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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): October 21, 1997
ANDREA ELECTRONICS CORPORATION
(Exact Name of Registrant as Specified in Charter)
New York 1-4324 11-0482020
(State or Other Jurisdiction (Commission (IRS Employer
of Incorporation) File Number) Identification No.)
11-40 45th Road, Long Island City, New York 11101
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (718) 729-8500
Not Applicable
(Former Name or Former Address, if Changed Since Last Report)
Page 1
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ITEM 5. OTHER EVENTS.
On October 21, 1997, Andrea Electronics Corporation (the "Registrant")
released financial information with respect to the quarter ended
September 30, 1997. A copy of the press release containing such financial
information is annexed as Exhibit 99.1 to this Report and by this reference
incorporated herein and made a part hereof.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
(c) Exhibits:
Exhibit
Number Description
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99.1 Press release dated October 21, 1997
Page 2
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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 hereunto duly authorized.
Dated: October 23, 1997 ANDREA ELECTRONICS CORPORATION
------------------------------
(Registrant)
/s/ Patrick D. Pilch
------------------------------
Patrick D. Pilch
Executive Vice President,
Chief Financial Officer
Page 3
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EXHIBIT 99.1
FOR IMMEDIATE RELEASE
- ---------------------
October 21, 1997
ANDREA ELECTRONICS CORPORATION ANNOUNCES CONTINUING STRONG FINANCIAL
--------------------------------------------------------------------
RESULTS IN THIRD QUARTER 1997
-----------------------------
Q3 Highlights
- -------------
- - Q3 revenues up 163% vs. Q3 1996 to $7.2 million; nine month revenues
rise 240% to $18.7 million
- - Nine month net income $2.9 million, or $0.31 per share, vs. 1996 net
loss of $1.2 million, or $0.17 per share
- - Company extends procurement agreement to sell headsets, handsets,
microphones to IBM
- - Company supplies PC headsets to Dragon Systems for its Dragon
NaturallySpeaking(Trademark) software
- - Company receives patent allowance for certain ANC microphone and ANR
earphone technology
- - Company introduces first ANR & ANC technology PC headset and first
wireless, infra-red headset
- - Company launches four new retail products in CompUSA stores nationally
<TABLE>
<CAPTION>
FINANCIAL SUMMARY TABLE
(in 000's, except per share data)
Quarter Ended Nine Months Ended
------------- -----------------
<S> <C> <C> <C> <C>
9/30/97 9/30/96 9/30/97 9/30/96
------- ------- ------- -------
Total revenues $7,210,911 $2,745,095 $18,676,055 $5,489,504
Net Income/(loss) 1,568,339 286,361 2,852,816 (1,181,694)
Net Income (loss)/Share+ 0.17 0.04 0.33 (0.17)
Primary Wtd. Ave. Equivalent Shares
Outstanding*+ 9,244,113 7,339,052 8,708,335 6,980,476
</TABLE>
- ---------------
*The Weighted average number of common equivalent shares outstanding reflects
the addition of approximately 1,000,000 shares pursuant to the Company's
application of the treasury stock method as required by Accounting Principles
Board Opinion #15. Under this method, earnings per share data are computed
as if stock options outstanding at the end of the period were exercised and
funds obtained thereby were used to purchase common stock.
+On September 2, 1997, the Company's Board of Directors authorized a
two-for-one stock split effected in the form of a 100% stock dividend that
was distributed on September 17, 1997 to shareholders of record on September
10, 1997. All share and per share data included in this release have been
restated to reflect the stock split. The effect of the split is presented
retroactively within stockholders' equity at December 31, 1996 by
transferring the par value for the additional shares issued from the capital
in excess of par account to the common stock account.
Long Island City, New York, October 21, 1997 -- Andrea Electronics
Corporation (AMEX: AND) today announced that revenues for the third quarter
ended September 30, 1997 increased 163% to $7,210,911 compared to $2,745,095
in the third quarter of 1996, and rose 19% over $6,080,875 in revenues in the
second quarter 1997. Net income for the third quarter of 1997 was $1,568,339
or $0.17 per share, based on 9,244,113 weighted average shares outstanding,
versus net income of $286,361 or $0.04 per share, based on 7,339,052
weighted average shares outstanding in the third quarter of 1996. Net
income for the second quarter 1997 was $678,036, or $0.08 per share based
on 8,060,352 weighted average common shares outstanding.
For the nine months ended September, 1997, revenues increased 240% to
$18,676,055, up from $5,489,504 in the same period of 1996, and rose 63% over
$11,465,144 in revenues for the six months ended June 30, 1997. Net income
for the first nine months of 1997 rose to $2,852,816 or $0.33 per share based
on 8,708,335 weighted average common equivalent shares outstanding, compared
with a net loss of $1,181,694 or $0.17 per share based on 6,980,476 weighted
average common equivalent shares outstanding in the first nine months of
1996. Net income for the six months ended June 30, 1997 was $1,284,477, or
$0.16 per share, based on 7,880,040 weighted average common shares
outstanding.
