SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-Q
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 For the Quarterly Period Ended September 30, 2001
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
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AMERITRANS CAPITAL CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 52-2102424
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
747 Third Avenue
Fourth Floor
New York, New York 10017
(Address of Registrant's (Zip Code)
principal executive office)
Registrant's telephone number, including area code: (800) 214-1047
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes [X] No [ ]
The number of shares of Common Stock, par value $.0001 per share,
outstanding as of November 13, 2001: 1,745,600
AMERITRANS CAPITAL CORPORATION
FORM 10-Q
Table of Contents
PART I. FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
Consolidated Balance Sheets as of September 30, 2001
(unaudited) and June 30, 2001 ................................. 1
Consolidated Statements of Operations -- For the Three Months
Ended September 30, 2001 and 2000 (unaudited) ................. 3
Consolidated Statements of Cash Flows -- For the Three
Months Ended September 30, 2001 and 2000 (unaudited) .......... 4
Notes to Consolidated Financial Statements ...................... 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations ............................. 10
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K .................................. 11
Signatures ........................................................ 12
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AMERITRANS CAPITAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
September 30, 2001 (Unaudited) and June 30, 2001
ASSETS
September 30, 2001 June 30, 2001
------------------ -------------
Loans receivable ................................... $ 53,785,894 $ 54,559,970
Less: unrealized depreciation on loans receivable .. (318,500) (318,500)
------------ ------------
53,467,394 54,241,470
Cash and cash equivalents .......................... 721,881 575,229
Accrued interest receivable ........................ 1,157,655 985,334
Assets acquired in satisfaction of loans ........... 741,879 932,814
Receivables from debtors on sales of assets acquired
in satisfaction of loans ....................... 416,551 421,823
Equity securities .................................. 489,439 436,914
Furniture, fixtures and leasehold improvements, net 101,680 101,902
Prepaid expenses and other assets .................. 589,673 289,383
------------ ------------
TOTAL ASSETS ................... $ 57,686,152 $ 57,984,869
============ ============
The accompanying notes are an integral part of these financial statements.
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AMERITRANS CAPITAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
September 30, 2001 (Unaudited) and June 30, 2001
LIABILITIES AND STOCKHOLDERS' EQUITY
September 30, 2001 June 30, 2001
------------------ -------------
LIABILITIES
Debentures payable to SBA .......................... $ 8,880,000 $ 8,880,000
Notes payable, banks ............................... 35,000,000 35,550,000
Accrued expenses and other liabilities ............. 457,554 456,316
Accrued interest payable ........................... 219,920 291,427
----------- -----------
TOTAL LIABILITIES ............................. 44,557,474 45,177,743
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COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY
Common stock, $.0001 par value: 5,000,000 shares
authorized; 1,745,600 shares issued and outstanding, 175 175
Additional paid-in-capital ......................... 13,471,474 13,471,474
Accumulated deficit ................................ (357,041) (678,593)
Accumulated other comprehensive income ............. 14,070 14,070
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TOTAL STOCKHOLDERS' EQUITY .................... 13,128,678 12,807,126
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TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY .... $57,686,152 $57,984,869
=========== ===========
The accompanying notes are an integral part of these financial statements.
