<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------
FORM 10-K/A
AMENDMENT NO. 1
FOR ANNUAL AND TRANSITION REPORTS
PURSUANT TO SECTIONS 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
(Mark One)
/x/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 (FEE REQUIRED)
For the fiscal year ended December 31, 1996
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
For the transition period from ____________ to ____________
Commission file number 1-4324
ANDREA ELECTRONICS CORPORATION
-------------------------
(Exact name of registrant as specified in its charter)
New York 11-0482020
- --------------------------------- ------------------------------------
(State or other jurisdiction (I.R.S. employer identification no.)
of incorporation or organization)
11-40 45th Road, Long Island City, New York 11101
- -------------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 800-442-7787
------------
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
- ------------------- -----------------------------------------
Common Stock, par value American Stock Exchange
$.50 per share
Securities registered under Section 12(g) of the Exchange Act: None
Indicate by check mark whether the registrant: (1) 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
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form
10-K or any amendment to this Form 10-K. ( )
As of March 21, 1997, the aggregate market value of the voting stock
held by non-affiliates of the registrant was approximately $29,416,443
(based on the closing sale price on the American Stock Exchange).
The number of shares outstanding of the registrant's common stock as of
March 21, 1997 was 3,942,197.
DOCUMENTS INCORPORATED BY REFERENCE
NONE
Reason for Filing Form 10-K/A (Amendment No. 1):
To include the information required by Part III of Form 10-K.
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PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The directors and executive officers of the Company are listed below.
Frank A.D. Andrea, Jr., age 70, has been Chairman of the Board since
December 1965 and a Director of the Company since 1962. He served as
President of the Company from December 1965 to November 1992. Mr. Andrea is
the father of Douglas J. Andrea and John N. Andrea.
John N. Andrea, age 39, has been Co-President of the Company since
November 1992 and a Director of the Company since 1992. He served as
Executive Vice President of the Company from January 1992 to November 1992
and as Sales & Marketing Director from September 1991 to November 1992. Mr.
Andrea is the son of Frank A.D. Andrea, Jr. and the brother of Douglas J.
Andrea.
Douglas J. Andrea, age 34, has been Co-President of the Company since
November 1992 and a Director of the Company since 1991. He served as Vice
President - Engineering of the Company from December 1991 to November 1992,
and as Secretary of the Company from 1989 to January 1993. Mr. Andrea is the
son of Frank A.D. Andrea, Jr. and the brother of John N. Andrea.
Patrick D. Pilch, age 37, has been Executive Vice President and Chief
Financial Officer of the Company since April 1995 and a Director of the
Company since 1992. He served as Vice President - Investment Banking at
Greenwich Capital Markets, Inc. from November 1991 to April 1995, and is a
Certified Public Accountant.
Paul M. Morris, age 36, has been a Director of the Company since 1992.
He has been a Senior Managing Director at Schroder Capital Management since
December 1996. He had been a Partner at Weiss, Peck & Greer since July 1995
and prior to that he was employed by Union Bank of Switzerland from 1987 to
June 1995, where his last position was Managing Director - Equities.
Christopher Dorney, age 54, has been a Director of the Company since
April 1995. He has been President of Andrea Military Communications, LLC.
Until that time, he had been President of the Pulse Laser Division of
Holographics, Inc. since September 1994. He served as Director of Business
Development at Grumman Corporation's Electronic System Division from January
1989 to September 1994.
Scott Koondel, age 33, has been a Director of the Company since April
1995. He has been the Eastern Manager, Off-Network Television, Paramount
Pictures, a subsidiary of Viacom International since June 1993, and was the
National Sales Manager for WPIX-TV, a division of Tribune Broadcasting, from
June 1990 to June 1993.
Gary A. Jones, age 51, has been a Director of the Company since April
1996. He has served as President of Digital Technologies, Inc. since 1994
and was Chief Engineer, Allied Signal Ocean Systems from 1987 to 1994.