The weighted average number of common equivalent shares outstanding
reflects the addition of approximately 1,000,000 shares pursuant to the
Company's application of the treasury stock method as required by Accounting
Principles Board Opinion #15. Under this method, earnings per share data are
computed as if stock options outstanding at the end of the period were
exercised and funds obtained thereby were used to purchase common stock. In
addition, all share and per share data included in this release have been
restated to reflect a two-for-one split of Andrea Electronics common stock,
which was authorized by the Company's Board of Directors on September 2, 1997
and was paid out as a 100 percent stock dividend on September 17, 1997 to
shareholders of record as of September 10, 1997. The stock split was
undertaken to increase liquidity of the stock and to broaden shareholder
participation in the Company.
On September 23, 1997, Andrea Electronics entered into a $10 million
expandable credit facility with ABN AMRO and IBM Credit. This facility,
coupled with a strong cash position furthers the Company's ability to manage
the significant growth expected over the coming months, including product
ramp-up in anticipation of growing demand entering the holiday season.
"Outside of daily working capital management and research and development
efforts, we anticipate sizable investment in improving the overall efficiency
of the corporate infrastructure," said Patrick D. Pilch, Executive Vice
President and Chief Financial Officer of Andrea Electronics Corporation.
"For example, one project is currently underway to upgrade our existing
information systems so that Andrea Electronics can continue to grow
while still raising the high quality of service we provide to all our
partners and customers worldwide."
In commenting on the Company's positive results, Mr. Pilch said, "In the
third quarter of 1997 -- the Company's fifth consecutive profitable quarter -
- - Andrea Electronics has continued to experience strong sales of Andrea Anti-
Noise(Trademark) products, buoyed by several contract agreements with leading
OEMs (original equipment manufacturers) and software publishers."
John N. Andrea, Co-president of Andrea Electronics Corporation, added,
"Andrea Electronics' technologies are chosen by the PC industry's top OEMs
and software publishers because our product lines consistently emerge as
price/performance leaders. We are continuing to enter into co-licensing,
sales and promotional agreements that strategically partner Andrea
Electronics with companies that lead the PC hardware and software markets,
bringing the Company closer towards our ultimate goal of having patented
Active Noise Cancellation(Trademark) (ANC) microphone technology and
Active Noise Reduction(Trademark) (ANR) earphone technology recognized as the
global audio standards. In line with this strategy, in the third quarter of
1997 we were particularly pleased that all three of the speech recognition
market's top software publishers chose Andrea Anti-Noise products to be sold
with their speech recognition software."
The Andrea Anti-Noise Technology product line includes headsets,
handsets and microphones using the Company's high-performance Noise
Cancellation (NC) and patented ANC technologies, which substantially
improve voice intelligibility by essentially eliminating background noise.
- - Andrea Electronics Expands Existing Strategic Relationships, Establishes
New Alliances
During the third quarter of 1997, Andrea Electronics expanded its
strategic relationships with International Business Machines Corp. (NYSE:IBM),
Microsoft Corporation (Nasdaq:MSFT) and Kurzweil Applied Intelligence, Inc.,
a wholly-owned subsidiary Lernout & Hauspie Speech Products N.V. (Nasdaq:
LHSPF; Nasdaq: LHSP-ED). In addition, Andrea Electronics established a new
relationship with Dragon Systems, Inc.
In August, Andrea Electronics announced that it had expanded on its
previous arrangement with IBM by signing a procurement agreement to supply
several models of Andrea Anti-Noise PC headsets, handsets and microphones to
IBM for packaging with a full line of IBM's speech recognition software,
including VoiceType(Trademark) Simply Speaking and VoiceType(Trademark)
Simply Speaking Gold, as well as the new IBM ViaVoice(Trademark) and
ViaVoice Gold continuous speech recognition programs.
During the third quarter of 1997, Andrea Electronics also continued
bundling its Andrea Anti-Noise products with Kurzweil VoicePad(Trademark)
Starter Edition discrete speech recognition software for national retail and
corporate sale under a licensing agreement the Company entered into in July
1996 with Kurzweil A.I. VoicePad is being bundled as "free CD software" with
a spectrum of Andrea NC and ANC technology products, which are being sold
through distributors and resellers in the United States, Canada and Europe.
Additionally, in July Dragon Systems, Inc. chose Andrea Electornics'
NC-50 Universal PC headset for use and distribution with Dragon Naturally
Speaking(Trademark).
