elk has historically been unable to make due to SBA restrictions.  Ameritrans makes loans which have primarily been secured by real estate mortgages or, in the case of corporate loans, generally are senior within the capital structure.  We also make equity investments which have primarily been in income producing real estate properties, or in real estate construction projects.

Elk was organized primarily to provide long-term loans to businesses eligible for investments by small business investment companies (each an “SBIC”) under the Small Business Investment Act of 1958, as amended (the “1958 Act”).  Elk makes loans for financing the purchase or continued ownership of businesses that qualify for funding as small concerns under SBA Regulations.

Both Ameritrans and Elk are registered as business development companies, or “BDCs,” under the Investment Company Act of 1940, as amended (the “1940 Act”).  Accordingly, Ameritrans and Elk are subject to the provisions of the 1940 Act governing the operation of BDCs.  Both companies are managed by their executive officers under the supervision of their Boards of Directors.

The Company categorizes its investments into five security types:  1) Corporate Loans Receivable; 2) Commercial Loans Receivable; 3) Life Insurance Settlements; 4) Equity Investments; and 5) Medallion Loans Receivable.   For a more detailed description of these investment categories please see the Company’s Annual Report on Form 10-K for the year ended June 30, 2009, filed with the Commission by the Company on September 28, 2009 and which is available on the Company’s web site at www.ameritranscapital.com .

Basis of Consolidation

The consolidated financial statements include the accounts of Ameritrans, Elk Capital Corporation (“ECC”), Elk and Elk’s wholly owned subsidiary, EAF Holding Corporation (“EAF”).  All significant inter-company transactions have been eliminated in consolidation.

ECC is a wholly owned subsidiary of Ameritrans, which may engage in lending and investment activities similar to its parent.   At March 31, 2010 ECC was not operating any assets.

EAF began operations in December 1993 and owns and operates certain real estate assets acquired in satisfaction of defaulted loans by Elk debtors.  At March 31, 2010 EAF was not operating any assets.

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Investment Valuations

The Company’s loans receivable, net of participations and any unearned discount are considered investment securities under the 1940 Act and are recorded at fair value. As part of fair value methodology, loans are valued at cost adjusted for any unrealized appreciation (depreciation). Since no ready market exists for these loans, the fair value is determined in good faith by management, and approved by the Board of Directors. In determining the fair value, the Company and Board of Directors consider 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. Foreclosed properties, which represent collateral received from defaulted borrowers, are valued similarly.

Loans are considered “non-performing” once they become ninety (90) days past due as to principal or interest. The value of past due loans are periodically determined in good faith by management, and if, in the judgment of management, the amount is not collectible and the fair value of the collateral is less than the amount due, the value of the loan will be reduced to fair value.

Equity investments (common stock and stock warrants, including certain controlled subsidiary portfolio investments) and investment securities are recorded at fair value, represented as cost, plus or minus unrealized appreciation or depreciation. Investments for which market quotations are readily available are valued at such quoted amounts.  When no public market exists the fair value of the investment are determined by management and approved by the Board of Directors.  Fair market valuation will be based upon the assets and revenue of the underlying investee companies as well as general market trends for business in the same industry.

The Company records the investment in life insurance policies at the Company’s estimate of their fair value based upon various factors including a discounted cash flow analysis of anticipated life expectancies, future premium payments, and anticipated death benefits.  The fair value of the investment in life settlement contracts have no ready market and are determined in good faith by management, and approved by the Board of Directors (see Note 2).

Because of the inherent uncertainty of valuations, the Company’s estimates of the values of the investments may differ significantly from the values that would have been used had a ready market for the investments existed, and the differences could be material.

Effective July 1, 2008, the Company adopted Accounting Standard Codification (“ASC”) 820-10 previously Statement of Financial Accounting Standards No. 157, Fair Value Measurements (“SFAS 157”), which expands the application of fair value accounting for investments (see Note 2).

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, a company must pay out 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 year 2009/2010, the Company intends to make the required distributions to its stockholders, therefore, no provision for federal income taxes has been provided in the accompanying consolidated financial statements.

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 included in “Other administrative expenses” in the consolidated statements of operations in each of the fiscal years presented.  The Company’s tax returns for fiscal years ended 2006 through 2009 are subject to examination by federal, state and local income tax authorities.

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.  The fair value of the Company’s investments are particularly susceptible to significant changes.

Earnings (Loss) Per Share

Basic earnings (loss) per share includes no dilution and is computed by dividing current net increase (decrease) in net assets from operations 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.

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Dividends

Dividends and distributions to our common and preferred stockholders are recorded on the record date.  The amount to be paid out as a dividend is determined by the Board each quarter and is generally based upon the earnings estimated by management.  Net realized capital gains, if any, are distributed at least annually, although the Company may decide to retain such capital gains for investment.

On June 30, 2008, the Board approved and adopted a dividend reinvestment plan that provides for reinvestment of distributions in the Company’s Common Stock on behalf of common stockholders, unless a stockholder elects to receive cash.  As a result, if the Board authorizes, and the Company declares, a cash dividend, then those stockholders who have not “opted out” of the dividend reinvestment plan will have their cash dividends automatically reinvested in additional shares of Common Stock, rather than receiving the cash dividends.  As of March 31, 2010, no shares have been purchased under the Plan.

Income Recognition

Interest income, including interest on loans in default, is recorded on an accrual basis and in accordance with loan terms to the extent such amounts are expected to be collected.  The Company recognizes interest income on loans classified as non-performing only to the extent that the fair market value of the related collateral exceeds the specific loan balance.  Loans that are not fully collateralized and in the process of collection are placed on nonaccrual status when, in the judgment of management, the collectability of interest and principal is doubtful.

Stock Options

The Company adopted ASC 718-10 (previously SFAS No. 123R, “ Accounting for Stock-Based Compensation ”) and related interpretations in accounting for its stock option plans effective January 1, 2006, and accordingly, the Company will expense these grants as required.  Stock-based employee compensation costs in the form of stock options will be reflected in net increase (decrease) in net assets from operations for grants made including and subsequent to January 1, 2006 only, since there were no unvested options outstanding at December 31, 2005, using the fair values established by usage of the Black-Scholes option pricing model, expensed over the vesting period of the underlying option.  Previously, no compensation cost was recognized under these plans, as the Company followed the disclosure-only provisions under guidance at that time.

The Company elected the modified prospective transition method for adopting ASC 718-10.  Under this method, the provisions of ASC 718-10 apply to all awards granted or modified after the date of adoption.  The compensation cost is then recognized over the vesting period of the options (see Note 9).   The Stock Option Plans expired on May 21, 2009.  The Company has chosen not to renew the plans.

Financial Instruments

The carrying value of cash and cash equivalents, accrued interest receivable and payable, and other receivables and payables approximates fair value due to the relative short maturities of these financial instruments.  The Company’s investments, including loans receivable, life settlement contracts and equity securities, are carried at their estimated fair value.  The carrying value of the bank debt is a reasonable estimate of their fair value as the interest rates are variable, based on prevailing market rates.  The fair value of the SBA debentures were computed using the discounted amount of future cash flows using the Company’s current incremental borrowing rate for similar types of borrowings (see Note 6).

Presentation of Prior Quarter Data

Certain reclassifications have been made to conform prior quarter data to the current presentation.  Although the reclassifications resulted in changes to certain line items in the previously filed financial statements the overall effect of the reclassifications did not impact net assets available.

2.   Investments

The following table shows the Company’s portfolio by security type at March 31, 2010 and June 30, 2009:

		March 31, 2010					June 30, 2009
Security Type		Cost		Fair Value	% (1)		Cost		Fair Value	% (1)
Medallion Loans	$	221,496	$	221,496	0.9%	$	362,611	$	356,700	1.3%
Commercial Loans		9,599,075		8,864,721	37.6%		12,094,430		11,293,132	42.8%
Corporate Loans		13,278,432		12,481,443	53.0%		12,007,939		12,193,255	46.2%
Life Settlement Contracts		2,274,014		984,000	4.2%		2,859,489		1,764,081	6.7%
Equity Securities		1,438,927		1,017,063	4.3%		1,444,927		802,300	3.0%
Total	$	26,811,944	$	23,568,723	100.0%	$	28,769,396	$	26,409,468	100.0%

(1)Represents percentage of total portfolio at fair value

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Investments by Industry 

Investments by industry consist of the following as of March 31, 2010 and June 30, 2009:

	Percentage of Portfolio at
	March 31, 2010	June 30, 2009
Assisted Living Facilities	-	3.4%
Broadcasting/Telecommunications	8.0%	7.3%
Commercial Construction	11.8%	11.6%
Construction and Predevelopment	7.7%	6.5%
Debt Collection	2.1%	2.0%
Education	8.2%	3.7%
Gaming	5.3%	5.2%
Gasoline Distribution	2.5%	2.4%
Laundromat	1.3%	1.3%
Life Insurance Settlement	4.2%	6.7%
Manufacturing	16.4%	15.5%
Office Water Systems	1.5%	1.9%
Printing/Publishing	5.8%	7.3%
Processing Control Instruments	4.7%	6.6%
Residential Mortgages	-	1.8%
Restaurant/Food Service	12.7%	9.5%
Sanitaryware Distributor	1.5%	4.4%
Supermarkets	4.2%	-
Industries less than 1%	2.1%	2.9%
TOTAL	100.0%	100.0%