DIRECTORS' FEES, BOARD MEETINGS AND COMMITTEES
The Board does not have a nominating committee or a committee performing
similar functions. In fiscal 1996, the Audit Committee was comprised of
Messrs. Douglas J. Andrea, Paul M. Morris, Christopher Dorney and Scott
Koondel. The Audit Committee meets with management to consider the adequacy
of the internal controls of the Company and the objectivity of the financial
reporting; the committee also meets with the independent accountants and with
appropriate Company financial personnel about these matters. The Audit
Committee met four times during 1996. The Compensation Committee is
comprised of Paul M. Morris, Scott Koondel and Christopher Dorney. The
Compensation Committee administers the 1991 Plan and makes recommendations to
the Board of Directors with respect to the compensation of management. The
Compensation Committee met four times in 1996. The Board of Directors held
six meetings during the last year. None of the directors attended less than
75% of such meetings. Each outside director receives a fee of $1,000 for each
meeting attended. Paul M. Morris, Scott Koondel, Gary Jones and Christopher
Dorney were each paid directors' fees in the amount of $6,000 during 1996.
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ITEM 11. EXECUTIVE COMPENSATION
The following table sets forth information for the last three fiscal
years, respecting compensation earned by the four most highly compensated
executive officers earning over $100,000, including the Chief Executive
Officer.
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
--------------------
ANNUAL COMPENSATION AWARDS
----------------------------------- --------------------
OTHER RESTRICTED ALL
ANNUAL STOCK STOCK OTHER
NAME AND SALARY BONUS COMPENSATION AWARDS OPTIONS COMPENSATION
PRINCIPAL POSITION YEAR ($) ($) ($) ($) (#) ($)
- ------------------------ ---- -------- -------- ------------- ---------- -------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Frank A.D. Andrea, Jr. 1996 170,640 0 2,079(1) 0 0 0
Chairman of the Board, 1995 161,160 0 8,820(2) 0 0 0
Chief Executive Officer 1994 204,109 15,000 2,344(3) 0 0 0
John N. Andrea 1996 202,885 0 7,071(4) 0 0 0
Co-President 1995 174,616 0 7,307(5) 0 50,000(6) 0
1994 141,956 10,000 3,987(7) 0 0 0
Douglas J. Andrea 1996 195,577 5,000 9,651(8) 0 0 0
Co-President 1995 184,616 0 7,955(9) 0 50,000(6) 0
1994 142,500 10,000 1,916(10) 0 0 0
Patrick D. Pilch 1996 157,500 0 1,555(11) 0 0 0
Executive Vice President, 1995 73,077(12) 0 0 0 0 0
Chief Financial Officer
</TABLE>
(1) Represents car allowance payments of $2,079.
(2) Represents contribution to Company's profit sharing plan equal to $6,750,
or 4.2% of Frank Andrea's salary, and car allowance payments of $2,070.
(3) Represents contribution to Company's profit sharing plan equal to $2,344,
or 1.1% of Frank Andrea's salary.
(4) Represents contribution to Company's profit sharing plan equal to $4,500,
or 2.2% of John Andrea's salary, and car allowance payments of $2,571.
(5) Represents contribution to Company's profit sharing plan equal to $4,500,
or 2.6% of John Andrea's salary, and car allowance payments of $2,807.
(6) Represents number of shares covered by options granted in September 1994.
Such grant was subject to shareholder approval of an increase in the number of
shares covered by the 1991 Plan, which approval was obtained in September
1995.
(7) Represents contribution to Company's profit sharing plan equal to $3,987,
or 2.8% of John Andrea's salary.
(8) Represents contribution to Company's profit sharing plan equal to $6,750,
or 3.3% of Douglas Andrea's salary, and car allowance payments of $2,901.
(9) Represents contribution to Company's profit sharing plan equal to $6,059,
or 3.3% of Douglas Andrea's salary, and car allowance payments of $1,896.
(10) Represents contribution to Company's profit sharing plan equal to
$1,916, or 1.3% of Douglas Andrea's salary.
(11) Represents car allowance payments of $1,555.