Andrea Electronics expanded its key relationship with Microsoft during
the third quarter of 1997. Andrea Anti-Noise products have been endorsed and
recommended by Microsoft's NetMeeting Group, and under a licensing agreement,
Andrea Electronics has bundled NetMeeting(Registered Trademark) 2.0 with its
products for OEMs, retail distributors and end-users. Andrea ANC technology's
ability to enhance the performance of Microsoft's premier videoconferencing
software, NetMeeting 2.0, was a key factor in Microsoft's recommendation of
Andrea ANC headsets for use with Internet Explorer 4.0(Registered Trademark)
(which included NetMeeting 2.0). As well, Microsoft Windows Hardware
Qualifications Lab has certified Andrea ANC products for use with Windows
95(Registered Trademark) and Windows NT(Registered Trademark), which
incorporates NetMeeting 2.0.
Most recently, on August 27, 1997, Andrea Electronics announced that it
had been chosen by Microsoft to be one of several select companies to join
Microsoft in promotional efforts surrounding the launch of Internet Explorer
4.0. As part of the promotion, customers participating in Microsoft's
"Reserve Your Copy Early" program could order from the Microsoft website a
Commemorative Edition Internet Explorer 4.0 CD-ROM, whose packaging included
coupons offering $10 off of the list price of Andrea Electronics'
VoiceSolutions(Trademark) PC headsets. Andrea Electronics' website
(www.AndreaElectronics.com) was linked to Microsoft's, allowing customers to
order Andrea Electronics' headsets on line.
"We believe strongly in the impact the computer is having as a
communications tool," said John Andrea. "In particular, we think that speech
recognition programs will gain widespread acceptance to the point where
speech may eventually become the premier computer interface. The software
that exists today is just the beginning of this interface revolution, and many
leading software publishers and OEMs, including Microsoft and IBM, are making
significant investments in the development of natural interface
technologies. Andrea Electronics has invested, too -- in technologies that
enhance the performance of speech-related software. We are continuously
examining how we can help PC OEMs, software publishers and end-users in the
advancement of speech-driven computing."
Andrea Electronics Introduces New Products, Focuses on Retail Expansion
At the recent SpeechTEK conference in New York City, Andrea Electronics
showcased for the first time its full line of patented, high-performance PC
audio products, designed to significantly enhance the performance of all
voice-driven, PC and Internet applications, even in noisy environments. The
retail line included many form factors incorporating NC, ANC -- and
for the first time, ANC with ANR technology -- which have been developed for
both OEM and end-user consumers.
Andrea Electronics' top-of-the-line PC headset, QuietWare(Trademark)
1000/ANC, was brought to market at SpeechTEK as the first consumer PC headset
that incorporates ANR earphone technology and ANC microphone technology in a
single unit. The QuietWare 1000/ANC represents the highest-end PC headset,
essentially eliminating background noise to provide clear speech amplification
and reception and significantly improving voice intelligibility. Consumers
can now purchase the QuietWare 1000/ANC on a global basis either by phone or
on line via the Company's secured, encrypted product catalogue on its website.
The QuietWare 1000/ANC is priced at a competitive MSRP of $99.95.
Also at SpeechTEK, Andrea Electronics introduced its first wireless,
infrared PC headset with ANC microphone technology. This highly user-
friendly headset provides freedom of movement to PC users, enabling them to
"talk" to and communicate through their computers - untethered - using voice
recognition applications while also canceling ambient noise and echo speaker
feedback that can distort the speech signal. The product will become
available in the first half of 1998 for an MSRP of about $149.
"Andrea Electronics remains acutely aware through its relationships with
OEM and software partners of the needs of PC multimedia users," said Douglas
J. Andrea, Co-president of Andrea Electronics Corporation. "We plan to
continue focusing on research and development to anticipate and answer those
needs with high-quality PC audio products that can enhance the user experience
of desktop computing, including increasingly accepted voice-related computer
applications."
Andrea Electronics, while exhibiting its full line of PC audio products
at SpeechTEK, debuted its new retail packaging that will appear nationally in
October, November and December of 1997 during a promotional campaign with
CompUSA. The campaign will include advertising and an endcap display
featuring four products: Andrea ANC-550 VoiceSolutions ultra-light PC
stereo headset with ON/MUTE mic switch; Andrea ANC-200 VoiceSolutions
dual function PC handset-desktop microphone; Andrea NC-65 GameWare(Trademark)
pro-stereo PC gamers' headset with pre-equalized CD-quality sound; and Andrea
NC-50 NetSet(Trademark) ultra-light, monaural PC headset.
"Andrea Electronics wants to provide consumers with a comprehensive,
top-quality approach to enjoying voice-related computer applications," said
John Andrea. "To that end we are pleased to be expanding national
distribution of our products in CompUSA, the leading computer superstore."
