10-Q 1 d01-34272.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 JUNE 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 August 9, 2001 was 2,570,100 shares of Class A Common Stock, $0.01 par value. -1- ARISTA INVESTORS CORP. TABLE OF CONTENTS PART I. FINANCIAL INFORMATION Page Item 1. Financial Statements: Consolidated Balance sheets at June 30, 2001 Unaudited) and December 31, 2000 3 Consolidated Statements of Income (Unaudited)for the three months and six months ended June 30, 2001 and 2000 4 Consolidated Statements of Changes in Stock- holders' Equity for the six months ended June 30, 2001 (Unaudited) and the year ended December 31, 2000 5 Consolidated Statements of Cash Flows (Unaudited) for the six months ended June 30, 2001 and 2000 6 Notes to Consolidated Financial Statements 7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operattions 10 Item 3. Quantitative and Qualitative Disclosures about Market Risk 12 PART II. OTHER INFORMATION Item 1 through Item 6 13 Signatures 14 -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 Six month period ended June 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 Six months ended June 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 June 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 for interim financial statements. In the opinion of the management of 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 June 30, 2001 and results of operations for the three-month and six-month periods ended June 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 In December 1999, The SEC issued Staff Accounting Bulletin No. 101 ("SAB 101"), entitled "Revenue Recognition in Financial Statements", as amended by SAB No. 101A and SAB No. 101B, which provides guidance on the recognition, presentation and disclosure of revenue in financial statements filed with the SEC. 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 result of operation because its policies were substantially the same as the following requirements of SAB 101. The Registrant recognized revenue only when: o Persuasive evidence of the service arrangement existed; o The services had been provided; o The registrant's service prices to its customers were known and determinable; and o Collectibility was reasonably assumed. -7- ARISTA INVESTORS CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS June 30, 2001 and 2000 (Unaudited) NOTE 2 - CONTINUED These policies presume that "shipment" occurs when administrative services are completed. NOTE 3 - TRANSACTIONS WITH RELATED PARTIES At June 30, 2001 and December 31, 2000, Bernard Kooper, Chairman of the Boards of Directors of the Company and 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 statutory, superstatutory and voluntary disability benefits insurance (collectively, the "Insurance"). During the six months ended June 30, 2001 and 2000, the Agency received approximately $74,000 and $87,000, respectively, in commissions and fees based on the premiums collected on this Insurance. Of this amount, the Agency paid approximately $58,000 and $63,000, respectively, during the six months ended June 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 $5,000 and $7,000 for the six months ended June 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 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 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 -8- ARISTA INVESTORS COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS June 30, 2000 and 1999 (Unaudited) NOTE 4 - CONTINUED 30, 2003. However, The Guardian has the option to terminate the TPA Agreement after the first two years (or after September 24, 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 Girls 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. 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. For the six months ended June 30, 2001 and 2000, a substantial portion of the Registrant's revenue was derived from services to The Guardian. Such revenue aggregated 88.5% and 97.7% of the total revenue from third-party administrative services for each period, respectively. In the event of termination of the agreement, such an event would have a significant negative impact on Arista's financial position and operating results. NOTE 5 - NEW ACCOUNTING PRONOUNCEMENT In June 2001, the Financial Accounting Standards Board 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 in the year 2002, management does not believe they will have a material impact on the Company's financial position or results of operation in future periods. -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 in other sections herein. RESULTS OF OPERATIONS Six-Month And Three-Month Periods Ended June 30, 2001 vs. JUne 30, 2000 (Unaudited) Consolidated revenues from third-party administrative services during the six months ended June 30, 2001 and 2000 were approximately $2,115,000 and $2,002,000, respectively. For each second quarter of 2001 and 2000, such revenues were approximately $1,028,000 and $971,000, respectively. The increase in revenue, in each period, was due to the Company's administration of additional books of disability benefits insurance business. Consolidated total revenue from operations for the first six months of 2001 was approximately $2,173,000, resulting in a net loss of approximately $69,000. This compares to consolidated total revenue of approximately $2,028,000 and net income of approximately $250,000 for the same six-month period of 2000. For the second quarters of 2001 and 2000, the consolidated total revenue was approximately $1,040,000 and $986,000, respectively. The net income for the second quarter of 2001 was approximately $13,000 as compared to net income of approximately $159,000 for the same period of 2000. The decreases in net income for the first six months of 2001 and the second quarter of 2001 when compared to the same periods of 2000 were due to increases in general and administrative expenses, primarily due to higher professional fees, -10- ARISTA INVESTORS CORP. Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued) employee salaries and benefits, and rent. Consolidated investment income for the first six months of 2001 and 2000 was approximately $15,000 and $19,000, respectively. For the second quarters of 2001 and 2000, consolidated investment income was approximately $8,000 and $12,000, respectively. Consolidated other income for the first six months of 2001 and 2000 was approximately $43,000 and $7,000, respectively. For the second quarters of 2001 and 2000, consolidated other income was approximately $4,000 and $3,000 respectively. The consolidated general and administrative expenses for the first six months of 2001 and 2000 were approximately $2,261,000 and $1,704,000, respectively. Changes in the following expenses attributed to this increase of approximately $557,000: $270,000 in professional fees, of which less than 10% represent expenses related to the proposed sale of Arista Insurance Company ("Arista"), a wholly-owned subsidiary of the Company; $184,000 in employee salaries and benefits; and $85,000 in rent and commercial rent tax. General and administrative expenses increased from approximately $795,000 for the first six months of 2000 to approximately $1,024,000 for the first six months of 2001 due to increases in expenses previously listed. LIQUIDITY AND CAPITAL RESOURCES Retained earnings decreased from $1,161,829 at December 31, 2000 to $1,092,510 at June 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., an Indiana non-profit corporation, all of the issued and outstanding shares of common stock of Arista (the -11- ARISTA INVESTORS CORP. Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued) "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. 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, or an aggregate sale price of approximately $779,000. 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. QUANTITATIVE 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 and use of Proceeds 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) August 10, 2001 -14-

ARISTA INVESTORS CORP 10-Q