<PAGE>

                     U.S. SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                   FORM 10-K/A

                                   (Mark One)
                [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934

                     For the Fiscal Year Ended June 30, 1999

                                       OR

     [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
                              EXCHANGE ACT OF 1934

              For the transition period from ________ to _________

                         Commission file number 0-22153

                       ELK ASSOCIATES FUNDING CORPORATION
             (Exact name of registrant as specified in its charter)


              NEW YORK                              11-2502336
      (State of Incorporation)           (IRS Employer Identification No.)

                   747 THIRD AVENUE, NEW YORK, NEW YORK 10017
               (Address of principal executive offices) (Zip Code)

                                 (212) 355-2449
              (Registrant's telephone number, including area code)

        Securities registered pursuant to Section 12(b) of the Act: None

           Securities registered pursuant to Section 12(g) of the Act:
                     Common Stock, par value $.01 per share
                                (Title of class)

     Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. YES [X] NO [ ]

     Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein and will not be contained, to
the best of Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K [X].


<PAGE>




         The approximate aggregate market value of common equity held by
non-affiliates of the Registrant as of September 27, 1999 was approximately
$10,872,434, based on the last sale price of the Registrant's Common Stock on
the Nasdaq SmallCap Market as of the close of business on September 27, 1999.
There were 1,745,600 shares of the Registrant's Common Stock outstanding as of
September 27, 1999.

                       DOCUMENTS INCORPORATED BY REFERENCE

         Part III of the Registrant's Annual Report on Form 10-K for the fiscal
year ended June 30, 1999, as filed on September 28, 1999 (the "Elk Form 10-K")
incorporated by reference certain portions of the Registrant's Definitive Proxy
Statement for its 1999 Annual Meeting of Shareholders originally scheduled to be
held on November 18, 1999, which Definitive Proxy Statement was expected to be
filed with the Securities and Exchange Commission not later than 120 days after
the Registrant's fiscal year-end of June 30, 1999. Such Annual Meeting having
been tentatively rescheduled for December 10, 1999 and such Definitive Proxy
Statement not having been filed, the information required by Part III of Form
10-K is included in this Form 10-K/A.



                                       -2-

<PAGE>



This amendment on Form 10-K/A to the Elk Form 10-K contains (i) a correction of
Elk's state of incorporation on the Cover page; (ii) the information required by
Part III of Form 10-K; and (iii) a replacement of the Consolidated Financial
Statements, revised to correct typographical errors in the first paragraph of
Note 6 -- Notes Payable to Banks and paragraph (b) of Note 15 - Subsequent
Events.


                        FORM 10-K/A -- TABLE OF CONTENTS

                                                                            Page
                                                                            ----
PART III ................................................................     4

ITEM 10.          DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.....     4

ITEM 11.          EXECUTIVE COMPENSATION.................................     7

ITEM 12.          SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
                  MANAGEMENT.............................................    12

ITEM 13.          CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.........    15

CONSOLIDATED FINANCIAL STATEMENTS........................................    16

SIGNATURE................................................................    17


                                       -3-


<PAGE>



                                    PART III

ITEM 10.          DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

         The following table sets forth certain information concerning the
directors and executive officers of Elk:

Name                                Position
----                                --------
Gary C. Granoff(1)(2)               President and Chairman of Board of Directors
Ellen M. Walker(1)(2)               Vice President, General Counsel and Director
Lee A. Forlenza(1)(2)               Vice President and Director
Steven Etra                         Vice President and Director
Margaret Chance(2)                  Secretary
Silvia M. Mullens(2)                Vice President
Marvin Sabesan                      Director
Paul Creditor                       Director
Allen Kaplan                        Director
John L. Acierno                     Director
John R. Laird                       Director
Howard F. Sommer                    Director


-------------


(1)      Ellen M. Walker, Gary C. Granoff and Lee A. Forlenza are officers and
         shareholders in the law firm of Granoff, Walker & Forlenza, P.C. See
         "Item 13.  Certain Relationships and Related Transactions."

(2)      Gary C. Granoff, Ellen M. Walker, Lee A. Forlenza, Margaret Chance, and
         Silvia Mullens are each "interested persons" with respect to Elk, as
         such term is defined in the 1940 Act.


         Gary C. Granoff, age 51, has been President and a director of Elk since
its formation in July 1979 and Chairman of the Board of Directors since December
1995, and he has been President and a director of Ameritrans since its
formation. Mr. Granoff has been a practicing attorney for the past twenty-six
years and is presently an officer and stockholder in the law firm of Granoff,
Walker & Forlenza, P.C. Mr. Granoff is a member of the bar of the State of New
York and the State of Florida and is admitted to the United States District
Court of the Southern District of New York. Mr. Granoff is also President and
the sole stockholder of GCG Associates, Inc. ("GCG"), Elk's former investment
adviser. He has served as President and the sole stockholder of Seacrest
Associates, Inc., a hotel operator, since August 1994. Mr. Granoff has also been
President and a director since June 1996 of Gemini Capital Corporation
("Gemini"), a company primarily engaged in the business of making consumer
loans, and he has been a director of Enviro-Clean of America, Inc. since
September 1999. In February 1998, Mr. Granoff was elected to and is presently
serving as a trustee on the Board of Trustees of The George Washington
University. Mr. Granoff holds a

                                       -4-

<PAGE>



Bachelor of Business Administration degree in Accounting and a Juris Doctor
degree (with honors) from The George Washington University.

         Ellen M. Walker, age 44, has been a Vice President, General Counsel and
a director of Elk since July 1983 and of Ameritrans since its formation. She was
a director of Elk from July 1983 to August 1994, and has been a director of Elk
since 1995. Ms. Walker has been a practicing attorney for more than 17 years and
she is presently an officer and stockholder in the law firm of Granoff, Walker &
Forlenza, P.C. Ms. Walker is a member of the Bar of the State of New York and
she is admitted to the United States District Court of the Southern District of
New York. Since August 1983 Ms. Walker has been Vice President of GCG. Ms.
Walker has been a director, Vice President and General Counsel of Gemini since
June 1996. Ms. Walker received a Bachelor of Arts degree from Queens College and
obtained her Juris Doctor degree with honors from Brooklyn Law School.

         Lee A. Forlenza, age 42, has been a Vice President of Elk since March
1992 and a director of Elk since January 1995, and he has been a Vice President
and a director of Ameritrans since its formation. Mr. Forlenza has been a
practicing attorney since February 1983 and is presently an officer and
stockholder in the law firm of Granoff, Walker & Forlenza, P.C. Since March 1992
Mr. Forlenza has been an investment analyst for GCG. Mr. Forlenza has also been
Vice President, Secretary and a director of Gemini since June 1996. Mr. Forlenza
was Vice President of True Type Printing, Inc. from 1976-1995 and has been
President since May 1995. From 1983 through 1986 Mr. Forlenza was an attorney
with the SBA. Mr. Forlenza graduated Phi Beta Kappa from New York University and
obtained his Juris Doctor degree from Fordham University School of Law.

          Steven Etra, age 50, has been a Vice President of Elk since January
1999 and a director of Elk since November 1995, and he has been a Vice President
and a director of Ameritrans since its inception. Mr. Etra has been Sales
Manager since 1975 of Manufacturers Corrugated Box Company, a company owned by
Mr. Etra's family for more than 75 years. Mr. Etra has also been a director of
Gemini since June 1996 and has been a director of Enviro-Clean of America, Inc.
since January 1999. Mr. Etra has extensive business experience in investing in
emerging companies.

         Silvia Maria Mullens, age 48, has been a Vice President of Elk since
1996 and the Loan Administrator of Elk since February 1994, and she has been a
Vice President of Ameritrans since its inception. Prior to joining Elk, she was
the Legal Coordinator for Castle Oil Corporation from September 1991 through
June 1993 and from June 1993 through January 1994, a legal assistant
specializing in foreclosures in the law firm of Greenberg & Posner. Ms. Mullens
received a B.A. from Fordham University and an M.B.A. from The Leonard Stern
School of Business Administration of New York University.

         Margaret Chance, age 45, has been Secretary of Elk and involved in loan
administration since November 1980, and she has been Secretary of Ameritrans
since its inception. Ms. Chance is the office manager of Granoff, Walker &
Forlenza, P.C. and has served as the Secretary of GCG Associates Inc., since
January 1982. Ms. Chance holds a paralegal certificate.

         Marvin Sabesan, age 70, has been a director of Elk since July 1982, and
he has been a director of Ameritrans since its inception. Mr. Sabesan has been
employed by Pearl River Textiles, Inc. as an executive since 1990. He was an
Executive Vice President of N.O.L. Inc., a lingerie company, from 1988 to 1990.
Mr. Sabesan was an Executive Vice President of A.J. Schneierson & Son, a
clothing manufacturer from 1971 to 1987.

                                       -5-

<PAGE>




         Paul Creditor, age 63, has been a director of Elk since November 1995,
and he has been a director of Ameritrans since its inception. Mr. Creditor has
been a practicing attorney since 1961, engaging in the general practice of law
and specializing in corporate law. From 1974 through 1979 he served as an
elected Judge in Suffolk County, New York. He also served as counsel to the New
York State Constitutional Convention and various State Agencies and Commissions.

         Allen Kaplan, age 49, has been a director of Elk since November 1995,
and he has been a director of Ameritrans since its inception. Mr. Kaplan has
been, since November 1987, Vice President and Chief Operating Officer of Team
Systems, Inc., a company which manages and operates more than 200 New York City
Medallion taxicabs. Mr. Kaplan is currently Vice President of the Metropolitan
Taxicab Board of Trade, a trade association consisting of 22 member fleets
representing 1,200 New York City medallions.

         John L. Acierno, age 41, has been a director of Elk since October 1997,
and he has been a director of Ameritrans since its inception. Mr. Acierno has
served as president of Executive Charge Inc. and its affiliated companies for
the last ten years. During that time, Executive Charge Inc. has become the
largest executive sedan operation in the United States with over 1,100 vehicles
servicing the greater New York Metropolitan area. His background includes
practicing law as a labor attorney for Proskauer Rose and serving as counsel for
R.H. Macy & Co. Mr. Acierno was the founder, and served as president for six
years, of the Black Car Assistance Corporation, the organization which serves as
the New York black car industry association. He was named International Taxicab
and Limousine Association Premium Service Operator of the Year for 1996. Mr.
Acierno graduated Phi Beta Kappa from Tufts University, and Cum Laude from
Cornell Law School.

