U.S. SECURITIES AND EXCHANGE COMMISSION


Washington, D.C. 20549




FORM 10-Q




þ
Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act 1934 for the Quarterly Period Ended September 30, 2011


or


o
Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the transition period from  to




Commission File Number 0-22153




AMERITRANS CAPITAL CORPORATION


(Exact name of registrant as specified in its charter)





Delaware
52-2102424(State of incorporation)
(I.R.S.  Employer Identification No.)50 Jericho Quadrangle, Suite 109

Jericho, NY 11753(Address of Registrant’s principal executive office) (Zip Code)(212) 355-2449(Registrant’s telephone number, including area code)N/A(Former name, former address and former fiscal year, if changed since last report)





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




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





 ̈
Large accelerated filer
 ̈
Accelerated filer
þ
Non-accelerated filer

(Do not check if a small

reporting company.)
 ̈
Smaller reporting company





Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes  ̈ No þ




The number of shares of registrant ’ s common stock, par value $.0001 per share, outstanding as of November 10, 2011 was 3,395,583. The number of shares of Registrants 9 3⁄8 cumulative participating redeemable preferred stock outstanding as of November 10, 2011 was 300,000.





AMERITRANS CAPITAL CORPORATION AND SUBSIDIARIES




FORM 10-Q




TABLE OF CONTENTS





PART I. FINANCIAL INFORMATION
3ITEM 1.
FINANCIAL STATEMENTS
3ITEM 2.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONAND RESULTS OF OPERATIONS
25ITEM 3.
QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
29ITEM 4.
CONTROLS AND PROCEDURES
30PART II. OTHER INFORMATION
31Item 1.
Legal Proceedings
31Item 1A.
Risk Factors
31Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds
32Item 3.
Default upon Senior Securities
32Item 4.
Removed and Reserved
32Item 5.
Other Information
32Item 6.
Exhibits
32Exhibit Index
32(a)
Exhibits
32SIGNATURES
33








PART I.    FINANCIAL INFORMATION







ITEM 1.   FINANCIAL STATEMENTS


AMERITRANS CAPITAL CORPORATION AND SUBSIDIARIES


CONSOLIDATED STATEMENTS OF ASSETS AND LIABILITIES





September 30, 2011


June 30, 2011(unaudited)AssetsInvestments at fair value (cost of $26,124,304 and $27,828,620, respectively):Non-controlled/non-affiliated investments

$
21,310,639


$
23,565,240Non-controlled affiliated investments


3,753



4,761Controlled affiliated investments


344,052



351,734Total investments at fair value


21,658,444



23,921,735Cash


3,637,246



4,151,616Accrued interest receivable


443,379



412,647Assets acquired in satisfaction of loans


1,075,547



1,075,547Furniture and equipment, net


51,558



52,075Deferred loan costs, net


313,597



331,310Prepaid expenses and other assets


367,105



177,204Total assets

$
27,546,876


$
30,122,134Liabilities and Net AssetsLiabilities:Debentures payable to SBA

$
21,175,000


$
21,175,000Notes payable


4,423,620



4,500,000Accrued expenses and other liabilities


701,988



1,505,969Accrued interest payable


108,205



367,572Dividends payable


421,875



337,500Total liabilities


26,830,688



27,886,041Commitments and contingencies (Notes 2, 3, 4, 7 and 8)Net Assets:Preferred stock 9,500,000 shares authorized, none issued or outstanding


-



-9-3/8% cumulative participating redeemable preferred stock; $.01 par value, $12.00 face value, 500,000 shares authorized; 300,000 shares issued and outstanding


3,600,000



3,600,000Common stock, $.0001 par value; 45,000,000 shares authorized, 3,405,583 shares issued; 3,395,583 shares outstanding


341



341Additional paid-in capital


21,330,544



21,330,544Losses and distributions in excess of earnings


(19,678,837
)


(18,717,907
)Net unrealized depreciation on investments


(4,465,860
)


(3,906,885
)Total


786,188



2,306,093Less: Treasury stock, at cost, 10,000 shares of common stock


(70,000
)


(70,000
)Total net assets


716,188



2,236,093Total liabilities and net assets

$
27,546,876


$
30,122,134Net asset (liability) value per common share

$
(0.85
)

$
(0.40
)




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





3


AMERITRANS CAPITAL CORPORATION AND SUBSIDIARIES


CONSOLIDATED STATEMENTS OF OPERATIONS





For the three months ended September 30,2011


2010Investment income:

(unaudited)


(unaudited)Interest on loans receivable:Non-controlled/non-affiliated investments

$
516,334


$
480,696Non-controlled affiliated investments


-



-Controlled affiliated investments


7,053



10,957523,387



491,653Fees and other income


8,243



8,725Total investment income


531,630



500,378Expenses:Interest


400,803



327,592Salaries and employee benefits


426,780



364,519Occupancy costs


43,297



43,785Legal fees


273,796



98,942Accounting and compliance fees


228,940



167,347Directors fees and expenses


37,531



45,158Advisory Fee


46,084



49,464Other administrative expenses


214,442



166,733Total expenses


1,671,673



1,263,540Net investment loss


(1,140,043
)


(763,162
)Net realized gains (losses) on investments:Non-controlled/non-affiliated investments


263,489



(232,106
)263,489



(232,106
)Net unrealized appreciation (depreciation) on investments


(558,976
)


400,719Net realized/unrealized gains (losses) on investments


(295,487
)


168,613Net decrease in net assets from operations


(1,435,530
)


(594,549
)Distributions to preferred shareholders


(84,375
)


(84,375
)Net decrease in net assets from operations available to common shareholders

$
(1,519,905
)

$
(678,924
)Weighted Average Number of Common Shares Outstanding:Basic and diluted


3,395,583



3,395,583Net Decrease in Net Assets from Operations Per Common Share:Basic and diluted

$
(0.45
)

$
(0.20
)




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





4


AMERITRANS CAPITAL CORPORATION AND SUBSIDIARIES


CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETS





For the three months ended September 30,2011


2010(unaudited)


(unaudited)Decrease in net assets from operations:Net investment loss

$
(1,140,043
)

$
(763,162
)Net realized gain (loss) from investments


263,489



(232,106
)Unrealized appreciation (depreciation) on investments


(558,976
)


400,719Net decrease in net assets resulting from operations


(1,435,530
)


(594,549
)Shareholder distributions:Distributions to preferred shareholders


(84,375
)


(84,375
)Net decrease in net assets resulting from shareholder distributions


(84,375
)


(84,375
)Total decrease in net assets


(1,519,905
)


(678,924
)Net assets:Beginning of period


2,236,093



8,376,169End of period

$
716,188


$
7,697,245Net assets per preferred

$
3,600,000


$
3,600,000Net assets (liabilities) per common

$
(2,883,812
)

$
4,097,245




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





5


AMERITRANS CAPITAL CORPORATION AND SUBSIDIARIES


CONSOLIDATED STATEMENTS OF CASH FLOWS





For the three months ended September 30,2011


2010(unaudited)


(unaudited)Cash flows from operating activities:Net decrease in net assets from operations

$
(1,435,530
)

$
(594,549
)Adjustments to reconcile net decrease in net assets from operations to net cash provided by (used in) operating activities:Depreciation and amortization


20,119



19,614Net realized (gains) losses on investments


(263,489
)


232,106Net unrealized (appreciation) depreciation on investments


558,976



(400,719
)Portfolio Investments


(300,205
)


(7,859,051
)Proceeds from principal receipts, sales, maturity of investments


2,268,009



2,927,629Changes in operating assets and liabilities:Accrued interest receivable


(30,732
)


(37,489
)Prepaid expenses and other assets


(189,900
)


(49,450
)Accrued expenses and other liabilities


(803,981
)


(66,738
)Accrued interest payable


(259,367
)


(234,050
)Total adjustments


999,430



(5,468,148
)Net cash used in operating activities


(436,100
)


(6,062,697
)Cash flows from investing activities:Purchases of furniture and equipment


(1,890
)


(18,027
)Net cash used in investing activities


(1,890
)


(18,027
)Cash flows from financing activities:Repayment of debt


(76,380
)


(370,000
)Dividends paid


-



(84,375
)Net cash used in financing activities


(76,380
)


(454,375
)Net decrease in cash and cash equivalents


(514,370
)


(6,535,099
)Cash:Beginning of period


4,151,616



7,362,491End of period

$
3,637,246


$
827,392Supplemental disclosure of cash flow information:Cash paid during the period for:Interest

$
660,170


$
561,642Supplemental disclosure of non cash investing and financing activities:Accrued dividend payable

$
84,375


$
84,375




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





6


AMERITRANS CAPITAL CORPORATION AND SUBSIDIARIES


CONSOLIDATED STATEMENT OF INVESTMENTS





Portfolio Valuation as of September 30, 2011Portfolio Company (1)
Investment

Investment Rate/Maturity

Principal


Net Cost


ValueCommercial Loans Receivable (796.50%) (4)PPCP Inc. (6)

Computer Software
Business Loan

8.00%, due 7/08 and 1/10

$
36,691


$
36,691


$
-Geronimo ATM Fund LLC (6)

ATM Operator
Collateralized Business Loan

12.0%, due 5/09


123,282



123,282



-Vivas & Associates, Inc. (6)

Nail Salon
Collateralized Business Loan

9.00%, due 1/10


11,985



11,985



-E&Y General Construction Co. (6)

Construction Services
Senior Real Estate Mortgage

10.50%, due 10/10


870,791



870,791



870,791Soundview Broadcasting LLC

Television and Broadcasting
Senior Real Estate Mortgage

6.00%, due 9/16


1,804,956



1,804,956



1,804,956Golden Triangle Enterprises LLC

Retail Food Service
Senior Real Estate Mortgage

4.74%, due 12/13


208,949



208,949



208,949Conklin Services & Construction Inc. (6)

Specialty Construction and Maintenance
Collateralized Business Loan

11.00%, due 10/08


1,648,181



1,648,181



1,450,000Mountain View Bar & Grill Inc. (6)

Retail Food Service
Collateralized Business Loan

12.00%, due 5/09


406,067



406,067



406,067J. JG. Associates, Inc. (6)

Consumer Receivable Collections
Senior Loan

no stated rate, no maturity


182,936



182,936



85,250J. JG. Associates, Inc. (6)

Consumer Receivable Collections
Senior Loan

no stated rate, no maturity


35,781



35,781



35,781Car-Matt Real Estate LLC (6)

Real Estate Mortgage
Senior Real Estate Mortgage

12.00%, due 11/08


135,577



135,577



135,577CMCA, LLC (3)

Consumer Receivable Collections
Collateralized Business Loan

12,00% no stated maturity


227,791



227,791



227,791CMCA, LLC #2 (3) (6)

Consumer Receivable Collections
Collateralized Business Loan

12.00%, no stated maturity


106,261



106,261



106,261Andy Fur (6)

Dry Cleaners
Collateralized Business Loan

11.5%, due 1/10


12,103



12,103



-Greaves-Peters Laundry Systems Inc.(6)

Laundromat
Collateralized Business Loan

10.90%, due 9/13


20,471



20,471



20,471Patroon Operating Co. LLC

Retail Food Service
Collateralized Business Loan

10.00%, due 6/12


250,000



250,000



250,000Medallion Loan

Taxicab Medallion Loan
1 Medallion Loan

8.25% , due 1/12


7,617



7,617



7,617Other Miscellaneous Loans (5) (6)



115,964



115,964



94,911Total Commercial Loans






6,205,403



5,704,422Corporate Loans Receivable (1,719.33%) (4)Charlie Brown’s Acquisition Co. (6)

Retail Food Service
Term Loan B

10.25%, all PIK, due 10/13


2,356,682



2,356,682



942,673Alpha Media Group Inc.

