The Registrant's and Arista's principal executive offices are located at 116 John Street, New York, New York 10038. The offices contain approximately 16,100 square feet. On January 9, 1995, effective on or about June 1, 1995, the Company entered into a five year lease for its principal executive office space at an average rent over the term of the lease of approximately $210,000 per year, exclusive of electricity.
The Company has the option to terminate the lease provided it notifies the landlord ninety days prior to the termination date, and reimburses the landlord for the unamortized portion of the landlord's contribution for leasehold improvements which was approximately $50,000 at December 31, 1998.
The financial statements of the Company have been prepared in accordance with generally accepted accounting principles, which differ in certain respects from those followed in financial state ments prepared for regulatory authorities. See Notes to the accompanying Consolidated Financial Statements.
Consolidated revenues during the year ended December 31, 1998 were $1,483,080, an increase of $1,131,734 compared to consolidated revenues of $351,346 during 1997 from the Company's continuing third party administrative service operations. In 1998 the Company operated as a full time third party administrative service provider after July 1, compared to a part time basis in 1997 and prior years.
Revenue from discontinued insurance operations for the year 1998 was $5,161,632 compared to $10,381,720 in 1997. Net loss from discontinued operations was $167,122 ($0.06 per share) in 1998
compared to a net income of $21,244 ($0.01 per share) in 1997. Net gain on disposal of discontinued operations was $838,171 (or $0.32 per share) in 1998.
Arista's gross premiums earned for the year 1997 were approximately $20.8 million as compared with approximately $23.2 million for 1996. This decrease was due to Arista's continued net loss of covered lives and policyholders. The continuing net loss in covered lives is a function of increased competition for experience-rated groups and a lower competitive rate structure for non-experience-rated groups.
Income from TPA services was $351,346 in 1997, as compared to $260,664 for 1996. Other income was $7,087 in 1997, as compared to $38,660 for 1996.
At December 31, 1998, the Company had cash and cash equivalents aggregating $6,330,909 compared to $8,296,943 at December 31, 1997. The decrease in 1998 was due principally to the repayment to Cologne of the surplus note of $3,000,000 plus accrued interest of $1,034,256. These outflows were partially offset by the net proceeds from The Guardian of $1,368,900 upon settlement of the cession transaction.
The Company has considered the impact of Year 2000 issues on its computer systems and applications and has developed a remediation plan. Conversion activities are in process and the Company expects conversion and testing to be completed by the middle of 1999. All expenses in connection with the Year 2000 compliance project are being charged to operations. Expenditures in 1998 aggregated $20,500 and the Company expects to incur additional costs of less than $1,000 in 1999 to complete the project.