         John R. Laird, age 57, has been a director of Elk since January 1999,
and he has been a director of Ameritrans since its inception. Mr. Laird has been
a private investor since 1994, when he retired from Shearson Lehman Brothers
Inc. ("Shearson"). Mr. Laird served as President and Chief Executive Officer of
Shearson Lehman Brothers Division of Shearson and as a member of the Shearson
Executive Committee from 1992 to 1994. Mr. Laird was also Chairman and Chief
Executive Officer of The Boston Company, a subsidiary of Shearson, from 1990
until its sale by Shearson in 1993. From 1977 to 1989, Mr. Laird was employed by
American Express in various capacities including Senior Vice President and
Treasurer. He also is and has been a member of boards of various cultural and
philanthropic organizations, including, but not limited to, the Corporate
Advisory Committee of the Boston Museum of Fine Arts and the Board of Overseers
for the Boston Symphony Orchestra. Mr. Laird received a B.S. in finance and an
M.B.A. from Syracuse University and attended the Advanced Management Program at
Harvard Business School.

         Howard F. Sommer, age 59, has been a director of Elk since January
1999, and he has been a director of Ameritrans since its inception. Mr. Sommer
has been President and Chief Executive Officer of New York Community Investment
Company L.L.C., an equity investment fund providing long-term capital to small
business throughout the State of New York, since 1995. He has also been a
director of York Research Corp. since September 1997. Mr. Sommer was President
of Fundex Capital Corporation from 1978 to 1995, and Executive Vice President of
U.S. Capital Corporation from 1973 to 1995 and of Liberty Financial Corp. from
May 1994 through September 1995. He worked in management consulting from 1971
to 1973, and held various positions at IBM and Xerox Corporations.


                                       -6-

<PAGE>

Compliance with Section 16(a) of the 1934 Act

         Section 16(a) of the Securities Exchange Act of 1934 (the "1934 Act")
requires Elk's officers and directors, and persons who own more than 10% of
Elk's Common Stock, to file initial reports of beneficial ownership and changes
in beneficial ownership with the SEC and to furnish Elk with copies of all
reports filed.

         Based solely on a review of the forms furnished to Elk, or written
representations from certain reporting persons, Elk believes that all persons
who were subject to Section 16(a) in fiscal 1999 complied with the filing
requirements.

Committees of the Board and Meeting Attendance.

         The Audit Committee is comprised of Paul Creditor, John Acierno, and
Gary Granoff. The function of the Audit Committee is to review the internal
accounting control procedures of Elk, review the consolidated financial
statements of Elk and review with the independent public accountants the results
of their audit.

         The 1998 Employee Plan Committee consists of Messrs. Sabesan, Kaplan,
Creditor, and Acierno. The function of the 1998 Employee Plan Committee is to
administer Elk's 1998 Employee Plan.

         The Holding Company Committee consists of Steven Etra and Lee Forlenza.
The purpose of the Holding Company Committee is to oversee the formation and
capitalization of, and the transactions with, Ameritrans.

         The Board of Directors does not have standing nominating or
compensation committees. The Board of Directors held four formal meetings during
fiscal 1999. Mr. Acierno attended 25% of the Board meetings and all committee
meetings, Mr. Kaplan attended 50% of the Board meetings and all committee
meetings, and each other director attended 100% of the meetings of the Board of
Directors and all committees of the Board on which he or she served.

ITEM 11.          EXECUTIVE COMPENSATION

         The following table sets forth certain compensation information for the
fiscal year ended June 30, 1999 for Elk's (i) Chief Executive Officer and (ii)
Elk's four most highly compensated executive officers, other than the Company's
Chief Executive Officer, whose total annual salary and bonus exceed $100,000
(the "Named Executive Officers").

         Officers' salaries constitute a major portion of Elk's total
"management fee compensation," which must be approved by the SBA. The SBA has
approved total officer and employee compensation of $648,000 for Elk for fiscal
1999. This amount includes officers' salaries, other salaries, and employee
benefits.


                                       -7-

<PAGE>

                                            Summary Compensation Table
<TABLE>
<CAPTION>
                                                                                                                 Long Term
                                                                                                                Compensation
                                                                                                             (Shares of Common
                                                                                        Other Annual        Stock issuable upon
Name and Principal Position                Salary($)          Bonus($)                Compensation($)       exercise of options)
---------------------------                ---------          --------                ---------------       --------------------
<S>                                        <C>                 <C>                    <C>                   <C>
Gary C. Granoff, President and             225,712                                         44,000(1)             30,000(3)
Chairman of the Board of Directors

Ellen M. Walker, Vice President,           103,917                                         15,000(2)             20,000(3)
General Counsel and Director

                                                                            Long Term
                                                                          Compensation
                                                                        (Shares of Common
                                                                       Stock issuable upon
                                            Directors Fees($)         exercise of options)
                                            -----------------         --------------------
Lee A. Forlenza, Vice President and             51,750(4)                   17,500(3)
Director

Steven Etra, Vice President and                  5,000(5)                   17,500(3)
Director

Marvin Sabesan, Director                         5,000                       5,556(6)

Paul Creditor, Director                          5,000                       5,556(6)

Allen Kaplan, Director                           5,000                       5,556(6)

John L. Acierno, Director                        3,500                       5,556(6)

John R. Laird, Director                          3,250

Howard F. Sommer                                 3,250
</TABLE>
-----------
(1)      Consists of $20,000 of reimbursed expenses and a $24,000 contribution
         to Elk's Simplified Employee Pension Plan ("SEP").

(2)      Consists of a $15,000 contribution to the SEP.

(3)      Consists of shares issuable upon the exercise of options granted under
         Elk's 1998 Employee Incentive Stock Option Plan (the "1998 Employee
         Plan").

(4)      Includes $45,000 of salary and a $6,750 contribution to the SEP paid to
         Mr. Forlenza in his capacity as an officer of Elk.

(5)      Includes $2,500 of salary paid to Mr. Etra in his capacity as an
         officer of Elk and $2,500 of director's fees paid to Mr. Etra prior to
         his appointment as an officer of Elk

(6)      Consists of shares issuable upon the exercise of options granted under
         Elk's 1998 Non-Employee Director Stock Option Plan (the "1998 Director
         Plan").


                                       -8-

<PAGE>



         No cash bonuses were paid to any officers in fiscal 1999. Salary
increases were authorized for Gary C. Granoff ($15,000), Ellen M. Walker
($10,000) and Lee A. Forlenza ($5,000), effective July 1, 1999. The other
officers are receiving, in the aggregate, the same compensation from Elk and/or
Ameritrans as was paid by Elk as of the end of the fiscal year ended June 30,
1999. However, if the Share Exchange is completed, it is anticipated that future
compensation will be allocated between Elk and Ameritrans, based upon factors
determined by their respective Boards of Directors. The Boards of Directors may
increase such compensation, in the form of salary increases or bonuses, for the
fiscal year ending June 30, 2000.

         Elk has a policy of paying its directors who are not employees fees of
$750 for each meeting attended. Elk pays each non-affiliated director a minimum
fee of $2,000 per year in addition to the fees paid for each meeting attended.
Eligible non-employee directors are entitled to participate in Elk's 1998
Director Plan. The non-employee directors receive no other compensation for
their services to Elk.

         Employee directors of Elk are eligible to participate in Elk's
Simplified Employee Pension Plan and its 1998 Employee Plan. Elk does not
provide any other pension or retirement plan with respect to its directors or
employees.

         The following table sets forth certain information regarding options
granted during the fiscal year ended June 30, 1999 by Elk to the following Named
Executive Officers:
<TABLE>
<CAPTION>
                                                Option Grants -- Individual Grants

                                                                                        Potential Realizable
                            Number of        Percent of                                   Value at Assumed
                           Securities      Total Options                               Annual Rates of Stock
                           Underlying        Granted to      Exercise                  Price Appreciation for
                             Options        Employees in       Price      Expiration       Option Term(2)
Name                       Granted(#)       Fiscal Year    ($/share)(1)      Date         5%($)       10%($)
----                       ----------      -------------   ------------   ----------   ----------------------
<S>                        <C>               <C>            <C>            <C>         <C>           <C>
Gary C. Granoff              30,000            30.0%           9.77         1/11/04       47,400     136,800

Ellen M. Walker              20,000            20.0%           8.88         1/11/09      112,400     284,400



                        Aggregated Option Exercises in the Last Fiscal Year and Year-End Option Values
                                                 Unexercised       Value of In-The-
                          Shares Acquired      Options at Year     Money Options at
Name                        on Exercise              End             Year End(1)
----                      ---------------      ---------------     -----------------

Gary C. Granoff                  0                  30,000              $51,000

Ellen M. Walker                  0                  20,000              $40,400
</TABLE>
--------------


(1)      All the options are currently exercisable.

                                       -9-

<PAGE>



Report of the Board of Directors as to Compensation Matters

         The objectives of Elk's executive compensation program are to establish
compensation levels designed to enable Elk to attract, retain and reward
executive officers who contribute to the long-term success of Elk so as to
enhance stockholder value. The Board of Directors makes decisions each year
regarding executive compensation, including annual base salaries and bonus
awards, and the 1998 Employee Plan Committee, consisting of non-interested
directors, will make decisions each year regarding stock option grants. Option
grants are key components of the executive compensation program and are intended
to provide executives with an equity interest in Elk so as to link a meaningful
portion of the compensation of Elk's executives with the performance of Elk's
Common Stock. This report is submitted by the full Board of Directors and
addresses the compensation policies for fiscal 1999 as they affected Gary C.
Granoff, in his capacity as the Chief Executive Officer of the Company, as well
as each of Elk's other officers.

Compensation Philosophy

         Elk's executive compensation philosophy is based on the belief that
competitive compensation is essential to attract, motivate and retain highly
qualified and industrious employees. Elk's policy is to provide total
compensation that is competitive for comparable work and comparable corporate
performance. The compensation program includes both motivational and
retention-related compensation components. Bonuses may be included to encourage
effective performance relative to current plans and objectives. Stock options
are included to help retain productive people and to more closely align their
interests with those of stockholders.

         In executing its compensation policy, Elk seeks to relate compensation
with Elk's financial performance and business objectives, reward high levels of
individual performance and tie a significant portion of total executive
compensation to both the annual and long-term performance of Elk. While
compensation survey data are useful guides for comparative purposes, Elk
believes that a successful compensation program also requires the application of
judgment and subjective determinations of individual performance, and to that
extent the Board of Directors applies judgment in reconciling the program's
objectives with the realities of retaining valued employees.

Executive Compensation Program

         Annual compensation for Elk's executives consists of two principal
elements: cash compensation, consisting of salaries and bonuses, and stock
options.

         Cash Compensation

         In setting the annual base salaries for Elk's executives, the Board of
Directors reviews the aggregate salary and bonus compensation for individuals in
comparable positions with other companies, including competitors of Elk, and
adjusts such amounts to reflect individual performance. Many of these companies
are specialty finance companies. Elk also regularly compares the salary levels
of its executive officers with other leading companies.

