You should read the following discussion in conjunction with the financial statements and notes to financial statements. The results described below are not necessarily indicative of the results to be expected in any future period. Certain statements in this discussion and analysis, including statements regarding our strategy, financial performance, and revenue sources, are forward-looking statements based on current expectations and entail various risks and uncertainties that could cause actual results to differ materially from those expressed in the forward-looking statements, including those described in "Risk Factors" and elsewhere in this Annual Report.

CRITICAL ACCOUNTING POLICIES

Investment Valuations

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

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

Equity investments (common stock and stock warrants, including certain controlled subsidiary portfolio investments) and investment securities are recorded at fair value, represented as cost, plus or minus unrealized appreciation or depreciation. Investments for which market quotations are readily available are valued at such quoted amounts. 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 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, including health evaluations.

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

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 unrealized depreciation on loans receivable. Subsequent reductions in estimated net realizable value are charged to operations as losses on assets acquired in satisfaction of loans.

Use of Estimates

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

Income Recognition

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

Contingencies

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

RESULTS OF OPERATIONS FOR THE YEARS ENDED JUNE 30, 2009 AND 2008

Total Investment Income

The Company's investment income for the year ended June 30, 2009, decreased $2,915,953 or 47% to $3,344,324 as compared with the prior year ended June 30, 2008. The decrease is primarily due to a decrease in interest income of $2,814,370. The decrease in interest income is primarily due to the reduction of income producing assets under management as a result of the sale of medallion loans as compared to the year ended June 30, 2008, and a reduction in interest rates received on variable rate loans.

Medallion loans outstanding decreased by $29,513,642, or 99%, to $356,700 as compared with the prior year ended June 30, 2008. The interest earned on medallion loans decreased in 2009 as compared with the prior year by approximately $1,726,000.

Commercial Loans outstanding decreased by $2,539,953, or 18%, to $11,293,070, as compared with the prior year ended June 30, 2008. Interest income decreased approximately $1,500,000 primarily due to a decrease in commercial loans outstanding and further due to a decrease in LIBOR. Offsetting this decrease in Commercial Loans outstanding was stronger performance in the remaining portfolio, interest rate floors and collection of past due interest.

Corporate Loans outstanding increased by $685,285, or 6%, to $12,193,255, as compared with the prior year ended June 30, 2008. The interest income earned on Corporate Loans increased in 2009 by approximately $350,000, primarily due to increased loan funding at the end of June 30, 2008.

Life Settlements Contracts outstanding decreased by $1,078,377, or 38% to $1,764,081, as compared with the prior year ended June 30, 2008. The Company adjusted the fair value of these policies based on marketability, due to market conditions and other factors more specifically detailed below.

Operating Expenses

Interest expense for the year ended June 30, 2009 decreased $1,267,430 or 54% to $1,090,074 when compared to the year ended June 30, 2008. Interest expense decreased due to a net decrease in average bank borrowings over the course of the year ended June 30, 2009. At June 30, 2009, overall bank borrowings had a net decrease of $27,725,697, or 99% as compared to the prior year ended June 30, 2008, due to the use of proceeds from the sale of substantially all of the medallion loan portfolio to pay down existing bank debt.

Salaries and employee benefits increased $344,734 or 18% when compared with the prior year. This increase reflects the costs associated with a one time payment made to an officer during the year ended June 30, 2009 pursuant to the restructuring of his employment agreement, as well as increases due under various other employment agreements.

Occupancy costs increased $12,000 or 4%, when compared with the year ended June 30, 2008 due to rent increases on the Company's NYC office, as well as increased general overhead expenses.

Professional fees increased $1,022,958 or 130% when compared with the prior year. The increase was due to increases of accounting fees of $165,038 for an out sourced controller, consulting fees related to compliance with Sarbanes Oxley of $161,170, audit and audit related fees of $103,212, consulting fees of $142,758 related to portfolio investments, non related party legal fees of $465,247 largely due to the write off of certain prepaid offering expenses and prepaid fee expenses totaling $247,130 as well as additional legal fees in connection with life settlement related matters of $83,708. These increases were partially offset by decreases in related party legal fees of $28,973 and decreases in legal fees related to Chicago medallion loans of $69,559.

Miscellaneous administrative expenses decreased $138,282 or 15% when compared with the prior year. This decrease in administrative expenses was due to the following reductions: permits of $6,000, bank audit fees of $4,000, commissions of $3,000, outside help of $50,000, recruitment fees of $29,000, service fees of $88,000, filing fees of $4,000, association dues of $11,000, application fees of $25,000, messenger service of $6,000, investor relation fees of $3,000, and custodial fees of $17,000. These decreases were partially offset by increases in foreclosure expenses of $14,000., Market data fees of $22,000, advertising and promotion fees of $8,200, NASDAQ fees of $14,000, website and computer fees of $19,000, and miscellaneous fees of $31,400.