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AMERITRANS CAPITAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
For the Three Months Ended September 30, 2001 and 2000
Three Months Ended Three Months Ended
September 30, 2001 September 30, 2000
------------------ ------------------
INVESTMENT INCOME
Interest on loans receivable $1,479,631 $1,548,345
Fees and other income 45,700 75,983
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TOTAL INVESTMENT INCOME 1,525,331 1,624,328
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OPERATING EXPENSES
Interest 651,689 962,499
Salaries and employee benefits 155,581 141,494
Legal fees 46,088 38,291
Miscellaneous administrative expenses 289,834 183,066
Loss on assets acquired in
satisfaction of loans, net 37,445 14,588
Directors' fees 3,750 250
Depreciation in value of loans 18,322 194,298
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TOTAL OPERATING EXPENSES 1,202,709 1,534,486
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OPERATING INCOME 322,622 89,842
NET INCOME BEFORE INCOME TAXES 322,622 89,842
INCOME TAXES 1,070 2,091
----------- -----------
NET INCOME $321,552 $ 87,751
=========== ===========
WEIGHTED AVERAGE SHARES OUTSTANDING
Basic 1,745,600 1,745,600
=========== ===========
Diluted 1,745,600 1,750,684
=========== ===========
NET INCOME PER COMMON SHARE
Basic $.1842 $.0503
=========== ===========
Diluted $.1842 $.0501
=========== ===========
The accompanying notes are an integral part of these financial statements
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AMERITRANS CAPITAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
For the Three Months Ended September 30, 2001 and 2000
September 30, 2001 September 30, 2000
------------------ ------------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 321,552 $ 87,751
----------- -----------
Adjustments to reconcile net income to net cash (used in)
provided by operating activities:
Depreciation and amortization 8,600 15,541
Changes in assets and liabilities
Accrued interest receivable (172,321) 132,278
Prepaid expenses and other assets (300,290) (46,722)
Accrued expenses and other liabilities 1,238 40,369
Accrued interest payable (71,507) (75,139)
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TOTAL ADJUSTMENTS (534,280) 66,327
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NET CASH (USED IN) PROVIDED BY OPERATING ACTIVITIES (212,728) 154,078
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CASH FLOWS FROM INVESTING ACTIVITIES
Net change in loans receivable, assets acquired in
satisfaction of loans and receivables from debtors
on sales of assets acquired in satisfaction of loans 970,283 (685,185)
(Purchases) of equity securities (52,525) (38,788)
Acquisition of furniture, fixtures and leasehold
improvements (8,378) (1,965)
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NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES 909,380 (725,938)
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CASH FLOWS FROM FINANCING ACTIVITIES
(Repayments) proceeds from notes payable, banks, net (550,000) 700,000
----------- -----------
NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES $ (550,000) 700,000
----------- -----------
The accompanying notes are an integral part of these financial statements.
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AMERITRANS CAPITAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED), Continued
For the Three Months Ended September 30, 2001 and 2000
September 30, 2001 September 30, 2000
------------------ ------------------
NET INCREASE IN CASH AND CASH EQUIVALENTS $ 146,652 $ 128,140
CASH AND CASH EQUIVALENTS - Beginning 575,229 376,507
----------- -----------
CASH AND CASH EQUIVALENTS - Ending $ 721,881 $ 504,647
=========== ===========
The accompanying notes are an integral part of these financial statements.
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AMERITRANS CAPITAL CORPORATION AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 -- Organization and Summary of Significant Accounting Policies
Financial Statements
The consolidated balance sheet of Ameritrans Capital Corporation
("Ameritrans" or the "Company") as of September 30, 2001, the related statements
of operations, and cash flows for the three months ended September 30, 2001 and
September 30, 2000 included in Item 1 have been prepared by the Company, without
audit, pursuant to the rules and regulations of the Commission. Certain
information and footnote disclosures normally included in financial statements
prepared in accordance with generally accepted accounting principles have been
condensed or omitted pursuant to such rules and regulations. In the opinion of
management, the accompanying consolidated financial statements include all
adjustments (consisting of normal, recurring adjustments) necessary to summarize
fairly the Company's financial position and results of operations. The results
of operations for the three months ended September 30, 2001 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, 2001 as filed with the
Commission.
Organization and Principal Business Activity
Ameritrans, a Delaware corporation acquired all of the outstanding shares
of Elk Associats Funding Corporation ("Elk") on December 16, 1999 in a share for
share exchange. Prior to the acquisition, Elk had been operating independently
and Ameritrans had no operations. The historical financial statements prior to
December 16, 1999 were those of Elk.