Loans Receivable

Loans are considered non-performing once they become ninety (90) days past due as to principal or interest.  The Company had loans which are considered non-performing in the amount of $5,353,686 and $4,952,769 as of March 31, 2010, and June 30, 2009, respectively.  These loans are either fully or substantially collateralized and are in some instances personally guaranteed by the debtor.  Included in the total non-performing loans is $5,215,583 and $3,249,070 at March 31, 2010, and June 30, 2009, respectively, which is no longer accruing interest since the loan principal and accrued interest exceed the estimated fair value of the underlining collateral.  The following table sets forth certain information regarding performing and non-performing loans as of March 31, 2010, and June 30, 2009:

		March 31, 2010		June 30, 2009
Loans receivable	$	21,567,660	$	23,843,087
Performing loans		16,213,974		18,890,318
Nonperforming loans	$	5,353,686	$	4,952,769
Nonperforming loans:
Accrual	$	138,103	$	1,703,699
Nonaccrual		5,215,583		3,249,070
	$	5,353,686	$	4,952,769

The Company has pledged its loans receivable and all other assets of the Company as collateral for its lines of credit (see Note 4).

On October 29, 2008, the Company completed the sale of substantially all of the Company’s taxicab medallion portfolio to Medallion Financial Corp. and Medallion Bank, pursuant to that certain loan portfolio sale and purchase agreement dated as of July 16, 2008, as amended October 17, 2008, and further amended October 20, 2008, (the “Loan Purchase Agreement”). Ameritrans utilized cash on hand and all of the net proceeds from this transaction in the amount of $25,883,820 to fully pay down its existing bank indebtedness.  Except for costs in the amount of approximately $340,000, relating to disposal of the assets, there was no gain or loss realized on this transaction as the taxi medallion portfolio was sold at par value.  The loan Purchase Agreement was approved by the Company’s shareholders on August 26, 2008.

As of March 31, 2010 the Company has accrued approximately $218,000 in professional fees, in connection with the Company’s Investment Advisory and Management Agreement (the “Advisory Agreement”) with Velocity Capital Advisors LLC related to Corporate Loans, including $173,000 with respect to an amendment (the “Amendment”) to the Advisory

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agreement, which the Company has submitted to its stockholders for approval at the Company’s 2010 annual meeting, and which the Company anticipates will be approved at such meeting.  The Company expects to pay a fee in the amount of $173,000 to Velocity Capital Advisors upon execution of the Amendment shortly after the Company’s Annual Meeting, provided the Amendment is approved by our stockholders.  Pursuant to the Advisory Agreement, in future periods, the Company will pay a pro rated annual base fee of 1.50% per annum of the aggregate fair value of Corporate Loans outstanding at the end of each quarter.  The Advisory Agreement also provides for an Income Based and Capital Gains fee as described therein.  The amount of the annual base fee, Income Based fee and Capital Gains based fee will not be affected by the Amendment.

Pursuant to the Advisory Agreement, Velocity Capital Advisors serve as the non-discretionary investment adviser to the Company with respect to the investment in below investment grade senior loans and notes, and subordinated notes, which are collectively referred to as “Corporate Loans” and incidental equity investments received in connection with the investment in the Debt Portfolio (“Incidental Equity”) (collectively, the “Velocity Assets”).  All investments in Corporate Loans are subject to the supervision of the Board.

At such time as the Velocity Assets exceed $75 million, the Adviser’s services under the Advisory Agreement will be exclusive with respect to the Velocity Assets and assets similar to the Velocity Assets.  The Advisory Agreement may be terminated at any time, without payment of a penalty, upon 60 days’ written notice, by the vote of stockholders holding a majority of the outstanding voting securities of the Company, or by the vote of the Company’s directors or by the Adviser.  The Advisory Agreement will automatically terminate in the event of its assignment by the Adviser.

Life Settlement Contracts

In September 2006, the Company entered into an agreement with Vibrant Capital Corporation (“Vibrant”), (the “Vibrant Agreement”), an unaffiliated entity, to purchase life insurance policies owned by unrelated individuals. Under the terms of the Vibrant Agreement, the Company was designated as nominee to maintain possession of the policies and process transactions related to such policies until the policies were subsequently sold or a death benefit payment was made.  Pursuant to the Vibrant Agreement, the Company was entitled to receive from Vibrant a twelve percent (12%) annual return on the amount of funds paid by the Company and outstanding on a monthly, prorated basis.  Proceeds from the sale of the policies were to be distributed, net of direct expenses, as defined in the Vibrant Agreement.

In April, 2009, the Company learned that the manager of Vibrant had been charged with various violations of securities laws by the SEC.  The SEC obtained a court order freezing the assets of the manager and other entities with which he was involved, including Vibrant (the “Receivership Estate”).  As of April 14, 2009, a trustee and a receiver (the “Receiver”) were appointed to operate Vibrant.  Throughout calendar 2009, the Company worked with the Receiver and investigated potential opportunities to maximize the value of the Company’s interest in the life insurance contracts.

Initially, the Company made certain contributions to the payment of the premiums in order to keep the policies in full force and effect and preserve their value.  Thereafter, utilizing a line of credit secured by certain assets of the Receivership Estate, the Receiver advanced premiums due under certain policies to keep the policies in full force and effect.  The Receiver engaged an independent specialist firm to service and market for sale all of the policies in the Receivership Estate.   In October 2009, the Receiver indicated it no longer had the funds available to pay future premiums and that it wanted to engage in a sale to one of two buyers that had indicated an interest in purchasing the Receivership Estate.  Subsequently, both buyers determined not to complete a transaction.  Following discussions with the Receiver, the Company negotiated an agreement (the “Purchase Agreement”), which among other items, granted the Company the right to purchase the policies, subject to certain terms and conditions and court approval.

Pursuant to the Purchase Agreement:  

1)  The Company acquired all of the rights to and title and interest in, ten (10) life insurance policies (7 of which had been previously included in the Joint Venture), with an aggregate death benefit of $28,159,809, including one policy that had lapsed but could be possibly reinstated on appeal to the insurer.

2)  The Company agreed to pay the Receiver $30,000 to cover certain expenses;

3)  The Company agreed to pay the Receivership Estate 20% of all recoveries until such time as the Company has recouped approximately $2.1 million plus the amount of any premiums paid following the date of the Purchase Agreement;

4)  The Company agreed to pay the Receivership Estate 50% of all recoveries above the amounts described in Item 3 above;

5)  The Company entered into an agreement of sale on the rescission of one of the original joint venture policies.  In accordance with the terms of the settlement agreement with the Receiver the Company recorded proceeds of $109,857 and recognized a loss on sale of the policy of $342,496;

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6)  The Company agreed to the cancellation of certain claims the Company had against the Receivership Estate for premiums advanced since April 2, 2009;

7)  The Company and the Receivership Estate agreed that the Joint Venture Agreement would be cancelled, terminated and have no further effect; and

8)  Despite the percentage interest of the Receiver in any recovery, the Company reserved the right, in its sole discretion, to continue to fund premium payments or let any or all of the policies lapse.

The Purchase Agreement was dated December 18, 2009, and approved by the court on January 8, 2010.

Subsequent to court approval, the Company learned that certain of the policies had lapsed due to non-payment of premiums. As of March 31, 2010, the Company owned a total of five (5) policies with an aggregate death benefit of $17,659,809 which remained in full force and effect.  

As of March 31, 2010, the fair value of the policies owned by the Company was $984,000, which represents the estimated fair value for the five (5) life insurance policies with an aggregate face value of $17,659,809. The Company’s cost on these policies to date is $2,274,014, including insurance premiums of $233,312 which were paid in the quarter ended March 31, 2010.  Premiums on the policies must be paid until the policies are sold in order to keep the policies in full force.   The Company no longer expects Vibrant to make any further premium payments and pursuant to the Purchase Agreement the Company has no duty to make any premium payments on the various policies.  

The Company entered into a rescission and settlement agreement on one of the original joint venture policies on January 14, 2010, for $109,857.  This was the Company’s share of the proceeds for rescission of said policy.

The Company is entitled to sell the policies at any time, in its sole discretion and has no obligation to pay future premiums on the various policies.  The approximate future minimum premiums due for each of the next five (5) years and in the aggregate thereafter, based on current life expectancy of the insureds, are as follows:

Year Ending June 30		Policy Premiums
2010 (three months)	$	266,622
2011		1,066,488
2012		1,066,488
2013		1,066,488
2014		1,066,488
Thereafter		3,429,518
	$	7,962,092

Based upon the current uncertain state of the life settlement market, the lack of liquidity at this time in this market due to the difficult credit conditions and the overall economy, the fact that these policies may have diminished value due to having been associated with Vibrant, and the Company’s previously stated decision to exit the life settlement area, the Company has adjusted the fair value of these policies to reflect the current anticipated recovery based on estimated actuarial values that take into account the various factors discussed above.   This is an estimate based upon the information currently available.  The Company continues to pursue alternatives that could allow for a higher recovery.