Net Realized Loss on Investments

The components of realized gains and losses were as follows: A loss of approximately ($605,000) related to the sale of the Company's interest in a sanitary ware distributor, a loss of approximately ($340,000) associated with the sale of the Company's taxicab medallion portfolio, the loss of approximately ($94,000) associated with the foreclosure and sale of a commercial loan, the loss of approximately ($70,000) associated with the foreclosure and sale of the collateral associated with a commercial loan, and other miscellaneous losses of approximately ($175,000). Offsetting these amounts was approximately $45,000 associated with the reversal of certain reserves for assets acquired which were subsequently sold.

Net Unrealized Depreciation on Investments

During the year ended June 30, 2009, the Company's investments had a net unrealized depreciation of approximately ($1,283,620). The net unrealized depreciation for the year ended June 30, 2009 is primarily due to decreases in the fair value of certain investments in our portfolio.

An unrealized write-down of $1,095,408 in the Company's life settlement portfolio was the largest component of unrealized depreciation. Other significant factors were a write-down of the fair value of a loan receivable of $250,000 to reflect the Company's estimate of its recoverable value in the collateral underlying the loan, a $195,000 decrease in the fair value of a loan to reflect the actual recovery achieved on that loan following the resale of the property subsequent to June 30, 2009. Also contributing to unrealized depreciation was a $95,000 reduction in the value of the Company's LLC interest in a condominium construction project, a $62,000 net reduction in the fair value of the various real estate limited partnership investments. Offsetting these items was approximately $410,000 of investment value that was reclassified as "realized losses".

Net Increase (Decrease) in Net Assets from Operations

Net decrease in net assets resulting from operations for the year ended June 30, 2009 was ($5,462,453) as compared to a net decrease in net assets resulting from operations for the year ended June 30, 2008 of ($537,571).

RESULTS OF OPERATIONS FOR THE YEARS ENDED JUNE 30, 2008 AND 2007

Total Investment Income

The Company's investment income for the year ended June 30, 2008, increased $383,607 or 6.5% to $6,260,277 as compared with the prior year ended June 30, 2007. The increase is primarily due to increases in interest income of $701,454 which was offset by a decrease of other fees of $241,464 and a decrease in leasing income of $76,383. Elk conducted no leasing activities in the year ended June 30, 2008. The increase in interest income is primarily due to a re-allocation of assets in the Company's investment portfolio as compared to the year ended June 30, 2007.

Medallion loans outstanding decreased by $4,990,832, or 14%, to $29,870,342 as compared with the prior year ended June 30, 2008. The interest rate earned on medallion loans decreased in 2008 as compared with the prior year, leading to a decrease in income of $486,509.

Commercial Loans outstanding decreased by $4,938,313, or 26% to $ 13,833,085, as compared with the prior year ended June 30, 2008. Offsetting this decrease in Commercial Loans outstanding was stronger performance in the remaining portfolio, interest rate floors and collection of past due interest.

Corporate Loans outstanding increased by $7,507,970, or 187%, to $11,507,970, as compared with the prior year ended June 30, 2008. The interest rate earned on Corporate Loans decreased in 2008, as compared with the prior year, primarily due to decreases in LIBOR. This was offset by higher rates earned on loans originated in this fiscal year and further offset by increases in rates on existing loans due to covenant resets.

Life Settlements Contracts outstanding increased by $932,381, or 49% to $2,842,458, as compared with the prior year ended June 30, 2008. The interest rate on these contracts was constant over the two periods, resulting in an increase in interest income as compared with the prior year ended June 30, 2008.

Operating Expenses

Interest expense for the year ended June 30, 2008 increased $239,829 or 11% to $2,357,504 when compared to the year ended June 30, 2007. Interest expense increased due to a net increase in average bank borrowings over the course of the year ended June 30, 2008. At June 30, 2008, overall bank borrowings had a net decrease of $1,236,803 as compared to the prior year ended June 30, 2007.
Offsetting the increase in average bank borrowings was a decrease in the average interest rate the Company paid on its lines of credit.

Salaries and employee benefits increased $99,061 or 6% when compared with the prior year. This increase reflects the costs associated with the hiring of a new employee during the year ended June 30, 2008, as well as increases due under various employment agreements.

Occupancy costs increased $36,307 or 16%, when compared with the year ended June 30, 2007 due to increased office space utilized for an executive hired in the year ended June 30, 2007, as well as increased general overhead expenses.

Professional fees decreased $39,002 or 5% when compared with the prior year.
This decrease is due primarily to a decrease in accounting fees, which was partially offset by increases in internal control consulting fees.
Miscellaneous administrative expenses decreased $9,549 or 1% when compared with the prior year. Loss and impairments on assets acquired decreased by $54,339 due to no change in value of remaining assets acquired held during the year ended June 30, 2008.

