<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 March 31, 2000
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 May 10, 2000 was
2,570,100 shares of Class A Common Stock, $0.01 par value.
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ARISTA INVESTORS CORP.
TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION Page
Item 1. Financial Statements:
Consolidated Balance sheets at March 31,
2000 (Unaudited) and December 31, 1999 3
Consolidated Statements of Income and
Comprehensive Income (Unaudited) for
the three months ended March 31, 2000
and 1999 5
Consolidated Statements of Changes in
Stockholders' Equity for the
three months ended March 31, 2000
(Unaudited) and the year ended
December 31, 1999 6
Consolidated Statements of Cash Flows
(Unaudited) for the three months ended
March 31, 2000 and 1999 7
Notes to Financial Statements 8
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of
Operations 11
PART II. OTHER INFORMATION
Item 1 through Item 6 13
Signatures 14
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<PAGE>
ARISTA INVESTORS CORP.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
March 31, December 31,
2000 1999
(unaudited)
<S> <C> <C>
ASSETS
Investments:
Held-to-maturity securities:
Bonds and long-term U. S. Treasury
obligations at amortized cost (market
value $175,000 at March 31, 2000 and
at December 31, 1999) 175,016 $ 175,112
---------- ----------
Total investments 175,016 175,112
Cash and equivalents 403,741 206,079
Deferred acquistion costs, net 124,993 134,608
Accounts receivable 808,395 1,074,139
Receivables from related parties 398,388 422,919
Furniture and equipment, at cost, net of
accumulated depreciation of $875,719 at March
31, 2000 and $871,094 at December 31, 1999 40,224 44,849
Prepaid and refundable income taxes 109,428 139,904
Other assets 275,736 262,986
---------- ----------
Total assets $2,335,921 $2,460,596
========== ==========
</TABLE>
(Continued)
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<PAGE>
ARISTA INVESTORS CORP.
CONSOLIDATED BALANCE SHEETS
(Continued)
<TABLE>
<CAPTION>
March 31, December 31,
2000 1999
(unaudited)
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Accounts payable and accrued expenses $ 598,045 $ 617,909
Payable to related parties 600,000 800,000
---------- ----------
Total liabilities 1,198,045 1,417,909
---------- ----------
Stockholders' equity:
Class A common stock, $.01 par value;
9,950,000 shares authorized; 2,580,100
shares issued 25,801 25,801
Retained earnings 1,138,815 1,043,626
---------- ----------
1,164,616 1,069,427
Less 10,000 shares Class A common stock held in
treasury (26,740) (26,740)
---------- ----------
Total stockholders' equity 1,137,876 1,042,687
---------- ----------
Total liabilities and stockholders' equity $2,335,921 $2,460,596
========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
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ARISTA INVESTORS CORP.
CONSOLIDATED STATEMENTS OF INCOME
Three months ended March 31, 2000 and 1999
(Unaudited)
<TABLE>
<CAPTION>
<S> <C> <C>
2000 1999
---------- ----------
Revenue from operations
Third-party administrative services 1,030,519 $ 879,595
Net realized investment gains -- 213
Net investment income 7,288 84,587
Other income 4,420 58
---------- ----------
Total revenue 1,042,227 964,453
---------- ----------
Expenses:
General and administrative expenses 909,139 932,544
---------- ----------
Income from operations before income tax provision (benefit) 133,088 31,909
Provision (benefit) for income taxes:
Provision for income taxes (benefit) 41,500 (62,125)
---------- ----------
Net income 91,588 94,034
---------- ----------
Other comprehensive loss:
Unrealized loss on securities -- (2,146)
Income tax effect -- 730
---------- ----------
Other comprehensive loss, net -- (1,416)
---------- ----------
Total comprehensive income $ 91,588 $ 92,618
========== ==========
Net income per common share:
Basic and diluted $ 0.04 $ 0.04
========== ==========
Weighted average number of common shares:
Basic and diluted 2,570,100 2,617,500
========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
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ARISTA INVESTORS CORP.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
Three month period ended March 31, 2000 (unaudited) and year ended
December 31, 1999
<TABLE>
<CAPTION>
Class A Convertible Class B
-------------------------- -----------------------
Number Par Number Par Additional
of value of value paid-in Retained
Shares $.01 Shares $.01 capital earnings
--------- ----------- ------- ---------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C>
Balance - January 1, 1999 2,580,100 $ 25,801 47,400 $474 $ 5,989,609 $1,468,780
Net loss -- -- -- -- -- (37,567)
Acquisition of Convertible Class B common stock -- -- -- -- -- --
Retirement of Class B common stock -- -- (47,400) (474) (258,286) (387,587)