Fair Value of Investments

Effective July 1, 2008, the Company adopted ASC 820-10 (previously SFAS 157, Fair Value Measurements), which expands application of fair value accounting. ASC 820-10 defines fair value, establishes a framework for measuring fair value in accordance with generally accepted accounting principles and expands disclosure of fair value measurements. ASC 820-10 determines fair value to be the price that would be received for an investment in a current sale, which assumes an orderly transaction between market participants on the measurement date. ASC 820-10 requires the Company to assume that the portfolio investment is sold in a principal market to market participants, or in the absence of a principal market, the most advantageous market, which may be a hypothetical market. Market participants are defined as buyers and sellers in the principal or most advantageous market that are independent, knowledgeable, and willing and able to transact. In accordance with ASC 820 - -10, the Company has considered its principal market as the market in which the Company exits its portfolio investments with the greatest volume and level of activity. ASC 820-10 specifies a hierarchy of valuation techniques based on whether the inputs to those valuation techniques are observable or unobservable. In accordance with ASC 820-10, these inputs are summarized in the three broad levels listed below:

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·

Level 1 – Valuations based on quoted prices in active markets for identical assets or liabilities that the Company has the ability to access.

·

Level 2 – Valuations based on quoted prices in markets that are not active or for which all significant inputs are observable, either directly or indirectly.

·

Level 3 – Valuations based on inputs that are unobservable and significant to the overall fair value measurement.

In addition to using the above inputs in investment valuations, we continue to employ the valuation policy approved by our board of directors that is consistent with ASC 820-10 (see Note 1).  Consistent with our valuation policy, we evaluate the source of inputs, including any markets in which our investments are trading (or any markets in which securities with similar attributes are trading), in determining fair value. Our valuation policy considers the fact that because there is not a readily available market value for most of the investments in our portfolio, the fair value of the investments must typically be determined using unobservable inputs.

Due to the inherent uncertainty of determining the fair value of investments that do not have a readily available market value, the fair value of our investments may fluctuate from period to period. Additionally, the fair value of our investments may differ significantly from the values that would have been used had a ready market existed for such investments and may differ materially from the values that we may ultimately realize.   Further, such investments are generally subject to legal and other restrictions on resale or otherwise are less liquid than publicly traded securities. If we were required to liquidate a portfolio investment in a forced or liquidation sale, we may realize significantly less than the value at which we have previously recorded it.

In addition, changes in the market environment and other events that may occur over the life of the investments may cause the gains or losses ultimately realized on these investments to be different than the valuations currently assigned.

The following table presents fair value measurements of investments as of March 31, 2010:

				Fair Value Measurements Using
		Total		Level 1		Level 2		Level 3
Investments	$	23,568,723	$	9,763	$	-	$	23,558,960

The following table’s present changes in investments that use Level 3 inputs for the nine months ended March 31, 2010:

		Nine months ended
		March 31, 2010
Balance as of June 30, 2009	$	26,400,402
Net unrealized gains (losses)		(883,990)
Net purchases, sales or redemptions		(1,957,452)
Net transfers in and/or out of Level 3		-
Balance as of March 31, 2010	$	23,558,960

As of March 31, 2010, the net unrealized loss on the investments that use Level 3 inputs was $2,885,957.

3.

Debentures Payable to SBA

At March 31, 2010, and June 30, 2009, debentures payable to the SBA consisted of subordinated debentures with interest payable semiannually, as follows:

Issue Date	Due Date	% Interest Rate		March 31, 2010		June 30, 2009		Annual Amount of Interest and User Fees
July 2002	September 2012	4.67 (1)	$	2,050,000	$	2,050,000	$	113,488
December 2002	March 2013	4.63 (1)		3,000,000		3,000,000		164,880
September 2003	March 2014	4.12 (1)		5,000,000		5,000,000		249,300
February 2004	March 2014	4.12 (1)		1,950,000		1,950,000		97,227
December 2009	March 2020	4.11 (2)		9,175,000		-		402,782
			$	21,175,000	$	12,000,000	$	1,027,677

(1)

 Elk is also required to pay an additional user fee of 0.866% on these debentures.

(2)

 Elk is also required to pay an additional user fee of 0.28% on these debentures.

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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.

Pursuant to SBA’s issuance of leverage in the form of debentures in the aggregate of $9,175,000, Elk submitted an application to draw the full amount of the awarded fiscal year 2009 commitment. SBA approved the leverage request and on December 2, 2009, Elk received the disbursement of $9,175,000 from the long term guaranteed debenture, and paid fees totaling $314,244.  In accordance with SBA regulation, $91,750 of these fees were paid prior to closing therefore the net fees at closing were $222,494.  The net proceeds of the draw were $8,952,506.

4.    Notes Payable

Banks

At March 31, 2010, the Company had lines of credit with two (2) banks aggregating $472,000 of which $370,000 was outstanding.  The weighted average interest rate on the outstanding bank debt at March 31, 2010, was approximately 4.34% which represents an interest rate of 1.0% above the prime rate of interest designated by each bank. The credit line in the amount of $120,000 was extended to July 6, 2010.  The credit line of $352,000 has been extended to June 30, 2010.  Both lines extend under the same terms and conditions.  The Company anticipates renewing the credit lines, subject to approval from the banks.

Pursuant to the terms of the current 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 all other assets as collateral for the above lines of credit.  Pursuant to the SBA agreement and an “intercreditor agreement” among the lending banks and the SBA, the SBA agreed to subordinate the SBA Debentures outstanding in favor of the banks.  In accordance with the loan documentation with the SBA and the banks, the Company must also comply with maintaining overall debt levels within a formula based upon the performance of its loan portfolio according to a “borrowing base” which is submitted for review to the SBA and the banks for periodic review.  The Company was in compliance with the terms and conditions of the “borrowing base” at March 31, 2010.

Other

On December 22, 2009, the Company issued $2,025,000 aggregate principal amount of its 8.75% notes due December 2011 (the “December Notes”) in a private offering.  The December Notes bear interest at a rate of 8.75%, payable quarterly, but the Company has the option to extend the December Notes until December 2012 at a rate of 5.5%, plus the then-current prime rate.  The December Notes are redeemable by the Company at any time upon not less than 30 days prior notice.  A member of the Company’s Board of Directors, and certain affiliated entities acquired $1,375,000 of the December Notes in the offering.

On March 24, 2010, the Company issued $975,000 of  its 8.75% notes due March 2012 (the “March Notes” and together with the December Notes, the “Notes”).  The March Notes have the same terms as the December Notes, except the March Notes mature in March 2012.  The Company has the option to extend the March Notes until March 2013 at a rate of 5.5%, plus the then-current prime rate.  A member of the Company’s Board of Directors and certain affiliated entities acquired $660,000 of the March Notes in the offering.

5.    Dividends to Stockholders

The following table sets forth the dividends declared by the Company on its Preferred Stock for the nine months ended March 31, 2010, and 2009:

		For the nine months ended March 31, 2010
		Dividend Per Share		Amount	Declaration Date	Record Date	Pay Date
Preferred Stock:
Fourth Quarter (April 1, 2009– June 30, 2009)	$	0.28125	$	84,375	02/25/10	03/08/10	03/12/10
First quarter (July 1, 2009 – September 30, 2009)	$	0.28125	$	84,375	02/25/10	03/08/10	03/12/10
Second quarter (October 1, 2009 – December 31, 2009)	$	0.28125	$	84,375	02/25/10	03/08/10	03/12/10
Third Quarter (January 1, 2010–March 31, 2010)	$	0.28125	$	84,375	04/09/10	04/22/10	04/27/10
Total Preferred Stock Dividends Declared	$	1.125	$	337,500

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		For the nine months ended March 31, 2009
		Dividend Per Share		Amount	Declaration Date	Record Date	Pay Date
Preferred Stock:
First quarter (July 1, 2008 – September 30, 2008)	$	0.28125	$	84,375	09/29/08	10/09/08	10/15/08
Second quarter (October 1, 2008 – December 31, 2008)	$	0.28125	$	84,375	12/12/08	12/31/08	01/15/09
Third Quarter (January 1, 2009– March 31, 2009)	$	0.28125	$	84,375	03/20/09	03/31/09	04/15/09
Total Preferred Stock Dividends Declared	$	0.84375	$	253,125

The Company declared a preferred stock dividend for the quarters ended June 30, 2009, September 30, 2009, and December 31, 2009, on February 25, 2010, which was paid on March 12, 2010.  Dividends on preferred stock accrue whether or not they have been declared.  The Company did not declare or pay any dividends on its Common Stock during the nine months ended March 31, 2010 and 2009.

6.    Financial Instruments

Fair value is defined as the amount at which the instrument could be exchanged in a current transaction between willing parties. The fair values presented below have been determined by using available market information and by applying valuation methodologies.

