<PAGE>
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(Mark One)
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended SEPTEMBER 30, 1999
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
-------------- ----------
Commission File No. 2-8381-NY
ARISTA INVESTORS CORP.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 13-2957684
-----------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
116 JOHN STREET, NEW YORK, N.Y. 10038
- ---------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (212) 964-2150
Indicate by check mark whether the registrant has filed all reports required to
be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
--- ----
The aggregate number of Registrant's outstanding shares on November 12, 1999 was
2,570,100 shares of Class A Common Stock, $0.01 par value (excluding 10,000
shares of treasury stock), $0.01 par value.
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<PAGE>
ARISTA INVESTORS CORP.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION Page
<S> <C>
Item 1. Financial Statements:
Consolidated Balance sheets at September
30, 1999 (Unaudited) and December 31, 1998 3
Consolidated Statements of Income and
Comprehensive Income (Unaudited) for
the three months and nine months ended
September 30, 1999 and 1998 5
Consolidated Statements of Changes in Stock-
holders' Equity for the nine months ended
September 30, 1999 (Unaudited) and the year
ended December 31, 1998 6
Consolidated Statements of Cash Flows
(Unaudited) for the nine months ended
September 30, 1999 and 1998 7
Notes to Financial Statements 8
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of
Operations 13
PART II. OTHER INFORMATION
Item 1 through Item 6 16
Signatures 18
</TABLE>
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<PAGE>
ARISTA INVESTORS CORP.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
September 30, December 31,
1999 1998
---- ----
(unaudited)
<S> <C> <C>
ASSETS
Investments:
Held-to-maturity securities:
Bonds and long-term U. S. Treasury
obligations at amortized cost (market
value $175,273 at September 30, 1999 and
$2,676,995 at December 31, 1998) $ 175,210 $ 2,618,068
Available-for-sale securities:
Redeemable preferred stocks, at market value
(amortized cost of $31,524 at December 31, 1998) 0 3,552
Trading securities, at market value (cost of $279 at
December 31, 1998) 0 87
----------- -----------
Total investments 175,210 2,621,707
Cash and equivalents 452,751 6,330,909
Receivables from related parties 599,245 557,902
Receivables under third party administration contracts 1,682,257 7,802
Furniture and equipment, at cost, net of
accumulated depreciation of $860,773 at September 30,
1999 and $831,754 at December 31, 1998 51,550 75,707
Prepaid and refundable income taxes 224,242 0
Deferred income taxes, net 0 759,310
Prepaid expenses 116,845 140,687
Other assets 136,369 148,987
----------- -----------
Total assets $ 3,438,469 $10,643,011
----------- -----------
----------- -----------
</TABLE>
(Continued)
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<PAGE>
ARISTA INVESTORS CORP.
CONSOLIDATED BALANCE SHEETS
(Continued)
<TABLE>
<CAPTION>
September 30, December 31,
1999 1998
---- ----
(unaudited)
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Commissions payable $ 0 $ 43,841
Amounts payable to related parties 1,030,739 1,932,141
Accounts payable and accrued expenses 1,329,062 1,151,274
Income taxes payable 0 580,319
----------- ------------
Total liabilities 2,359,801 3,707,575
----------- ------------
Commitments and contingencies (Note 3)
Stockholders' equity:
Class A common stock, $.01 par value;
9,950,000 shares authorized; 2,580,100
shares issued 25,801 25,801
Class B convertible common stock, $.01 par
value; 50,000 shares authorized, 47,400
shares issued 474 474
Additional paid-in capital 258,286 5,989,609
Retained earnings 1,465,259 1,468,780
Accumulated comprehensive income (loss):
Net unrealized investment loss (Note 5) 0 (22,488)
------------ ------------
1,749,820 7,462,176
Secured promissory note from shareholder 0 (500,000)
Cost of 10,000 shares Class A and 47,400 shares of
Class B common stocks held in treasury (671,152) (26,740)
------------ ------------
Total stockholders' equity 1,078,668 6,935,436
------------ ------------
Total liabilities and stockholders' equity $ 3,438,469 10,643,011
------------ ------------
------------ ------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
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<PAGE>
ARISTA INVESTORS CORP.