         Increases in annual base salary are based on a review and evaluation of
the performance of the activity for which the executive has responsibility, the
impact of that activity on Elk and the skills

                                      -10-

<PAGE>



and experience required for the job, coupled with a comparison of these elements
with similar elements for other executives both inside and outside Elk.

         Cash bonuses are tied directly to Elk's financial performance and the
contribution of the executive to such performance.

         Equity Ownership

         Executive officer compensation also includes long-term incentives
afforded by options to purchase shares of Common Stock. The purposes of Elk's
stock ownership program are to (i) highlight and reinforce the mutuality of
long-term interests between employees and the stockholders and (ii) to assist in
the attraction and retention of critically important key executives, managers
and individual contributors who are essential to Elk's growth and development.

         Elk's stock option plans were adopted in 1998. The purpose of these
plans is to orient Elk's executive officers and non-employee directors to longer
term success. The options granted to date under the 1998 Employee Plan were
granted to persons who had been associated with Elk for at least five (5) years
and, consequently, were immediately vested in full. Options granted in the
future under the 1998 Employee Plan (or the Ameritrans 1999 Employee Plan, if
the Share Exchange is completed) may be immediately vesting or may vest of a
period of years after the date of grant. If employees leave Elk before then end
of these vesting periods, they would forfeit the unvested portions of these
awards.

         The number of shares of Common Stock subject to option grants under the
1998 Employee Plan is generally intended to reflect the significance of the
executive's current and anticipated contributions to Elk. The exercise price of
options granted by the Company is required under the 1940 Act to equal not less
than 100% of the fair market value per share on the date of grant (110% for
options granted to any holder of 10% or more of Elk's outstanding Common Stock).
Prior to determining the 1999 option grants to Elk's executives, the Board of
Directors considered the equity compensation policies of competitors and other
companies, both privately held and publicly traded, with comparable
capitalizations. The value realizable from exercisable options is dependent upon
the extent to which Elk's performance is reflected in the price of Elk's Common
Stock at any particular point in time. However, the decision as to whether such
value will be realized through the exercise of an option in any particular year
is primarily determined by each individual within the limits of the vesting
schedule and not by the Board of Directors.

         The grant of options under the 1998 Director Plan and the Ameritrans
1999 Director Plan is automatic.

Simplified Employee Pension Plan

         In 1996, Elk adopted a simplified employee pension plan covering all
eligible employees of Elk. Contributions to the plan are at the discretion of
the Board of Directors. During the fiscal year ended June 30, 1999,
contributions amounted to $64,137.


                                      -11-

<PAGE>



Gary C. Granoff's Fiscal 1999 Compensation

         The Board of Directors has set Gary C. Granoff's total annual
compensation at a level it believes to be competitive with the chief executive
officers of similarly capitalized specialty finance companies. Gary C. Granoff,
in his capacity as Chief Executive Officer, is eligible to participate in the
same executive compensation program available to Elk's other senior executives.

Interlocks and Insider Participation

     Elk does not currently have a compensation committee, and the Board of
Directors as a whole considers executive compensation matters. Each of Messrs.
Granoff, Forlenza and Etra and Ms. Walker, all of whom are executive officers
and directors of Elk, is an "interested person" as such term is defined in
Section 2(a)(19) of the 1940 Act.

Stock Performance Graph

         Although Elk's Common Stock is listed on the Nasdaq SmallCap Market
since June 1988 and traded in the over-the-counter market prior to that time,
trading in Elk's Common Stock has been extremely limited, making it difficult to
meaningfully compare the performance of Elk's Common Stock to that of other
similar companies or a broad market index. Therefore, Elk has not included a
stock performance graph.


ITEM 12.          SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
                  MANAGEMENT

         The following table sets forth certain information as to (i) those
persons who, to Elk's knowledge, owned 5% or more of its outstanding Common
Stock as of June 30, 1999, (ii) each of Elk's directors, and (iii) all of Elk's
officers and directors as a group. Except as set forth below, the address of
each person listed below is the address of Elk.
<TABLE>
<CAPTION>
                                       Shares of Common
                                      Stock Beneficially     Percentage of Outstanding
Name                                        Owned               Common Stock Owned
----                                  -------------------    --------------------------
<S>                                    <C>                   <C>
*Gary C. Granoff                           350,708(1)                19.0%

*Ellen M. Walker                            57,374(2)                 3.1%

*Lee A. Forlenza                            48,095(3)                 2.6%

Steven Etra                                133,016(4)                 7.2%
55-25 58th Street
Maspeth, NY

Marvin Sabesan                              84,417(5)                 4.8%
c/o  Pearl River Textiles, Inc.
57 West 38th Street
New York, NY
</TABLE>


                                      -12-

<PAGE>

<TABLE>
<CAPTION>
                                       Shares of Common
                                      Stock Beneficially     Percentage of Outstanding
Name                                        Owned               Common Stock Owned
----                                  -------------------    --------------------------
<S>                                    <C>                   <C>
Paul Creditor                                7,556(6)                  **
747 Third Avenue, Suite 4C
New York, NY

Allen Kaplan                                10,556(7)                  **
c/o  Team Systems, Inc.
30-17 40th Avenue
Long Island City, NY

John L. Acierno                              5,556(8)                  **
c/o  Executive Charge, Inc.
1440 39th Street
Brooklyn, NY

John R. Laird                                  100                     **
481 Canoe Hill Road
New Canaan, CT

Howard F. Sommer                              ----                     **
New York Community Investment
Co., LLC
120 Broadway
New York, NY

Dan M. Granoff                             155,979(9)                 8.9%
Children's Hospital
Oakland Research Institute
747 52nd Street
Oakland, CA

Alexander Nash                             103,750(10)                5.9%
20 West Lincoln Avenue
Valley Stream, NY

Paul D. Granoff                            143,179(11)                8.2%
c/o  Rush-Copley Medical Center
1900 Ogden Avenue
Aurora, IL

All Officers and Directors as a            726,890(12)               38.9%
group (12 persons)
</TABLE>
-----------


*        Gary C. Granoff, Ellen Walker, and Lee A. Forlenza are each "interested
         persons" with respect to Elk, as such term is defined in the 1940 Act.

**       Less than 1%.

                                      -13-

<PAGE>

(1)      Excludes (i) 24,933 shares owned directly or indirectly by Mr.
         Granoff's wife, as to which he disclaims beneficial ownership and (ii)
         10,500 shares owned by one of Mr. Granoff's sons, as to which shares he
         does not exercise any control and disclaims beneficial ownership.
         Includes (i) 10,900 shares owned by The Granoff Family Foundation, a
         charitable foundation of which Mr. Granoff and his father, mother, and
         brother, Dan M. Granoff, are trustees; (ii) 35,321 shares held by Mr.
         Granoff as trustee for his children and other family members; (iii) 261
         shares held by GCG Associates Inc., a corporation owned by Mr. Granoff;
         (iv) 76,084 shares owned by DAPARY Management Corp., a corporation
         controlled by Mr. Granoff and (v) 30,000 shares issuable upon the
         exercise of five-year options issued under the 1998 Employee Plan.

(2)      Includes (i) 200 shares held by Ms. Walker as custodian for her son;
         (ii) 22,800 shares held by various trusts of which Ms. Walker is a
         trustee and as to which she disclaims beneficial ownership (Mr. Granoff
         retains a reversionary interest in 21,000 of such shares), and (iii)
         20,000 shares issuable upon the exercise of ten-year options issued
         under the 1998 Employee Plan.

(3)      Includes 17,500 shares issuable upon the exercise of ten year options
         issued under the 1998 Employee Plan.

(4)      Includes (i) 29,022 shares held by Mr. Etra and his wife as joint
         tenants; (ii) 27,000 shares held by Mr. Etra's wife; (iii) 1,500 shares
         held by Mr. Etra's son; (iv) 10,000 shares held by SRK Associates LLC,
         a limited liability company controlled by Mr. Etra, (v) 10,000 shares
         held by Lance's Property Development Corp. Pension Plan, of which Mr.
         Etra is a trustee and (vi) 17,500 shares issuable upon the exercise of
         ten-year options issued under the 1998 Employee Plan.

(5)      Includes 21,387 shares held by Mr. Sabesan and his wife as joint
         tenants and 28,551 shares held by his wife. Mr. Sabesan disclaims
         beneficial ownership as to the 28,551 shares held by his wife. Also
         includes 5,556 shares issuable upon the exercise of ten-year options
         issued under the 1998 Director Plan.

(6)      Includes 5,556 shares issuable upon the exercise of ten-year options
         issued under the 1998 Director Plan.

(7)      Includes 5,556 shares issuable upon the exercise of ten-year options
         issued under the 1998 Director Plan.

(8)      Consists of 5,556 shares issuable upon the exercise of ten-year options
         issued under the 1998 Director Plan.

(9)      Includes (i) 10,900 shares owned by a charitable foundation, of which
         N. Henry Granoff, his wife, Jeannette Granoff, Gary C. Granoff and Dr.
         Dan M. Granoff are the trustees, and (ii) 2,800 shares held in an IRA
         rollover account for the benefit of Dr. Granoff.

(10)     Includes (i) 6,500 shares held by Dr. Nash as custodian for his
         daughter and (ii) 58,650 shares held by his wife, as to which shares
         Dr. Nash disclaims beneficial ownership.

(11)     Includes 40,049 shares held by Dr. Paul Granoff directly, 77,630 held
         by Granoff Family Partners Ltd. of which Dr. Granoff is a general
         partner, and 25,500 shares held by the Granoff Pediatric Associates
         Profit Sharing Plan. Excludes 14,127 shares held by Dr. Granoff's wife
         as to which shares he disclaims beneficial ownership.

(12)     Includes 100,000 shares issuable upon the exercise of 30,000 five-year
         and 70,000 ten-year options issued under the 1998 Employee Plan and
         22,224 shares issuable upon the exercise of ten-year options issued
         under the 1998 Director Plan.

         Except pursuant to applicable community property laws or as described
above, each person listed in the table above has sole voting and investment
power, and is both the owner of record and the beneficial owner of his or her
respective shares.

         Persons listed above, for as long as they continue to be officers
and/or directors of Elk or to hold 5% percent or more of Elk's outstanding
Common Stock, will be deemed "affiliated persons" of Elk, as such term is
defined in the 1940 Act.

                                      -14-

<PAGE>



ITEM 13.          CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

         Elk pays legal fees, on a fixed or hourly basis, for loan closing
services relating to loans other than New York taxi and radio car loan closings
to Granoff, Walker & Forlenza, P.C. ("Granoff, Walker"), whose stockholders are
officers and directors of Elk. Such services related to New York taxi and radio
car loans are provided by the officers and employees of Elk. Elk paid Granoff,
Walker fees of $62,987 during the fiscal year ended June 30, 1999. Elk generally
charges its borrowers loan origination fees to generate income to offset the
legal fees paid by Elk for loan closing services.