Net Increase (Decrease) in Net Assets from Operations

Net decrease in net assets resulting from operations for the year ended June 30, 2008 was ($537,571) as compared to a net increase in net assets resulting from operations for the year ended June 30, 2007 of $199,072.

Net Unrealized Depreciation on Investments

This decrease was due to a decrease in the fair value of $742,277 as compared to June 30, 2007. This loss was offset by a smaller net investment loss of $111,000 and $106,000 reduction in realized gain as compared to June 30, 2007.

Net Realized Gain on Investments

The Net Realized Gain on Investments of $205,000 was a reduction of $106,000 as compared to June 30, 2007. The net realized gains were comprised of a gain on the sale of an equity investment in a medallion loan for a gain of approximately $555,000, a gain on a sale of a real estate investment of approximately $25,000, offset by a loss on a real estate equity investment of $335,000 and a realized loss on interest of $40,000.

BALANCE SHEET

Total assets decreased by $33,695,312 as of June 30, 2009 when compared to total assets as of June 30, 2008. This decrease was primarily due to a decrease in the investments at fair value of $33,188,819, which is primarily attributable to the sale of medallion loans, and to a lesser extent, payoffs and settlements in excess of new loans, and declines in fair value of certain investments during the fiscal year. Prepaid expenses decreased $586,794, primarily due to the Company expensing costs related to prepaid stock offering costs and costs associated with the pending sale agreement of the Company's medallion loans receivable. The sale of substantially all of the medallion loans during the fiscal year resulted in proceeds of approximately $29,000,000. In addition, Elk's proceeds from banks for the fiscal year were $472,000 versus approximately $28,000,000 in repayments made on notes payable from banks. This resulted in net decrease of $27,725,697 in short-term bank borrowings for the fiscal year ended June 30, 2009, which was funded from the proceeds of the medallion loan portfolio sale.

ASSET / LIABILITY MANAGEMENT

Interest Rate Sensitivity

Ameritrans, like other financial institutions, is subject to interest rate risk to the extent its interest-earning assets rise or fall at a different rate over time in comparison to its interest-bearing liabilities (consisting primarily of its credit facilities with banks and subordinated SBA debentures, which currently have fixed rates of interest).

A relative measure of interest rate risk can be derived from Ameritrans' interest rate sensitivity gap, i.e. the difference between interest-earning assets and interest-bearing liabilities, which mature and/or reprice within specified intervals of time. The gap is considered to be positive when repriceable assets exceed repriceable liabilities and negative when repriceable liabilities exceed repriceable assets. A relative measure of interest rate sensitivity is provided by the cumulative difference between interest sensitive assets and interest sensitive liabilities for a given time interval expressed as a percentage of total assets.

Ameritrans' interest rate sensitive assets were $25,607,168 and interest rate sensitive liabilities were $370,000 at June 30, 2009. Having interest-bearing liabilities that mature or reprice more frequently on average than assets may be beneficial in times of declining interest rates, although such an asset/liability structure may result in declining net earnings during periods of rising interest rates. Abrupt increases in market rates of interest may have an adverse impact on our earnings until we are able to originate new loans at the higher prevailing interest rates. Conversely, having interest-earning assets that mature or reprice more frequently on the average than liabilities may be beneficial in times of rising interest rates, although this asset/liability structure may result in declining net earnings during periods of falling interest rates. This mismatch between maturities and interest rate sensitivities of our interest-earning assets and interest-bearing liabilities results in interest rate risk.

The effect of changes in interest rates is mitigated by regular turnover of the portfolio. Based on past experience, Ameritrans anticipates that approximately 20% of the portfolio will mature or be prepaid each year. Ameritrans believes that the average life of its loan portfolio varies to some extent as a function of changes in interest rates. Borrowers are more likely to exercise prepayment rights in a decreasing interest rate environment because the interest rate payable on the borrower's loan is high relative to prevailing interest rates. Conversely, borrowers are less likely to prepay in a rising interest rate environment.

Interest Rate Swap Agreements

Ameritrans manages the exposure of its portfolio to increases in market interest rates by entering into interest rate swap agreements to hedge a portion of its variable-rate debt against increases in interest rates and by incurring fixed-rate debt consisting primarily of subordinated SBA debentures.

On October 14, 2005, Elk entered into two (2) interest rate swap transactions for $5,000,000 each, with expiration dates of October 15, 2007 and October 14, 2008, respectively. As a portion of the Company's loan portfolio is at "fixed" rates, Elk entered into these swap transactions to hedge against an upward movement in interest rates relating to outstanding bank debt. The swaps expired on October 15, 2007 and October 15, 2008, respectively. The swap transaction that expired October 14, 2008, provided for a fixed rate of 6.23%. As of June 30, 2009, the Company was not a party to any interest rate swaps.