Andrea Electronics Corporation is a developer and manufacturer of audio
communications equipment for military electronics, personal computers,
telecommunications and commercial markets. Andrea Electronics Corporation is
based in Long Island City, New York.
(financial tables attached)
# # #
To receive Andrea Electronics' latest news release and other corporate
documents via FAX -- no cost -- please dial 1-800-PRO-INFO. Use Company's
ticker: AND.
This press release contains "forward-looking statements" within the meaning
of the Private Securities Litigation Reform Act of 1995. Such forward-
looking statements involve known and unknown risks, uncertainties or other
factors which may cause actual results, performance or achievements of the
Company to be materially different from any future results, performance or
achievements expressed or implied by such forward-looking statements.
Factors that might cause such a difference include, but are not limited to,
those discussed under the heading "Certain Factors That May Affect Future
Results" included in the Management's Discussion and Analysis of Financial
Condition and results of operations in the Company's Annual Report on Form
10-K and in the Company's 1996 Annual Report to stockholders, and in
documents subsequently filed by the Company with the Securities and Exchange
Commission.
<TABLE>
<CAPTION>
ANDREA ELECTRONICS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
----------------------------------------------------------------------
For the Three Months Ended For the Nine Months Ended
September 30, September 30,
----------------------------------------------------------------------
<S> <C> <C> <C> <C>
1997 1996 1997 1996
----------------------------------------------------------------------
SALES $ 7,210,911 $ 2,745,095 $ 18,676,055 $ 5,489,504
COST OF SALES 4,247,121 1,585,646 11,022,262 3,767,308
------------- ---------------- ----------------- --------------
Gross Profit 2,963,790 1,159,449 7,653,793 1,722,196
RESEARCH AND DEVELOPMENT EXPENSES 189,798 177,843 431,431 700,676
GENERAL, ADMINISTRATIVE AND SELLING
EXPENSES 1,679,168 713,281 4,478,410 2,112,288
------------- ---------------- ----------------- --------------
Income (loss) from operations 1,094,824 268,325 2,743,952 (1,090,768)
------------- ---------------- ----------------- --------------
OTHER INCOME (EXPENSE)
Interest income 10,889 9,731 52,173 38,432
Interest expense (71,314) (50,553) (198,221) (305,016)
Rent and miscellaneous income 62,940 58,858 178,723 175,658
------------- ---------------- ----------------- --------------
2,515 18,036 32,675 (90,926)
------------- ---------------- ----------------- --------------
INCOME (LOSS) BEFORE INCOME TAX BENEFIT 1,097,339 286,361 2,776,627 (1,181,694)
INCOME TAX BENEFIT 471,000 -- 76,189 --
------------- --------------- ------------------ --------------
NET INCOME (LOSS) $ 1,568,339 $ 286,351 $ 2,852,816 $ (1,181,694)
NET INCOME (LOSS) PER SHARE $ 17 $ 04 $ 33 $ (17)
------------- --------------- ------------------ --------------
WEIGHTED AVERAGE COMMON EQUIVALENT
SHARES OUTSTANDING 9,244,113 7,339,052 8,708,335 6,980,476
------------- --------------- ------------------ --------------
See Notes to Consolidated Financial Statements
</TABLE>
Item 1 - FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
ANDREA ELECTRONICS CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<S> <C> <C>
ASSETS September 30, December 31,
1997 1996
---- ----
(unaudited) (audited)
CURRENT ASSETS:
Cash and cash equivalent $ 2,960,072 $ 921,065
Marketable securities 100,270 197,697
Accounts receivable, net 5,463,211 2,678,449
Inventories, net 5,638,171 4,774,175
Deferred income taxes 1,306,615 1,222,000
Prepaid expenses and other current assets 561,233 132,691
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Total current assets 16,029,572 9,926,077
PROPERTY, PLANT AND EQUIPMENT, net 789,319 868,173
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Total assets $16,818,891 $ 10,794,250
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LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Trade accounts payable $ 1,897,145 $ 822,400
Accrued salaries and wages payable 42,716 62,920
Other current liabilities 277,280 204,683
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Total current liabilities 2,217,150 1,090,003
CONVERTIBLE DEBENTURE, net 1,813,712 2,157,786
OTHER LIABILITIES 28,735 38,500
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Total liabilities 4,059,597 3,286,289
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SHAREHOLDERS' EQUITY:
Common stock, $.50 par value, authorized: 15,000,000
shares; issued and outstanding: 8,380,804 and
7,584,394 shares, respectively 4,190,402 3,792,197
Additional paid-in capital 8,259,035 6,258,723
Retained earnings (deficit) 309,857 (2,542,959)
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Total shareholders' equity 12,759,294 7,507,961
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Total liabilities and shareholders' equity $ 16,818,891 $ 10,794,250
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See Notes to Consolidated Financial Statements
</TABLE>