Elk, a New York corporation, is licensed by the Small Business
Administration ("SBA") to operate as a small Business Investment Company
("SBIC") under the Small Business Investment Act of 1958, as amended. Elk has
also registered as an investment company under the Investment Company Act of
1940 to make business loans.
Ameritrans is a specialty finance company that through its subsidiary, Elk
makes loans to taxi owners, to finance the acquisition and operation of the
medallion taxi businesses and related assets, and to other small businesses in
the New York City, Chicago, Miami, and Boston markets.
Basis of Consolidation
The consolidated financial statements include the accounts of Ameritrans,
Elk and EAF Holding Corporation ("EAF"), a wholly owned subsidiary of Elk,
collectively referred to as the "Company". All significant inter-company
transactions have been eliminated in consolidation.
EAF was formed in June 1992 and began operations in December 1993. The
purpose of EAF is to own and operate certain real estate assets acquired in
satisfaction of loans by Elk.
Ameritrans organized another subsidiary on June 8, 1998, Elk Capital
Corporation ("Elk Capital"), which may engage in similar lending and investment
activities. Since inception, Elk Capital had no operations and activities.
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Income Taxes
The Company has elected to be taxed as a Regulated Investment Company under
the Internal Revenue Code. A Regulated Investment Company will generally not be
taxed at the corporate level to the extent its income is distributed to its
stockholders. In order to be taxed as a Regulated Investment Company, the
Company must pay at least 90 percent of its net investment company taxable
income to its stockholders as well as meet other requirements under the Code. In
order to preserve this election for fiscal 2002, the Company intends to make the
required distributions to its stockholders in accordance with applicable tax
rules.
Net Income per Share
During the year ended June 30, 1999, the Company adopted the provision of
Statements of Financial Accounting Standards No. 128 "Earnings per Share" ("SFAS
No. 128"). SFAS No. 128 eliminates the presentation of primary and fully
dilutive earnings per share ("EPS") and requires presentation of basic and
diluted EPS. Basic EPS is computed by dividing income (loss) available to common
stockholders by the weighted-average number of common shares outstanding for the
period. Diluted EPS is based on the weighted-average number of shares of common
stock and common stock equivalents outstanding. At September 30, 2001 and June
30, 2001 the Company has 133,336 options outstanding.
Loans Valuations
The Company's loans are recorded at fair value. Loans are valued at cost
less unrealized depreciation. Since no ready market exists for these loans, the
fair value is determined in good faith 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.
Use of Estimates in the Financial Statements
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities at the
date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates. Estimates that are particularly susceptible to change relate to the
determination of the fair value of financial instruments.
New Accounting Pronouncements
The Financial Accounting Standards Board ("FASB") has issued Statement No.
144, "Accounting for the Impairment or Disposal of Long-Lived Assets" in August
2001. Statement No. 144 changes the accounting for long-lived assets to be held
and used by eliminating the requirement to allocate goodwill to long-lived
assets to be tested for impairment, by providing a probability weighted cash
flow estimation approach to deal with situations in which alternative courses of
action to recover the carrying amount of possible future cash flows and by
establishing a "primary-asset" approach to determine the cash flow estimation
period for a group of assets and liabilities that represents the unit of
accounting for long-lived assets to be held and used. Statement No. 144 changes
the accounting for long-lived assets to be disposed of other than by sale by
requiring that the depreciable life of a long-lived asset to be abandoned be
revised to reflect a shortened useful life and by requiring that an impairment
loss to be recognized at the date a long-lived asset is exchanged for a similar
productive asset or distributed to owners in spin-off if the carrying amount of
the asset exceeds its fair value. Statement No. 144 changes the accounting for
long-lived assets to be disposed of by sale by requiring that discontinued
operations no longer be recognized on a net realizable value basis (but at the
lower of carrying amount or fair value less costs to sell), by eliminating the
recognition of future operating losses of discontinued components before they
occur and by broadening the presentation of discontinued operations in the
income statement to include a component of an entity rather than a segment of a
business. A component of an entity comprises operations and cash flows that can
be clearly distinguished, operationally, and for financial reporting purposes,
from the rest of the entity. The effective date for Statement No. 144 is for
fiscal years beginning after December 15, 2001.