Loans Receivable and Life Settlement Contracts

·

Loans receivable and life settlement contracts are recorded at their estimated fair value (see Note 2).

Investment Securities

·

The estimated fair value of publicly traded equity securities is based on quoted market prices and privately held equity securities are recorded at their estimated fair value (see Note 2).

Debt

·

The carrying value of the bank debt is a reasonable estimate of fair value as the interest rates are variable, based on prevailing market rates.

·

The fair value of the SBA debentures was computed using the discounted amount of future cash flows using the Company’s current incremental borrowing rate for similar types of borrowings.  The estimated fair values of such debentures as of March 31, 2010, and June 30, 2009, were approximately $21,253,700 and $11,844,000 respectively.  However, the Company does not expect that the estimated fair value amounts determined for these debentures would be realized in an immediate settlement of such debentures with the SBA.

·

The carrying value of the note payable, other is a reasonable estimate of the fair value based on prevailing market rates.

Other

The carrying value of cash and cash equivalents, accrued interest receivable and payable, and other receivables and payables approximates fair value due to the relative short maturities of these financial instruments

7.    Related Party Transactions

The Company paid fees of $10,806 and $25,429 for the nine months ended March 31, 2010 and 2009, respectively, for legal services provided by a law firm related to the chairman and certain other officers and directors of the Company (the “Law Firm”).

Total occupancy costs under existing leases and overhead cost reimbursement agreements paid to the Law Firm and to another entity in which an officer of the Company has a financial interest amounted to $207,525 and $215,107 for the nine months ended March 31, 2010 and 2009, respectively.

In Fiscal 2009, the Company utilized a relative of an officer of the Company to perform part-time administrative services. This individual was paid per hour for administrative work he performed for the Company.  For the nine months ended March 31, 2010 and 2009, he was paid an aggregate of $0 and $9,085, respectively.

The Company utilized a printing company partially owned by an officer and stockholder of the Company.  An aggregate of $3,838 and $9,255 for the nine months ended March 31, 2010 and 2009, respectively, was paid for these services.  .

See Note 4 for additional related party transactions.

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8.    Commitments and Contingencies

Interest Rate Swap

In October, 2005, Elk entered into two (2) interest rate swap transactions for $5,000,000 each, to hedge against an upward movement in interest rates relating to outstanding bank debt.  The swap transaction which expired October 15, 2007 provided for a fixed rate of 6.20%, and the swap transaction which expired October 14, 2008, provided for a fixed rate of 6.23%.  If the Company’s floating borrowing rate (the one-month LIBOR rate plus 1.5%) fell below the fixed rate, Elk was obligated to pay the bank the differences in rates. If the Company’s floating borrowing rate rose above the fixed rate, the bank was obligated to pay Elk the differences in rates. For the nine months ended March 31, 2010 and 2009, Elk incurred additional net interest expense of $0 and $32,973, respectively, due to the fluctuation of interest rates under these agreements.  As of March 31, 2010, the Company had no interest rate swaps outstanding.

9.    Stock Option Plans

The Company’s stock option plans expired on May 21, 2009

Employee Incentive Stock Option Plan

An employee stock option plan (the “1999 Employee Plan”) was adopted by the Ameritrans Board, including a majority of the non-interested directors, and approved by a vote of the stockholders, in order to link the personal interests of key employees to the Company’s long-term financial success and the growth of stockholder value.  The Plan had a ten (10) year life which expired in May, 2009.  Subsequent amendments to the 1999 Employee Plan were approved by the stockholders in January 2002 and June 2007.  The amendments increased the number of shares reserved under the plan to 300,000 shares.

The 1999 Employee Plan authorized the grant of incentive stock options within the meaning of the Section 422 of the Internal Revenue Code for the purchase of an aggregate of 300,000 shares (subject to adjustment for stock splits and similar capital changes) of Common Stock to the Company’s employees.   Effective as of May 21, 2009, in accordance with the terms of the 1999 Employee Plan, the Board can no longer issue incentive stock options pursuant to such plan.  The Board adopted the 1999 Employee Plan to be in a better position attract, motivate, and retain as employees people upon whose judgment and special skills the Company’s success in large measure depends.  As of March 31, 2010, options to purchase an aggregate of 262,425 shares of Common Stock were outstanding and fully vested.

The 1999 Employee Plan is administered by the 1999 Employee Plan Committee of the Board, which is comprised solely of non-employee directors (who are “outside directors” within the meaning of Section 152(m) of the Internal Revenue Code and “disinterested persons” within the meaning of Rule 16b-3 under the Securities Exchange Act of 1934 (the “Exchange Act”). The committee can make such rules and regulations and establish such procedures for the administration of the 1999 Employee Plan as it deems appropriate.  Effective May 21, 2009, the 1999 Employee Plan expired.

Non-Employee Director Stock Option Plan

A stock option plan for non-employee directors (the “Director Plan”) was adopted by the Ameritrans Board and approved by a vote of the stockholders, in order to link the personal interests of non-employee directors to the Company’s long-term financial success and the growth of stockholder value.  The Director Plan is substantially identical to, and the successor to, a non-employee director stock option plan adopted by the Board of Elk and approved by its stockholders in September 1998 (the “Elk Director Plan”).  Ameritrans and Elk submitted an application for, and received on August 31, 1999, an exemptive order relating to these plans from the SEC.  The Director Plan was amended by the Board on November 14, 2001, and approved by the stockholders at the Annual Meeting on January 18, 2002.  The amendment is still subject to the approval of the Securities and Exchange Commission.  The amendment (i) increases the n umber of shares reserved under the plan from 75,000 to 125,000 and (ii) authorizes the automatic grant of an option to purchase up to 1,000 shares at the market value at the date of grant to each eligible director who is re-elected to the Board.

The total number of shares for which options may be granted from time to time under the Director Plan is 75,000 shares, which will be increased to 125,000 shares upon SEC approval of the Amended Director Plan.  As of March 31, 2010, options to purchase an aggregate of 59,000 shares were issued and outstanding with 33,462 fully vested under the Director Plan.  The Director Plan is administered by a committee of directors who are not eligible to participate in the Director Plan.  Effective May 21, 2009, the Director Plan expired.

Options Granted, Expired and Canceled

There were no options granted or canceled during either of the nine month periods ended March 31, 2010 and 2009.

On October 29, 2009, 29,425 options in connection with the 1999 Employee Plan expired.  On January 12, 2010, 16,000 options in connection with the Director Plan expired.

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After adoption of ASC 718-10 (previously SFAS No. 123R, “ Accounting for Stock-Based Compensation ”)  (see Note 1), the fair value of the options granted amounted to $191,040 at March 31, 2010, and June 30, 2009, which is reflected as stock options outstanding in the accompanying consolidated statements of assets and liabilities.  Compensation expense related to options vested for the nine months ended March 31, 2010 and 2009 was $28,344 and $59,213, respectively.  As of March 31, 2010, total deferred compensation related to unvested options was $822, which is expected to be recognized over a period of approximately three months.

The following tables summarize information about the transactions of both stock option plans as of March 31, 2010:

	Stock Options
	Number of Options		Weighted Average Exercise Price Per Share
Options outstanding at June 30, 2009	366,850	$	3.90
Granted	-		-
Canceled	-		-
Expired	45,425		5.25
Exercised	-		-
Options outstanding at March 31, 2010	321,425	$	3.71

	Options Outstanding			Options Exercisable
Range of Exercise Prices	Number Outstanding at March 31, 2010	Weighted Average Remaining Contractual Life	Weighted Average Exercise Price	Number Exercisable at March 31, 2010	Weighted Average Exercise Price
$5.56-$6.12	29,425	.75 years	$5.81	29,425	$5.81
$3.60	13,888	3.14 years	$3.60	13,888	$3.60
$5.28	80,000	3.14 years	$5.28	80,000	$5.28
$5.30	9,433	1.73 years	$5.30	9,433	$5.30
$4.50	20,000	2.53 years	$4.50	20,000	$4.50
$4.93	10,141	2.11 years	$4.93	10,141	$4.93
$1.78	25,538	4.10 years	$1.78	-	$1.78
$2.36	133,000	3.53 years	$2.36	133,000	$2.36
$1.78-$6.25	321,425	3.05 years	$3.71	295,887	$3.88

Effective December 10, 2009, the date on which the Investment Advisory Agreement with Velocity became effective, no further grants will be made under the Stock Option Plan.  Effective May 21, 2009, the date on which the Employee Plan and the Director Plan expired, no further grants will be made pursuant to such plans.  On October 29, 2009, 29,425 grants expired.