Publishing
Term Loan, First Lien

12.00%, all of which is PIK , due 7/13


2,455,753



2,404,943



1,399,779Hudson Products Holdings Inc.

Diversified Manufacturing
Term Loan, First Lien

8.5%, due 8/15


1,266,427



1,240,854



1,177,777Education Affiliates Inc.

Private Education
Term Loan, First Lien

8.0%, due 1/15


814,396



801,487



806,252Fairway Group Acquisition Company

Diversified Supermarkets
Term Loan, First Lien

7.5%, due 3/17


1,492,500



1,478,760



1,492,500Shearer’s Foods Inc.

Wholesale Food Supplier
Term Loan, First Lien

15.50%, due 6/15


1,045,065



1,026,316



1,034,614Syncsort Incorporated

Data Protection Software
Term Loan, First Lien

7.50%, due 03/15


898,093



883,415



898,093




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





7


AMERITRANS CAPITAL CORPORATION AND SUBSIDIARIES


CONSOLIDATED STATEMENT OF INVESTMENTS (continued)





Portfolio Valuation as of September 30, 2011Portfolio Company (1)
Investment

Investment Rate/Maturity

Principal


Net Cost


ValueCenterplate Inc.

Stadium Concessions Provider
Term Loan, First Lien

10.5%, due 09/16

$
990,000


$
966,150


$
996,930Impact Confections Inc.

Candy Manufacturer
Term Loan, First Lien

17.00%, which 5% is PIK, due 07/15


1,557,810



1,557,810



1,557,810Affinity Group Inc.

Direct marketing organization-focus RV’s
Term Loan, First Lien

11.50%, due 12/16


1,250,000



1,227,560



1,168,750Miramax Film NY, LLC

Film Library
Term Loan, First Lien

7.75%, due 06/16


838,462



821,189



838,462Total Corporate Loans






14,765,166



12,313,640Total loans receivable






20,970,569



18,018,062Life Insurance Settlement Contracts

(370.85%) (4)Life Settlement Contracts
4 life insurance policies, aggregate

face value of $17,250,000






3,801,108



2,656,000Equity Investments (137.45%) (4)MBS Serrano, Ltd.

Rental Real Estate Limited Partnership
Limited Partnership Interest






50,600



8,487MBS Colonnade, Ltd.

Rental Real Estate Limited Partnership
Limited Partnership Interest






50,000



10,211MBS Sage Creek, Ltd.

Rental Real Estate Limited Partnership
Limited Partnership Interest






50,000



10,015MBS Walnut Creek, Ltd.

Rental Real Estate Limited Partnership
Limited Partnership Interest






25,000



-238 W. 108 Realty LLC (2)

Residential Real Estate Development
5.00% LLC Interest






100,000



3,763Asset Recovery & Management, LLC (3)

Consumer Receivable Collections
30.00% LLC Interest






6,000



6,000CMCA, LLC (3)

Consumer Receivable Collections
30.00% LLC Interest






4,000



4,000Soha Terrace II LLC

Real Estate Development
4.20% LLC Interest






700,000



936,337Fusion Telecommunications

Internet Telephony
69,736 Shares of Common Stock






367,027



5,579Total equity investments






1,352,627



984,382Total investments





$
26,124,304


$
21,658,444




(1) As of July 5, 2011, all investments previously pledged as collateral for a note payable to a bank (see Note 4 to the consolidated financial statements) were released in connection with the expiration of the credit line.


(2)   As defined in the Investment Company Act of 1940, we are an affiliate of this portfolio company because, as of September 30, 2011, we own 5% or more of the portfolio company’s outstanding voting securities.


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


(4)   Percentage of net assets.


(5)   Other small balance loans.


(6)   Loan receivable is on non-accrual status and therefore is considered non-income producing. Included in Other Miscellaneous Loans is a loan valued at $12,000 that is on non-accrual status.





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





8


AMERITRANS CAPITAL CORPORATION AND SUBSIDIARIES


CONSOLIDATED STATEMENT OF INVESTMENTS





Portfolio Valuation as of June 30, 2011Portfolio Company (1)
Investment

Investment Rate/Maturity

Principal


Net Cost


ValueCommercial Loans Receivable (279.27%) (4)PPCP Inc. (6)

Computer Software
Business Loan

8.00%, due 7/08 and 1/10

$
36,691


$
36,691


$
-Geronimo ATM Fund LLC (6)

ATM Operator
Collateralized Business Loan

12.0%, due 5/09


123,282



123,282



-Vivas & Associates, Inc. (6)

Nail Salon
Collateralized Business Loan

9.00%, due 1/10


11,985



11,985



-E&Y General Construction Co. (6)

Construction Services
Senior Real Estate Mortgage

10.50%, due 10/10


870,791



870,791



870,791Soundview Broadcasting LLC

Television and Broadcasting
Senior Real Estate Mortgage

6.00%, due 9/11


1,820,868



1,820,868



1,820,868Golden Triangle Enterprises LLC

Retail Food Service
Senior Real Estate Mortgage

4.74%, due 12/13


218,824



218,824



218,824Conklin Services & Construction Inc. (6)

Specialty Construction and Maintenance
Collateralized Business Loan

11.00%, due 10/08


1,648,181



1,648,181



1,450,000Mountain View Bar & Grill Inc. (6)

Retail Food Service
Collateralized Business Loan

12.00%, due 5/09


406,067



406,067



406,067J. JG. Associates, Inc. (6)

Consumer Receivable Collections
Senior Loan

no stated rate, no maturity


185,436



185,436



87,750J. JG. Associates, Inc. (6)

Consumer Receivable Collections
Senior Loan

no stated rate, no maturity


36,121



36,121



36,121Car-Matt Real Estate LLC (6)

Real Estate Mortgage
Senior Real Estate Mortgage

12.00%, due 11/08


135,577



135,577



135,577CMCA, LLC (3)

Consumer Receivable Collections
Collateralized Business Loan

12,00% no stated maturity


235,473



235,473



235,473CMCA, LLC #2 (3) (6)

Consumer Receivable Collections
Collateralized Business Loan

12.00%, no stated maturity


106,261



106,261



106,261Adiel Homes Inc. (6)

Construction Services
Senior Real Estate Mortgage

12.00%, due 1/09


270,000



270,000



270,000Adiel Homes Inc. (6)

Construction Services
Senior Real Estate Mortgage

12.0%, no stated maturity


89,396



89,396



89,396Andy Fur (6)

Dry Cleaners
Collateralized Business Loan

11.5%, due 1/10


12,103



12,103



-Greaves-Peters Laundry Systems Inc.(6)

Laundromat
Collateralized Business Loan

10.90%, due 9/13


20,471



20,471



20,471Patroon Operating Co. LLC

Retail Food Service
Collateralized Business Loan

10.00%, due 6/12


250,000



250,000



250,000Medallion Loans

Taxicab Medallion Loans
2 Medallion Loan

11.7% weighted average rate


152,000



152,000



152,000Other Miscellaneous Loans (5) (6)



116,270



116,270



95,216Total Commercial Loans






6,745,797



6,244,815Corporate Loans Receivable (638.96%) (4)Charlie Brown’s Acquisition Co. (6)

Retail Food Service
Term Loan B

10.25%, all PIK, due 10/13


2,356,682



2,356,682



1,343,309Resco Products Inc.

Diversified Manufacturing
Term Loan, First Lien

8.50%, due 6/13


1,301,945



1,301,945



1,301,945Alpha Media Group Inc.

Publishing
Term Loan, First Lien

12.00%, of which 8% is PIK , due 7/13


2,359,106



2,304,012



1,344,691Hudson Products Holdings Inc.

Diversified Manufacturing
Term Loan, First Lien

8.5%, due 8/15


1,269,691



1,242,511



1,231,600Education Affiliates Inc.

Private Education
Term Loan, First Lien

8.0%, due 1/15


829,824



815,922



829,824Fairway Group Acquisition Company

Diversified Supermarkets
Term Loan, First Lien

7.5%, due 3/17


1,500,000



1,485,635



1,500,000Shearer’s Foods Inc.

Wholesale Food Supplier
Term Loan, First Lien

15.50%, due 6/15


1,035,751



1,015,960



1,043,519Syncsort Incorporated

Data Protection Software
Term Loan, First Lien

7.50%, due 03/15


910,067



894,298



910,067




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


9


AMERITRANS CAPITAL CORPORATION AND SUBSIDIARIES


CONSOLIDATED STATEMENT OF INVESTMENTS (continued)





Portfolio Valuation as of June 30, 2011Portfolio Company (1)
Investment

Investment Rate/Maturity

Principal


Net Cost


ValueCenterplate Inc.

Stadium Concessions Provider
Term Loan, First Lien

10.5%, due 09/16

$
992,500


$
967,150


$
997,463Impact Confections Inc.

Candy Manufacturer
Term Loan, First Lien

17.00%, due 07/15


1,538,367



1,538,367



1,538,367Affinity Group Inc.

Direct marketing organization-focus RV’s
Term Loan, First Lien

11.50%, due 12/16


1,250,000



1,226,456



1,312,500Miramax Film NY, LLC

Film Library
Term Loan, First Lien

7.75%, due 06/16


892,308



874,126



928,000Total Corporate Loans






16,023,064



14,281,285Total loans receivable






22,768,861



20,526,100Life Insurance Settlement Contracts

(107.74%) (4)Life Settlement Contracts
5 life insurance policies, aggregate

face value of $17,659,809






3,681,632



2,408,000Equity Investments (44.19%) (4)MBS Serrano, Ltd.

Rental Real Estate Limited Partnership
Limited Partnership Interest






50,600



8,487MBS Colonnade, Ltd.