Investment Considerations

In the fiscal year ended June 30, 2009, the Company's investment income was negatively affected by steady decreases in LIBOR due to the federal reserve's decrease in interest rates and the general dislocation of credit markets. This decrease had a direct result on the actual rate of interest the Company received on its outstanding Corporate loans, and to a lesser extent, certain Commercial Loans. The dollar amount of the Company's adjustable rate loans receivable at June 30, 2009 was approximately $19,355,000 million with the remainder being fixed rate loans. Because we borrow money to finance the origination of loans, our income is dependent upon the differences between the rate at which we borrow funds and the rate at which we lend funds. While many of the loans in our portfolio bear interest at fixed-rates or adjustable-rates, we may, in the future, finance a substantial portion of such loans by incurring indebtedness with floating interest rates. As short-term 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. However, a decrease in prevailing interest rates may lead to more loan prepayments, which could adversely affect our business over time. A borrower is likely to exercise prepayment rights at a time when the interest rate payable on the borrower's loan is high relative to prevailing interest rates. In a lower interest rate environment, we will have difficulty re-lending prepaid funds at comparable rates, which may reduce the net interest spread we receive.

Lending to small businesses involves a high degree of business and financial risk, which can result in substantial losses and should be considered speculative. Our borrower base consists primarily of small business owners that have limited resources and that are generally unable to obtain financing from banks or other primary sources. There is generally no publicly available information about these small business owners, and we must rely on the diligence of our employees and agents to obtain information in connection with our credit decisions. In addition, these small businesses often do not have audited financial statements. Some smaller businesses have narrower product lines and market shares than their competition. Therefore, they may be more vulnerable to customer preferences, market conditions, or economic downturns, which may adversely affect the return on, or the recovery of, our investment in these businesses.

Liquidity and Capital Resources

The Company has funded its operations through private and public placements of its securities, bank financing, the issuance to the SBA of its subordinated debentures and internally generated funds. The Company entered into a Loan Purchase Agreement dated July 16, 2008 with Medallion Financial Corp. and Medallion Bank pursuant to which the Company sold substantially all of its taxicab medallion loans. The Company used the proceeds of sale to pay down its bank lines. Because the Company's banks notified the Company that the Company's then existing loan agreements permit business loans secured by real estate or equipment but not investments in Corporate Loans, the Company is seeking other sources of financing for its Corporate Loan Strategy and renegotiate the terms of its bank lines of credit for its business loans secured by real estate or equipment. The Company is actively pursuing alternative sources of funding.
At June 30, 2009, 2.9% or $370,000 of the Company's indebtedness was represented by indebtedness to its banks with interest rates of approximately 4.37%, and 97.1% or $12,000,000 by the debentures issued to the SBA with fixed rates of interest plus user fees which results in rates ranging from 4.99% to 5.54%. Elk currently may borrow additional amounts from banks subject to the limitations imposed by its borrowing base agreement with its banks and the SBA, the statutory and regulatory limitations imposed by the SBA and the availability of obtaining future bank credit lines.

Contractual obligations expire or mature at various dates through March 1, 2014.
The following table shows all contractual obligations at June 30, 2009.

                                               Payments due by period
                  Less than                                                      More than 5
                   1 year   1 - 2 years 2 - 3 years   3 - 4 years    4 - 5 years    years       Total
Floating rate             $
borrowings         370,000         $ -         $ -      $         -         $ -         $ -   $   370,000
Fixed rate
borrowings               -           -           -      5,050,000     6,950,000            -  12,000,000
Operating lease
obligations
(including
overhead)          230,422     233,735      235,761        237,868      152,577            -   1,090,363
                          $

Our sources of liquidity are credit lines with banks, long-term SBA debentures that are issued to or guaranteed by the SBA, loan amortization and prepayment. As a RIC, we distribute at least 90% of our investment company taxable income. Consequently, we primarily rely upon external sources of funds to finance growth.

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

Like Elk, Ameritrans will distribute at least 90% of its investment company taxable income and, accordingly, we will continue to rely upon external sources of funds to finance growth. In order to provide the funds necessary for our expansion strategy, we expect to raise additional capital and to incur, from time to time, additional bank indebtedness and (if deemed necessary by management) to obtain SBA loans. There can be no assurances that such additional financing will be available on acceptable terms.

The Company will require additional sources of capital and new bank lines of credit and its cash flow from operations to fund its business plan. As a result, the Company continues to explore additional options, which may increase available funds for its growth and expansion of this strategy.

In December 2008, Elk applied for a commitment from SBA for $15 million in additional guaranteed debentures. In June 2009, management met with representatives from SBA to further the processing of this application. As of the date of this filing, SBA has not made a determination regarding Elk's debenture application.

. . .