         Elk also rents office space from Granoff, Walker and share certain
office expenses with that firm. For the fiscal year ended June 30, 1999, Elk
paid $39,600 in rent and $85,138 in shared overhead expenses. For the year
ending June 30, 2000, Elk has agreed to pay $39,600 in rent and a minimum of
$59,400 in expenses and $22,000 for other shares expenses, which amount is
subject to adjustment if actual expenses vary.

         During the fiscal year ended June 30, 1998, Granoff, Walker exercised
an option in its lease, at Elk's request, and rented an additional 1,800 square
feet of office space contiguous with its offices at a below market rent (the
"Additional Space"). Until Elk requires the Additional Space, the law firm
sublets the Additional Space to outside tenants under short-term arrangements.
In the event all or a portion of the Additional Space is vacant, Elk's Board of
Directors has agreed to reimburse the law firm for the additional rent due. The
estimated maximum amount of rent for which Elk would be responsible is $58,000
per year, less any sublet rental income received from the outside tenants. At
present, the Additional Space is fully occupied, thus requiring no reimbursement
payment from Elk, although some liability under the reimbursement obligation may
occur in the future. In the event Elks's operations expand, Elk could occupy all
or part of the Additional Space without the inconvenience and expense of having
to relocate its offices.


                                      -15-




<PAGE>


                       ELK ASSOCIATES FUNDING CORPORATION
                          INDEX TO FINANCIAL STATEMENTS

                                              ELK ASSOCIATES FUNDING CORPORATION
                                                                  AND SUBSIDIARY

                                                                        CONTENTS
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
                                                                                                   Page
                                                                                                   ----
<S>                                                                                                <C>
INDEPENDENT AUDITORS' REPORT ...................................................................     F-1

CONSOLIDATED FINANCIAL STATEMENTS

    Balance Sheets at June 30, 1999 and June 30, 1998 ..........................................   F-2-3
    Statements of Income for the years ended June 30, 1999, 1998 and 1997 ......................     F-4
    Statements of Comprehensive Income for the years ended June 30, 1999, 1998 and 1997 ........     F-5
    Statements of Stockholders' Equity for the years ended June 30, 1999, 1998 and 1997 ........   F-6-7
    Statements of Cash Flows for the years ended June 30, 1999, 1998 and 1997 ..................   F-8-9
    Schedule of Loans as of June 30, 1999 ......................................................    F-10

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ..................................................... F-11-25
</TABLE>

Note:    The Consolidated Financial Statements set forth below are in all
         respects identical to the Consolidated Financial Statements contained
         in the Elk Form 10-K, as filed September 28, 1999, except that the
         first paragraph of "Note 6 -- Notes Payable to Banks" and paragraph (b)
         of "Note 15 - Subsequent Events" have been revised to correct
         typographical errors.


                                      -16-

<PAGE>

                          INDEPENDENT AUDITORS' REPORT
                          ----------------------------

To the Board of Directors and Stockholders of
Elk Associates Funding Corporation and Subsidiary
(A Small Business Investment Company Licensed by the SBA)

We have audited the accompanying consolidated balance sheets of Elk Associates
Funding Corporation and Subsidiary as of June 30, 1999 and 1998, and the related
consolidated statements of income, comprehensive income, stockholders' equity
and cash flows for the years ended June 30, 1999, 1998 and 1997 and the schedule
of loans as of June 30, 1999. These consolidated financial statements and
schedule are the responsibility of the Company's management. Our responsibility
is to express an opinion on these consolidated financial statements and schedule
based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements and schedule referred to
above present fairly, in all material respects, the financial position of Elk
Associates Funding Corporation and Subsidiary as of June 30, 1999 and 1998, and
the results of their operations and their cash flows for the years ended June
30, 1999, 1998 and 1997 in conformity with generally accepted accounting
principles.

As explained in Note 1, the consolidated financial statements include loans
valued at $50,723,932 and $41,295,000 as of June 30, 1999 and 1998,
respectively, whose values have been estimated by the Board of Directors in the
absence of readily ascertainable market values. We have reviewed the procedures
used by the Board of Directors in arriving at their estimate of the value of
such loans and have inspected underlying documentation and, in the
circumstances, we believe the procedures are reasonable and the documentation is
appropriate. However, because of the inherent uncertainty of valuation, those
estimated values may differ significantly from the values that would have been
used had a ready market for such loans existed, and the differences could be
material.


                                                   MARCUM & KLIEGMAN LLP




New York, NY
August 11, 1999, except for Note 15(b) as to which is dated August 31, 1999

<PAGE>

                                              ELK ASSOCIATES FUNDING CORPORATION
                                                                  AND SUBSIDIARY

                                                     CONSOLIDATED BALANCE SHEETS

                                                          June 30, 1999 and 1998
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
                                                      ASSETS
                                                      ------
                                                                          1999                  1998
                                                                       ----------------------------------
<S>                                                                    <C>                   <C>
Loans receivable                                                       $51,103,932           $41,590,000
Less: allowance for loan losses                                           (380,000)             (295,000)
                                                                       ------------          ------------

                                                                        50,723,932            41,295,000

Cash and cash equivalents                                                  542,290             1,755,429
Accrued interest receivable                                                714,626               516,110
Assets acquired in satisfaction of loans                                   612,491               400,470
Receivables from debtors on sales of assets acquired in
  satisfaction of loans                                                    409,939               451,222
Equity securities                                                          909,386               629,179
Furniture, fixtures and leasehold improvements, net                        105,440               102,247
Prepaid expenses and other assets                                          492,697               250,081
                                                                       -----------           -----------

       TOTAL ASSETS                                                    $54,510,801           $45,399,738
                                                                       ===========           ===========
</TABLE>


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

                                       F-2

<PAGE>

                                              ELK ASSOCIATES FUNDING CORPORATION
                                                                  AND SUBSIDIARY

                                                     CONSOLIDATED BALANCE SHEETS

                                                           June 30,1999 and 1998
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
                                 LIABILITIES AND STOCKHOLDERS' EQUITY
                                 ------------------------------------

                                                                    1999                  1998
                                                                ---------------------------------
<S>                                                             <C>                   <C>
LIABILITIES

  Debentures payable to SBA                                     $ 8,880,000           $ 8,880,000
  Notes payable, banks                                           31,000,000            22,085,000
  Accrued expenses and other liabilities                            223,458               204,099
  Accrued interest payable                                          354,918               221,704
  Dividends payable                                                 314,208               314,208
                                                                -----------           -----------

       TOTAL LIABILITIES                                         40,772,584            31,705,011
                                                                -----------           -----------

COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS' EQUITY
  Common stock, $.01 par value: 3,000,000 shares
    authorized; 1,745,600 shares issued and outstanding              17,456                17,456
  Additional paid-in-capital                                     13,197,277            12,485,825
  Restricted capital                                                256,916               968,368
  Retained earnings                                                   4,815                24,289
  Accumulated other comprehensive income                            261,753               198,789
                                                                -----------           -----------

       TOTAL STOCKHOLDERS' EQUITY                                13,738,217            13,694,727
                                                                -----------           -----------

       TOTAL LIABILITIES AND STOCKHOLDERS'
       EQUITY                                                   $54,510,801           $45,399,738
                                                                ===========           ===========
</TABLE>

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

                                       F-3

<PAGE>
                                              ELK ASSOCIATES FUNDING CORPORATION
                                                                  AND SUBSIDIARY

                                               CONSOLIDATED STATEMENTS OF INCOME

                                For the Years Ended June 30, 1999, 1998 and 1997
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
                                                                 1999              1998            1997
                                                            ------------------------------------------------
<S>                                                            <C>              <C>             <C>
INVESTMENT INCOME
  Interest on loans receivable                                 $5,197,667       $4,108,727      $3,660,825
  Fees and other income                                           386,227          497,729         362,970
                                                               ----------       ----------      ----------

   TOTAL INVESTMENT INCOME                                      5,583,894        4,606,456       4,023,795
                                                               ----------       ----------      ----------

OPERATING EXPENSES
  Interest                                                      2,440,051        1,840,731       1,582,700
  Salaries and employee benefits                                  533,352          495,889         469,060
  Legal fees                                                      303,995          336,700         307,127
  Miscellaneous administrative expenses                           886,995          739,875         604,347
  Loss on assets acquired in satisfaction of Loans,
   net                                                             11,272           14,649           8,923
  Directors' fee                                                   32,375           52,050          27,500
  Bad debt expense                                                146,465          227,748              --
                                                               ----------       ----------      ----------

   TOTAL OPERATING EXPENSES                                     4,354,505        3,707,642       2,999,657
                                                               ----------       ----------      ----------

   OPERATING INCOME                                             1,229,389          898,814       1,024,138
                                                               ----------       ----------      ----------

OTHER INCOME (EXPENSES)
  (Write-off) gain of non-cash receivable                              --         (25,000)          25,000
  Net gain (loss) from rental activities                            7,200            6,125        (11,233)
  Recoveries                                                           --           57,673          11,118
                                                               ----------       ----------      ----------

   TOTAL OTHER INCOME                                               7,200           38,798          24,885
                                                               ----------       ----------      ----------

   INCOME BEFORE INCOME TAXES                                   1,236,589          937,612       1,049,023

INCOME TAX (BENEFIT) EXPENSE                                        (769)            3,271          28,676
                                                               ----------       ----------      ----------

   NET INCOME                                                  $1,237,358       $  934,341      $1,020,347
                                                               ==========       ===========      ==========
Weighted Average Shares Outstanding
  - Basic                                                       1,745,600        1,518,969       1,283,600
                                                               ==========       ===========      ==========
  - Diluted                                                     1,750,684        1,518,969       1,283,600
                                                               ==========       ===========      ==========
Net Income Per Common Share
  - Basic                                                           $0.71            $0.62           $0.79
                                                                    =====            =====           =====
  - Diluted                                                         $0.71            $0.62           $0.79
                                                                    =====            =====           =====
</TABLE>

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

                                       F-4

<PAGE>


                                              ELK ASSOCIATES FUNDING CORPORATION
                                                                  AND SUBSIDIARY

                                 CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

                                For the Years Ended June 30, 1999, 1998 and 1997
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
                                                          1999            1998           1997
                                                   ------------------------------------------------
<S>                                                    <C>             <C>            <C>
NET INCOME                                             $1,237,358      $  934,341     $1,020,347


OTHER COMPREHENSIVE INCOME
 Unrealized gain on equity securities                      62,964         140,548         58,241
                                                       ----------      ----------     ----------


   TOTAL COMPREHENSIVE INCOME                          $1,300,322      $1,074,889     $1,078,588
                                                       ==========      ==========     ==========
</TABLE>