Rental Real Estate Limited Partnership
Limited Partnership Interest






50,000



10,211MBS Sage Creek, Ltd.

Rental Real Estate Limited Partnership
Limited Partnership Interest






50,000



10,015MBS Walnut Creek, Ltd.

Rental Real Estate Limited Partnership
Limited Partnership Interest






25,000



-238 W. 108 Realty LLC (2)

Residential Real Estate Development
5.00% LLC Interest






100,000



4,761Asset Recovery & Management, LLC (3)

Consumer Receivable Collections
30.00% LLC Interest






6,000



6,000CMCA, LLC (3)

Consumer Receivable Collections
30.00% LLC Interest






4,000



4,000Soha Terrace II LLC

Real Estate Development
4.20% LLC Interest






700,000



936,337Fusion Telecommunications

Internet Telephony
69,736 Shares of Common Stock






367,027



6,974EraGen Biosciences

Analytic Compounds
17,000 shares of Common Stock






25,500



850Total equity investments






1,378,127



987,635Total investments





$
27,828,620


$
23,921,735





(1) Unless otherwise noted, all investments are pledged as collateral for a note payable, to a bank (see Note 4 to the consolidated financial statements).


(2)   As defined in the Investment Company Act of 1940, we are an affiliate of this portfolio company because, as of June 30, 2011, we own 5% or more of the portfolio company’s outstanding voting securities.


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


(4)   Percentage of net assets.


(5)   Other small balance loans.


(6)   Loan receivable is on non-accrual status and therefore is considered non-income producing. Included in Other Miscellaneous Loans is a loan valued at $12,000 that is on non-accrual status.





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





10


AMERITRANS CAPITAL CORPORATION AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS




Information at and for the three months ended September 30, 2011 and 2010 are unaudited




1.    Organization and Summary of Significant Accounting Policies




Financial Statements




The consolidated statement of assets and liabilities of Ameritrans Capital Corporation (“Ameritrans”, the “Company”, “our”, “us”, or “we”) as of  September 30, 2011, and the related consolidated statements of operations, statement of changes in net assets, and cash flows for the three months ended September 30, 2011 and 2010, have been prepared by the Company, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC” or “the Commission”). Certain information and footnote disclosures normally included in financial statements prepared in accordance with
accounting principles generally accepted in the United States have been condensed or omitted pursuant to such rules and regulations. In the opinion of management and the board of directors of the Company (“Management” and “Board of Directors”), the accompanying consolidated financial statements include all adjustments (consisting of normal, recurring adjustments) necessary to summarize fairly the Company’s financial position and results of operations. The results of operations for the three months ended September 30, 2011, are not necessarily indicative of the results of operations for the full year or any other interim period. These financial statements should be read in conjunction with the audited financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2011, as filed with the
Commission by the Company on September 28, 2011.




Organization and Principal Business Activity




Ameritrans is a Delaware closed-end investment company formed in 1998, which, among other activities, makes loans and investments with the goal of generating both current income and capital appreciation. Through our subsidiary, Elk Associates Funding Corporation (“Elk”), we make loans to finance the acquisition and operation of small businesses as permitted by the U.S. Small Business Administration (the “SBA”).  Ameritrans also makes direct loans to and directly invests in opportunities that Elk has historically been unable to make due to SBA restrictions.  Ameritrans makes loans which have primarily been secured by real estate mortgages or, in the case of
corporate loans, generally are senior within the capital structure. Elk was organized primarily to provide long-term loans to businesses eligible for investments by small business investment companies (each an “SBIC”) under the Small Business Investment Act of 1958, as amended (the “1958 Act”).  Elk makes loans for financing the purchase or continued ownership of businesses that qualify for funding as small concerns under SBA Regulations. The Company categorizes its investments into four security types:  1) Corporate Loans Receivable; 2) Commercial Loans Receivable; 3) Life Insurance Settlements and 4) Equity Investments.




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




Basis of Presentation and Consolidation




The consolidated financial statements are presented based on accounting principles generally accepted in the United States of America (“GAAP”). These consolidated financial statements include the accounts of Ameritrans, Elk Capital Corporation (“Elk Capital”), Elk and Elk’s wholly owned subsidiary, EAF Holding Corporation (“EAF”) and five single-member, limited liability companies,  each wholly-owned by Ameritrans and each holding one insurance policy in connection with our life settlement investments portfolio. All significant inter-company transactions have been eliminated in consolidation.




Elk Capital is a wholly owned subsidiary of Ameritrans, which may engage in lending and investment activities similar to its parent.




EAF began operations in December 1993 and owns and operates certain real estate assets acquired in satisfaction of defaulted loans by Elk debtors.  At September 30, 2011, EAF was operating the real estate of Sealmax, Inc., and certain assets of Mountain View Bar & Grill, Inc. and Car-Matt Real Estate, LLC, acquired in satisfaction of loans.




Presentation of Prior Year Data




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




11


Investment Valuations




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




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




Equity investments (preferred stock, common stock, stock warrants, LLC interests, and LP interests including certain controlled subsidiary portfolio investments) and investment securities are recorded at fair value, represented as cost, plus or minus unrealized appreciation or depreciation.  Investments for which market quotations are readily available are valued at such quoted amounts. If no public market exists the fair value of investments that have no ready market are determined in good faith by management and approved by the Board of Directors, based upon assets and revenues of the underlying investee companies, as well as general market trends for businesses in the same
industry.




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




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




Income Taxes




The Company has elected to be taxed as a Regulated Investment Company (“RIC”) under the Internal Revenue Code (the “Code”).  A RIC, generally, is not taxed at the corporate level to the extent its income is distributed to its stockholders. In order to qualify as a RIC, a company must pay out at least 90 percent of its net taxable investment income to its stockholders as well as meet other requirements under the Code.  In order to preserve this election for fiscal year 2011/2012, the Company intends to make the required distributions to its stockholders to the extent the Company has net taxable investment income. No dividends on the Company’s common stock have
been paid in each of the fiscal years ended June 30, 2011, 2010 and 2009 or during the three months ended September 30, 2011, inasmuch as the Company had no taxable investment income during such periods. Accordingly, the Company has maintained its status as a RIC.




The Company is subject to certain state and local franchise taxes, as well as related minimum filing fees assessed by state taxing authorities.  Such taxes and fees are included in “Other administrative expenses” in the consolidated statements of operations in each of the fiscal periods presented.  The Company’s tax returns for fiscal years ended 2008 through 2011 are subject to examination by federal, state and local income tax authorities.




Assets Acquired in Satisfaction of Loans




Assets acquired in satisfaction of loans are carried at the lower of the net value of the related foreclosed loan or the estimated fair value. Losses incurred at the time of foreclosure are charged to the realized losses on loans receivable. Subsequent reductions in estimated net realizable value are charged to operations as losses on assets acquired in satisfaction of loans.




Use of Estimates





The preparation of financial statements in conformity with GAAP requires management to make extensive use of estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.  Actual results could differ from those estimates.  The fair value of the Company’s investments is particularly susceptible to significant changes.




Increase (Decrease) in Net Assets Per Share




Increase (decrease) in net assets per share includes no dilution and is computed by dividing current net increase (decrease) in net assets from operations available to common stockholders by the weighted average number of common shares outstanding for the period.  Diluted increase (decrease) in net assets per share reflects, in periods in which they have a dilutive effect, the effect of common shares issuable upon the exercise of stock options and warrants.  The difference between reported basic and diluted weighted average common shares results from the assumption that all dilutive stock options outstanding were exercised.  For the periods presented, the effect of common stock
equivalents has been excluded from the diluted calculation since the effect would be antidilutive.




12


Dividends




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




On June 30, 2008, the Board approved and adopted a dividend reinvestment plan that provides for reinvestment of distributions in the Company’s Common Stock on behalf of common stockholders, unless a stockholder elects to receive cash.  As a result, if the Board authorizes, and the Company declares, a cash dividend, then those stockholders who have not “opted out” of the dividend reinvestment plan will have their cash dividends automatically reinvested in additional shares of Common Stock, rather than receiving the cash dividends. As of September 30, 2011, no shares have been purchased under the plan.




Income Recognition




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




Stock Options




Stock-based employee compensation costs in the form of stock options is recognized as an expense over the vesting period of the underlying option using the fair values established by usage of the Black-Scholes option pricing model.




13


The Stock Option Plans expired on May 21, 2009.  The Company has chosen not to renew the plans and, as a result of the restrictions contained in the 1940 Act, the Company’s ability to grant equity-based compensation in the future may be limited due to compensation terms contained in the agreement with its investment advisor.




Financial Instruments




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




2.    Investments




The following table shows the Company’s portfolio by security type at September 30, 2011 and June 30, 2011:





September 30, 2011


June 30, 2011(Unaudited)Security Type

Cost


Fair Value



% (1)


Cost


Fair Value



% (1)Commercial Loans

$
6,205,403


$
5,704,422



26.3
%

$
6,745,797


$
6,244,815



26.1
%Corporate Loans


14,765,166



12,313,640



56.9
%


16,023,064



14,281,285



59.7
%Life Settlement Contracts


3,801,108



2,656,000



12.2
%


3,681,632



2,408,000



10.1
%Equity Securities


1,352,627



984,382



4.6
%


1,378,127



987,635



4.1
%Total

$
26,124,304


$
21,658,444



100.0
%

$
27,828,620


$
23,921,735



100.0
%




(1)Represents percentage of total portfolio at fair value





14


Investments by Industry




Investments by industry consist of the following as of September 30, 2011 and June 30, 2011:





September 30, 2011

(Unaudited)


June 30, 2011Value


Percentage of Portfolio


Value


Percentage of PortfolioBroadcasting/Telecommunications

$
1,804,956



8.3
%

$
1,820,868



7.6
%Commercial Construction


2,456,368



11.3
%


2,456,368



10.3
%Computer Software


898,093



4.2
%


910,067



3.8
%Construction and Predevelopment


940,090



4.3
%


1,300,494



5.4
%Direct Marketing


1,168,750



5.4
%


1,312,500



5.5
%Debt Collection


465,083



2.2
%


475,605



2.0
%Education


806,252



3.7
%


829,824



3.5
%Film Distribution


838,462



3.9
%


928,000



3.9
%Food and Candy Manufacturing


3,589,354



16.6
%


2,581,886



10.8
%Life Insurance Settlement Contracts


2,656,000



12.3
%


2,408,000



10.1
%Manufacturing


1,177,777



5.4
%


2,533,545



10.6
%Printing/Publishing


1,399,779



6.5
%


1,344,691



5.6
%Restaurant/Food Service


1,807,689



8.3
%


3,215,663



13.5
%Supermarkets


1,492,500



6.9
%


1,500,000



6.3
%Other industries less than 1%


157,291



0.7
%


304,224



1.1
%TOTAL

$
21,658,444



100.00
%

$
23,921,735



100.00
%




Loans Receivable




Loans are considered non-performing once they become ninety (90) days past due as to principal or interest.  The Company had thirteen and sixteen loans as of September 30, 2011, and June 30, 2011, respectively, which are considered non-performing in the amount of $4,064,871 and $4,827,743 as of September 30, 2011, and June 30, 2011, respectively. These loans are either fully or substantially collateralized and are, in some instances, personally guaranteed by the debtor. These loans are no longer accruing interest, since the loan principal and accrued interest exceed the estimated fair value of the underlying collateral. The following table sets forth certain information regarding performing
and non-performing loans as of September 30, 2011 and June 30, 2011:





September 30, 2011

(Unaudited)


June 30, 2011Loans receivable

$
18,018,062


$
20,526,100Performing loans


13,953,191



15,698,357Nonperforming loans

$
4,064,871


$
4,827,743Nonperforming loans:Accrual

$
-


$
-Nonaccrual


4,064,871



4,827,743$
4,064,871


$
4,827,743




As of September 30, 2011 the Company has accrued, but not yet paid, approximately $46,000 in fees in connection with the Company’s Investment Advisory and Management Agreement, as amended, (the “Advisory Agreement”) with Velocity Capital Advisors LLC (the “Adviser”) related to its Corporate Loans business. Pursuant to the Advisory Agreement, the Company pays fees to the Adviser that are comprised of the following: (a) an annual base fee of 1.50% per annum of the aggregate fair value of Corporate Loans outstanding at the end of each quarter; (b) an income-based fee of 5% per annum, calculated quarterly, computed on interest and dividends earned from the Corporate Loan
portfolio and (c) a capital gains fee of 17.5% based on capital gains from the Corporate Loan portfolio. However, because minimum thresholds have not been met, the fees paid to the Adviser, to date, have been based solely on each quarterly portion of the annual fee.




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




At such time as the Velocity Assets exceed $75 million, the Adviser’s services under the Advisory Agreement will be exclusive to the Company with respect to the Velocity Assets.  The Advisory Agreement may be terminated at any time, without payment of a penalty, upon 60 days’ written notice, by the vote of stockholders holding a majority of the outstanding voting securities of the Company, or by the vote of the Company’s directors or by the Adviser.  The Advisory Agreement will automatically terminate in the event of its assignment by the Adviser. Pursuant to a Stock Purchase Agreement (see Note 8, Stock Purchase Agreement), on April 15, 2011, the Advisor was
notified as to termination of the Advisory Agreement. As such, the Advisory Agreement will terminate upon the Initial Closing of the Stock Purchase Agreement.




15


Life Settlement Contracts


In September, 2006, the Company entered into a joint venture agreement with an unaffiliated entity (the “Joint Venture”) to purchase previously issued life insurance policies owned by unrelated individuals. Subsequently, after a series of events involving the manager of the Joint Venture, on April 14, 2009, a receiver was appointed (the “Receiver”) to handle the affairs of the manager of the Joint Venture. Following discussions with the Receiver, the Company negotiated an agreement, which, among other items, granted the Company the right to purchase the policies, subject to certain terms and conditions, including the following:




1)
The Company agreed to pay the Receivership Estate 20% of all recoveries until such time as the Company has recouped approximately $2.1 million plus the amount of any premiums paid following the date of the Purchase Agreement;




2)
The Company agreed to pay the Receivership Estate 50% of all recoveries above the amounts described in Item 3 above;




3)
The Company agreed to the cancellation of certain claims the Company had against the Receivership Estate for premiums advanced since April 2, 2009;




4)
Despite the retained interest of the Receiver in any recovery, the Company reserved the right, in its sole discretion, to continue to fund premium payments or let any or all of the policies lapse.




After a review of the current financing and regulatory environment, and other opportunities to make loans and investments, the Company decided to exit this line of business and plans to make no new investments in life insurance settlement policies other than the continued payment of premiums on existing investments.




As of September 30, 2011 and June 30, 2011, the fair value of the policies owned by the Company was $2,656,000 and $2,408,000, respectively, which represents the estimated fair value for the four and five life insurance policies with an aggregate face value of $17,250,000 and $17,659,809, respectively. The Company’s cost on these policies to date is $3,801,108, including insurance premiums of $159,184, which were paid in the quarter ended September 30, 2011. Premiums on the policies must be paid until the policies are sold in order to keep the policies in full force. One of the insureds who was covered by one of the policies in the Company’s life insurance settlement portfolio,
passed away on August 17, 2011. The Company has received approximately $320,000 from the proceeds of such policy after payment to the Receiver. At June 30, 2011, the fair value of such policy was $58,400, with a cost of $39,708.




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

June 30

Policy

Premiums2012 (nine months)

$
508,1942013


872,3522014


872,3522015


872,3522016


872,352Thereafter


1,178,848$
5,176,450
  Based upon the current uncertain state of the life settlement market, the lack of liquidity at this time in this market due to the difficult credit conditions and the overall economy and the Company’s previously stated decision to exit the life settlement area, the Company has adjusted the fair value of these policies to reflect the current anticipated recovery based on estimated actuarial values that take into account the various factors discussed above. This is an estimate based upon the information currently available. The Company intends to pay future premiums and continues to pursue alternatives that could allow for a higher recovery.


16





Fair Value of Investments




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




·


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




·


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




·


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





In addition to using the above inputs in investment valuations, the Company continues to employ the valuation policy approved by its board of directors that is consistent with ASC 820-10 (see Note 1).  Consistent with its valuation policy, the Company evaluates the source of inputs, including any markets in which its investments are trading (or any markets in which securities with similar attributes are trading), in determining fair value. The Company’s valuation policy considers the fact that because there is not a readily available market value for most of the investments in its portfolio, the fair value of the investments must typically be determined using unobservable inputs.
The Company's Level 3 investments require significant judgments by its investment committee, its investment advisor and its management and include market price quotations from market makers, original transaction price, recent transactions in the same or similar investments, financial analysis, economic analysis and related changes in financial ratios or cash flows to determine fair value. Such investments may also be discounted to reflect observed or reported illiquidity and/or restrictions on transferability. See Note 1 for additional information on the Company’s valuation policy.




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




17


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





Assets measured at fair value on a recurring basis:





Fair Value at Reporting Date UsingSeptember 30, 2011

(Unaudited)


Quoted Prices in

Active Markets

for Identical

Assets (Level 1)


Significant Other Observable

Inputs (Level 2)


Significant

Unobservable

Inputs (Level 3)Commercial Loans

$
5,704,422


$
-


$
-


$
5,704,422Corporate Loans


12,313,640



1,168,750



-



11,144,890Life Settlement Contracts


2,656,000



-



-



2, 656 ,000Equity Securities


984,382



5,579



-



978,803Total Investments

$
21,658,444


$
1,174,329


$
-


$
20,484,115




Fair Value at Reporting Date UsingJune 30, 2011


Quoted Prices in

Active Markets

for Identical

Assets (Level 1)


Significant Other Observable

Inputs (Level 2)


Significant

Unobservable

Inputs (Level 3)Commercial Loans

$
6,244,815


$
-


$
-


$
6,244,815Corporate Loans


14,281,285



1,312,500



-



12,968,785Life Settlement Contracts


2,408,000



-



-



2, 408,000Equity Securities


987,635



6,974



-



980,661Total Investments

$
23,921,735


$
1,319,474


$
-


$
22,602,261




Assets measured at fair value on a recurring basis using significant unobservable inputs (Level 3):


Commercial Loans


Corporate Loans


Life Settlement Contracts


Equity Securities


TotalBeginning balance as of June 30, 2011

$
6,244,815


$
12,968,785


$
2,408,000


$
980,661


$
22,602,261Net realized gains (losses) on investments


-



0



288,139



(24,650
)


263,489Net unrealized gains (losses) on investments


-



(564,893
)


128,524



23,642



(412,727
)Purchases of investments


2,463



137,455



159,184



(850
)


298,252Repayments, sales or redemptions of investments


(542,856
)


(1,396,457
)


(327,847
)


-



(2,267,160
)Transfers in and/or out of Level 3


-



-



-



-



-Ending balance as of September 30, 2011

$
5,704,422


$
11,144,890


$
2,656,000


$
978,803


$
20,484,115




The amount of total gains or (losses) for the period included in changes in net assets attributable to the change in unrealized gains or losses relating to assets still held at the reporting date.

$
(412,727
)Gains and losses (realized and unrealized) included in net decrease in net assets from operations for the period above are reported as follows:Net realized gain on sales and dispositions


(3,858
)Change in unrealized gains or losses relating to assets still held at reporting date

$
(416,585
)




Commerical Loans


Corporate Loans


Life Settlement Contracts


Equity Securities


TotalBeginning balance as of June 30, 2010

$
8,941,332


$
12,868,110


$
1,356,800


$
1,009,548


$
24,175,790Net realized losses on investments


-



(232,106
)


-



-



(232,106
)Net unrealized gains (losses) on investments


68,284



352,442



(74,165
)


-



346,561Purchases of investments


1,719



7,555,967



301,365



-



7,859,051Repayments, sales or redemptions of investments


(708,117
)


(2,219,512
)


-



-



(2,927,629
)Transfers in and/or out of Level 3


-



-



-



-



-Ending balance as of September 30, 2010

$
8,303,218


$
18,324,901


$
1,584,000


$
1,009,548


$
29,221,667
  The amount of total gains or losses for the period included in changes in net assets attributable to the change in unrealized gains or losses relating to assets still held at the reporting date.

$
346,561Gains and losses (realized and unrealized) included in net decrease in net assets from operations for the period above are reported as follows:Net gain (loss) on sales and dispositions


(232,106
)Change in unrealized gains or losses relating to assets still held at reporting date

$
114,455


18


As of June 30, 2011, the aggregate net unrealized loss on the investments that use Level 3 inputs was $3,632,876. As of June 30, 2011, the aggregate net unrealized loss on Level 1 investments was $274,009. At June 30, 2011, only the investments in Affinity Group, Inc. and Fusion Communications were included in Level 1.





As of September 30, 2011, the aggregate net unrealized loss on the investments that use Level 3 inputs was $4,045,602. As of September 30, 2011, the aggregate net unrealized loss on Level 1 investments was $420,258. For the three months ended September 30, 2011, the net unrealized loss on Level 1 investments aggregated $146,249. At September 30, 2011, only the investments in Affinity Group, Inc. and Fusion Communications were included in Level 1.