(12) Mr. Pilch joined the Company on April 1, 1995.
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The Company did not grant any stock options or stock appreciation rights
during fiscal year 1996 to any of the named executive officers.
The following table summarizes for each of the named executive officers
the number of shares acquired and value realized upon exercise of options
during fiscal 1996 and the aggregate dollar value of in-the-money,
unexercised options at December 31, 1996. None of the named executive
officers exercised or held any SARs during the year.
<TABLE>
<CAPTION>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR END OPTION VALUES
Number of Securities Value of Unexercised
Shares Underlying Options at In-the-Money Options
Acquired on Value Fiscal Year End -- at Fiscal Year End --
Name Exercise Realized Exercisable/Unexercisable Exercisable/Unexercisable(1)
- - ----------- ----------- -------- ------------------------- ---------------------------
<S> <C> <C> <C> <C>
Frank A.D. Andrea, Jr. 100,000 (2) $556,646 150,000 shares/ $1,427,100/
0 shares (2)(6) $0
John N. Andrea 25,000 (3) $0 150,000 shares/ $1,206,250/
25,000 shares (3)(6) $0
Douglas J. Andrea 0 $0 175,000 shares/ $1,447,500/
25,000 shares (4)(6) $0
Patrick D. Pilch 0 $0 50,000 shares/ $ 241,250/
25,000 shares (5)(6) $0
</TABLE>
(1) Values were based on a closing trade price for the Company's Common Stock
on December 31, 1996 of $11 per share.
(2) Frank A. D. Andrea was granted options under the 1991 Plan to purchase
100,000 shares at a price of $.908 per share on December 31, 1991 (all of which
were exercised during 1996) and to purchase 150,000 shares at a price of $1.486
per share on June 26, 1992.
(3) John N. Andrea was granted options under the 1991 Plan to purchase 150,000
shares at $1.35 per share on June 26, 1992 (of which options for 25,000 shares
were exercised during 1996) and to purchase 50,000 shares at a price of $12.00
per share on September 12, 1994.
(4) Douglas J. Andrea was granted options under the 1991 Plan to purchase
150,000 shares at $1.35 per share on June 26, 1992 and to purchase 50,000
shares at a price of $12.00 per share on September 12, 1994.
(5) Patrick D. Pilch was granted options under the 1991 Plan to purchase
12,500 shares at $1.35 per share on June 26, 1992, to purchase 12,500 shares
at $1.35 per share on October 26, 1992 and to purchase 50,000 shares at a
price of $12.00 per share on September 12, 1994.
(6) Of the options granted, none are exercisable during the first year
following grant; 25% of the options become exercisable during the second
year following grant; an additional 25% become exercisable during the third
year following grant; and the remaining 50% become exercisable during the
fourth year following grant.
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ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information as of April 29, 1996
with respect to the stock ownership of (i) those persons or groups who
beneficially own more than 5% of the Company's Common Stock, (ii) each
director and director-nominee of the Company, (iii) each executive officer
whose compensation exceeded $100,000 in the 1995 fiscal year, and (iv) all
directors and executive officers of the Company as a group. The total number
of shares of Common Stock outstanding on April 29, 1996 was 4,038,277.
<TABLE>
<CAPTION>
NAME OF AMOUNT AND NATURE OF PERCENT OF
BENEFICIAL OWNER BENEFICIAL OWNERSHIP(1) CLASS
- - ---------------- -------------------- ----------
<S> <C> <C>
Camille Andrea Casling (2) 398,371 9.9%
Frank A. D. Andrea, Jr.(2) 391,341(3) 9.7%
Mary Louise Andrea (2) 391,341(3) 9.7%
ANC-I Limited Partnership(4) 230,000 5.7%
Douglas J. Andrea (2) 201,615(5) 4.8%
John N. Andrea (2) 186,066(6) 4.4%
Patrick D. Pilch 50,000(7) 1.2%
Paul M. Morris 25,000 *
Christopher Dorney 5,200(8) *
Scott Koondel 5,000(8) *
Gary A. Jones 6,550(9) *
Directors and Executive
Officers as a group
(8 persons) 870,772(10) 19.7%
</TABLE>
- ---------------------------
* Less than 1%.