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

                                       F-5

<PAGE>
                               ELK ASSOCIATES FUNDING CORPORATION AND SUBSIDIARY

                                 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

                                For the Years Ended June 30, 1999, 1998 and 1997
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>

                                                Shares of              Common             Additional
                                              Common Stock          Stock $0.01            Paid-In            Restricted
                                              Outstanding            Par Value             Capital             Capital
                                            ---------------------------------------------------------------------------------
<S>                                             <C>                    <C>               <C>                  <C>
BALANCE - July 1, 1996                          1,283,600              $12,836           $ 8,179,545          $2,391,268

 Transfer of restricted capital                        --                   --               711,448            (711,448)
 Dividends paid                                        --                   --                    --                  --
 Net income                                            --                   --                    --                  --
 Unrealized gain on equity
  securities                                           --                   --                    --                  --
                                                ---------              -------           -----------          ----------

BALANCE - June 30, 1997                         1,283,600               12,836             8,890,993           1,679,820

 Transfer of restricted capital                        --                   --               711,452            (711,452)
 Dividends paid                                        --                   --                    --                  --
 Net income                                            --                   --                    --                  --
 Unrealized gain on equity
  securities                                           --                   --                    --                  --
 Proceeds from sale of
 common stock, net of direct
 costs                                            462,000                4,620             2,883,380                  --
                                                ---------              -------           -----------          ----------

BALANCE - June 30, 1998                         1,745,600               17,456            12,485,825             968,368

Transfer of restricted capital                         --                   --               711,452            (711,452)
Dividends declared                                     --                   --                    --                  --
Net income                                             --                   --                    --                  --
Unrealized gain on equity
securities                                             --                   --                    --                  --
                                                ---------              -------           -----------          ----------

BALANCE - June 30, 1999                         1,745,600              $17,456           $13,197,277         $   256,916
                                                =========              =======           ===========         ===========
</TABLE>

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

                                      F-6
<PAGE>

[RESTUBED TABLE FOR ABOVE]
                               ELK ASSOCIATES FUNDING CORPORATION AND SUBSIDIARY

                                 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

                                For the Years Ended June 30, 1999, 1998 and 1997
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
                                                                                        Accumulated
                                                                  Restricted               Other
                                               Retained            Retained             Comprehensive
                                               Earnings            Earnings                Income           Total
                                            -------------------------------------------------------------------------
<S>                                          <C>                    <C>                    <C>              <C>
BALANCE - July 1, 1996                       $   317,186            $     --               $     --      $10,900,835

 Transfer of restricted capital                       --                  --                     --               --
 Dividends paid                                 (946,655)                 --                     --         (946,655)
 Net income                                      995,347              25,000                     --        1,020,347
 Unrealized gain on equity
  securities                                          --                  --                 58,241            58,24
                                             -----------            --------               --------      -----------

BALANCE - June 30, 1997                          365,878              25,000                 58,241       11,032,768

 Transfer of restricted capital                       --                  --                     --               --
 Dividends paid                               (1,300,930)                 --                     --       (1,300,930)
 Net income                                      959,341             (25,000)                    --          934,341
 Unrealized gain on equity
  securities                                          --                  --                140,548          140,548
 Proceeds from sale of
 common stock, net of direct
 costs                                                --                  --                     --        2,888,000
                                             -----------            --------               --------      -----------

BALANCE - June 30, 1998                           24,289                  --                198,789       13,694,727

Transfer of restricted capital                        --                  --                     --               --
Dividends declared                            (1,256,832)                 --                     --       (1,256,832)
Net income                                     1,237,358                  --                     --        1,237,358
Unrealized gain on equity
securities                                            --                  --                 62,964           62,964
                                             -----------            --------               --------      -----------

BALANCE - June 30, 1999                      $     4,815            $     --               $261,753      $13,738,217
                                             ===========            ========               ========      ===========
</TABLE>

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

                                       F-7

<PAGE>


                                              ELK ASSOCIATES FUNDING CORPORATION
                                                                  AND SUBSIDIARY

                                           CONSOLIDATED STATEMENTS OF CASH FLOWS

                                For the Years Ended June 30, 1999, 1998 and 1997
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
                                                                      1999                1998              1997
                                                                 ---------------------------------------------------
<S>                                                               <C>               <C>                <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income                                                        $ 1,237,358       $    934,341       $ 1,020,347
                                                                 ------------       ------------       -----------
Adjustments to reconcile net income to net cash
   provided by operating  activities:
   Depreciation and amortization                                       63,649             49,890            53,546
   Write-off (gain) on non-cash receivable                                 --             25,000           (25,000)
   Increase in accrued interest receivable                           (198,516)          (107,945)         (114,078)
   Increase in prepaid expenses and other assets                     (267,071)           (30,616)          (27,318)
   Decrease (increase) in accrued expenses and other
     liabilities                                                       19,358             92,096           (28,893)
   Increase (decrease) in accrued interest payable                    133,214             40,456           (15,204)
                                                                 ------------        -----------       -----------

     TOTAL ADJUSTMENTS                                               (249,366)            68,881          (156,947)
                                                                 ------------        -----------      ============

     NET CASH PROVIDED BY OPERATING
     ACTIVITIES                                                       987,992          1,003,222           863,400
                                                                 ------------        -----------       -----------

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          (9,599,670)        (8,177,183)       (9,062,902)
   Payments for building improvements on assets
     acquired in satisfaction of loans                                     --                 --           (13,974)
   Purchases of equity securities                                    (217,242)           (52,450)         (243,040)
   Acquisition of furniture, fixtures and leasehold
     improvements                                                     (42,387)           (37,468)          (18,530)
                                                                 ------------        -----------       -----------

     NET CASH USED IN INVESTING
     ACTIVITIES                                                    (9,859,299)        (8,267,101)       (9,338,446)
                                                                 ------------        -----------       -----------

CASH FLOWS FROM FINANCING ACTIVITIES
   Proceeds from notes payable, banks, net                          8,915,000          5,265,000        10,195,000
   Payments for loan costs                                                 --                 --           (15,050)
   Proceeds from debentures payable to SBA                                 --                 --           430,000
   Repayment of debentures payable to SBA                                  --                 --          (408,000)
   Net proceeds from sale of common stock                                  --          2,888,000                --
   Dividends paid                                                  (1,256,832)          (986,724)         (946,655)
                                                                 ------------        -----------       -----------

   NET CASH PROVIDED BY FINANCING
   ACTIVITIES                                                     $ 7,658,168        $ 7,166,276       $ 9,255,295
                                                                 ------------        -----------       -----------
</TABLE>


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

                                       F-8

<PAGE>


                                              ELK ASSOCIATES FUNDING CORPORATION
                                                                  AND SUBSIDIARY

                                CONSOLIDATED STATEMENTS OF CASH FLOWS, Continued

                                For the Years Ended June 30, 1999, 1998 and 1997
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
                                                                        1999               1998             1997
                                                                   -------------------------------------------------
<S>                                                                 <C>                 <C>              <C>
NET (DECREASE) INCREASE IN CASH
    AND CASH EQUIVALENTS                                            $(1,213,139)        $  (97,603)      $  780,249

CASH AND CASH EQUIVALENTS - Beginning                                 1,755,429          1,853,032        1,072,783
                                                                    -----------         ----------       ==========

CASH AND CASH EQUIVALENTS - Ending                                  $   542,290         $1,755,429       $1,853,032
                                                                    ===========         ==========       ==========


SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION

Cash paid during the years for:

  Interest                                                          $ 2,306,837         $1,840,276       $1,597,904
  Income taxes                                                      $        --         $    8,048       $   31,260

Noncash investing and financing activities:

  Conversion of loans to assets acquired in                         $   381,500         $   26,090       $  140,914
    satisfaction of loans

Exchange of preferred stock for a note resulting                    $        --         $       --       $  125,000
  in a noncash gain of $25,000

Unrealized gain on equity securities                                $    62,694         $  140,548       $   58,241

Transfer of restricted capital                                      $   711,452         $  711,452       $  711,448

Declaration of cash dividend                                        $   314,208         $  314,208       $       --

</TABLE>

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

                                      F-9

<PAGE>


                                              ELK ASSOCIATES FUNDING CORPORATION
                                                                  AND SUBSIDIARY

                                                               SCHEDULE OF LOANS

                                                                   June 30, 1999
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
                                                                                     Maturity
                                                     Number        Interest            Dates               Balance
Type of Loan                                        of Loans        Rates           (In Months)          Outstanding
---------------------------------------------------------------------------------------------------------------------------
<S>                                                    <C>        <C>                   <C>               <C>
New York City:
 Taxi medallion                                        123        8.25 - 12%            1 - 240           $19,818,871
 Radio car service                                      34           1 - 15%             1 - 59               285,562

Chicago:
 Taxi medallion                                        417          11 - 15%            15 - 84            15,825,539

Boston:
 Taxi medallion                                         25        9.25 - 14%            21 - 60             2,717,995

Miami:
 Taxi medallion                                         38          12 - 18%          100 - 120             1,943,335

Other loans:
 Restaurant                                              2          10 - 12%             1 - 66               243,629
 Hairdresser                                             2               12%                  7                97,836
 Car wash                                                1             11.5%                 36               214,234
 Ambulance service                                       1             10.5%                  6                 4,907
 Bagel store                                             1               14%                 37                22,123
 Dry cleaners                                           25           9 - 18%           31 - 120             3,657,590
 Laundromats                                            19          10 - 17%           12 - 120             3,951,498
 Laundry equipment                                       1              9.5%                 51               170,333
 Financial services                                      1               14%                  3                 4,980
 Black car service (real property)                       1               12%                 23               196,132
 Auto sales                                              3        10.5 - 13%             1 - 43               477,839
 Registered investment advisor                           1               14%                  3               169,012
 Embroidery manufacturer                                 1               12%                 53                84,814
 Theater                                                 1               16%                 53               166,492
 Retirement home                                         1               15%                 78               300,000
 Garden center                                           1               14%                 90               431,304
 Auto center                                             1               12%                 78               122,536
 Construction                                            1               16%                 80               197,371
                                                                                                          -----------
Total Loans Receivable                                                                                     51,103,932

Less: Allowance for loan losses                                                                              (380,000)
                                                                                                          -----------
   Loans Receivable, net                                                                                  $50,723,932
                                                                                                          ===========
</TABLE>
   The accompanying notes are an integral part of these financial statements.

                                      F-10

<PAGE>

--------------------------------------------------------------------------------

                                              ELK ASSOCIATES FUNDING CORPORATION
                                                                  AND SUBSIDIARY

                   Notes to Consolidated Financial Statements

NOTE 1 - Organization and Summary of Significant Accounting Policies

         Organization and Principal Business Activity

         Elk Associates Funding Corporation (the "Company"), 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. The Company has also
         registered as an investment company under the Investment Company Act of
         1940 to make business loans.