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
(Unaudited)
<TABLE>
<CAPTION>
Three months ended Nine months ended
September 30, September 30,
----------------------------- ------------------------------
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenue:
Third-party administrative services $ 891,626 $ 837,198 $ 2,523,390 $ 1,035,988
Net realized investment gains or (losses) 0 0 (10,602) 0
Net unrealized investment gains 0 (14) 192 346
Net investment income 6,671 139,119 141,793 403,626
Other income (6,066) 4,609 2,090 21,323
----------- ----------- ----------- -----------
Total revenue 892,231 980,912 2,656,863 1,461,283
Expenses:
General and administrative expenses 884,526 1,041,890 2,734,781 1,041,890
----------- ----------- ----------- -----------
Income (loss) from continuing operations before
income tax provision (benefit) 7,705 (60,978) (77,918) 419,393
Income taxes:
Provision for income taxes (benefit) 6,888 (23,781) (74,397) 163,563
----------- ----------- ----------- -----------
Income (loss) from continuing operations 817 (37,197) (3,521) 255,830
Discontinued operations: (Note 7)
Income (loss) from operations of disposed segment
(net of income taxes) 0 166,387 0 (8,887)
Gain on disposal of discontinued operations, net of
tax of $530,719 0 838,171 0 838,171
----------- ----------- ----------- -----------
Income (loss) from discontinued operations 0 1,004,558 0 829,284
----------- ----------- ----------- -----------
Net income 817 967,361 (3,521) 1,085,114
----------- ----------- ----------- -----------
Other comprehensive income (loss):
Unrealized gain (loss) on securities during period 0 (3,054) 0 (3,350)
Reclassification of losses included in revenue 0 0 29,822 0
Income tax effect 0 1,039 (7,334) 1,139
----------- ----------- ----------- -----------
Other comprehensive income (loss) net 0 (2,015) 22,488 (2,211)
----------- ----------- ----------- -----------
Total comprehensive income 817 965,346 18,967 1,082,903
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Net income (loss) per common share:
Basic and diluted
Continuing operations $ 0.00 ($ 0.01) $ 0.00 $ 0.10
Discontinued operations 0.00 0.38 0.00 0.31
----------- ----------- ----------- -----------
Net income $ 0.00 $ 0.37 $ 0.00 $ 0.41
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Weighted average number of common shares:
Basic and diluted 2,570,100 2,617,500 2,570,100 2,617,500
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
</TABLE>
The accompanying notes are an integral part of these financial
statements.
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<PAGE>
ARISTA INVESTORS CORP.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
Nine months ended September 30, 1999 (unaudited) and year ended
December 31, 1998
<TABLE>
<CAPTION>
Common Stock
------------------------------------------- Paid-in
Class A Convertible Class B capital
-------------------- ------------------- attributed
Number Par Number Par Additional to
of value of value paid-in detachable
Shares $.01 Shares $.01 capital warrants
---------- --------- -------- ------- ------------- -----------
<S> <C> <C> <C> <C> <C> <C>
Balance - January 1, 1998 2,580,100 $ 25,801 47,400 $ 474 $ 5,839,609 $ 150,000
Net income -- -- -- -- -- --
Unrealized securities loss, net -- -- -- -- -- --
Expiration of option -- -- -- -- 150,000 (150,000)
---------- --------- -------- ------- ------------- -----------
Balance - December 31, 1998 2,580,100 $ 25,801 47,400 $ 474 $ 5,989,609 $ 0
Net income (loss) (unaudited) -- -- -- -- -- --
Acquisition of Convertible Class B Common Stock (unaudited) -- -- -- -- -- --
Cancellation (unaudited) -- -- -- -- -- --
Partial liquidating distribution (unaudited) -- -- -- -- (5,731,323) --
Unrealized securities loss, net (unaudited) -- -- -- -- -- --
---------- --------- -------- ------- ------------- -----------
Balance - September 30, 1999 (unaudited) 2,580,100 $ 25,801 47,400 $ 474 $ 258,286 $ 0
---------- --------- -------- ------- ------------- -----------
---------- --------- -------- ------- ------------- -----------
<CAPTION>