Partial liquidation distribution -- -- -- -- (5,731,323) --
Unrealized securities loss included in income -- -- -- -- -- --
--------- -------- ------- ------- ----------- ----------
Balance - December 31, 1999 2,580,100 $ 25,801 0 $ 0 $ 0 1,043,626
Net income -- -- -- -- -- 91,588
--------- -------- ------- ------- ----------- ----------
Balance - March 31, 2000 2,580,100 $ 25,801 0 $ 0 $ 0 $1,135,214
========= ======== ======= ======= =========== ==========
</TABLE>
<TABLE>
<CAPTION>
Accumulated Secured Class A Convertible
other promissory common Class B
comprehensive note stock held common
income receivable in treasury stock Total
------ ---------- ----------- ---- -----
<S> <C> <C> <C> <C> <C>
Balance - January 1, 1999 (22,488) ($500,000) ($26,740) $ 0 $6,935,436
Net loss -- -- -- -- (37,567)
Acquisition of Convertible Class B common stock -- 500,000 -- (646,347) (146,347)
Retirement of Class B common stock -- -- -- 646,347 0
Partial liquidation distribution -- -- -- -- (5,731,323)
Unrealized securities loss included in income 22,488 -- -- -- 22,488
------- --------- -------- --------- ----------
Balance - December 31, 1999 0 0 (26,740) 0 1,042,687
Net income -- -- -- -- 91,588
------- --------- -------- --------- ----------
Balance - March 31, 2000 $ 0 $ 0 ($26,740) $ 0 $1,134,275
======= ========= ======== ========= ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
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ARISTA INVESTORS CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
2000 1999
--------------- -----------------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 91,588 $ 94,034
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation 4,625 9,623
Amortization of deferred acquisition costs 9,615 0
Deferred income taxes 0 787,910
(Increase) decrease in operating assets:
Prepaid and refundable income taxes 34,076 (217,602)
Accounts receivable 265,744 (1,182,140)
Receivable from related parties 24,531 (5,032)
Other assets (12,749) 30,095
Increase (decrease) in operating liabilities:
Commissions payable 0 (13,569)
Income taxes payable 0 (580,319)
Accounts payable and accrued expenses (19,864) (299,138)
Payable to related parties (200,000) 0
-------- ----------
Net cash provided by (used in) operating activities 197,566 (1,376,138)
-------- ----------
Cash flows from investing activities:
Proceeds from sales of securities and amortization of premiums 96 (663)
-------- ----------
Net cash provided by (used in) investing activities 96 (663)
-------- ----------
Increase (decrease) in cash and equivalents 197,662 (1,376,801)
Cash and equivalents:
Beginning of period 206,079 6,330,909
-------- ----------
End of period $403,741 $4,954,108
======== ==========
Supplemental cash flow disclosure:
Cash paid during the period for income taxes $ 8,383 $ 44,804
======== ==========
Interest 5,492 12,966
======== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
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ARISTA INVESTORS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2000 and 1999
(Unaudited)
Note 1 - 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
Arista Investors Corp. (the "Registrant"), all adjustments (consisting of
normal recurring accruals only) have been reflected for a fair presentation
of the unaudited financial position as of March 31, 2000 and results of
operations for the three-month periods ended March 31, 2000 and 1999. The
operating results for the periods are not necessarily indicative of the
results to be expected for the entire year.
Note 2 - Reinsurance
- --------------------
The Registrant and its wholly owned subsidiary, Arista Insurance Company
("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 Life Insurance Company of
America ("The Guardian"). Pursuant to this Treaty, all of Arista's
liabilities under each and every policy of New York State satutory 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.
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ARISTA INVESTORS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2000 and 1999
(Unaudited)
A contingent liability exists 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 3 - Transactions with related parties
- ------------------------------------------
At March 31, 2000 and December 31, 1999, Bernard Kooper, Chairman of the Boards
of Directors of the Company and Arista and a Director of The Collection Group,
Inc., beneficially owns 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 three months ended March 31, 2000 and 1999,
the Agency received approximately $43,000 and $45,000, respectively, in
commissions based on the premiums collected under the Treaty's Insurance. Of
this amount, the Agency paid approximately $33,000 during the three months ended
March 31, 2000 and 1999 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 $4,000
and $6,000 for the three months ended March 31, 2000 and 1999, respectively.