3.    Debentures Payable to SBA




At September 30, 2011, and June 30, 2011, debentures payable to the SBA consisted of subordinated debentures with interest payable semiannually, as follows:





Issue Date
Due Date

% Interest Rate


September 30, 2011


June 30, 2011


Annual Amount of Interest and User FeesJuly 2002
September 2012


4.67(1)


$
2,050,000


$
2,050,000


$
113,488December 2002
March 2013


4.63(1)



3,000,000



3,000,000



164,880September 2003
March 2014


4.12(1)



5,000,000



5,000,000



249,300February 2004
March 2014


4.12(1)



1,950,000



1,950,000



97,227December 2009
March 2020


4.11(2)



9,175,000



9,175,000



402,782$
21,175,000


$
21,175,000


$
1,027,677




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


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





Under the terms of the subordinated debentures, Elk may not repurchase or retire any of its capital stock or make any distributions to its stockholders other than dividends out of retained earnings (as computed in accordance with SBA regulations) without the prior written approval of the SBA.





Elk is required to calculate the amount of capital impairment each reporting period based on SBA regulations. The purpose of the calculation is to determine if the Undistributed Net Realized Earnings (Deficit) after adjustment for net unrealized gain or loss on securities exceeds the SBA regulatory limits. If so, Elk is considered to have impaired capital.  As of September 30, 2011, Elk’s calculated maximum impairment percentage (regulatory limit) was 40%, with a calculated capital impairment percentage of approximately 59.0%. Accordingly, Elk had a condition of capital impairment as of September 30, 2011, which would require additional capital of approximately $6.7 million to cure.
  In October 2010, members of management met with representatives of SBA for a portfolio review meeting.  After discussions with SBA, management has undertaken a plan to invest additional equity in Elk which, it is anticipated, will cure the condition of capital impairment. See Note 8, Stock Purchase Agreement, for recent developments in connection with such plan.




4.      Notes Payable




Bank




The Company had a $120,000 line of credit with a bank, with no balance outstanding, as the line had been paid in full as of August 31, 2010. Although this loan was paid in full, the line remained available until its maturity date of July 6, 2011. The Company had pledged its loans receivable and all other assets as collateral for the line of credit and such collateral was released with the expiration of the line.




Other, Including Related Party Notes




On December 22, 2009, the Company issued $2,025,000 aggregate principal amount of its 8.75% notes due December 2011 (the “December Notes”) in a private offering.  Prior to their amendment, as described below, the Notes bore interest at a rate of 8.75%, payable quarterly, but the Company had the option to extend the December Notes until December 2012 at a rate of 5.5%, plus the then-current prime rate.  The December Notes are redeemable by the Company at any time upon not less than 30 days prior notice.  A member of the Company’s Board of Directors and certain affiliated entities acquired $1,375,000 of the December Notes in the offering. The total amount of interest
incurred on the December Notes issued to related parties was $41,250 and $29,744 for the three months ended September 30, 2011 and 2010, respectively.




19


On March 24, 2010, the Company issued $975,000 aggregate principal amount of its 8.75% notes due March 2012 (the “March Notes” and, together with the December Notes, the “2009/2010 Notes”) in a private offering.  The March Notes have the same terms as the December Notes, except prior to their amendment as described below, the March Notes were scheduled to mature in March 2012.  A member of the Company’s Board of Directors, and certain affiliated entities acquired $685,000 of the March Notes in the offering. The total amount of interest incurred on the March Notes issued to related parties was $20,550 and $14,277 for the three months ended September 30, 2011
and 2010, respectively.




In connection with the issuance of a Senior Secured Note on January 19, 2011 (see below), in order to facilitate certain covenants under this Senior Secured Note relating to the 2009/2010 Notes, the Company entered into an Amendment to Promissory Note (the “Amendment”) with each holder of the 2009/2010 Notes. Pursuant to the Amendment, the interest rate on the 2009/2010 Notes was increased from 8.75% to 12.0% and the maturity date was extended until May 2012. The holders of the 2009/2010 Notes also waived certain covenants contained in the 2009/2010 Notes related to additional borrowings by the Company. In connection with the Amendment, the Company paid a fee equal to 1% of principal,
or an aggregate of $30,000, to the holders of the 2009/2010 Notes.




On January 19, 2011, the Company issued a Senior Secured Note in the principal amount of $1,500,000 (the “2011 Note”) to an unaffiliated lender. The lender is an affiliate of Renova US Holdings Ltd., the purchaser under the Stock Purchase Agreement (See Note 8, Stock Purchase Agreement). The Note bears interest at the rate of 12% per annum (except following an event of default under the 2011 Note, in which case the interest rate would be 14%) and matures on February 1, 2012. The Company may prepay the 2011 Note at any time. The Company is required to prepay the 2011 Note in certain circumstances, including in the event and to the extent (i) the Company issues any capital stock (other
than upon the conversion of securities outstanding as of January 19, 2011), (ii) a subsidiary of the Company pays a dividend to the Company; (iii) the Company sells assets (other than in the ordinary course of business in an amount less than $100,000 in the aggregate and only to the extent of 50% of the proceeds from such sales); or (iv) the Company engages in a transaction that results in a change of control. The Company will incur a 15% fee for any principal prepayments other than in respect of asset sales. The Company’s obligations under the 2011 Note may be accelerated by the 2011 Note holder under certain circumstances, including: (i) the Company fails to pay the principal of the 2011 Note when due or interest on the 2011 Note when due and such failure continues for three business days and/or fails to pay any other amount payable under the 2011 Note for thirty days following
notice of such failure; (ii) the Company materially breaches any representation, warranty or covenant made pursuant to the 2011 Note and such breach is not cured within five business days following the Company’s awareness thereof or receipt of notice with respect thereto; (iii) the Company or any of its subsidiaries commences a bankruptcy or similar proceeding (or such a proceeding is commenced against the Company or its subsidiaries); (iv) a person or group of persons acquires a majority of the voting power of the Company or Elk; (v) a judgment is entered against the Company or any of its subsidiaries in an aggregate amount exceeding $500,000 or any execution, garnishment or attachment is levied against the Company’s or any of its subsidiaries’ assets and such execution, garnishment or attachment impairs the Company’s or its subsidiaries’ ability to
conduct its business; (vi) the Company fails to pay obligations in excess of $500,000 when due; or (vii) an event occurs which has or would reasonably be expected to have a material adverse effect on the Company’s or any of its subsidiaries’ business. The 2011 Note also contains customary representations and warranties as well as affirmative and negative covenants. Pursuant to the 2011 Note, the Company has agreed, among other things, (i) to reimburse the lender for certain out-of-pocket expenses incurred in connection with the 2011 Note; (ii) to maintain a minimum consolidated net asset value of $4,000,000; (iii) not to sell any material assets with a fair market value in excess of $500,000; (iv) not to declare or pay any dividend with respect to any class of capital stock or make any payment on any indebtedness ranking junior to the lender under the 2011 Note; (v) not
incur any indebtedness for borrowed money in excess of $250,000; and (vi) not to enter into certain related party transactions. Currently, the Company is not in compliance with certain covenants, including financial covenants.  Accordingly, the lender may declare that an event of default has occurred and declare the principal amount of the Company’s indebtedness, together with any accrued and unpaid interest (including default interest) due thereon, to be immediately due and payable.




The 2011 Note was originally secured by a pledge of 100% of the issued and outstanding shares of common stock of Elk owned by the Company and was subsequently amended to include all personal property and other assets of the Company other than the common stock and all other equity interests of Elk. In order to facilitate certain covenants under the 2011 Note relating to the Company’s 2009/2010 Notes, on January 19, 2011, the Company entered into an Amendment to Promissory Note with each holder of the 2009/2010 Notes (see above).




In connection with the Stock Purchase Agreement (see Note 7, Stock Purchase Agreement), on April 12, 2011, the Company also entered into an amendment to the 2011 Note (the “Note Amendment”), which amended a provision of the 2011 Note that prohibited the Company from incurring any indebtedness for borrowed money in excess of $250,000.  Such provision, as modified by the Note Amendment, provides that the Company shall not incur any indebtedness for borrowed money in excess of $250,000 other than indebtedness incurred in the ordinary course of business consistent with past practices for use as working capital in an aggregate principal amount not to exceed $500,000.  All other
terms of the 2011 Note remain in full force and effect. Interest expense incurred in connection with the 2011 Note aggregated $44,719 in the three months ended September 30, 2011.




5.           Dividends to Stockholders




The following table sets forth the dividends accrued by the Company on its Preferred Stock for the three months ended September 30, 2011, and 2010:





For the three months ended September 30, 2011Dividend Per Share


Amount

Declaration

Date
Record Date
Pay DatePreferred Stock:First Quarter

(July 1, 2011 – September 30, 2011)

$
0.28125



84,375

Undeclared




20


For the three months ended September 30, 2010Dividend Per Share

Amount

Declaration

Date

Record Date

Pay DatePreferred Stock:First Quarter

(July 1, 2010 – September 30, 2010)
$
0.28125

84,375

Undeclared




The Company did not declare or pay any dividends on its Common Stock during the three months ended September 30, 2011 and 2010.




6.      Financial Instruments




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




Loans Receivable and Life Settlement Contracts




·


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




Investment Securities




·


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




Debt




·


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




·


The fair value of the SBA debentures was computed using the discounted amount of future cash flows using the Company’s current incremental borrowing rate for similar types of borrowings.  The estimated fair values of such debentures as of September 30, 2011, and June 30, 2011, were approximately $21,235,000 and $22,188,000 respectively.  However, the Company does not expect that the estimated fair value amounts determined for these debentures would be realized in an immediate settlement of such debentures with the SBA.




·


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




Other




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




7.   Stock Purchase Agreement




As previously disclosed in the Company’s Form 8-K filed April 14, 2011 and in its Definitive Proxy Statement on Schedule 14A filed May 23, 2011 and amended on June 17 2011, on April 12, 2011, the Company entered into a Stock Purchase Agreement (the “Purchase Agreement”) with Renova US Holdings Ltd. (“Renova”). Subject to the terms and conditions set forth in the Purchase Agreement, the Company agreed to issue and sell to Renova, and Renova agreed to purchase, (i) $25,000,000 of Common Stock of the Company (the "Initial Purchased Stock") at a price per share equal to the greater of $1.80 and the then-prevailing per share net asset value of the Company at the time of
issuance (as determined in accordance with the terms of the Purchase Agreement) (the "Applicable Per Share Purchase Price"), at an initial closing (the “Initial Closing”) to be held no later than November 30, 2011 following satisfaction or waiver of the conditions to such issuance  and (ii) between an additional $35,000,000 to $40,000,000 of additional Common Stock (depending upon the timing of such purchases) at the Applicable Per Share Purchase Price (the “Additional Purchased Stock” and together with the Initial Purchased Stock, the “Purchased Stock”) at subsequent closings (each, a “Subsequent Closing”) to be held from time to time, subject to satisfaction of the conditions to such issuances, between the date of the Initial Closing and the second anniversary of the Initial Closing based upon the terms and conditions set forth
in the Purchase Agreement.