Accumulated Secured
other promissory
Retained comprehensive note Treasury
earnings income receivable Shares Total
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Balance - January 1, 1998 $ 1,035,985 ($ 18,727) ($ 500,000) ($ 26,740) $ 6,506,402
Net income 432,795 -- -- -- 432,795
Unrealized securities loss, net -- (3,761) -- -- (3,761)
Expiration of option -- -- -- -- --
----------- ----------- ----------- ----------- -----------
Balance - December 31, 1998 1,468,780 (22,488) (500,000) (26,740) 6,935,436
Net income (loss) (unaudited) (3,521) -- -- -- (3,521)
Acquisition of Convertible Class B Common Stock (unaudited) -- -- -- (644,412) (644,412)
Cancellation (unaudited) -- -- 500,000 -- 500,000
Partial liquidating distribution (unaudited) -- -- -- -- (5,731,323)
Unrealized securities loss, net (unaudited) -- 22,488 -- -- 22,488
----------- ----------- ----------- ----------- -----------
Balance - September 30, 1999 (unaudited) $ 1,465,259 $ 0 $ 0 ($ 671,152) $ 1,078,668
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
</TABLE>
The accompanying notes are an integral part of these
financial statements.
-6-
<PAGE>
ARISTA INVESTORS CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Nine months ended September 30, 1999 and 1998
(Unaudited)
<TABLE>
<CAPTION>
1999 1998
----------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ (3,521) $ 1,085,114
Adjustments to reconcile net income to net cash provided
by (used in) operating activities:
Depreciation 35,910 35,910
Discount on surplus note 0 11,250
Amortization of deferred acquisition costs 0 484,398
Loss on sale of investments 10,602 0
Deferred income taxes/(benefit) 761,246 (1,257,257)
(Increase) decrease in operating assets:
Premiums receivable 0 2,978,600
Receivables from officers and directors (41,343) (119,212)
Prepaid and refundable income taxes (224,242) 710,050
Receivables from third party administration (1,674,455) (748,120)
Receivables from reinsurer 0 (1,461,360)
Prepaid expenses 23,842 0
Other assets 12,618 292,073
Increase (decrease) in operating liabilities:
Amounts payable to related parties (901,402) 1,883,193
Accounts payable and accrued expenses 177,788 356,185
Payable to reinsurer 0 (158,721)
Net claims liabilities 0 (3,391,950)
Net unearned premiums 0 (1,464,800)
Commissions and fees payable (43,841) (503,795)
Income taxes payable, net (580,319) 1,248,944
----------- -----------
Net cash provided by (used in) operating activities (2,447,117) (19,498)
----------- -----------
Cash flows from investing activities:
Capital expenditures (11,753) (9,999)
Proceeds from sale of investments 2,458,383 8,942
Purchases of investments 0 0
----------- -----------
Net cash provided by (used in) investing activities 2,446,630 (1,057)
----------- -----------
Cash flows from financing activities:
Exercise option to acquire Class B common stock (146,348) 0
Partial liquidating distribution (5,731,323) 0
----------- -----------
Net cash provided by (used in) financing activities (5,877,671) 0
----------- -----------
Increase (decrease) in cash and equivalents (5,878,158) (20,555)
Cash and equivalents:
Beginning of period 6,330,909 8,296,943
----------- -----------
End of period $ 452,751 $ 8,276,388
----------- -----------
----------- -----------
Supplemental cash flow disclosure:
Cash paid during the period for income taxes $ 67,772 $ 299,195
----------- -----------
----------- -----------
Supplemental investing and financing disclosure:
Proceeds from sale of insurance business $ 0 $(3,421,486)
Premiums receivable sold 0 (3,249,000)
Net claim liabilities 0 2,400,000
Net unearned premiums 0 1,328,491
Payable to reinsurer 0 1,480,635
----------- -----------
$ 0 $(1,461,360)
----------- -----------
----------- -----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
-7-
<PAGE>
ARISTA INVESTORS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 1999 and 1998
(Unaudited)
NOTE 1 - NATURE OF OPERATIONS
Arista Investors Corp. (the "Registrant") entered into an administrative service
agreement dated September 23, 1998 (the "TPA Agreement") with The Guardian Life