10.    Financial Highlights

		Nine Months Ended March 31, 2010		Nine Months Ended March 31, 2009		Year Ended June 30, 2009
Net share data
Net asset value at the beginning of the period	$	3.40	$	5.06	$	5.06
Net investment loss		(0.78)		(0.50)		(0.86)
Net realized and unrealized losses on investments		(0.57)		(0.23)		(0.73)
Net decrease in net assets from operations		(1.35)		(0.73)		(1.59)
Distributions to Stockholders (4)		(0.10)		(0.07)		(0.07)
Total decrease in net asset value		(1.45)		(0.80)		(1.66)
Net asset value at the end of the period	$	1.95	$	4.26	$	3.40
Per share market value at beginning of period	$	1.63	$	3.01	$	3.01
Per share market value at end of period	$	1.30	$	1.96	$	1.63
Total return (1)		(14.2%)		(32.6%)		(43.5%)
Ratios/supplemental data
Average net assets (2) (in 000’s)	$	9,084	$	15,824	$	14,371
Total expense ratio (3)		56.8%		40.1%		43.7%
Net investment loss to average net assets (5)		(38.8%)		(14.1%)		(20.5%)

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(1)

Total return is calculated by dividing the change in market value of a share of common stock during the year, assuming the reinvestment of dividends on the payment date, by the per share market value at the beginning of the year.

(2)

Average net assets excludes capital from preferred stock.

(3)

Total expense ratio represents total expenses divided by average net assets annualized for interim periods.

(4)

Amount represents total dividends on both common and preferred stock divided by weighted average shares.

(5)

Annualized for interim periods.

11.    Subsequent Events

On April 9, 2010, the Board of Directors declared a dividend of $0.28125 per share on the Company’s Preferred Stock for the quarterly period commencing January 1, 2010 and ending March 31, 2010.  Accordingly, on April 27, 2010, the Company paid aggregate dividends in the amount of $84,375 to the holders of the Company’s Preferred Stock as of April 22, 2010.

On May 12, 2010, the Board of Directors approved a repurchase program (the "Repurchase Program") for the Preferred Stock.  Under the Repurchase Program, Ameritrans may from time to time purchase up to 150,000 shares of Preferred Stock in open market purchases in accordance with Rules 10b5-1 and 10b-18 under the Securities Exchange Act of 1934, as amended. The timing and amount of purchases made under the Repurchase Program will depend upon prevailing stock prices, general economic and market conditions, and other factors. Any Preferred Stock acquired under the Repurchase Program will be retired.

12.     Recent Accounting Pronouncements

In January 2010, FASB issued ASU No. 2010-06, “Fair Value Measurements and Disclosures (Topic 820),” that requires reporting entities to make new disclosures about recurring or nonrecurring fair-value measurements including significant transfers into and out of Level 1 and Level 2 fair-value measurements and information on purchases, sales, issuances, and settlements on a gross basis in the reconciliation of Level 3 fair-value measurements.  The FASB also clarified existing fair-value measurement disclosure guidance about the level of disaggregation, inputs, and valuation techniques. The new and revised disclosures are required to be implemented for interim and annual periods beginning after December 15, 2009, except for the disclosures about purchases, sales, issuances, and settlements of Level 3 activity.  Those disclosures are effective for interim and annual periods beginning after December 15, 2010.  The Compan y does not expect adoption of FASB ASU 2010-06 to have a material impact on its financial condition and results of operations.

In December 2009, FASB issued ASU No. 2009-17, “Consolidations: Improvements to Financial Reporting by Enterprises Involved with Variable Interest Entities,” that amends the FASB ASC for the issuance of FASB Statement No. 167, “Amendments to FASB Interpretation No. 46(R).”  The amendments in this ASU replace the quantitative-based risks and rewards calculation for determining which reporting entity, if any, has a controlling financial interest in a variable interest entity with an approach focused on identifying which reporting entity has the power to direct the activities of a variable interest entity that most significantly impact such entity’s economic performance and (1) the obligation to absorb losses of such entity or (2) the right to receive benefits from such entity. An approach that is expected to be primarily qualitative will be more effective for identifying which reporting entity has a con trolling financial interest in a variable interest entity. The amendments in ASU No. 2009-17 also require additional disclosures about a reporting entity’s involvement in variable interest entities, which will enhance the information provided to users of financial statements.  ASU No. 2009-17 is effective for annual periods beginning after November 15, 2009.  The Company does not expect adoption of this standard to have a material impact on its financial condition and results of operations.

In September 2009, the FASB issued Accounting Standards Update 2009-12, “Fair Value Measurements and Disclosures (Topic 820), Investments in Certain Entities That Calculate Net Asset value per Share or its Equivalent” (FASB ASU 2009-12). FASB ASU 2009-12 amends Subtopic 820-10, Fair Value Measurements and Disclosures - Overall, and permits in certain circumstances a reporting entity to measure the fair value of an investment on the basis of the net asset value per share of the investment. Additionally, the update requires additional disclosures such as the nature of any restrictions on the investor’s ability to redeem its investments at the measurement date, any unfunded commitments and the investment strategies of the investees. FASB ASU 2009-12 is effective for reporting periods ending after December 15, 2009 with early adoption permitted. The adoption of FASB ASU 2009-12 did no t have a material impact on its financial condition or results of operations.

In August 2009, the FASB issued Accounting Standards Update 2009-05, “Fair Value Measurements and Disclosures (Topic 820), Measuring Liabilities at Fair Value” (FASB ASU 2009-05). FASB ASU 2009-05 provides amendments to subtopic 820-10, Fair Value Measurements and Disclosures Overall, clarifies the techniques a reporting entity should use in valuing a liability in circumstances where a quoted price in an active market for an identical liability is not available, as well as clarifying that the requirements needed for Level 1 fair value measurements when the quoted price of an identical liability is utilized. FASB ASU 2009-05 is effective for the first reporting period beginning after issuance. The adoption of FASB ASU 2009-05 to did not have a material impact on its financial condition or results of operations.

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In June 2009, FASB issued ASC 105, (previously SFAS NO. 168, The FASB Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Principles (“GAAP”) — a replacement of FASB Statement No. 162 (“Codification”)). This Codification will become the source of authoritative U.S. GAAP recognized by FASB to be applied by nongovernmental entities. Once the Codification is in effect, all of its content will carry the same level of authority, effectively superseding SFAS No. 162, The Hierarchy of Generally Accepted Accounting Principles . In other words, the GAAP hierarchy will be modified to include only two levels of GAAP: authoritative and nonauthoritative. The Codification is not intended to change GAAP, but it will change the way GAAP is organized and presented. The Codification is effective for financial statements issued for interim and annual periods ending a fter September 15, 2009. In order to ease the transition to the Codification, the Company has provided the Codification cross-reference alongside the references to the standards issued and adopted prior to the adoption of the Codification.

In June 2009, FASB issued ASC 810 (previously SFAS No. 167, Amendments to FASB Interpretation No. 46(R), which amends the guidance in FASB Interpretation No. (“FIN”) 46(R), Consolidation of Variable Interest Entities ). It requires reporting entities to evaluate former qualifying special-purpose entities (“QSPEs”) for consolidation, changes the approach to determining the primary beneficiary of a variable interest entity (a “VIE”) from a quantitative assessment to a qualitative assessment designed to identify a controlling financial interest, and increases the frequency of required reassessments to determine whether a company is the primary beneficiary of a VIE. It also clarifies, but does not significantly change, the characteristics that identify a VIE. ASC 810 requires additional year-end and interim disclosures for public and non-public companies that are similar to the disclosures required by FSP FAS 140-4 and FIN 46(R)-8,  Disclosures by Public Entities (Enterprises) about Transfers of Financial Assets and Interests in Variable Interest Entities.  ASC 810 is effective as of the beginning of a company’s first fiscal year that begins after November 15, 2009, and for subsequent interim and annual reporting periods. All QSPE’s and entities currently subject to FIN 46(R) will need to be reevaluated under the amended consolidation requirements as of the beginning of the first annual reporting period that begins after November 15, 2009. Early adoption is prohibited. The Company does not expect the adoption of the provisions of ASC 810 will have a material impact on our financial condition and results of operations.

In June 2009, the FASB issued ASC 860 (previously SFAS No. 166, Accounting for Transfer of Financial Assets, which amends the guidance in SFAS No. 140, Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities).  It eliminates the QSPEs concept, creates more stringent conditions for reporting a transfer of a portion of a financial asset as a sale, clarifies the derecognition criteria, revises how retained interests are initially measured, and removes the guaranteed mortgage securitization recharacterization provisions. ASC 860 requires additional year-end and interim disclosures for public and nonpublic companies that are similar to the disclosures required by FSP FAS 140-4 and FIN 46(R)-8. ASC 860 is effective as of the beginning of a company’s first fiscal year that begins after November 15, 2009, and for subsequent interim and annual reporting periods. ASC 860’s disclosure requirements must be applied to transfers that occurred before and after its effective date. Early adoption is prohibited. The Company does not expect the adoption of the provisions of ASC 860 will have a material impact on our financial condition and results of operations.

ITEM 2.   MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The information contained in this section should be read in conjunction with the consolidated Financial Statements and Notes thereto appearing in this quarterly report on Form 10-Q and in the Company’s Annual Report on Form 10-K for the year ended June 30, 2009, filed with the Commission by the Company on September 28, 2009, and which is available on the Company’s web site at www.ameritranscapital.com.