21


In connection with the transactions contemplated by the Purchase Agreement the parties agreed, among other things, that: (1) the Company’s Board of Directors would be reconstituted at the Initial Closing by increasing the size of the Board of Directors to eleven and appointing six individuals identified by Renova (as set forth in the Purchase Agreement) to serve as members of the board; and (2) the Company's advisory agreement with Velocity would be terminated and the Company would enter into an investment advisory agreement with Ameritrans Capital Management LLC, an affiliate of Renova, in each case, effective as of the Initial Closing.




Requisite stockholder approval of the transactions contemplated by the Purchase Agreement was obtained at a special meeting of stockholders held on June 24, 2011. Consummation of the Initial Closing is subject to certain additional customary closing conditions, as well as the approval of the SBA of the indirect change of ownership and control of the Company’s wholly-owned subsidiary, Elk, which is a SBA licensee.




Consummation of each Subsequent Closing is also subject to certain closing conditions, including, without limitation, (i) the absence of any injunction, court order or law prohibiting or enjoining such Subsequent Closing (subject to the parties’ obligation to use commercially reasonable efforts to render permissible the consummation of the purchase and sale of the Purchased Stock); and (ii) Elk having remained in good standing with the SBA,  in substantial compliance with all applicable rules and regulations and eligible to receive leverage commitments under normal requirements and conditions.





On September 19, 2011, the Company received a letter from the SBA describing certain concerns related to its change of ownership and control application and requesting certain additional pieces of information. In particular, the SBA has informed the Company that the proposed transaction, as currently structured, would not satisfy applicable SBA management-ownership diversity requirements.  While the Company continues to believe that the transaction satisfies SBA diversity requirements, to date the SBA has not concurred with that view.  The Company intends to continue discussions with the SBA on its diversity interpretation and is also discussing with Renova potential
modifications to the terms of the transaction in order to satisfy the SBA's interpretation of those requirements. There is no assurance that the SBA will modify its position, that the Company and Renova will be able to reach agreement on revised terms or that the revised terms would satisfy the SBA.  Furthermore, any revised terms may not be as favorable to the Company and its shareholders as the current terms and may also require resubmission of the agreement for shareholder approval.  If the Company and Renova cannot agree on revised terms or if the SBA does not change its current view of the diversity requirements, the Purchase Agreement and related agreements may be terminated.





In connection with the Company's notice of termination of the Advisory Agreement, described above, the Company canceled a warrant that was issued to the Adviser on December 10, 2009. Such warrant gave the Adviser the right to purchase 100,000 shares of the Company’s common stock at an initial exercise price of $1.25, subject to adjustment, for five years from the date of issuance.




8.      Commitments and Contingencies




Litigation




From time to time, the Company is engaged in various legal proceedings incident to the ordinary course of its business.  In the opinion of the Company’s management and based upon the advice of legal counsel, there is no proceeding pending, or to the knowledge of management threatened, which in the event of an adverse decision would result in a material adverse effect on the Company’s results of operations or financial condition.





9.      Stock Option Plans




The Company’s employee incentive stock option plan and non-employee director stock option plan expired on May 21, 2009





The following tables summarize information about the transactions of both stock option plans as of September 30, 2011:





Stock OptionsNumber of Options


Weighted

Average

Exercise Price

Per ShareOptions outstanding at June 30, 2011


289,000


$
3.51Granted


-



-Canceled


-



-Expired


(10,000
)


2.36Exercised


-



-Options outstanding at September 30, 2011


279,000


$
3.55


22


Options Outstanding and ExercisableRange of

Exercise Prices

Number

Outstanding and Exercisable

at September 30, 2011

Weighted

Average

Remaining

Contractual

Life

Weighted

Average

Exercise

Price$3.60


13,888

1.64 years


$3.60$5.28


80,000

1.66 years


$5.28$5.30


9,433

.23 years


$5.30$4.50


20,000

1.03 years


$4.50$4.93


10,141

.61 years


$4.93$2.36


120,000

2.03 years


$2.36$1.78


25,538

2.60 years


$1.78$ 1.78-$ 5.30


279,000

1.77 years


$3.55


10.      Financial Highlights





Three Months

Ended

September 30, 2011


Three Months

Ended

September 30, 2010


Year Ended

June 30, 2011Net share dataNet asset (liability) value at the beginning of the period

$
(0.40
)

$
1.40


$
1.40Net investment loss


(0.34
)


(0.22
)


(1.53
)Net realized and unrealized losses on investments


(0.09
)


0.05



(0.17
)Net decrease in net assets from operations


(0.43
)


(0.17
)


(1.70
)Distributions to Stockholders (4)


(0.02
)


(0.02
)


(.10
)Total decrease in net asset value


(0.45
)


(0.19
)


(1.80
)Net asset value at the end of the period

$
(0.85
)

$
1.21


$
(0.40
)Per share market value at beginning of period

$
1.17


$
1.32


$
1.32Per share market value at end of period

$
0.54


$
1.10


$
1.17Total return (1)


(53.85
)%


(16.7
)%


(11.4
%)Ratios/supplemental dataAverage net assets (2) (in 000’s)

$
(2,124
)

$
4,436


$
1,706Total expense ratio (3)


(314.8
%)


113.4
%


431.8
%Net investment loss to average net assets (5)


(214.7
%)


(69.0
%)


(306.2
%)




(1)
Total return is calculated by dividing the change in market value of a share of common stock during the year, assuming the reinvestment of dividends on the payment date, by the per share market value at the beginning of the year.




(2)
Average net assets excludes capital from preferred stock.




(3)
Total expense ratio represents total expenses divided by average net assets annualized for interim periods.




(4)
Amount represents total dividends on both common and preferred stock divided by weighted average shares.




(5)
Annualized for interim periods.




11.      Other Matters





On September 20, 2011, the Company received a letter (the “Notice”) from The Nasdaq Stock Market (“Nasdaq”) notifying the Company that, because the closing bid price for the Company’s common stock has been below $1.00 per share for the 30 consecutive business days preceding the Notice, the Company no longer complies with the continued listing requirements under Nasdaq Marketplace Rule 5550(a)(2). Nasdaq Marketplace Rule 5550(a)(2) requires securities listed on the Nasdaq Capital Market to maintain a minimum bid price of $1.00 per share (the “Minimum Bid Requirement”). The Notice will not immediately result in the delisting of the Company’s common
stock. Nasdaq Marketplace Rule 5810(c)(3)(A) provides the Company with 180 calendar days from the date of the Notice (the “Initial Grace Period”) to regain compliance with the Minimum Bid Requirement.  To regain compliance, the closing bid price for the Company’s common stock must be at least $1.00 per share for a minimum of ten consecutive business days.  In the event the Company does not regain compliance with the Minimum Bid Requirement during the Initial Grace Period, the Company may be eligible for an additional 180 day period to regain compliance with the Minimum Bid Requirement.





23


On October 3, 2011, the Company received a letter (the “Letter”) from Nasdaq notifying the Company that the Company does not satisfy the minimum stockholders’ equity requirement (or alternative standards) for continued listing under Nasdaq Marketplace Rule 5550(b), based on its stockholders’ equity as of June 30, 2011.  Nasdaq Marketplace Rule 5550(b)(1) requires listed companies to maintain a minimum of $2.5 million of stockholders' equity or satisfy alternative standards of market value of listed securities or net income from continuing operations.  As reported in the Company’s Form 10-K for the year ended June 30, 2011, stockholders’
equity as of June 30, 2011 was $2,236,093.  The Letter also indicated that the Company does not satisfy the alternative criteria for continued listing under Rule 5550(b).





The Letter will not immediately result in the delisting of the Company’s common stock. Under Nasdaq rules, the Company has 45 calendar days (November 17, 2011) to submit to Nasdaq a plan to regain compliance with continued listing standards.  If the Company submits a compliance plan and such plan is accepted by Nasdaq, Nasdaq can grant an extension of up to 180 days from October 3, 2011 for the Company to demonstrate its compliance.  If the Company’s compliance plan is not accepted, the Company may appeal Nasdaq’s determination not to accept the plan in accordance with Nasdaq procedures governing such appeals.





The Company is considering plans to regain compliance to submit to Nasdaq.  There can be no assurance, however, that it will successfully develop a plan to regain compliance, that any such plan will be accepted by Nasdaq, or that the Company’s common stock will not be delisted.





On November 8, 2011 the Company received a letter (the “Communication”) from Nasdaq notifying the Company that it does not satisfy the minimum market value of publicly held shares (“MVPHS”) requirement for continued listing under Nasdaq Marketplace Rule 5550(a)(5), based on the Company’s MVPHS during the period from September 26, 2011 through November 7, 2011.  Nasdaq Marketplace Rule 5550(a)(5) requires listed companies to maintain a minimum MVPHS of $1,000,000.




The Communication will not immediately result in the delisting of the Company’s common stock. Under Nasdaq rules, the Company has 180 calendar days (or until May 7, 2012) (the “Compliance Period”) to regain compliance with the MVPHS requirement.  If at any time during the Compliance Period, the Company’s MVPHS closes at $1,000,000 or more for a minimum of ten consecutive business days, the Company will have regained compliance with the MVPHS requirement.  If the Company does not regain compliance during the Compliance Period, Nasdaq will notify the Company that its common stock is subject to delisting.





12.     Recent Accounting Pronouncements




In May 2011, the FASB issued Accounting Standards Update (“ASU”) 2011-04, “Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and International Financial Reporting Standards.” ASU 2011-04 amends Topic 820 (Fair Value Measurement) by providing a consistent definition of fair value, ensuring that the fair value measurement and disclosure requirements are similar between U.S. GAAP and International Financial Reporting Standards. ASU 2011-04 changes certain fair value measurement principles and enhances the disclosure requirements, particularly for level 3 fair value measurements. ASU 2011-04 is effective for the first interim or annual
reporting period beginning after December 15, 2011 and is to be applied prospectively. The Company is evaluating the impact adoption of ASU 2011-04 will have on its disclosures and does not believe adoption will have an impact on its financial condition or results of operations.




Other recently issued accounting pronouncements are not expected to have a material impact on our financial position or results of operations.





13.     Subsequent Events





Except for the matters discussed in Note 11, Other Matters, the Company is aware of no significant subsequent events.




24





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





The information contained in this section should be read in conjunction with the consolidated Financial Statements and Notes thereto appearing in this quarterly report on Form 10-Q and in the Company’s Annual Report on Form 10-K for the year ended June 30, 2011, filed with the Commission by the Company on September 28, 2011, and which is available on the Company’s web site at www.ameritranscapital.com.