Insurance Company of America ("The Guardian"). The TPA Agreement was consummated
on November 12, 1998 and deemed effective as of July 1, 1998. As a third party
administrator under the TPA Agreement, the Registrant performs various services
relating to New York State statutory disability benefits insurance policies
("DBL") underwritten by The Guardian, including, but not limited to pricing of
risk, underwriting new and renewal business, investigation, and calculation and
payment of claims. In addition, the Registrant acts as a third party
administrator for the DBL book of business of the United States Life Insurance
Company in the City of New York and the temporary disability insurance book of
business of Hartford Life and Health Insurance Company. Arista Insurance
Company, a New York State insurance company and the Registrant's wholly owned
subsidiary ("Arista"), acted as the third party administrator for the three
books of business in prior periods.
NOTE 2 - BASIS OF PRESENTATION
The accompanying consolidated financial statements are prepared on the basis of
generally accepted accounting principles ("GAAP"). Certain information normally
included in annual financial statements prepared in accordance with GAAP has
been condensed or omitted pursuant to the rules and regulations of the
Securities and Exchange Commission. In the opinion of the management of the
Registrant, all adjustments (consisting of normal recurring accruals only) have
been reflected for a fair presentation of the unaudited financial position as of
September 30, 1999 and results of operations for the three-month and nine-month
periods ended September 30, 1999 and 1998. The operating results for the periods
are not necessarily indicative of the results to be expected for the entire
year.
-8-
<PAGE>
ARISTA INVESTORS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 1999 and 1998
(Unaudited)
(continued)
NOTE 3 - REINSURANCE
The Registrant and Arista, sometimes hereinafter individually or collectively
referred to as the "Company", entered into an Assumption Reinsurance Agreement,
dated September 23, 1998 (the "Treaty") with The Guardian. Pursuant to this
Treaty, all of Arista's liabilities for the New York State statutory disability
benefits insurance policies including super statutory and voluntary disability
benefits insurance, (collectively the "Insurance"), were ceded to The Guardian.
The cession of the Insurance to The Guardian, deemed effective July 1, 1998, was
consummated on November 12, 1998. Arista discontinued writing the Insurance
effective November 12, 1998.
From January 1, 1998 to June 30, 1998, Arista had a Quota Share Reinsurance
Treaty with The Guardian, pursuant to which Arista ceded by way of reinsurance,
a 50% participation in the Insurance, both for business in force as of January
1, 1998 and for business written or acquired after January 1, 1998.
A contingent liability would exist with respect to reinsurance ceded which would
become a liability to Arista in the event that the reinsurer is unable to meet
its proportionate share of the obligations assumed under the reinsurance
agreement.
NOTE 4 - TRANSACTIONS WITH RELATED PARTIES
At September 30, 1999 and December 31, 1998, Bernard Kooper, Chairman of the
Boards of Directors of the Company and Arista and a Director of The Collection
Group, Inc., beneficially owned 20.4% of the outstanding shares of Class A
common stock, par value $.01 per share (the "Class A Common Stock"). At December
31, 1998 Mr. Kooper also owned 100% of the outstanding shares of Class B common
stock, par value $.01 per share (the "Class B Common Stock"). Mr. Kooper is also
the owner of Bernard Kooper Life Agency, Inc. (the "Agency"), one of the general
agents marketing the Insurance. During the nine months ended September 30, 1999
-9-
<PAGE>
ARISTA INVESTORS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 1999 and 1998
(Unaudited)
(continued)
and 1998, the Agency received approximately $141,000 and $156,000, respectively,
in commissions based on the premiums collected on DBL serviced by the Company.
