10-Q 1 a2063725z10-q.txt FORM 10-Q 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, 2001 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 13, 2001 was 2,570,100 shares of Class A Common Stock, $0.01 par value. -1- ARISTA INVESTORS CORP. TABLE OF CONTENTS

-2- ARISTA INVESTORS CORP. CONSOLIDATED BALANCE SHEETS

The accompanying notes are an integral part of these financial statements. -3- ARISTA INVESTORS CORP. CONSOLIDATED STATEMENTS OF INCOME (Unaudited)

The accompanying notes are an integral part of these financial statements. -4- ARISTA INVESTORS CORP. CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY Nine month period ended September 30, 2001 (unaudited) and year ended December 31, 2000

The accompanying notes are an integral part of these financial statements. -5- ARISTA INVESTORS CORP. CONSOLIDATED STATEMENTS OF CASH FLOWS Nine months ended September 30, 2001 and 2000 (Unaudited)

The accompanying notes are an integral part of these financial statements. -6- ARISTA INVESTORS CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS September 30, 2001 and 2000 (Unaudited) NOTE 1 - BASIS OF PRESENTATION The accompanying consolidated financial statements are prepared using accounting principles generally accepted in the United States ("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 (the "SEC") for interim financial statements. In the opinion of the management of the Arista Investors Corp. (the "Registrant" or the "Company"), all adjustments (consisting of normal recurring accruals only) have been reflected for a fair presentation of the unaudited financial position as of September 30, 2001 and results of operations for the three-month and nine-month periods ended September 30, 2001 and 2000. The operating results for the periods are not necessarily indicative of the results to be expected for the entire year. NOTE 2 - REVENUE RECOGNITION Staff Accounting Bulletin No. 101 ("SAB 101") outlined the basic criteria that companies must follow to recognize revenue and provide guidance for disclosures related to recognition policies. The Registrant adopted SAB 101 effective January 1, 2001 without having any effect on its reported results of operations because its policies were substantially the same as the requirements of SAB 101. NOTE 3 - TRANSACTIONS WITH RELATED PARTIES At September 30, 2001 and December 31, 2000, Bernard Kooper, Chairman of the Boards of Directors of the Company and Arista Insurance Company {"Arista") beneficially owned 20.4% of the outstanding shares of Class A common stock, par value $.01 per share (the "Class A Common Stock"). Mr. Kooper is also the owner of Bernard Kooper Life Agency, Inc. (the "Agency"), one of the general agents marketing The Guardian Life Insurance Company's ("The Guardian") statutory, superstatutory and voluntary disability benefits insurance (collectively, the "Insurance"). During the nine months ended September 30, 2001 and 2000, the Agency received approximately $121,000 and -7- ARISTA INVESTORS CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS September 31, 2001 and 2000 (Unaudited) NOTE 3 - CONTINUED $123,000, respectively, in commissions based on the premiums collected on this Insurance. Of this amount, the Agency paid approximately $84,000 and $91,000, respectively, during the nine months ended September 30, 2001 and 2000 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 $8,000 and $11,000 for the nine months ended September 30, 2001 and 2000, respectively. NOTE 4 - 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. The TPA Agreement terminates on June 30, 2003. However, The Guardian has the option to terminate the TPA Agreement after the first two years (or after June 30, 2000). In addition, the Registrant provides third party administrative services for the temporary disability insurance book of business of Hartford Life and Health Insurance Company. Also, until June 30, 2000, the Registrant acted 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. Effective January 1, 1999, the Registrant entered into an agreement with the Girl Scouts of the U.S.A. (the "Girl Scouts") to provide third-party administrative claim services for the Super Statutory Disability Benefits Insurance provided by the Girl Scouts. -8- ARISTA INVESTORS CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS September 30, 1999 and 1998 (Unaudited) NOTE 4 - CONTINUED Effective October 1, 2000, the Registrant entered into an agreement with Highmark Life Insurance Company of New York ("Highmark") to provide third-party administrative services relating to disability policies underwritten by Highmark. This agreement was terminated effective September 30, 2001. For the nine months ended September 30, 2001 and 2000, a substantial portion of the Registrant's revenue was derived from services to The Guardian. Such revenue aggregated 88.9% and 98.2% of the total revenue from third-party administrative services for each period, respectively. NOTE 5 - NEW ACCOUNTING STANDARDS In June 2001, the Financial Accounting Standards Board ("FASB") issued two new statements, SFAS No. 141, "Business Combinations", and SFAS No. 142, "Goodwill and Other Intangible Assets." Although the provisions of these statements are effective beginning the calendar year 2002, management does not believe they will have a material impact on the Company's financial position or results of operations in future periods. Also in June 2001, the FASB issued statements SFAS No. 143, "Accounting for Asset Retirement Obligations", and SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets" in August 2001. Both statements are effective for fiscal years ending in year 2002. Management does not believe these statements will have a material effect on the Company's financial position or results of operations. -9- ARISTA INVESTORS CORP Item 2. 