         The Company makes loans to taxi owners, to finance the acquisition and
         operation of the medallion taxi businesses and related assets, and to
         other small businesses in the New York City, Chicago, Miami, and Boston
         markets.

         Loans and the Allowance for Loans Losses

         Loans are stated at cost, net of participation with other lenders, less
         an allowance for possible losses. This amount represents the fair value
         of such loans as determined in good faith by the Board of Directors.
         The allowance for loan losses is maintained at a level that, in the
         Board of Directors' judgement, is adequate to absorb losses inherent in
         the portfolio. The allowance for loan losses is reviewed and adjusted
         periodically by the Board of Directors on the basis of available
         information, including the fair value of the collateral held, existing
         risk of individual credits, past loss experience, the volume,
         composition and growth of the portfolio, and current and projected
         economic conditions. Because of the inherent uncertainty in the
         estimation process, the estimated fair values of the loans may differ
         significantly from the values that would have been used had a ready
         market existed for such loans and the differences could be material. As
         of June 30, 1999 and 1998, approximately 79% and 85% respectively, of
         all loans are collateralized by New York City, Boston, Chicago, and
         Miami taxicab medallions.

         Accounting Standard for Impairment of Loans

         Pursuant to Statement of Financial Accounting Standards ("SFAS") No.
         114 as amended by SFAS No. 118, "Accounting by Creditors for Impairment
         of a Loan - Income Recognition and Disclosure", a loan is determined to
         be impaired if it is probable that the contractual amounts due will not
         be collected in accordance with the terms of the loan. The SFAS
         generally requires that impaired loans be measured based on the present
         value of expected future cash flows discounted at the loan's effective
         interest rate or, as a practical expedient, at the loan's observable
         market price or the fair value of the collateral if the loan is
         collateral dependent. As all of the Company's loans are collateral
         dependent, impairment is measured based on the fair value of the
         collateral. If the fair value of the impaired loan is less than the
         recorded investment in the loan (including accrued interest, net of
         deferred loan fees or costs, and unamortized premium or discount), the
         Company recognized an impairment by creating a valuation allowance with
         a corresponding charge to the provision for loan losses. The Company
         individually evaluates all loans for impairment. See Note 3 for further
         discussion.

                                      F-11

<PAGE>

                                              ELK ASSOCIATES FUNDING CORPORATION
                                                                  AND SUBSIDIARY

                   Notes to Consolidated Financial Statements

NOTE 1 - Organization and Summary of Significant Accounting Policies, continued

         Loans Receivable

         Loans are placed on nonaccrual status once they become 180 days past
         due as to principal or interest. In addition, loans that are not fully
         collateralized and in the process of collection are placed on
         nonaccrual status when, in the judgement of management, the ultimate
         collectibility of interest and principal is doubtful.

         Cash and Cash Equivalents

         For the purposes of the statement of cash flows, the Company considers
         all short-term investments with an original maturity of three months or
         less to be cash equivalents.

         The Company has cash balances in banks in excess of the maximum amount
         insured by the FDIC as of June 30, 1999 and 1998

         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 1999, the Company intends to make the required distributions
         to its stockholders in accordance with applicable tax rules.

         Depreciation and Amortization

         Depreciation and amortization of furniture, fixtures and leasehold
         improvements is computed on the straight-line method at rates adequate
         to allocate the cost of applicable assets over their expected useful
         lives.

         Net Income per Share

         During the year ended June 30, 1998, the Company adopted the provision
         of SFAS No. 128, "Earnings per Share". SFAS No. 128 eliminates the
         presentation of primary and fully dilutive earnings per share ("EPS")
         and requires presentation of basic and diluted EPS. Basic EPS is
         computed by dividing income (loss) available to common stockholders by
         the weighted-average number of common shares outstanding for the
         period. Diluted EPS is based on the weighted-average number of shares
         of common stock and common stock equivalents outstanding at year-end.
         Common stock equivalents have been excluded from the weighted-average
         shares for 1998 and 1997, as inclusion is anti-dilutive. At June 30,
         1999, the Company had 100,000 options outstanding, of which 30,000
         options are considered antidilutive and the remaining 70,000 options
         are dilutive and resulted in common stock equivalents of 5,084 shares.

                                      F-12

<PAGE>

                                              ELK ASSOCIATES FUNDING CORPORATION
                                                                  AND SUBSIDIARY

                   Notes to Consolidated Financial Statements

NOTE 1 - Organization and Summary of Significant Accounting Policies, continued

         Loan Costs

         Loan costs are included in prepaid expenses and other assets.
         Amortization of loan costs is computed on the straight-line method over
         ten (10) years. At June 30, 1999 and 1998, loan costs amounted to
         $129,331 and $153,786, respectively, net of accumulated amortization of
         $114,650 and $90,195, respectively. Amortization expense for the years
         ended June 30, 1999, 1998 and 1997 was $24,455, $24,455 and $23,283,
         respectively.

         Assets Acquired in Satisfaction of Loans

         Assets acquired in satisfaction of loans are carried at estimated fair
         value less selling costs. Losses incurred at the time of foreclosure
         are charged to the allowance for loan losses. Subsequent reductions in
         estimated net realizable value are recorded as losses on assets
         acquired in satisfaction of loans.

         Basis of Consolidation

         The consolidated financial statements include the accounts of EAF
         Holding Corporation ("EAF"), a wholly owned subsidiary of the Company.
         All intercompany transactions have been eliminated. 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.

         Use of Estimates in the Financial Statements

         The preparation of financial statements in conformity with generally
         accepted accounting principles requires management to make estimates
         and assumptions that affect the reported amounts of assets and
         liabilities at the date of the financial statements and the reported
         amounts of revenues and expenses during the reporting period. Actual
         results could differ from those estimates. Estimates that are
         particularly susceptible to change relate to the determination of the
         allowance for loan losses and the fair value of financial instruments.

         Comprehensive Income

         During the year ended June 30, 1999, the Company adopted SFAS No. 130,
         "Reporting Comprehensive Income". SFAS 130 requires the reporting of
         comprehensive income in addition to net income from operations.
         Comprehensive income is a more inclusive financial reporting
         methodology that includes disclosure of certain financial information
         that historically has not been recognized in the calculation of net
         income.

         Stock-Based Compensation

         In October 1995, SFAS No. 123, "Accounting for Stock-Based
         Compensation" was issued. SFAS 123 prescribes accounting and reporting
         standards for all stock-based compensation plans, including employee
         stock options, restricted stock, employee stock purchase plans and
         stock appreciation rights. SFAS 123 requires compensation expense


                                      F-13

<PAGE>

--------------------------------------------------------------------------------

                                              ELK ASSOCIATES FUNDING CORPORATION
                                                                  AND SUBSIDIARY
                   Notes to Consolidated Financial Statements

NOTE 1 - Organization and Summary of Significant Accounting Policies, continued

         Stock-Based Compensation, continued

         to be recorded (i) using the new fair value method or (ii) using the
         existing accounting rules prescribed by Accounting Principles Board
         Opinion No. 25, "Accounting for Stock Issued to Employees" ("APB 25")
         and related interpretations with pro forma disclosure of what net
         income and earnings per share would have been had the Company adopted
         the new fair value method The Company intends to continue to account
         for its stock based compensation plans in accordance with the
         provisions of APB 25.

         Business Segment

         During the year ended June 30, 1999, the Company adopted SFAS No. 131,
         "Disclosures About Segments of an Enterprise and Related Information",
         which supersedes SFAS No. 14, "Financial Reporting for Segments of A
         Business Enterprise". SFAS No. 131 establishes standards for the way
         that public enterprises report information about operating segments in
         annual financial statements and requires reporting of selected
         information about operating segments in interim financial statements
         regarding products and services, geographic areas and major customers.
         SFAS No. 131 defines operating segments as components of an enterprise
         about which separate financial information is available that is
         evaluated regularly by the chief operating decision maker in deciding
         how to allocate resources and in assessing performance. The Company has
         determined that under SFAS No. 131, it operates in one segment of
         financing services. The Company's customers and operations are within
         the United States.

         Loan Sales and Servicing Fee Receivable

         SFAS No. 125, "Accounting for Transfers and Servicing of Financial
         Assets and Extinguishments of Liabilities" was issued in June 1996.
         SFAS 125 provides accounting and reporting standards for transfers and
         servicing of financial assets and extinguishments of liabilities. This
         statement also provides consistent standards for distinguishing
         transfers of financial assets that are sales from transfers that are
         secured borrowings. It requires that liabilities and derivatives
         incurred or obtained by transferors as part of a transfer of financial
         assets be initially measured at fair value. SFAS 125 also requires that
         servicing assets be measured by allocating the carrying amount between
         the assets sold and retained interests based on their relative fair
         values at the date of transfer. Additionally, this statement requires
         that the servicing assets and liabilities be subsequently measured by
         (a) amortization in proportion to and over the period of estimated net
         servicing income or loss and (b) assessment for asset impairment or
         increased obligation based on their fair values. SFAS 125 also requires
         the Company's excess servicing rights be measured at fair market value
         and reclassified as interest only receivables and accounted for in
         accordance with SFAS No. 115, "Accounting for Certain Investments in
         Debt and Equity Securities". As required by SFAS 125, the Company
         adopted in the new requirements effective January 1, 1997.
         Implementation of SFAS 125 did not have any material impact on the
         financial statements of the Company.

                                      F-14

<PAGE>
--------------------------------------------------------------------------------

                                              ELK ASSOCIATES FUNDING CORPORATION
                                                                  AND SUBSIDIARY
                   Notes to Consolidated Financial Statements

NOTE 1 - Organization and Summary of Significant Accounting Policies, continued

         New Accounting Pronouncements

         In April 1998, Statement of Position ("SOP") 98-5, "Reporting on the
         Costs of Start-Up Activities" was issued. This SOP provides guidance on
         the financial reporting of start-up costs and organization costs. It
         requires the costs of start-up activities and organization costs to be
         expensed as incurred. The SOP is effective for financial statements for
         fiscal year beginning after December 15, 1998. The Company does not
         expect that the adoption of SOP No. 98-5 will have a material impact on
         its financial statements.

         In June 1998, SFAS No. 133, "Accounting for Derivative Instruments and
         Hedging Activities" was issued and is required to be adopted in years
         beginning after June 15, 1999, which has been deferred to June 30,
         2000. Management does not anticipate that the adoption of the new
         statement will have a significant effect on results of operations or
         the financial position of the Company.