Of this amount, the Agency paid approximately $105,000 and $113,000,
respectively, during the nine months ended September 30, 1999 and 1998 to
brokers, which included certain members of the Board of Directors of the Company
and Arista. The amount paid to members of the Board of Directors of the Company
and Arista by the Agency was approximately $16,000 and $15,000 for the nine
months ended September 30, 1999 and 1998, respectively.
NOTE 5 - NEW ACCOUNTING STANDARDS
In June 1997, the FASB issued Statement of Financial Accounting Standards
No. 130 (SFAS No. 130) entitled "Reporting Comprehensive Income". This
pronouncement requires entities to make certain disclosures about all types
of income, expenses, gains and losses arising during the period in addition
to net income from operations. SFAS No.130 is effective for years beginning
after December 15,1997. SFAS No. 130 did not have a material effect on the
Company's financial position or results of operations for the nine-month
periods ended September 30, 1999 and September 30, 1998.
In June 1997, the FASB issued Statement of Financial Accounting Standards No.
131 (SFAS No. 131) entitled "Disclosure of Segment Information". This
pronouncement requires (1) the use of "management approach" as a basis for
segmentation, (2) expanded disclosure about company segments and (3) disclosure
of segment information in interim financial reporting. See Note 6.
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<PAGE>
ARISTA INVESTORS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 1999 and 1998
(Unaudited)
(continued)
NOTE 6 - SEGMENT INFORMATION
<TABLE>
<CAPTION>
Adminis-
Discontinued trative
Insurance Service
Segment Segment Total
------- ------- -----
<S> <C> <C> <C>
1999
Revenues from outside customers $ 0 $2,523,390 $ 2,523,390
Major customers $ 0 $ 0 $ 0
Profit or (loss) $ 0 $ (77,918) $ (77,918)
1998
Revenues from outside customers $9,792,264 $ 1,035,988 $10,828,252
Major customers $ 0 $ 0 $ 0
Profit or (loss) $ 829,284 $ 255,830 $ 1,085,114
</TABLE>
NOTE 7 - DISCONTINUED OPERATIONS
In November 1998, the Company completed the cession of the Insurance, previously
conducted by Arista, to The Guardian. The summary of operating results of the
discontinued operations at September 30, 1999 and 1998 is as follows:
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<PAGE>
ARISTA INVESTORS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 1999 and 1998
(unaudited)
(continued)
<TABLE>
<CAPTION>
Three months ended Nine months ended
September 30, September 30,
---------------------------- ----------------------------
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenue:
Gross premiums earned $ 0 $ 281,000 $ 0 $ 9,792,264
Ceded premiums earned 0 0 0 4,630,632
----------- ----------- ----------- -----------
Net premiums earned 0 281,000 0 5,161,632
----------- ----------- ----------- -----------
Expenses:
Underwriting:
Gross claims incurred 0 (141,424) 0 4,839,236
Ceded claims incurred 0 (128,166) 0 2,362,164
----------- ----------- ----------- -----------
Net claims incurred 0 (13,258) 0 2,477,072
----------- ----------- ----------- -----------
Gross commissions incurred 0 77,844 0 1,965,300
Ceded commissions incurred 0 56,351 0 1,538,787
----------- ----------- ----------- -----------
Net commissions incurred 0 21,493 0 426,513
----------- ----------- ----------- -----------
Total underwriting expenses 0 8,235 0 2,903,585
General and administrative expenses 0 0 0 2,272,616
----------- ----------- ----------- -----------
Total expenses 0 8,235 0 5,176,201
----------- ----------- ----------- -----------
Income (loss) before income tax provision (benefit) 0 272,765 0 (14,569)
Net income tax provision (benefit) 0 106,378 0 (5,682)
----------- ----------- ----------- -----------
Net income (loss) $ 0 $ 166,387 $ 0 ($ 8,887)
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
</TABLE>
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<PAGE>
ARISTA INVESTORS CORP
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction with the
Consolidated Financial Statements (unaudited) of the Company and the notes
thereto appearing elsewhere in this Form 10-Q. Except for the historical
information contained herein, the following discussion contains forward-looking
statements that involve risks and uncertainties. The Company's actual results
could differ materially from those projected in the forward-looking statements
discussed herein. Factors that could cause or contribute to such differences
include, but are not limited to, those discussed in this section, as well as
in other sections herein.