CRITICAL ACCOUNTING POLICIES




Investment Valuations




Our loans receivable, net of participations and any unearned discount, are considered investment securities under the 1940 Act and are recorded at fair value. As part of fair value methodology, loans are valued at cost adjusted for any unrealized appreciation (depreciation). Since no ready market exists for these loans, the fair value is determined in good faith by management, and approved by the Board of Directors. In determining the fair value, we and our Board of Directors consider factors such as the financial condition of borrower, the adequacy of the collateral, individual credit risks, historical loss experience, and the relationships between current and projected market rates and portfolio
rates of interest and maturities. Foreclosed properties, which represent collateral received from defaulted borrowers, are valued based on appraisals prepared by third parties and market analysis.




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




Equity investments (preferred stock, common stock, LLC interests, LP interest, and stock warrants, including controlled subsidiary portfolio investments) and investment securities are recorded at fair value, represented as cost, plus or minus unrealized appreciation or depreciation. Investments for which market quotations are readily available are valued at such quoted amounts. If no public market exists, the fair value of investments that have no ready market are determined in good faith by management, and approved by the Board of Directors, based upon assets and revenues of the underlying investee companies as well as general market trends for businesses in the same industry.




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




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




Assets Acquired in Satisfaction of Loans




Assets acquired in satisfaction of loans are carried at the lower of the net value of the related foreclosed loan or the estimated fair value less cost of disposal.  Losses incurred at the time of foreclosure are charged to the realized losses on loans receivable.  Subsequent reductions in estimated net realizable value are charged to operations as losses on assets acquired in satisfaction of loans.




Use of Estimates




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




Income Recognition


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




Contingencies




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




25


General




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




Results of Operations for the Three Months Ended September 30, 2011 and 2010




Total Investment Income




The Company’s investment income for the three months ended September 30, 2011, increased $31,252, or 6%, to $531,630, as compared to $500,378 for the three months ended September 30, 2010. The increase was predominantly due to a timing difference on interest earned on an outstanding loan, as partially offset by a smaller portfolio.




Corporate Loans outstanding as of September 30, 2011, decreased by $7,336,261, or 37%, to $12,313,640, as compared with $19,649,901at September 30, 2010.  For the three months ended September 30, 2011, interest income on Corporate Loans increased approximately $41,000 to approximately $461,000 from $420,000 in the comparable quarter in the prior fiscal year. The interest earned on Corporate Loans increased in 2011, as compared with the prior year, primarily due to new loans at higher interest rates.   The decrease in Corporate Loans outstanding was due to payoffs of approximately $6,500,000 in principal; the sale of four loans for approximately $3,900,000 in proceeds and the
aggregate decrease of fair value of certain Corporate Loans of approximately $1,500,000, as partially offset by three new loans of approximately $4,000,000 in principal and capitalized interest and loan discount amortization aggregating approximately $600,000.




Commercial Loans outstanding as of September 30, 2011, decreased by $2,598,796, or 31%, to $5,704,422, as compared with $8,303,218 at September 30, 2010.  The decrease in Commercial Loans was due to loan amortization and paid off loans of approximately $1,600,000 and a foreclosure on a real estate loan for approximately $1,000,000. For the three months ended September 30, 2011, interest income on Commercial Loans decreased approximately $9,000 to approximately $57,000 from approximately $66,000 in the prior fiscal year’s comparable quarter. This decrease was attributable to paid off loans as partially offset by interest received of approximately $16,000, relating to non-accruing
loans.




Life settlement contracts outstanding as of September 30, 2011 increased by $1,072,000, or 68%, to $2,656,000, as compared with $1,584,000 at September 30, 2010. The fair value as of September 30, 2011, represents our estimate of the policies’ fair value based upon various factors, including a discounted cash flow analysis of anticipated life expectancies, future premium payments, current market conditions and anticipated death benefits related to the four life insurance policies which have an aggregate face value of $17,250,000.




Operating Expenses




Interest expense for the three months ended September 30, 2011 increased $73,211, or 22%, to $400,803, as compared to $327,592 for the three months ended September 30, 2010.  This was due to an increase in outstanding loans with the addition of a $1,500,000 Senior Secured Note in January 2011 and a related increase in interest rates for previously issued notes payable.




Salaries and employee benefits for the three months ended September 30, 2011 increased $62,261, or 17%, to $426,780 when compared to $364,519 for the three months ended September 30, 2010.  This increase was due to a one-time payment in connection with the cancelation of an employment contract and was partially offset by a reduction in officers’ salaries.




Occupancy costs for the three months ended September 30, 2011, remained consistent at $43,297 when compared with $43,785 for the three months ended September 30, 2010.




26


Legal fees increased $174,854, or 177%, to $273,796 in the first quarter of fiscal 2012 from $98,942 in the corresponding quarter in fiscal 2011 due, primarily, to legal work in connection with our capital raising efforts, most significantly, the work relating to the transactions contemplated by the Stock Purchase Agreement (the “Purchase Agreement”), dated April 12, 2011, between us and Renova US Holdings Ltd. (“Renova”) with Renova and the $1.5 million senior secured note (see Notes 4 and 7 to our consolidated financial statements), and, to a lesser extent, SEC filings, foreclosure expense, compliance and general legal matters.




Accounting and compliance fees increased $61,593 or 37% to $228,940 in the first quarter of fiscal 2012 from $167,347 in the corresponding quarter in the prior fiscal year prior. Such increase was attributable to a $15,533 increase in general accounting and other compliance fees; a $35,480 increase in financial management personnel, primarily related to our Chief Financial Officer, who was engaged in September 2010 and a $10,580 increase in audit fees.




Director fees for the three months ended September 30, 2011 decreased $7,627, or 17%, to $37,531 when compared to $45,158 for the three months ended September 30, 2010. Such decrease resulted from fewer director meetings during the first quarter of fiscal 2012 than in the comparable quarter of fiscal 2011.




Advisory Fees decreased approximately $3,380, or 7%, to $46,084 when compared to $49,464 for the three months ended September 30, 2010. This was due to a decrease in the size of the Corporate Loan portfolio.




Miscellaneous administrative expenses for the three months ended September 30, 2011, increased $47,709, to $214,442, or 29%, when compared with $166,733 for the three months ended September 30, 2010.  This increase was due primarily to the incurrence of $66,000 of foreclosure expense in the first quarter of fiscal 2012 and an increase of miscellaneous fees of approximately $5,100, as partially offset by decreases in moving expenses of approximately $17,300, insurance expense of approximately $2,000 and office expense of approximately $4,800.




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




Net decrease in net assets from operations for the three months ended September 30, 2011 was $1,435,530, as compared to a net decrease in assets results from operations for the three months ended September 30, 2010 of $594,549. The downward performance in operations in the 2011 three-month period was, primarily, attributable to (i) the decrease in the size of our investment portfolio, which went from an average of approximately $28.0 million in the first quarter of fiscal 2011 to an average of approximately $22.9 million in the first quarter of fiscal 2012; (ii) an overall increase in expenses to approximately $1.7 million for the three months ended Septembr 30, 2011as compared with
approximately $1.3 million for the three months ended September 30, 2010, as described above, and (iii) an increase in unrealized loss to approximately $559,000 for the three months ended September 30, 2011 as compared with an unrealized gain of approximately $401,000 for the three months ended September 30, 2010. The realized gain for the three months ended September 30, 2011 was approximately $265,000, as compared with a realized loss of approximately $232,000 for the three months ended September 30, 2010 and was, primarily, attributable to the proceeds from a life insurance policy.




Financial Condition at September 30, 2011 and June 30, 2011




Assets and Liabilities




Total assets decreased $2,575,258 to $27,546,876, at September 30, 2011, as compared with total assets of $30,122,134 at June 30, 2011. This net decrease was primarily due to an overall decrease in cash and cash equivalents of approximately $500,000, which was utilized, primarily, to fund general operations during the period, including reductions in accounts payable, accrued expenses and interest. The decrease in investments of approximately $2,300,000, which was, primarily, attributable to the payoff of loans of approximately $2,000,000 and net depreciation of investments of approximately $550,000, was partially offset by the funding of new loans receivable aggregating approximately
$250,000.




Total liabilities decreased by approximately $1,055,363, to $26,830,688 at September 30, 2011, as compared to $27,886,041 at June 30, 2011, primarily, due to the reduction of accounts payable and accrued expenses of approximately $804,000, the decrease in accrued interest payable of approximately $259,000 and principal payments against notes payable of approximately $76,000, as partially offset by an increase in accrued dividends payable on preferred stock of approximately $84,000.




Liquidity and Capital Resources




The Company has funded its operations through private and public placements of its securities, bank financing, the issuance to the SBA of its subordinated debentures, other borrowings and internally generated funds.




At September 30, 2011, approximately 80% of the Company’s indebtedness was due to debentures issued to the SBA with fixed rates of interest plus user fees resulting in rates ranging from 4.39% to 5.54%. At September 30, 2011, approximately 16% of the Company’s indebtedness was represented by certain notes payable which were issued in December, 2010, and March 2010, and bear an interest rate of 12%.




27


The Company invested in life settlement contracts which require the Company to continue premium payments to keep the policies in force through the insured’s life expectancy, or until such time the policies are sold.  The Company may sell the policies at any time, at its sole discretion.  However, if the Company chooses to keep the policies, as of and after September 30, 2011, premium payments due through the life expectancy of the insured are approximately $3,122,000 through June 30, 2015 and approximately $2,051,000 thereafter (see Note 2 to the consolidated financial statements).




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




The Company will distribute at least 90% of its investment company taxable income, if any, and, accordingly, will continue to rely upon external sources of funds to finance growth. No dividends on the Company’s common stock have been paid in each of the fiscal years ended June 30, 2011 and 2010 or during the three months ended September 30, 2011, inasmuch as the Company had no taxable investment income during such periods. Accordingly, the Company has maintained its status as a RIC.




On April 12, 2011, the Company entered into an agreement with Renova US Holdings Ltd. (“Renova” or “Purchaser”).  Pursuant to this agreement (the “Renova Purchase Agreement,”) the Company agreed to issue and sell to the Purchaser, and the Purchaser agreed to purchase, (i) the Initial Purchased Stock for an aggregate purchase price of $25,000,000 at the Initial Closing to be held no later than November 30, 2011 and (ii) the Additional Purchased Stock, for an aggregate purchase price initially equal to $35,000,000 (if such investment is made at the Initial Closing) as may be increased to up to $40,000,000 in accordance with the terms of the Renova Purchase
Agreement at the Subsequent Closing to be held from time to time between the date of the Initial Closing and the second anniversary of the Initial Closing based on the terms and conditions of the Renova Purchase Agreement. See Note 8, Stock Purchase Agreement, of Notes to Consolidated Financial Statements.  Although certain aspects of the Renova Transaction have been approved by our stockholders, the consummation of the Renova Transaction remains subject to various conditions to closing, including approval by the SBA of the change of ownership and control of Elk that would occur upon the Initial Closing.