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 inother sections herein. RESULTS OF OPERATIONS NINE-MONTH AND THREE-MONTH PERIODS ENDED SEPTEMBER 30, 2001 VS. SEPTEMBER 30, 2000 (UNAUDITED) Consolidated revenues from third-party administrative service operations during the nine months ended September 30, 2001 and 2000 were approximately $3,016,000 and $2,945,000, respectively. The administrative services provided to Highmark, terminated effective September 30, 2001, generated approximately $315,000 of consolidated revenues during the nine-months ended September 30, 2001. For the third quarters of 2001 and 2000, consolidated service revenues were approximately $901,000 and $943,000, respectively. Consolidated total revenue from operations for the first nine months of 2001 was approximately $3,078,000 resulting in a net loss of approximately $112,000, as compared to total revenue of approximately $2,983,000 and net income of approximately $277,000 for the same period of 2000. For the third quarters of 2001 and 2000, the consolidated total revenue was approximately $905,000 and $955,000. The net loss for the third quarter of 2001 was approximately $43,000 as compared to net income of approximately $27,000 for the same period of 2000. The decreases in net income for the first nine months of 2001 and the third quarter of 2001 when compared to the same periods of 2000 were due to increases in general and administrative expenses. -10- ARISTA INVESTORS CORP. Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued) Consolidated investment income for the first nine months of 2001 and 2000 was approximately $19,000 and $28,000, respectively. For the third quarters of 2001 and 2000, consolidated investment income was approximately $4,000 and $9,000, respectively. The decline in investment income were due to lower interest rates during 2001. The consolidated general and administrative expenses for the first nine months of 2001 and 2000 were approximately $3,225,000 and $2,627,000, respectively. Changes in the following expenses mainly attributed to the increase of approximately $598,000: $253,000 in salaries and benefits, $176,000 in professional fees, $101,000 in rent and $63,000 in insurance coverage. Effective October 2001, management reduced the salaries and benefits for officers as well as decreased the number of clerical staff in order to reduce the total general and administrative expenses. For the third quarters of 2001 and 2000, consolidated general and administrative expenses were approximately $965,000 and $922,000, respectively. LIQUIDITY AND CAPITAL RESOURCES Retained earnings decreased from $1,161,829 at December 31, 2000 to $1,049,388 at September 30, 2001 as a result of the Company's net loss. 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. The Registrant entered into a Stock Purchase Agreement (the "Stock Purchase Agreement"), dated as of June 15, 2001, to sell to Delta Dental Plan of Indiana, Inc., a not-for-profit corporation, all of the issued and outstanding shares of common stock of Arista (the "Transaction"). The Stock Purchase Agreement contains certain representations, warranties, conditions and indemnification provisions. 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. -11- ARISTA INVESTORS CORP. Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued) LIQUIDITY AND CAPITAL RESOURCES (CONTINUED) Pursuant to the Stock Purchase Agreement, the purchase price shall be equal to the sum of (i) the value of Arista's capital and surplus as of the closing date; plus (ii) $300,000. Arista's adjusted capital and surplus as of September 30, 2001 was approximately $449,000. INFLATION AND SEASONALITY The Company does not anticipate that inflation will significantly impact its business nor does it believe that its business is seasonal. Item 3. QUANTATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Market risk encompasses liquidity risk and price risk, both of which arise principally in transactions involving market risk sensitive instruments. The Company's operations do not involve such instruments. -12- 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. Exhibits: Nothing to report. b. Reports on Form 8-K: On July 25, 2001, the Registrant filed a Form 8-K to disclose under Item 5 that the Registrant entered into the Stock Purchase Agreement to sell to Delta Dental Plan of Indiana, Inc. all of the issued and outstanding shares of common stock of Arista. -13- 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 13, 2001 -14-

ARISTA INVESTORS CORP 10-Q