CRITICAL ACCOUNTING POLICIES

Investment Valuations

The Company’s loans receivable, net of participations and any unearned discount are considered investment securities under the 1940 Act and are recorded at fair value. As part of fair value methodology, loans are valued at cost adjusted for any unrealized appreciation (depreciation). Since no ready market exists for these loans, the fair value is determined in good faith by management, and approved by the Board of Directors. In determining the fair value, the Company and Board of Directors consider factors such as the financial condition of 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. Foreclosed properties, which represent collateral received from defaulted borrowers, are valued similarly.

Loans are considered “non-performing” once they become 90 days past due as to principal or interest. The value of past due loans are periodically determined in good faith by management, and if, in the judgment of management, the amount is not collectible and the fair value of the collateral is less than the amount due, the value of the loan will be reduced to fair value .

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Equity investments (common stock and stock warrants, including certain controlled subsidiary portfolio investments) and investment securities are recorded at fair value.  

The Company records the investment in life insurance policies at fair value, represented as cost, plus or minus unrealized appreciation or depreciation. The fair value of the investment in life settlement contracts have no ready market and are determined in good faith by management, and approved by the Board of Directors, based on secondary market conditions, policy characteristics and actuarial life expectancy, including health evaluations.

Because of the inherent uncertainty of valuations, the Company’s estimates of the values of the investments may differ significantly from the values that would have been used had a ready market for the investments existed, and the differences could be material.

Effective July 1, 2008, the Company adopted ASC 820-10 (previously SFAS 157, Fair Value Measurements), which expands the application of fair value accounting for investments.

Assets Acquired in Satisfaction of Loans

Assets acquired in satisfaction of loans are carried at the estimated fair value adjusted for estimated cost of disposal.  Losses incurred at the time of foreclosure are charged to the unrealized depreciation on loans receivable.  Subsequent reductions in estimated net realizable value are charged to operations as losses on assets acquired in satisfaction of loans.

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 significant change relate to the determination of the fair value of the Company’s investments.

Income Recognition

Interest income, including interest on loans in default, is recorded on an accrual basis and in accordance with loan terms to the extent such amounts are expected to be collected.  The Company recognizes interest income on loans classified as non-performing only to the extent that the fair market value of the related collateral exceeds the specific loan balance.  Loans that are not fully collateralized and in the process of collection are placed on nonaccrual status when, in the judgment of management, the collectability of interest and principal is doubtful.

Contingencies

The Company is subject to legal proceedings in the course of its daily operations from enforcement of its rights in disputes pursuant to the terms of various contractual arrangements.  In this connection, the Company assesses the likelihood of any adverse judgment or outcome to these matters as well as a potential range of probable losses.  A determination of the amount of reserve required, if any, for these contingencies is made after careful analysis of each individual issue.  The required reserves may change in the future due to new developments in each matter or changes in approach, such as a change in settlement strategy in dealing with these matters.

General

Ameritrans acquired Elk on December 16, 1999. Elk is an SBIC that has been operating since 1980, making loans to (and, to a limited extent, investments in) small businesses, who qualify under SBA Regulations. Most of Elk’s business historically consisted of originating and servicing loans collateralized by taxi medallions and loans to and investments in other diversified businesses.  Since completing the sale of the medallion portfolio, most of the Company’s net interest income has been generated from its Corporate and Commercial loans. Historically, Elk’s earnings derived primarily from net interest income, which is the difference between interest earned on interest-earning assets (consisting of business loans), and the interest paid on interest-bearing liabilities (consisting of indebtedness to Elk’s banks and subordinated debentures issued to the SBA). Net interest income is a function of the net interest rate spread, which is the diffe rence between the average yield earned on interest-earning assets and the average interest rate paid on interest-bearing liabilities, as well as the average balance of interest-earning assets as compared to interest-bearing liabilities. Unrealized appreciation or depreciation on loans and investments is recorded when Elk adjusts the value of a loan to reflect management’s estimate of the fair value, as approved by the Board of Directors.  

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Results of Operations for the Three Months Ended March 31, 2010 and 2009

Total Investment Income

The Company’s investment income for the three months ended March 31, 2010, decreased $168,704, or 26%, to $486,673, as compared to the three months ended March 31, 2009. This decrease was due to a reduction of income in its life settlement portfolio of $49,000 due to the restructuring of the investment.  Further impacting the reduction in income was an increase in the amount of loans on non-accrual status which reduced income by approximately $109,000 for the quarter when compared to the prior fiscal year.

Corporate Loans outstanding as of March 31, 2010, decreased by $173,585, or 1.4%, to $12,481,443, as compared with March 31, 2009.  The interest rate earned on Corporate Loans increased in 2010, as compared with the prior year, primarily due to interest rate “resets” on Corporate Loans due to covenant defaults.   The decrease in Corporate Loans outstanding was due to loan amortization totaling approximately $503,000, the sale of a loan for $869,337 and of the aggregate reduction of fair value of certain Corporate Loans of approximately $1,042,000.  This was partially offset by the addition of new Corporate Loans totaling approximately $2,242,000.  

Commercial Loans outstanding as of March 31, 2010 decreased by $3,044,463, or 26%, to $8,864,721 as compared with March 31, 2009.  The decrease in Commercial Loans was due to loan amortization and paid off loans of approximately $2,726,000, and further impacted by an aggregate reduction in the fair value of certain Commercial Loans of $318,000.

Medallion loans outstanding as of March 31, 2010 decreased by $158,135, or approximately 42%, to $221,496, as compared with March 31, 2009.   Medallion Loans declined in portfolio size, due to amortization and the sale of one loan, which led to a decrease in medallion income for the quarter March 31, 2010 of approximately $6,400 as compared to the same period March 31, 2009.

Life settlement contracts outstanding decreased by $1,686,708 as of March 31, 2010 or 63% as compared with the three months ended March 31, 2009.  Due to the restructuring of this investment, the Company has stopped accruing interest on the life settlement contracts and fair value adjustment reduction of $1,290,014 has been made to date to reflect the value of the investment as compared to the March 31, 2009.  The Company sold one of the original joint venture policies for net proceeds of $109,857 and recognized a loss of $392,496.  The investment has been valued based on the estimate of current policies fair market value based on market conditions.  This revaluation was partially offset by additional premiums paid of $233,000.  The reduction in interest income for the three months ended March 31, 2010, was approximately $49,000 when compared to the prior-year-period. (See Note 2 of the consolidated financial statements).

Operating Expenses

Interest expense for the three months ended March 31, 2010 increased $75,618, or 47%, to $236,513, as compared to the three months ended March 31, 2009.  This was due to an increase in SBA debentures and other notes outstanding.

Salaries and employee benefits for the three months ended March 31, 2010 increased $16,893 to $503,725, or approximately 3.5%, when compared to the three months ended March 31, 2009.  This increase was due to bonuses paid of approximately $35,000 and a one time salary payment of approximately $12,000, partially offset by a reduction in pension expenses.

Occupancy costs for the three months ended March 31, 2010, were unchanged at approximately $61,000 when compared with the three months ended March 31, 2009.   

Professional fees for the three months ended March 31, 2010 decreased $53,053 to $256,935, or approximately 17%, when compared to the three months ended March 31, 2009.   Legal fees to non-related parties decreased approximately $44,700 to $89,262, or approximately 33.4% when compared to the three months ended March 31, 2009.  Legal fees to non related parties decreased due to the smaller portfolio, and management has undertaken to review and prepare the SEC Filings internally except for final review thereby saving legal fees.  Legal fees to related parties increased approximately $11,100 to $6,294 when compared to the three months ended March 31, 2009.  These fees related to increased foreclosure activity in the Company’s Commercial Loan portfolio.    Legal fees associated with the Company’s life settlement portfolio increased by $6,226.   These increases were primarily due to the restructuring of the investment.  Accounting fees decreased approximately $36,100 to $38,700 when compared to the three months ended March 31, 2009.  Audit fees decreased approximately $32,600 to $52,518 when compared to the three months ended March 31, 2009.  These decreases were due to a reduction in audit fees attributable to the Company’s smaller portfolio.  Offsetting these decreases was an increase in accounting fees for internal controls of $43,075 to $63,936 when compared to the three months ended March 31, 2009.  This increase in our accounting fees was primarily attributable to the Company’s implementation of, and compliance with, Section 404 of the Sarbanes Oxley Act of 2002, including the improvement of documentation related to our internal control over financial reporting.  

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Director fees for the three months ended March 31, 2010 increased $46,869 to $69,750 or approximately 205% when compared to the three months ended March 31, 2009.  Effective January1, 2010, non-employee directors will be paid $25,000 per annum or $6,250 per quarter.  In addition each non-employee director will receive a fee of $1,000 for each meeting attended and $500 for each telephone or brief board meeting attended.

Advisory Fees decreased approximately $64,000 to $(14,261) when compared to the three months ended March 31, 2009.This was due to certain adjustments made in connection with an amendment to the Advisory Agreement that has been submitted to shareholders.

Miscellaneous administrative expenses decreased $14,164, to $167,933, or approximately 8% when compared with the three months ended March 31, 2009.  This decrease was due to a reduction of computer fees of approximately $7,500, website expense of approximately $4,000, line and facility fees of approximately $7,000, market data fees of approximately $7,000, audit and compliance fees of approximately $5,000, investor relations fees of approximately $4,000, and other miscellaneous fees and expenses of approximately $10,000 partially offset by an increase in recruitment fee for a new employee of approximately $14,000, insurance expenses of approximately $8,900, and SBA committee fee of approximately $7,600.