NOTE 2 - Assets Acquired in Satisfaction of Loans

         Receivables from debtors on sales of assets acquired in satisfaction of
         loans represent loans to borrowers arising out of the sales of
         defaulted assets. Pursuant to an SBA regulation, these loans are
         presented separately in the accompanying consolidated balance sheets.
<TABLE>
<CAPTION>
                                                                                          Assigned
                                                           Radio                          Mortgage
                                      Real Estate          Cars           Artwork         and Note             Total
                                     ----------------------------------------------------------------------------------

<S>                                       <C>              <C>               <C>              <C>               <C>
Balance - July 1, 1997                 $ 487,483         $ 41,077         $ 53,250        $     --           $ 581,810

Additions                                 26,090               --               --              --              26,090
Recoup on sale of assets
  previously sold                             --           43,376               --              --              43,376
Sales                                   (192,560)         (45,168)              --              --            (237,728)
Write-offs                                (8,078)              --           (5,000)             --             (13,078)
                                       ---------         --------         --------        --------           ---------

Balance - June 30, 1998                  312,935           39,285           48,250              --             400,470

Additions                                     --               --               --         381,500             381,500
Sales                                   (122,000)          (8,044)              --              --            (130,044)
Write-offs and payments                       --          (10,000)         (10,000)        (19,435)            (39,435)
                                       ---------         --------         --------        --------           ---------

Balance - June 30, 1999                $ 190,935         $ 21,241         $ 38,250        $362,065           $ 612,491
                                       =========         ========         ========        ========           =========
</TABLE>

                                      F-15

<PAGE>
--------------------------------------------------------------------------------

                                              ELK ASSOCIATES FUNDING CORPORATION
                                                                  AND SUBSIDIARY

                   Notes to Consolidated Financial Statements

NOTE 3 - Loans Receivable

         All loans on nonaccrual status have been classified as impaired. The
         Company recognizes interest income on a cash basis on these loans if
         the principal is fully secured. However, where there is doubt regarding
         the ultimate collectibility of the loan principal, cash receipts,
         whether designated as principal or interest, are applied to reduce the
         carrying value of the loan. The Company has loans totaling
         approximately $762,000 and $569,000 at June 1999 and 1998 respectively,
         which are still accruing interest but are not performing according to
         the terms of the contract and accordingly these loans are impaired
         under SFAS 114. At June 30, 1999 and 1998 approximately $743,000 and
         $546,000 respectively, of these loans were fully collateralized as to
         principal and interest. Interest receivable at June 30, 1999 and 1998
         totaled approximately $78,000 and $35,000 respectively, for such loans.

         The following table sets forth certain information concerning impaired
         loans as of June 30, 1999 and 1998:

                                                   1999                 1998
                                               ---------------------------------
    Impaired loans with an allowance            $  167,212             $174,952

    Impaired loans without an allowance          1,512,456              571,896
                                                ----------             --------

    Total impaired loans                        $1,679,668             $746,848
                                                ==========             ========

    Allowance for impaired loans                  $157,886             $150,626
                                                  ========             ========

    Average balance of impaired loans           $1,213,258             $524,101
                                                ==========             ========


    Transactions in the allowance for loan losses are summarized as follows:

    Balance - July 1, 1997                                             $325,000

    Recoveries, net                                                     (30,000)
                                                                       --------

    Balance - June 30, 1998                                             295,000


    Additions, net                                                       85,000
                                                                       --------

    Balance - June 30, 1999                                            $380,000
                                                                       ========

                                      F-16

<PAGE>


                                              ELK ASSOCIATES FUNDING CORPORATION
                                                                  AND SUBSIDIARY


                   Notes to Consolidated Financial Statements

NOTE 4 - Equity Securities

        Equity securities consist of the following as of June 30, 1999 and 1998:
<TABLE>
<CAPTION>
                                          Chicago           Miami        Investment        Dry         Telecom-
                                          Taxicab          Taxicab         Advisory       Cleaner     munications
                                         Medallions       Medallions        Firm         Company        Company       Total
                                        ---------------------------------------------------------------------------------------
        <S>                                 <C>                <C>           <C>           <C>           <C>          <C>
        Balance - July 1, 1997            $380,966         $21,215         $20,000       $14,000       $     --      $436,181

        Purchase of securities              39,100           5,265          50,000        14,000             --       108,365

        Sale of securities                 (50,936)         (4,979)             --            --             --       (55,915)

        Unrealized gain                     75,297          65,251              --            --             --       140,548
                                          --------         -------         -------       -------       --------      --------

        Balance - June 30, 1998            444,427          86,752          70,000        28,000             --       629,179

        Purchase of securities             128,754           4,102              --            --        150,000       282,856

        Sale of securities                 (15,613)             --         (50,000)           --             --       (65,613)

        Unrealized gain (loss)              85,897         (22,933)             --            --             --        62,964
                                          --------         -------         -------       -------       --------      --------

        Balance - June 30, 1999           $643,465         $67,921         $20,000       $28,000       $150,000      $909,386
                                          ========         =======         =======       =======       ========      ========
</TABLE>

        At June 30, 1999, the fair value of the Chicago Taxicab Medallions was
        increased, resulting in an unrealized gain, and the fair value of the
        Miami Taxicab Medallions was decreased resulting in a reduction in the
        unrealized gain recorded in prior periods. The fair value of the other
        equity securities approximated cost. At June 30, 1998, the fair value
        of the Chicago Taxicab Medallions and Miami Taxicab Medallions was
        increased resulting in an unrealized gain. The fair value of the other
        equity securities approximated cost.

                                      F-17

<PAGE>

                   Notes to Consolidated Financial Statements

NOTE 5 - Debentures Payable to SBA

         At June 30, 1999 and 1998 debentures payable to the SBA consist of
         subordinated debentures with interest payable semiannually, as follows:
<TABLE>
<CAPTION>
                                                                                             1999                   1998
                                                                Current Effective         Principal              Principal
  Issue Date                 Due Date                             Interest Rate             Amount                 Amount
  ------------------------------------------------------------------------------------------------------------------------
<S>                                 <C>                               <C>                 <C>                   <C>
September 1993            September 2003                              6.12 (1)            $1,500,000            $1,500,000
September 1993            September 2003                              6.12                 2,220,000             2,220,000
                                                                                          ----------            ----------

                    (Forward)                                                             $3,720,000            $3,720,000
                                                                                          ----------            ----------
</TABLE>

                                      F-18

<PAGE>
--------------------------------------------------------------------------------

                                              ELK ASSOCIATES FUNDING CORPORATION
                                                                  AND SUBSIDIARY

                   Notes to Consolidated Financial Statements

NOTE 5 - Debentures Payable to SBA, continued
<TABLE>
<CAPTION>
                                                          Current                                     1998
                                                         Effective           1999 Principal         Principal
       Issue Date                Due Date              Interest Rate             Amount              Amount
-------------------------------------------------------------------------------------------------------------------
<S>                                 <C>                    <C>                  <C>                  <C>
               (Forward)                                                       $3,720,000           $3,720,000

September 1994            September 2004                   8.20                 2,690,000            2,690,000
December 1995             December 2005                    6.54                 1,020,000            1,020,000
June 1996                 June 2006                        7.71                 1,020,000            1,020,000
March 1997                March 2007                       7.38(2)                430,000              430,000
                                                                               ----------           ----------

                                                                               $8,880,000           $8,880,000
                                                                               ==========           ==========
</TABLE>

         (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. In addition, the SBA has a junior collateral
         interest to the banks' debt. (See Note 6).


NOTE 6 - Notes Payable to Banks

         At June 30, 1999 and 1998 the Company had loan agreements with three
         (3) banks and four (4) banks for lines of credit aggregating
         $35,000,000 and $33,500,000 respectively. At June 30, 1999 and 1998,
         the Company had $31,000,000 and $22,085,000 respectively, outstanding
         under these lines. The loans, which mature through December 31, 1999,
         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 range from
         approximately prime minus 1/4% to prime minus 1/2%. Upon maturity, the
         Company anticipates extending the lines of credit for another year, as
         has been the practice in previous years.

         Pursuant to the terms of the agreements the Company is required to
         comply with certain terms, covenants and conditions. The Company
         pledged its loans receivable and other assets as collateral for the
         above lines of credit and was required to maintain compensating
         balances of 5% of loan balance outstanding with each individual bank
         for the year ended June 30, 1998. The compensating balance requirements
         were eliminated during the year ended June 30, 1999.

                                      F-19

<PAGE>
--------------------------------------------------------------------------------

                                              ELK ASSOCIATES FUNDING CORPORATION
                                                                  AND SUBSIDIARY
                   Notes to Consolidated Financial Statements

NOTE 7 - Preferred Stock

         Pursuant to a preferred stock repurchase agreement dated November 10,
         1994, the Company repurchased all cumulative preferred stock from the
         SBA for $3.50 per share, or an aggregate $1,915,449. As a condition
         precedent to the repurchase, the Company granted the SBA a liquidating
         interest in a newly established restricted capital surplus account. The
         surplus account is equal to the amount of the net repurchase discount.
         The initial value of the liquidating interest was $3,557,261, which is
         being amortized over a 60-month period on a straight-line basis. Should
         the Company be in default under the repurchase agreement at any time,
         the liquidating interest will become fixed at the level immediately
         preceding the event of default and will not decline further until such
         time as the default is cured or waived. The liquidating interest shall
         expire on (i) sixty months from the date of the repurchase agreement,
         or (ii) if any event of default has occurred and such default has been
         cured or waived, such later date on which the liquidating interest is
         fully amortized. Should the Company voluntarily or involuntarily
         liquidate prior to the amortization of the liquidating interest, any
         assets which are available, after the payment of all debts of the
         Company, shall be distributed first to the SBA until the fair market
         value of such assets is equal to the amount of the liquidating
         interest. Such payment, if any, would be prior in right to any payments
         made to the Company's stockholders. The amount restricted under this
         agreement at June 30, 1999 and 1998 was approximately $256,000 and
         $968,000, respectively.

         During 1992, the Company authorized the issuance of 752,729 shares of a
         new Series B cumulative preferred stock with a 4 percent dividend and a
         $10 par value. All preferred shares are restricted solely for issuance
         to the SBA. No sales of the Series B preferred shares have occurred to
         date. On September 30, 1996, Congress passed a law that in effect
         prevents the SBA from making any further purchase of 4% preferred stock
         from any specialized small business investment company.

         In September 1998, the stockholders of the Company approved and in
         February 1999 the SBA approved an amendment to the Certificate of
         Incorporation of the Company eliminating all of the authorized Series A
         and Series B preferred stock of the Company. This amendment to the
         Certificate of Incorporation was filed and became effective on May 21,
         1999.

NOTE 8 - Common Stock

         For the year ended June 30, 1998, the Company completed the sale, as
         part of a private placement offering, of 462,000 shares of common
         stock. Total proceeds from the sale of common stock amounted to
         $2,888,000, net of direct related expenses of $115,000.