RESULTS OF OPERATIONS
NINE-MONTH AND THREE-MONTH PERIODS ENDED SEPTEMBER 30, 1999 VS.
SEPTEMBER 30, 1998 (UNAUDITED)
Consolidated revenues from continuing third-party administrative service
operations during the nine months ended September 30, 1999 and 1998 were
approximately $2,523,000 and $1,036,000, respectively. During the first nine
months of 1999, the Company operated only as a full-time third party
administrative service provider. In comparison, for the third quarter of 1998
the Company operated only as a full-time third party administrative service
provider while for the first six months of 1998, the Company operated as a
part-time third party administrative service provider as well as a full-time New
York State statutory disability benefits insurer. For the third quarters of 1999
and 1998, such service revenues were approximately $892,000 and $837,000,
respectively. For the third quarter of 1999, this revenue was lower than
anticipated because of a delay in the Company's primary client's major
acquisition, which the Company now administers.
Consolidated total revenue from continuing operations for the first nine months
of 1999 was approximately $2,657,000, resulting in a net loss of approximately
$4,000, as compared to total revenue of approximately $1,461,000 and net income
of approximately $256,000 for the same period
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<PAGE>
ARISTA INVESTORS CORP.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
(continued)
of 1998. This decrease in net income was due to a reduction in investment income
and to general and administrative expenses attributable to discontinued
operations for 1998. For the third quarters of 1999 and 1998, the consolidated
total revenue was approximately $892,000 and $980,000, respectively, resulting
in net income for the third quarter of 1999 of approximately $1,000 as compared
to a net loss of approximately $37,000 for the same period of 1998.
Consolidated investment income for the first nine months of 1999 and 1998 was
approximately $142,000 and $404,000, respectively. For the third quarters of
1999 and 1998, consolidated investment income was approximately $7,000 and
$139,000, respectively. The decreases during the first nine months of 1999 and
the third quarter of 1999 were attributable to investment income earned in 1998
on the proceeds received by Arista from the issuance of a $3,000,000 surplus
note that was repaid during the fourth quarter of 1998.
The consolidated general and administrative expenses for the first nine months
of 1999 and 1998, from continuing and discontinued operations, were
approximately $2.7 million and $3.3 million, respectively. Reductions in the
following expenses mainly attributed to the approximately $580,000 decrease
were: $212,000 in interest expenses, $52,000 in New York State premium taxes,
$57,000 in loss adjustment expenses, $60,000 in licenses and fees, and $153,000
in salaries and benefits due to a reduction in employees. For the third quarters
of 1999 and 1998, consolidated general and administrative expenses, from
continuing and discontinued operations, were approximately $885,000 and
$1,042,000, respectively. Reductions in interest expenses, in loss adjustment
expenses and in salaries and benefits also contributed to this decrease in
general and administrative expenses.
LIQUIDITY AND CAPITAL RESOURCES
Retained earnings decreased slightly from $1,468,780 at December 31, 1998 to
$1,465,259 at September 30, 1999 as a result of the Company's net loss.
-14-
<PAGE>
ARISTA INVESTORS CORP.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
(continued)
Since the consummation of the cession of Arista's business to The Guardian,
Arista has reduced its capital and paid in surplus to the minimum amount
permitted by the New York State Insurance Department and is in process of
selling Arista's charter and license.