Decrease in Net Assets from Operations and Net Unrealized/Realized Gains (Losses)

Net decrease in net assets from operations was $915,297, for the three months ended March 31, 2010 as compared to a $769,550 decrease, for the three months ended March 31, 2009.   The change in net assets from operations between the periods was attributable to lower interest rates and a smaller investment portfolio, which resulted in a reduction in investment income of $168,704.   There was an increase in realized loss of approximately $340,000, partially offset by a decrease in unrealized loss of approximately $372,000.  The increase in realized loss and the decrease in unrealized loss was primarily attributable to the sale of one life settlement policy which resulted in a reclassification of a previously unrealized loss of approximately $392,000 to a realized loss.  

Results of Operations for the Nine Months Ended March 31, 2010 and 2009

Total Investment Income

The Company’s investment income for the nine months ended March 31, 2010 decreased $1,860,561, or 60%, to $1,225,021, as compared to the nine months ended March 31, 2009. This decrease can be attributed to lower interest income due to an overall decrease in the size of the Company’s loan receivable portfolio due to the sale of substantially all of the Company’s taxicab medallion portfolio.  Included in this is a reduction of interest income of approximately $160,000 which primarily reflects loans on non-accrual status and a reduction of income due to the restructuring of the Company’s life settlement portfolio.

Corporate Loans outstanding as of March 31, 2010, decreased by $173,585, or 1.4%, to $12,481,443, as compared with March 31, 2009.  The interest rate earned on Corporate Loans increased in 2010 as compared with the prior year, primarily due to interest rate “resets” on Corporate Loans due to covenant defaults.   The decrease in Corporate Loans outstanding was due to the sale of a loan for $922,000, loan amortization totaling approximately $559,000 and of the aggregate reduction of fair value of certain Corporate Loans of approximately $1,042,000.  This was partially offset by the addition of new Corporate Loans totaling approximately $2,294,000.  

Commercial Loans as of March 31, 2010, decreased by $3,044,463, or 26%, to $8,864,721 as compared with March 31, 2009.  The decrease in Commercial Loans was due to loan amortization and paid off loans of approximately $2,726,000, and  was further impacted by an aggregate reduction in the fair value of certain Commercial Loans of $318,000.

Medallion loans outstanding as of March 31, 2010 decreased by $158,135, or approximately 42%, to $221,496, as compared with March 31, 2009.   Medallion Loans declined in portfolio size, which lead to a decrease in medallion income for the quarter March 31, 2010, of approximately $6,400 as compared to the same period March 31, 2009.

Life settlement contracts outstanding decreased by $1,686,708 as of March 31, 2010 or 63% as compared with the period ended March 31, 2009.  Due to the restructuring of this investment, the Company has stopped accruing interest on the life settlement contracts and fair value adjustments of $1,290,014 have been made to date to reflect the value of the investment as compared to the March 31, 2009.   The investment has been valued based on the estimate of current policies fair market value based on market conditions industry valuation.  This revaluation was partially offset by additional premiums paid of $233,000.  The reduction in interest income for the three months ended March 31, 2010, was approximately $66,000 when compared to the prior-year-period. (See Note 2 of the consolidated financial statements).

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Operating Expenses

Interest expense for the nine months ended March 31, 2010 decreased $330,343, or 36%, to $583,926, as compared to the nine months ended March 31, 2009.  This was primarily due to a reduction in bank debt outstanding when compared to the prior period partially offset by an increase in SBA debentures and other notes outstanding as compared to the prior period.

Salaries and employee benefits for the nine months ended March 31, 2010 decreased $340,654 to $1,418,137, or approximately 19%, when compared to the nine months ended March 31, 2009.  This decrease was due to the absence of a one-time payment to an employee in connection with a restructuring of his employment agreement in the prior period.

Occupancy costs for the nine months ended March 31, 2010 decreased approximately $7,500 to $207,525 when compared with three months ended March 31, 2009.   

Professional fees for the nine months ended March 31, 2010 decreased $333,015 to $767,546, or approximately 30.2%, when compared to the nine months ended March 31, 2009.   Legal fees to non-related parties decreased approximately $160,000 to $242,863 or approximately 40.2% when compared to the nine months ended March 31, 2009.  Legal fees to related parties decreased approximately $14,600 to $10,806 when compared to the nine months ended March 31, 2009.   Legal fees associated with the Company’s life settlement portfolio increased by $65,401 when compared to the nine months ended 3/31/09.   These increases were primarily due to the restructuring of the investment.  Accounting fees decreased approximately $31,800 to $149,650 when compared to the nine months ended March 31, 2009.  Audit fees decreased approximately $102,000 to $156,042 when compared to the nine months ended March 31, 2009.  These decreases were due to a reduction in audit fees attributable to the Company’s smaller portfolio a decrease in accounting fees related to the improvement of the Company’s internal control over financial reporting of $86,832 to $142,785 when compared to the nine months ended March 31, 2009.  While the Company continues to implement the requirements of Section 404 of the Sarbanes Oxley Act of 2002 during the nine months ended March 31, 2010, audit fees related to such compliance decreased in the nine months ended March 31, 2010 as compared to the comparable period of the prior year during which the Company took significant steps towards compliance with such requirements.

Director fees for the nine months ended March 31, 2010 increased $45,738 to $119,097 or approximately 62% when compared to the nine months ended March 31, 2009.  Effective January1, 2010, non-employee directors will be paid $25,000 per annum or $6,250 per quarter.   In addition each non-employee director will receive a fee of $1,000 for each meeting attended, and $500 for each telephone or brief board meeting attended.

Advisory Fees increased approximately $200,381 to $299,671 when compared to the nine months ended March 31, 2009.  This was due to fees due under the Advisory Agreement that was approved by shareholders in December 2009.

Miscellaneous administrative expenses decreased $125,270 to $473,565, or approximately 21% when compared with the nine months ended March 31, 2009.  This decrease was due to a reduction in service fees and custodial fees of approximately $91,000 due to the smaller portfolio.  In addition, outside help, advertising, and investor relation related expenses were reduced partially offset by an increase in recruitment fees to hire a new employee.  

Decrease in Net Assets from Operations and Net Unrealized/Realized Gains (Losses)

Net assets from operations decreased $4,610,177 for the nine months ended March 31, 2010, as compared to a decrease of $2,555,553 for the nine months ended March 31, 2009.  The decrease in net assets from operations between periods was attributable primarily to a decrease in investment income of approximately $1,860,500.  This decrease was due to lower interest rates and smaller investment portfolio.  Unrealized losses increased by approximately $530,000 reflected the restructuring of three corporate loans of approximately $1,000,000 and one commercial real estate loan of approximately $130,000, partially offset by the reclassification of previously recorded unrealized loss on a life settlement policy of approximately $392,000 due to the loss being recognized on the sale of the life settlement policy and a unrealized gain of approximately $210,000 on a real estate equity investment.  Realized losses increased by approximately $555,000 primaril y due to the reclassification of a previously unrealized loss of approximately $392,000 to a realized loss related to a life settlement policy disposed during the period as noted above.  The decreases were partially offset by a reduction in operating expenses of approximately $890,000 as discussed above.

Financial Condition at March 31, 2010 and June 30, 2009

Assets and Liabilities

Total assets increased $7,140,997 to $35,427,153, at March 31, 2010, as compared to June 30, 2009, total assets of $28,286,156. This increase was primarily due to an increase in cash and equivalents of approximately $9,000,000, from funding of $9,175,000 in new debentures by the SBA and debt financing of approximately $3,000,000, partially offset by the

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funding of new loans of $2,240,000.  This was partially offset by a decrease in investments of $2,840,000 due to a decrease in the fair value of the investments due to a revaluation of certain loans.  Total liabilities increased by approximately $12,060,000, to $25,202,644 at March 31, 2010, as compared to June 30, 2009, primarily due to an increase in SBA debentures and debt offering financing totaling $12,175,000.

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 debentures and internally generated funds.

At March 31, 2010, approximately 2% of the Company’s indebtedness was represented by indebtedness to its banks and other lenders with variable rates ranging from 3.9% to 4.5%, whereas approximately 86% of the Company’s indebtedness was due to debentures issued to the SBA with fixed rates of interest plus user fees resulting in rates ranging from 4.39% to 5.54%. At March 31, 2010, approximately 12% of the Company’s indebtedness was represented by certain notes payable which were issued in December, 2009, and March 2010, and bear an interest rate of 8.5%.  At March 31, 2010, the Company had available $452,000 of credit lines from its banks, of which $370,000 was drawn down as of that date, subject to the statutory and regulatory limitations imposed by the SBA.   