(1) Beneficial ownership is determined in accordance with Rule 13d-3
promulgated under the Securities Exchange Act of 1934. The information
concerning the shareholders is based upon information furnished to the Company
by such shareholders. Except as otherwise indicated, all of the shares are
owned of record and beneficially and the persons identified have sole voting and
investment power with respect thereto.
(2) Camille Andrea Casling is a sister of Frank A.D. Andrea, Jr., Chairman
of the Company. Mary Louise Andrea is the spouse of Frank A.D. Andrea, Jr.,
Douglas J. Andrea and John N. Andrea, Co-Presidents of the Company, are the
sons of Frank A.D. Andrea, Jr. and Mary Louise Andrea. The address of each of
these individuals and ANC-I Limited Partnership is c/o the Company, 11-40 45th
Road, Long Island City, New York 11101.
(3) Includes (i) 191,341 shares owned directly by Frank A.D. Andrea, Jr.
and Mary Louise Andrea, his spouse, and (iii) 200,000 of the 230,000 shares
owned by ANC-I Limited Partnership, representing Mr. Andrea's 43.48% and
Mrs. Andrea's 43.48% interest in ANC-I Limited Partnership.
(4) ANC-I Limited Partnership is a Delaware limited partnership, of which
the General Partners are Frank A. D. Andrea, Jr. and Mary Louise Andrea.
John N. Andrea and Douglas J. Andrea are limited partners of this partnership.
(5) Includes (i) 16,972 shares owned directly by Douglas J. Andrea and
Mr. Andrea's spouse, (ii) 3,643 shares owned by Mr. Andrea's spouse,
(iii) 6,000 of the 230,000 shares owned by ANC-I Limited Partnership,
representing Mr. Andrea's 2.6% interest in ANC-I Limited Partnership, and
(iv) 175,000 shares issuable upon the exercise of options which are currently
exercisable and exercisable within 60 days from the date hereof. Does not
include 25,000 shares which are not currently exercisable or exercisable
within 60 days from the date hereof.
(6) Includes (i) 12,339 shares owned directly by John N. Andrea and Mr.
Andrea's spouse, (ii) 17,727 shares owned by Mr. Andrea's minor children,
(iii) 6,000 of the 230,000 shares owned by ANC-I Limited Partnership,
representing Mr. Andrea's 2.6% interest in ANC-I Limited Partnership, and
(iv) 150,000 shares issuable upon the exercise of options which are currently
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exercisable and exercisable within 60 days from the date hereof. Does not
include 25,000 shares which are not currently exercisable or exercisable
within 60 days from the date hereof.
(7) Includes (i) 25,000 shares owned directly by Patrick D. Pilch and
(ii) 25,000 shares issuable upon the exercise of options which are currently
exercisable pursuant to the terms of the 1991 Plan. Does not include 25,000
shares issuable upon the exercise of options which are not currently
exercisable and will not become exercisable within the next 60 days.
(8) Includes 5,000 shares issuable upon the exercise of options which are
currently exercisable pursuant to the terms of the 1991 Plan. Does not
include 5,000 shares issuable upon the exercise of options which are not
currently exercisable and will not become exercisable within the next 60 days.
(9) Includes 6,250 shares issuable upon the exercise of options which are
currently exercisable pursuant to the terms of the 1991 Plan. Does not
include 28,250 shares issuable upon the exercise of options which are not
currently exercisable and will not become exercisable within the next 60 days.
(10) Includes the shares issuable upon the exercise of the options discussed
in notes (5) through (9) above.