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<PAGE>
ARISTA INVESTORS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2000 and 1999
(Unaudited)
Note 4 - New Accounting Standards
- ---------------------------------
In December 1999, the SEC Staff issued Staff Accounting Bulletin No. 101,
"Revenue Recognition in Financial Statements," which requires all registrants to
comply with certain criteria for recognition of revenues in financial
statements. SAB 101A, issued in March 2000, delayed the effective date of SAB
101 until the second quarter of fiscal year 2000. The Company is currently
reviewing the provisions of SAB 101 to determine the impact, if any, on its
financial position and results of operations in future periods.
Note 5 - Third Party Administration
- -----------------------------------
The Registrant entered into an Administrative Services Agreement dated September
23, 1998 (the "TPA Agreement") with 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 the Insurance 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 statutory disability
benefits 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. Previously, Arista acted as the
third party administrator for these three books of business.
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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
- ---------------------
Three-Month Periods Ended March 31, 2000 vs. March 31, 1999
(unaudited)
- -----------------------------------------------------------
Consolidated revenues from third-party administrative services during the three
months ended March 31, 2000 and 1999 were approximately $1,031,000 and $880,000,
respectively. The increase in revenues for the current quarter was due to the
Company's administration of additional books of disability benefits insurance
business assumed by The Guardian.
Consolidated total revenue from operations for the first three months of 2000
was approximately $1,042,000, resulting in net income of approximately $92,000.
This compares to consolidated total revenue of approximately $964,000 and net
income of approximately $94,000 for the same period in 1999.
Consolidated investment income for the first three months of 2000 and 1999 was
approximately $7,000 and $85,000, respectively. The decrease was attributable to
the Company's issuance of a partial liquidating distribution of $2.23 per share
to stockholders of record on May 19, 1999.
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<PAGE>
ARISTA INVESTORS CORP.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
(continued)
The consolidated general and administrative expenses for the first three months
of 2000 and 1999 were approximately $909,000 and $933,000, respectively.
Reductions in expenses for travel and entertainment, professional fees and
interest expenses, offset by an increase in payroll taxes, were attributable to
the net decrease in general and administrative expenses.
Liquidity and Capital Resources
- -------------------------------
Retained earnings increased from $1,042,687 at December 31, 1999 to $1,134,275
at March 31, 2000 as a result of the Company's net income.
Since the consummation of the cession of Arista's Insurance 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 reviewing its
plans to sell Arista's charter and license.
Inflation and Seasonality
- -------------------------
The Company does not anticipate that inflation will significantly impact its
business nor does it believe that its business is seasonal.
Quantitative and Qualitative Disclosures about Market Risk
- ----------------------------------------------------------
Market risk encompasses liquidity risk and price risk, both of which arise
principally in transactions involving financial instruments. The Company's
operations are not subject to these risks.
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<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
Nothing to report.
Item 5. Other Information
Nothing to report.
Item 6. Exhibits and Reports on Form 8-K
a. Exhibit 27 - Financial Data Schedule
b. Reports on Form 8-K: None
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<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)
May 15, 2000
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<TABLE> <S> <C>
<PAGE>
<ARTICLE> 7
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-END> MAR-31-2000
<DEBT-HELD-FOR-SALE> 0
<DEBT-CARRYING-VALUE> 175,016
<DEBT-MARKET-VALUE> 175,000
<EQUITIES> 0
<MORTGAGE> 0
<REAL-ESTATE> 0
<TOTAL-INVEST> 175,016
<CASH> 403,741
<RECOVER-REINSURE> 0
<DEFERRED-ACQUISITION> 0
<TOTAL-ASSETS> 2,335,921
<POLICY-LOSSES> 0
<UNEARNED-PREMIUMS> 0
<POLICY-OTHER> 0
<POLICY-HOLDER-FUNDS> 0
<NOTES-PAYABLE> 0
0
0
<COMMON> 25,801
<OTHER-SE> 1,112,075
<TOTAL-LIABILITY-AND-EQUITY> 2,335,921
0
<INVESTMENT-INCOME> 7,288
<INVESTMENT-GAINS> 0
<OTHER-INCOME> 1,034,939
<BENEFITS> 0
<UNDERWRITING-AMORTIZATION> 0
<UNDERWRITING-OTHER> 909,139
<INCOME-PRETAX> 133,088
<INCOME-TAX> 41,500
<INCOME-CONTINUING> 91,588
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 91,588
<EPS-BASIC> .04
<EPS-DILUTED> .04
<RESERVE-OPEN> 0
<PROVISION-CURRENT> 0
<PROVISION-PRIOR> 0
<PAYMENTS-CURRENT> 0
<PAYMENTS-PRIOR> 0
<RESERVE-CLOSE> 0
<CUMULATIVE-DEFICIENCY> 0
</TABLE>