In September 2006, the Company invested in life settlement contracts which require the company to continue premium payments to keep the policies in force through the insured’s life expectancy, or until such time the policies are sold.  The Company may sell the policies at any time, at its sole discretion.  However, if the Company chooses to keep the policies, as of and after March 31, 2010, premium payments due through the life expectancy of the insured are approximately $4,533,000 over the next five years and approximately $3,430,000 thereafter (see Note 2 of the consolidated financial statements).

In December 31, 2009, the Company received from the SBA an additional $9,175,000 in SBA long term guaranteed debentures.  The debentures carried an initial interest rate of 0.28%.  On March 23, 2010, the debentures were pooled and a interest rate set of 4.117% was established.

Loan amortization and prepayments also provide a source of funding for the Company. Prepayments on loans are influenced significantly by general interest rates, economic conditions and competition.

The Company 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. To provide the funds necessary for expansion, management expects to raise additional capital and to incur, from time to time, additional bank indebtedness and to obtain SBA loans. There can be no assurances that such additional financing will be available on acceptable terms.

Recently Issued Accounting Standards

Refer to Note 12 in the accompanying consolidated financial statements for a summary of the recently issued accounting pronouncements.

ITEM 3.   QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

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 investment portfolio 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 may differ significantly from the values that would be placed on the investment portfolio if there existed a ready market for the investments.  The Company adjusts the valuation of the portfolio quarterly to reflect the Board of Directors’ estimate of the current fair value of each comp onent of the portfolio.  Any changes in estimated fair value are recorded in the Company’s statement of operations as net unrealized appreciation or depreciation on investments.

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In addition, the illiquidity of our investment portfolio may adversely affect our ability to dispose of investments at times when it may be advantageous for us to liquidate such investments.  Also, if we were required to liquidate some or all of the investments in the portfolio, the proceeds of such liquidation might be significantly less than the current value of such investments.  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 co ntinue 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.

Assuming that the assets and liabilities were to remain constant and no actions were taken to alter the existing interest rate sensitivity, a hypothetical immediate 1% increase in interest rates would have resulted in an additional net increase in net assets from operations of $142,104 at March 31, 2010. This is comprised of a 1% increase in two components, loans receivable of $144,881 at variable interest rate terms, and $2,777 for bank debt subject to variable market rates.  This hypothetical does not take into account interest rate floors or caps on the Company’s loan receivable portfolio.  No assurances can be given however, that actual results would not differ materially from the potential outcome simulated by these estimates.

ITEM 4T.  CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

Our management is responsible for establishing and maintaining adequate disclosure controls and procedures (as defined in Rules 13a-15( e ) and 15d-15( e) under the Exchange Act). Our management, with the participation of our Chief Executive Officer, President and Chief Financial Officer, conducted an evaluation of the effectiveness of our disclosure controls and procedures.  Based on such evaluation, our management, including our Chief Executive Officer, President and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of March 31, 2010.

Because of their inherent limitations, disclosure controls and procedures may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risks that disclosure controls and procedures may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Internal Control over Financial Reporting

There have been no changes in our internal control over financial reporting during the three months ended  March 31, 2010 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

IMPORTANT FACTORS RELATING TO FORWARD-LOOKING STATEMENTS

Cautionary Note Regarding Forward-Looking Statements

This Quarterly Report includes forward-looking statements within the meaning of Section 27A of the Securities Act and Section 21E of the Securities Exchange Act. The matters discussed in this Quarterly Report, as well as in future oral and written statements by management of Ameritrans Capital Corporation, that are forward-looking statements are based on current management expectations that involve substantial risks and uncertainties which could cause actual results to differ materially from the results expressed in, or implied by, these forward-looking statements. Forward-looking statements relate to future events or our future financial performance. We generally identify forward-looking statements by terminology such as “may,” “will,” “should,” “expects,” “plans,” “anticipates,” “could,” “intends,” “target,” “projects,” “contemplates,” “believes ,” “estimates,” “predicts,” “potential” or “continue” or the negative of these terms or other similar words. Important assumptions include our ability to originate new investments, achieve certain margins and levels of profitability, the availability of additional capital, and the ability to maintain certain debt to asset ratios. In light of these and other uncertainties, the inclusion of a projection or forward-looking statement in this Quarterly Report should not be regarded as a representation by us that our plans or objectives will be achieved. The forward-looking statements contained in this Quarterly Report include but are not limited to statements as to:

·

our future operating results;

·

our business prospects and the prospects of our existing and prospective portfolio companies;

·

the impact of investments that we expect to make;

·

our informal relationships with third parties;

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·

the dependence of our future success on the general economy and its impact on the industries in which we invest;

·

the ability of our portfolio companies to achieve their objectives;

·

our expected financings and investments;

·

our regulatory structure and tax treatment;

·

our ability to operate as a BDC and a RIC; and

·

the adequacy of our cash resources and working capital.

You should not place undue reliance on these forward-looking statements. The forward-looking statements made in this Quarterly Report relate only to events as of the date on which the statements are made. We undertake no obligation to update any forward-looking statement to reflect events or circumstances occurring after the date of this Quarterly Report.

PART II.  OTHER INFORMATION

INFORMATION INCORPORATED BY REFERENCE. Certain information previously disclosed in Part I of this quarterly report on Form 10-Q are incorporated by reference into Part II of this quarterly report on Form 10-Q.

Item 1. Legal Proceedings

The Company is not currently a party to any material legal proceeding. From time to time, the Company is engaged in various legal proceedings incident to the ordinary course of its business. In the opinion of the Company’s management and based upon the advice of legal counsel, there is no proceeding pending, or to the knowledge of management threatened, which in the event of an adverse decision would result in a material adverse effect on the Company’s results of operations or financial condition.

Item 1A. Risk Factors

None

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

None

Item 3. Default upon Senior Securities

None

Item 4. Removed and Reserved

Item 5. Other Information

On January 4, 2010, Elk executed a fixed rate promissory note with Bank Leumi USA (the “Leumi Note”) to extend its current line of credit in the principal amount of $120,000 to July 6, 2010, at an interest rate of 4.00%.  As part of the agreement, Elk must maintain a certificate of deposit in the amount of $120,000.

On January 31, 2010, Elk executed an agreement to extend its line of credit with Israel Discount Bank in the principal amount of $352,000 to June 30, 2010, at an interest rate of 1% over the bank’s prime rate of interest.  The credit line was increased to $352,000 and currently $250,000 is drawn.  

Item 6. Exhibits

The Exhibits filed as part of this report on Form 10-Q are listed on the Exhibit Index immediately preceding such Exhibits, which Exhibit index is incorporated by reference.

Exhibit Index

(a)

Exhibits

10.1   Executed Fixed Rate Promissory Note dated January 4, 2010, between Elk Associates Funding Corp. and Bank Leumi USA and extended to July 6, 2010.  (attached hereto)

10.2   Executed Demand Grid Promissory Note dated April 30, 2009, between Elk and Israel Discount Bank of New York as amended as of October 31, 2009, January 31, 2010, and extended to June 30, 2010 (attached hereto)

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31.1   Certification pursuant to Rule 13a-14(a) or Rule 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.  (attached hereto)

31.2   Certification pursuant to Rule 13a-14(a) or Rule 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.  (attached hereto)

32.1   Certification pursuant to 18 USC Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. (attached hereto)

32.2   Certification pursuant to 18 USC Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. (attached hereto)

(All other items of Part II are inapplicable)

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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

Dated: May 17, 2010

By: /s/ Michael Feinsod                                  

Michael Feinsod

Chief Executive Officer and President

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EX-31.1

Exhibit 31.1

CERTIFICATIONS

I, Michael Feinsod, certify that:

1.	I have reviewed this Quarterly Report on Form 10-Q of Ameritrans Capital Corporation;
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 this 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 operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.	The registrant’s other certifying officer and I are 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 us 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 control 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 changes in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter, that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.	The registrant’s other certifying officer and 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 registrant’s 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.
Date: May 17, 2010			/s/ Michael R. Feinsod             Michael R. Feinsod Chief Executive Officer

EX-31.2

Exhibit 31.2

CERTIFICATIONS

I, Gary C. Granoff, certify that:

1.	I have reviewed this Quarterly Report on Form 10-Q of Ameritrans Capital Corporation;
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 this 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 operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.	The registrant’s other certifying officer and I are 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 us 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 control 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 changes in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter, that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.	The registrant’s other certifying officer and 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 registrant’s 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.
Date: May 17, 2010			/s/ Gary C. Granoff             Gary C. Granoff Chief Financial Officer

EX-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 period ended March 31, 2010 as filed with the Securities and Exchange Commission on May 17, 2010 (the "Report"), the undersigned, in the capacity and on the date indicated below, hereby certifies 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, as amended; and

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operation of the Company.

Date: May 17, 2010 /s/ Michael R. Feinsod             Michael R. Feinsod Chief Executive Officer

EX-32.2

Exhibit 32.2

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 period ended March 31, 2010 as filed with the Securities and Exchange Commission on May 17, 2010 (the "Report"), the undersigned, in the capacity and on the date indicated below, hereby certifies 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, as amended; and

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operation of the Company.

Date: May 17, 2010 /s/ Gary C. Granoff               Gary C. Granoff Chief Financial Officer