On May 4, 1999, the Class A Directors of the Board of Directors of the
Registrant exercised an option to acquire the 47,400 shares of Class B Common
Stock, beneficially owned by Mr. Kooper. The 47,400 shares of Class B Common
Stock represented all of the issued and outstanding shares of the Class B Common
Stock. Upon the exercise of the option, Mr. Kooper received an amount equal to
$146,347.50, representing the Fair Market Value of the Registrant's Class A
Common Stock and the cancellation of the $500,000.00 outstanding principal
amount under a secured promissory note.
On May 28, 1999, the Registrant issued a partial liquidating distribution in the
amount of $2.23 per share to stockholders of record on May 19th of the Class A
Common Stock.
YEAR 2000
The Company has completed the conversion and testing of its systems and
applications and determined that the systems are Year 2000 compliant. The cost
of compliance to date totaled approximately $22,900.
The Company has been notified that its major third party administrator has
tested and modified all of its systems for Year 2000 compliance and has
contingency plans to address any problems that may occur.
In addition, the principal bank that the Company utilizes has completed its Year
2000 renovation and testing and its systems have passed is compliance tests. The
bank has informed the Company that it has continually reviewed and upgraded its
business continuity plans in an effort to mitigate potential risks.
INFLATION AND SEASONALITY
The Company does not anticipate that inflation will significantly impact its
business nor does it believe that its business is seasonal.
-15-
<PAGE>
ARISTA INVESTORS CORP.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
Nothing to report.
Item 2. Changes in Securities
Nothing to report
Item 3. Defaults Upon Senior Securities
Nothing to report.
Item 4. Submission of Matters to a Vote of Security Holders
The Registrant's Annual Meeting of Stockholders was held on August
6, 1999. The Stockholders approved the following:
a. The election of the nominees to the Board of Directors:
Daniel Glassman For: 2,236,900 Withheld: 50,400
Bernard Kooper For: 2,236,900 Withheld: 50,400
Michael Krasner For: 2,236,900 Withheld: 50,400
Stanley S. Mandel For: 2,236,900 Withheld: 50,400
Louis H. Saltzman For: 2,236,900 Withheld: 50,400
b. Adoption of the Registrant's 1999 Non-Qualified Stock Option Plan:
For: 1,784,810 Against: 26,000 Abstention: -0-
c. Adoption of the Registrant's 1999 Restricted Stock Plan:
For: 1,784,810 Against: 26,000 Abstention: -0-
-16-
<PAGE>
ARISTA INVESTORS CORP.
PART II. OTHER INFORMATION
(continued)
Item 5. Other Information
The Registrant and Arista entered into a Stock Purchase Agreement
(the "Agreement") dated as of October 22, 1999, to sell to WCA
Holdings, Inc., a Connecticut corporation (the "Buyer"), all of
the issued and outstanding shares of common stock of Arista (the
"Transaction"). The completion of the Transaction is subject to
various closing conditions, contingencies and regulatory
approvals, including, but not limited to, approval from the New
York State Insurance Department.
Pursuant to the Agreement, the purchase price shall be equal to
the sum of (i) the value of the assets of Arista minus the value
of the liabilities of Arista at the time of closing; plus (ii)
$500,000.
The consummation of the Transaction is expected to occur prior to
December 31, 1999.
Item 6. Exhibits and Reports on Form 8-K
a. Exhibits
27. Financial Data Schedule
b. Reports on Form 8-K: None
-17-
<PAGE>
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.
ARISTA INVESTORS CORP. (REGISTRANT)
BY: /S/ STANLEY S. MANDEL
--------------------------------------
STANLEY S. MANDEL, President and
Chief Executive Officer (principal
executive officer)
BY: /S/ SUSAN J. HALL
--------------------------------------
SUSAN J. HALL, Senior Vice President
and Treasurer (principal financial
and accounting officer)
November 18, 1999
-18-
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<PAGE>
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<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> SEP-30-1999
<DEBT-HELD-FOR-SALE> 0
<DEBT-CARRYING-VALUE> 175,210
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