                                      F-20

<PAGE>

--------------------------------------------------------------------------------
                                              ELK ASSOCIATES FUNDING CORPORATION
                                                                 AND SUBSIDIARY

                   Notes to Consolidated Financial Statements

NOTE 8 - Common Stock, continued

         In September 1998, the stockholders of the Company approved and in
         February 1999, the SBA approved an amendment to the Certificate of
         Incorporation increasing the total authorized shares of $0.01 par value
         common stock to 3,000,000 shares authorized. This amendment to the
         Certificate of Incorporation was filed and became effective on May 21,
         1999.

         On June 28, 1999, the Company declared a cash dividend of $0.18 per
         common share, for a total of $314,208 which was paid on July 12, 1999.

NOTE 9 - Income Taxes

         The provision for income tax expense (benefit) for the years ended June
         30, 1999, 1998 and 1997 consists of the following:
<TABLE>
<CAPTION>
                                              1999                1998              1997
                                           -------------------------------------------------
<S>                                          <C>               <C>                  <C>
         Federal                             $1,689            $(1,014)             $ 4,568
         State and City                      (2,458)             4,285               24,108
                                             -------           -------              -------
                                            $  (769)           $ 3,271              $28,676
                                            ========           =======              =======
</TABLE>

         The above provision represents income taxes incurred on undistributed
         income for the respective years.


NOTE 10 - Related Party Transactions/Commitments

         Related Party Transactions

         The Company paid $62,987, $43,234 and $43,645 to a related law firm for
         the years June 30, 1999,1998 and 1997, respectively, for the services
         provided. The Company generally charges its borrowers loan origination
         fees to generate income to offset expenses incurred by the Company for
         legal fees paid by the Company for loan closing services.

         The Company rents office space on a month-to-month basis from an
         affiliated entity without a formal lease agreement. Rent expense
         amounted to $39,600 each for the years ended June 30, 1999, 1998 and
         1997, respectively. The Company also shares overhead costs and
         reimburses for office and salary expenses from this affiliated entity.
         Overhead costs and reimbursed office and salary expenses amounted to
         $85,138, $81,308 and $51,513 for the years ended June 30, 1999, 1998
         and 1997, respectively.

                                      F-21

<PAGE>

--------------------------------------------------------------------------------

                                              ELK ASSOCIATES FUNDING CORPORATION
                                                                  AND SUBSIDIARY

                   Notes to Consolidated Financial Statements

NOTE 11 - Commitments and Contingencies

         Interest Rate Swap

         On June 8, 1998, the Company entered into a $10,000,000 interest rate
         Swap transaction with a bank expiring on June 8, 2001. On October 13,
         1998, the Company entered into an additional interest rate swap
         transaction with the same bank for $5,000,000 expiring on October 8,
         2001. These Swap transactions were entered into to protect the Company
         from an upward movement in interest rates relating to outstanding bank
         debt (see Note 6 for terms and effective interest rates). These Swap
         transactions call for a fixed rate of 5.86% and 4.95%, respectively 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.

         Interest Rate Cap

         At March 20, 1997, the Company was a party to one $5 million notional
         interest rate cap. This cap, which expired on March 20, 1999, was
         purchased by the Company to protect it from the impact of upward
         movements in interest rates related to its outstanding bank debt. The
         cap provided interest rate protection in the event that the three-month
         LIBOR rate exceeded 6.75 percent. The premium paid for the purchase of
         this cap was amortized over its life and recorded as an adjustment to
         interest expense. Payments received under this cap would be credited to
         interest expense.

         Loan commitments

         At June 30, 1999 and 1998, the Company had commitments to make loans
         totaling approximately $4,058,000 and $2,568,000 respectively, at
         interest rates ranging from 8.25% to 18%.


NOTE 12 - Defined Contribution Plan

         On April 15, 1996, the Company adopted a simplified employee pension
         plan covering all eligible employees of the Company. Contributions to
         the plan are at the discretion of the Board of Directors. During the
         years ended June 30, 1999, 1998 and 1997, contributions amounted to
         $64,137, $63,435 and $58,805, respectively.

                                      F-22

<PAGE>

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                                              ELK ASSOCIATES FUNDING CORPORATION
                                                                  AND SUBSIDIARY

                   Notes to Consolidated Financial Statements

NOTE 13 - Incentive Stock Option Plan

         During September 1998, the Company adopted an employee incentive stock
         option plan, an aggregate of 125,000 shares of common stock are
         authorized for issuance under the plan. The plan provides that options
         may be granted to attract and retain key employees of the Company.
         Options granted under the plan are exercisable for periods ranging from
         five to ten years. In addition, the option price will be at least
         market value or at least 110% of market value of the common stock on
         the grant date for employees and stockholders who own more than 5% of
         the common stock, respectively. In January 1999, the Company granted
         100,000 options to certain key employees at an exercise price ranging
         from $8.875 to $9.7625 per share.

         Pro forma information regarding net income and earnings per share is
         required by SFAS 123, and has been determined as if the Company had
         accounted for its employee stock options under the fair value method of
         SFAS 123. The fair market value for these options was estimated at the
         date of grant using a Black-Scholes option-pricing model with the
         following weighted-average assumptions for the year ended June 30,
         1999.

                                     Assumptions
         ----------------------------------------------------------------------
         Risk-free rate                                               4.68%
         Dividend yield                                               7.5%
         Volatility factor of the expected market
           price of the Company's common stock                        0.49
         Average life                                                 8.5 years

                  The Black-Scholes option valuation model was developed for use
         in estimating the fair value of traded options, which have no vesting
         restrictions and are fully transferable. In addition, option valuation
         models require the input of highly subjective assumptions including the
         expected stock price volatility. Because the Company's employee stock
         options have characteristics significantly different from those of
         traded options, and because changes in the subjective input assumptions
         can materially affect the fair value estimate, in management's opinion,
         the existing models do not necessarily provide a reliable single
         measure of the fair value of its employee stock options.

         For purposes of pro forma disclosures, the estimated fair value of the
         options is amortized to expense over the vesting period of the options.
         The Company's pro forma information for the year ended June 30, 1999 is
         as follows:

                Pro forma net income                     $1,035,958
                                                         ==========
                Pro forma net income per share
                          - basic                             $0.59
                                                              =====
                          - diluted                           $0.59
                                                              =====

                                      F-23

<PAGE>

--------------------------------------------------------------------------------

                                              ELK ASSOCIATES FUNDING CORPORATION
                                                                  AND SUBSIDIARY


                   Notes to Consolidated Financial Statements

NOTE 13 - Incentive Stock Option Plan, continued

         The weighted average fair value of options granted during the year
         ended June 30, 1999 was $2.01 for shares. The weighted average
         remaining contractual life of options exercisable at June 30, 1999 is
         7.5 years.

NOTE 14 - Fair Value of Financial Instruments

         The following disclosures represent the Company's best estimate of the
         fair value of financial instruments, determined on a basis consistent
         with requirements of SFAS No. 107, "Disclosure about Fair Value of
         Financial Instruments".

         The estimated fair values of the Company's financial instruments are
         derived using estimation techniques based on various subjective factors
         including discount rates. Such estimates may not necessarily be
         indicative of the net realizable or liquidation values of these
         instruments. Fair values typically fluctuate in response to changes in
         market or credit conditions. Additionally, valuations are presented as
         of a specific point in time and may not be relevant in relation to the
         future earnings potential of the Company. Accordingly, the estimates
         presented herein are not necessarily indicative of the amounts the
         Company will realize in a current market exchange. The use of different
         market assumptions and/or estimation methodologies may have a material
         effect on the estimated fair value amounts.

         Loans Receivable - The fair value of loans is estimated at cost net of
         the allowance for loan losses. The Company believes that the rates of
         these loans approximate current market rates (see Note 3).

         Equity Securities - The Company's equity securities consist of
         investments in corporations who own and operate Chicago taxicab
         medallions (71%), an investment advisory firm (2%), a dry cleaner (3%),
         Miami taxicab medallions (7%) and a Telecommunications Company (17%)
         (see Note 4).

         Debentures Payable to Small Business Administration - The fair value of
         debentures as of June 30, 1999 and 1998 were approximately $8,989,000
         and $9,035,000, respectively, and were estimated by discounting the
         expected future cash flows using the current rate at which the SBA has
         extended similar debentures to the Company (see Note 5).

         The fair value of financial instruments that are short-term or reprice
         frequently and have a history of negligible credit losses is considered
         to approximate their carrying value. Those instruments include balances
         recorded in the following captions:

                                      F-24

<PAGE>
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                                              ELK ASSOCIATES FUNDING CORPORATION
                                                                  AND SUBSIDIARY


                   Notes to Consolidated Financial Statements


NOTE 14 - Fair Value of Financial Instruments, continued

                         ASSETS                              LIABILITIES
--------------------------------------------------------------------------------

         Cash                                           Notes payable, banks
         Accrued interest receivable                    Accrued interest payable
         Assets acquired in satisfaction of loans
         Receivables from debtors on sales of
          assets acquired in satisfaction of loans

NOTE 15 - Subsequent Events

         (a) Agreement and Plan of Share Exchange

         The Company entered into an Agreement and Plan of Share Exchange with
         Ameritrans Capital Corporation, a newly-formed Delaware corporation
         ("Ameritrans") by the stockholders of the Company, pursuant to which
         each outstanding share of common stock of the Company would be
         exchanged for one share of common stock of Ameritrans. Pursuant to this
         Share Exchange Agreement, the ownership of each outstanding share of
         the Company's common stock would automatically vest in Ameritrans and
         the holders of the outstanding shares of the Company's common stock
         would automatically become entitled to receive one share of Ameritrans'
         common stock. This agreement has been approved by the board of
         directors of the Company and is subject to approval by the stockholders
         of the Company. In addition, Ameritrans has filed Form N-14, a proxy
         registration statement under the Securities Act of 1933 with the SEC
         and applied for certain "exemptive" orders to permit Ameritrans to act
         as a holding company. The SEC is currently reviewing these filings.

         (b) Non-Employee Directors Stock Option Plan

         On August 31, 1999, the SEC approved a Non-Employee Directors Stock
         Option Plan with an aggregate of 75,000 options authorized for
         issuance. On this same date, 22,224 options were granted to
         non-employee directors with an exercise price to be determined by the
         Board of Directors.

                                      F-25

<PAGE>


                                    SIGNATURE

         Pursuant to the requirements of Section 13 or 15(d) 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.


                                ELK ASSOCIATES FUNDING CORPORATION

                                By: /s/ Gary C. Granoff
                                    --------------------------------------------
                                    Gary C. Granoff, President, Chief Executive,
                                    Financial and Accounting Officer

Dated: October 28, 1999


                                      -17-