On September 19, 2011, we received a letter from the SBA describing certain concerns related to our change of ownership and control application and requesting certain additional pieces of information. In particular, the SBA has informed us that the proposed transaction, as currently structured, would not satisfy applicable SBA management-ownership diversity requirements.  While we continue to believe that the transaction satisfies SBA diversity requirements, to date the SBA has not concurred with that view.  We intend to continue discussions with the SBA on its diversity interpretation and are also discussing with Renova potential modifications to the terms of the transaction in
order to satisfy the SBA's interpretation of those requirements. There is no assurance that the SBA will modify its position, that we and Renova will be able to reach agreement on revised terms or that the revised terms would satisfy the SBA.  Furthermore, any revised terms may not be as favorable to us and our shareholders as the current terms and may also require resubmission of the agreement for shareholder approval.




Even if we consummate the Initial Closing, the Subsequent Closings contemplated by the Renova Purchase Agreement  will remain subject to the satisfaction of various conditions to Renova’s obligation to consummate the Subsequent Closings. If the transaction contemplated by the Renova Purchase Agreement is not consummated, we will require additional sources of capital and new bank lines of credit and cash flow from operations to fund our business plan.   Nevertheless, we believe that we have sufficient resources currently available to sustain our business for, at least, the next twelve months.




The Renova Purchase Agreement limits our ability to engage in certain financings until the earlier to occur of the Initial Closing or the termination of the Renova Purchase Agreement.  Specifically, the Renova Purchase Agreement prohibits the Company from, among other things, issuing any capital stock or debt securities (or debt securities convertible into or exchangeable for securities) having voting rights; or incurring any indebtedness for borrowed money, other than indebtedness incurred in the ordinary course of business and consistent with past practices for use as working capital in an aggregate principal amount not in excess of $500,000, in each case without Renova’s prior
written consent. In addition, the Renova Purchase Agreement prohibits us from soliciting, encouraging or facilitating financings that could constitute “Competing Proposals”, as defined in the Renova Purchase Agreement.




The Company has continued to engage in discussions with Renova regarding potential modifications to the terms of the Renova Transaction in order to satisfy the SBA’s interpretation of the regulations. The Company expects to continue discussions with Renova regarding a modified transaction that would satisfy the SBA’s interpretation of the applicable regulations.  However, no assurance can be given that the Company and Renova will be able to reach agreement on or complete an alternative transaction or what the terms of any such transaction would be. In the event the Company is unable to
reach an agreement on or complete an alternative transaction with Renova, it may terminate the Purchase Agreement and seek alternative sources of financings. There is no assurance that any such alternative sources of financing would be available or what the terms of any such transaction would be.




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Recently Issued Accounting Standards




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







ITEM 3.     QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK


The Company’s business activities contain elements of risk. The Company considers the principal types of risk to be fluctuations in interest rates and portfolio valuations.  The Company considers the management of risk essential to conducting its businesses.  Accordingly, the Company’s risk management systems and procedures are designed to identify and analyze the Company’s risks, to set appropriate policies and limits and to continually monitor these risks and limits by means of reliable administrative and information systems and other policies and programs.




The Company values its investment portfolio at fair value as determined in good faith by the Company’s Board of Directors in accordance with the Company’s valuation policy.  Unlike certain lending institutions, the Company is not permitted to establish reserves for loan losses.  Instead, the Company must value each individual investment and portfolio loan on a quarterly basis.  The Company records unrealized depreciation on investments and loans when it believes that an asset has been impaired and full collection is unlikely.  Without a readily ascertainable market value, the estimated value of the Company’s portfolio of investments may differ significantly
from the values that would be placed on the investment portfolio if there existed a ready market for the investments.  The Company adjusts the valuation of the portfolio quarterly to reflect the Board of Directors’ estimate of the current fair value of each component of the portfolio.  Any changes in estimated fair value are recorded in the Company’s statement of operations as net unrealized appreciation or depreciation on investments.




In addition, the illiquidity of our investment portfolio may adversely affect our ability to dispose of investments at times when it may be advantageous for us to liquidate such investments.  Also, if we were required to liquidate some or all of the investments in the portfolio, the proceeds of such liquidation might be significantly less than the current value of such investments.  Because we borrow money to make loans and investments, our net operating income is dependent upon the difference between the rate at which we borrow funds and the rate at which we loan and invest these funds.  As a result, there can be no assurance that a significant change in market interest rates
will not have a material adverse effect on our interest income.  As interest rates rise, our interest costs increase, decreasing the net interest rate spread we receive and thereby adversely affect our profitability. Although we intend to continue to manage our interest rate risk through asset and liability management, including the use of interest rate swaps, general rises in interest rates will tend to reduce our interest rate spread in the short term.




Assuming that the assets and liabilities were to remain constant and no actions were taken to alter the existing interest rate sensitivity, based on the balances at September 30, 2011, a hypothetical immediate 1% increase in interest rates would have resulted in an additional net increase in net assets from operations of $36,377 at September 30, 2011. This is based on a 1% increase in the Company’s loans receivable at variable interest rate terms. There is no offset to this because, at September 30, 2011, the Company had no outstanding variable rate loans payable. This hypothetical does not take into account interest rate floors or caps on the Company’s loan receivable
portfolio.  No assurances can be given however, that actual results would not differ materially from the potential outcome simulated by these estimates.




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ITEM 4.  CONTROLS AND PROCEDURES




Disclosure Controls and Procedures




Our management is responsible for establishing and maintaining adequate disclosure controls and procedures (as defined in Rules 13a-15( e ) and 15d-15( e) under the Exchange Act). Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, conducted an evaluation of the effectiveness of our disclosure controls and procedures.  Based on such evaluation, our management, including our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of September 30, 2011.




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




Internal Control over Financial Reporting




There have been no changes in our internal control over financial reporting during the three months ended  September 30, 2011 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.




IMPORTANT FACTORS RELATING TO FORWARD-LOOKING STATEMENTS




Cautionary Note Regarding Forward-Looking Statements




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




·


our future operating results;


·


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


·


the impact of investments that we expect to make;


·


our informal relationships with third parties;


·


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


·


the ability of our portfolio companies to achieve their objectives;


·


our expected financings and investments;


·


our regulatory structure and tax treatment;


·


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


·


the adequacy of our cash resources and working capital.




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





30


PART II.  OTHER INFORMATION




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




Item 1. Legal Proceedings




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




Item 1A. Risk Factors





Part I, Item 1A — “Risk Factors,” of our Annual Report on Form 10-K for the year ended June 30, 2011 (the “2011 Annual Report”), describes important factors that could materially affect our business, financial condition and/or future results and cause our operating results to differ materially from those indicated, projected or implied by forward-looking statements made in this Quarterly Report or presented elsewhere by management from time to time.  The risks described in our Annual Report on Form 10-K are not the only risks facing our Company; additional risks and
uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition and/or operating results and cause our operating results to differ materially from those indicated, projected or implied by forward-looking statements made in this Quarterly Report or presented elsewhere by management from time to time.





There were no material changes during the three months ended September 30, 2011 to the risk factors set for in the 2011 Annual Report, except for the addition of the following risk:





We are not in compliance with Nasdaq Capital Market rules regarding the minimum shareholders’ equity, minimum bid and minimum market value of publicly held shares requirements and are at risk of being delisted from the Nasdaq Capital Market.
 
 On September 20, 2011, we received a letter (the “September Nasdaq Notice”) from The Nasdaq Stock Market (“Nasdaq”) notifying us that, because the closing bid price for our common stock has been below $1.00 per share for the 30 consecutive business days preceding the September Nasdaq Notice, we no longer comply with the continued listing requirements under Nasdaq Marketplace Rule 5550(a)(2).  Nasdaq Marketplace Rule 5550(a)(2) requires securities listed on the Nasdaq Capital Market to maintain a minimum bid price of $1.00 per share (the “Minimum Bid Requirement”).  On October 3, 2011, we received a letter (the “October
Nasdaq Notice”) from Nasdaq notifying us that we do not satisfy the minimum stockholders’ equity requirement (or alternative standards) for continued listing under Nasdaq Marketplace Rule 5550(b), based on our stockholders’ equity as of June 30, 2011.  Nasdaq Marketplace Rule 5550(b)(1) requires listed companies to maintain a minimum of $2.5 million of stockholders' equity (the “Minimum Stockholders Equity Requirement”) or satisfy alternative standards of market value of listed securities or net income from continuing operations.  Stockholders’ equity as of September 30, 2011 was $716,188.   In addition, on November 8, 2011, we received a letter (the “November Nasdaq Notice”) from Nasdaq notifying us that we do not satisfy the minimum market value of publicly held shares (“MVPHS”) requirement
for continued listing under Nasdaq Marketplace Rule 5550(a)(5), based on our MVPHS during the period from September 26, 2011 through November 7, 2011.  Nasdaq Marketplace Rule 5550(a)(5) requires listed companies to maintain a minimum MVPHS of $1,000,000.   None of the September Nasdaq Notice, October Nasdaq Notice or the November Nasdaq Notice will immediately result in the delisting of our common stock.  Applicable Nasdaq rules provide for grace periods during which we may regain compliance with the listing standards noted above (see Note 11 to the consolidated financial statements).    No assurance can be given, however, that we will be able to regain compliance during such grace periods.
 
 If our common stock is delisted from the Nasdaq Capital Market, our common stock may be traded over-the-counter on the OTC Bulletin Board or in the "pink sheets."   These alternative markets, however, are generally considered to be less efficient than, and not as broad as, the Nasdaq Capital Market.   Accordingly, delisting of our common stock from the Nasdaq Capital Market could significantly negatively affect the value and liquidity of our common stock. In addition, the delisting of our common stock could adversely affect our ability to raise capital on terms acceptable to us or at all.   In addition, delisting of our common stock may preclude
us from using exemptions from certain state and federal securities regulations, including the SEC’s “penny stock” rules.


31


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









Item 3. Default Upon Senior Securities




None




Item 4. Removed and Reserved




Item 5. Other Information




None.




Item 6. Exhibits




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




Exhibit Index


(a )




Exhibits




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




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




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




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




(All other items of Part II are inapplicable)


32


AMERITRANS CAPITAL CORPORATION




SIGNATURES




Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.




AMERITRANS CAPITAL CORPORATION




Dated: November 14, 2011




By: /s/ Michael Feinsod


Michael Feinsod


Chief Executive Officer and President