The Company expects that the adoption of the new statement will not have a
significant impact on its financial statements. It is not possible to quantify
the impact until the newly issued statement has been studied.
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NOTE 2 -- Debentures Payable to SBA
At September 30, 2001 and June 30, 2001 debentures payable to the SBA
consist of subordinated debentures with interest payable semiannually, as
follows:
Current
Effective Principal
Issue Date Due Date Interest Rate Amount
---------- -------- ------------- ------
September 1993 September 2003 6.12(1) $1,500,000
September 1993 September 2003 6.12 2,220,000
September 1994 September 2004 8.20 2,690,000
December 1995 December 2005 6.54 1,020,000
June 1996 June 2006 7.71 1,020,000
March 1997 March 2007 7.38(2) 430,000
----------
$8,880,000
==========
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(1) Interest rate was 3.12% from inception through September 1998
(2) The Company is also required to pay an additional annual user fee of 1% on
this debenture
Under the terms of the subordinated debentures, the Company may not
repurchase or retire any of its capital stock or make any distributions to its
stockholders other than dividends out of retained earnings (as computed in
accordance with SBA regulations) without the prior written approval of the SBA.
NOTE 3 -- Notes Payable to Banks
At September 30, 2001 and June 30, 2001 the Company had loan agreements
with three (3) banks for lines of credit aggregating $40,000,000. At September
30, 2001 and June 30, 2001, the Company had $35,000,000 and $35,550,000
respectively, outstanding under these lines. The loans, which mature through
November 30, 2001, bear interest based on the Company's choice of the lower of
either the reserve adjusted LIBOR rate plus 150 basis points or the banks' prime
rates including certain fees which make the effective rates approximately prime
minus 1 1/2% as of September 30, 2001. Upon maturity, the Company anticipates
extending the lines of credit for another year, as has been the practice in
previous years. Pursuant to the terms of the agreements the Company is required
to comply with certain terms, covenants and conditions. The Company pledged its
loans receivable and other assets as collateral for the above lines of credit.
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NOTE 4 -- Commitments and Contingencies
Interest Rate Swap
On January 10, 2000, the Company entered into a $5,000,000 interest rate
Swap transaction with a bank expiring on October 8, 2001. On June 11, 2001, the
Company entered into an additional interest rate Swap transaction with the same
bank for $10,000,000 expiring on June 11, 2002. On June 11, 2001, the Company
entered into another interest rate Swap transaction for $15,000,000 with this
bank expiring June 11, 2003. These Swap transactions were entered into to
protect the Company from an upward movement in interest rates relating to
outstanding bank debt (see Note 3 for terms and effective interest rates). These
Swap transactions call for a fixed rate of 4.95%, 4.35% and 4.95%, respectively,
(plus 150 basis points) for the Company and if the floating one month LIBOR rate
is below the fixed rate then the Company is obligated to pay the bank for the
difference in rates. When the one-month LIBOR rate is above the fixed rate then
the bank is obligated to pay the Company for the differences in rates. The
effective fixed costs on the debt that was swapped, including the 150 basis
points, is 6.45%, 5.95% and 5.45% respectively.
Loan Commitments
At September 30, 2001 and June 30, 2001 the Company had commitments to make
loans totaling approximately $1,123,886 and $547,000, respectively, at interest
rates ranging from 8.25% to 18%.