Section 16(a) of the Securities Exchange Act of 1934, as amended,
requires the Company's directors and officers and persons who beneficially own
more than ten percent of the Company's Common Stock to file with the
Securities and Exchange Commission ("SEC") and the American Stock Exchange
initial reports of ownership and reports of changes in ownership of Common
Stock in the Company. Officers, directors and greater-than-ten percent
shareholders are also required to furnish the Company with copies of all
Section 16(a) reports they file. To the Company's knowledge, based solely on
review of the copies of such reports furnished to the Company and written
representation that no other reports were required, during the fiscal year
ended December 31, 1995, all Section 16(a) filing requirements were complied
with, except that one monthly report was filed late by Frank A.D. Andrea, Jr.,
Douglas J. Andrea and John N. Andrea.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
In 1996, the Company formed Andrea Military Communications, LLC
("AMC"), a Delaware limited liability company, in which the Company has a
72.7% equity interest. The purpose of AMC is to collaborate with Northrop
Grumman in accordance with the Company's agreement with Northrop Grumman
relating to the qualification for military sales and subsequent marketing
of headsets that incorporate Andrea Anti-Noise/(Registered Trademark)/
technology to military customers. Among the members of AMC is a corporation
owned by Christopher Dorney, a director of the Company. In exchange for this
corporation acting as a manager of AMC through Mr. Dorney, this corporation
was granted a 13.6% equity interest in AMC. In addition, commencing upon the
award of a contract for the purchase of the headsets from Northrop Grumman to
AMC, this corporation will receive an annual base compensation of $125,000,
plus monetary or other compensation sufficient to provide insurance and other
benefits to Mr. Dorney equivalent to those of the officers of the Company,
plus an annual bonus in a range between 0% and 40% of the base compensation.
Also immediately upon the award of such purchase contract, this corporation
will be awarded warrants to purchase 50,000 shares of Andrea Common Stock at
an exercise price of $10.00 per share, which warrants will vest at an annual
rate of 20% beginning on the first anniversary of the date of the award. No
assurance can be given that the headsets that are the subject of the agreement
with Northrop Grumman will be qualified for purchase by the military or that a
contract for the purchase of the headsets will by awarded by Northrop Grumman
to AMC. In addition, Mr. Dorney received $60,000 in consulting fees related
to AMC during 1996. See "PartI-Item 1-Business- Collaborative Arrangements-
Northrop Grumman Agreement".
During 1996 the Company paid an aggregate of $105,850 to Digital
Technologies, Inc., a software development company of which Gary A. Jones,
a director of the Company, is the President. Of this amount, $90,000 was for
software development fees and $15,850 was for reimbursable expenses.
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SIGNATURES
In accordance with the requirements of the Section 13 and 15(d) of the
Exchange Act, the Registrant caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.
ANDREA ELECTRONICS CORPORATION
By: /s/ Frank A.D. Andrea, Jr.
------------------------------------
Date: April 30, 1997 Frank A.D. Andrea, Jr.
Chairman of the Board
and Chief Executive Officer
In accordance with the Exchange Act, this report has been signed below
by the following persons on behalf of the Registrant and in the capabilities
and on the dates indicated.
/s/ Frank A.D. Andrea, Jr. Chairman of the Board April 30, 1997
- ------------------------- and Chief Executive Officer
Frank A.D. Andrea, Jr.
/s/ Patrick D. Pilch Executive Vice President April 30, 1997
- ------------------------- and Chief Financial Officer
Patrick D. Pilch
/s/ John N. Andrea Co-President April 30, 1997
- -------------------------
John N. Andrea
/s/ Douglas J. Andrea Co-President April 30, 1997
- -------------------------
Douglas J. Andrea
/s/ Jeffrey S. Gosman Vice President, April 30, 1997
- ------------------------- Controller
Jeffrey S. Gosman and Secretary
/s/ Christopher Dorney Director April 30, 1997
- -------------------------
Christopher Dorney
/s/ Gary A. Jones Director April 30, 1997
- -------------------------
Gary A. Jones
/s/ Scott Koondel Director April 30, 1997
- -------------------------
Scott Koondel
/s/ Paul M. Morris Director April 30, 1997
- -------------------------
Paul M. Morris
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