Employment Agreements
During November 2001, the Company entered into an employment agreement with
an executive effective as of July 1, 2001, whereby the Company would pay a
miminum of $240,000 plus a discretionary bonus and annual increases. This
employment agreement terminates on July 1, 2006 but will be automatically
renewed for an additional five (5) years unless either the Company or the
executive gives notice of non-renewal. During November 2001, the Company also
entered into a consulting agreement with this executive as of July 1, 2001,
whereby based on early termination of the employment agreement the Company would
pay a consulting fee for the term of the consulting agreement of a minimum of
one-half of the executive's base salary in effect at the termination date of the
employment agreement.
During November 2001, the Company entered into employment agreements with
three executives effective as of October 1, 2001, whereby the Company would pay
a minimum aggregate of $202,000 per annum plus a discretionary bonus and annual
increases. These employment agreements terminate on October 1, 2006, but will be
automatically renewed for an additional five (5) years unless either the Company
or the executives gives notice of non-renewal.
NOTE 5 -- Other Matters
Quarterly Dividend
The Company's Board of Directors declared for the quarters ended June 30,
2001 and September 30, 2001 a total dividend of $471,312 on October 11, 2001 to
stockholders of record on October 22, 2001, which was paid on October 30, 2001.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The information contained in this section should be used in conjunction
with the consolidated Financial Statements and Notes therewith appearing in this
report Form 10-Q and the Company's Annual Report on Form 10-K for the year ended
June 30, 2001.
General
The Company is licensed by the Small Business Administration (SBA) to
operate as a Small Business Investment Company (SBIC) under the Small Business
Investment Act of 1958, as amended. The Company has also registered as an
investment company under the Investment Company Act of 1940.
The Company primarily makes loans and investments to persons who qualify
under SBA regulation as socially or economically disadvantaged and loans and
investments to entities which are at least 50% owned by such persons. The
Company also makes loans and investments to persons who qualify under SBA
regulation as "non-disadvanged". The Company's primary lending activity is to
originate and service loans collateralized by New York City, Boston, Chicago and
Miami taxicab medallions. The Company also makes loans and investments in other
diversified businesses.
Results of Operations For the Three Months Ended September 30, 2001 and 2000.
Total Investment Income
The Company's investment income for the three months ended September 30,
2001 decreased to $1,525,331 from $1,624,328 or (6.1%) as compared with the
three month period ended September 30, 2000. This decrease was mainly due to a
decrease in the loan portfolio. The portfolio decreased from $57,633,533 as of
September 30, 2000 to $53,785,894 as of September 30, 2001. The reduction
reflects management's conservative approach over the last year as a result of
the slowdown of the U.S. economy.
Operating Expenses
Interest expense for the three month period ended September 30, 2001
decreased $310,810 ($651,689 vs. $962,499) over the similar period ended
September 30, 2000. This decrease was mainly due to decreased bank borrowings
for the period combined with lower interest rates for the period ended September
30, 2001.
Other operating expenses for the three months ended September 30, 2001
increased $132,152 when compared with the three months ended September 30, 2000.
Balance Sheet and Reserves
Total assets decreased by $298,717 as of September 30, 2001, when compared
with the balance sheet as of June 30, 2001. This decrease was due to
management's decision to level its portfolio in light of the slowdown of the
U.S. economy. During the period the Company reduced its bank debt by $550,000.
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PART II. OTHER INFORMATION
ITEM 6 -- Exhibits and Reports on Form 8-K
(a) Exhibits
10.1 Employment Agreement by and between the Company and Gary C. Granoff
dated as of July 1, 2001.
10.2 Consulting Agreement by and between the Company and Gary C. Granoff
dated as of July 1, 2001.
10.3 Employment Agreement by and between the Company and Ellen Walker dated
as of October 1, 2001.
(b) Reports on Form 8-K.
There were no reports filed on Form 8-K for the period ending September 30,
2001.
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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
Date: November 14, 2001 By: /s/ Gary C. Granoff
-------------------
Gary C. Granoff
Chief Financial Officer
(Principal Financial Officer and
Chief Accounting Officer)
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