<PAGE>
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): January 27, 1998
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 January 27, 1998, Andrea Electronics Corporation (the "Registrant")
released financial information with respect to the year ended
December 31, 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
------ -----------
99.1 Press release dated January 27, 1998
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: February 2, 1998 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
- ---------------------
January 27, 1998
ANDREA ELECTRONICS CORPORATION ANNOUNCES STRONG RESULTS IN 1997
---------------------------------------------------------------
1997 HIGHLIGHTS
- ---------------
- - 1997 revenues up 186% vs. 1996 $26.4 million; Q4 revenues rise 107% to
$7.8 million vs. 1996;
- - 1997 net income of $3.4 million, or $0.39 per share, vs. 1996 net loss
of $0.3 million, or $0.05 per share;
- - Company extends procurement agreement to sell headsets, handsets &
microphones to IBM;
- - Company signs procurement agreement to sell headsets, handsets &
microphones to Lernout & Hauspie;
- - Company supplies PC headsets to Dragon Systems for its Dragon
NaturallySpeaking(Trademark) software;
- - Andrea headsets chosen for launch with Microsoft Internet Explorer 4.0;
- - Company receives patent allowance for certain ANC microphone and ANR
earphone technology;
- - Company introduces first ANR & ANC technology PC headset Andrea
QuietWare 1000 with ANC;
- - Company introduces its first wireless, infra-red headset, Andrea
WirelessSolutions;
- - Andrea Electronics common stock undergoes two-for-one split, paid out as
100 percent stock dividend;
- - Company launches four new retail products nationally.
<TABLE>
<CAPTION>
FINANCIAL SUMMARY TABLE
(in 000's except per share data)
QUARTER ENDED TWELVE MONTHS ENDED
------------- -------------------
12/31/97 12/31/96 12/31/97 12/31/96
-------- -------- -------- --------
<S> <C> <C> <C> <C>
TOTAL REVENUES: $7,754 $3,755 $26,430 $9,244
NET INCOME (LOSS) 562 859 3,414 (322)
NET INCOME (LOSS) PER N
COMMON SHARE:
(Basic) 0.07 0.12 0.42 (0.05)
(Diluted) 0.06 0.12 0.39 (0.05)
COMMON SHARES USED IN
COMPUTING PER SHARE DATA:
(Basic) 8,148,153 7,129,534 8,148,153 7,129,534
(Diluted) 8,862,263 7,129,534 8,862,263 7,129,534
</TABLE>
LONG ISLAND CITY, NEW YORK, JANUARY 27, 1998 -- Andrea Electronics
corporation (AMEX: AND) announced today that revenues for the twelve months
ended December 31, 1997, increased 186% to approximately $26.4 million
compared to approximately $9.2 million in the same period 1996. Net income
for the year ended December 31, 1997 was approximately $3.4 million, or $0.39
per share on a diluted basis, versus a net loss of $0.3 million, or ($0.05)
per share, for the year ended December 31, 1996.
For the fourth quarter ended December 31, 1997, revenues increased 107%
to approximately $7.8 million, up from $3.8 million in the same period 1996.
Net income for the fourth quarter 1997 fell 35% to approximately $0.6
million, or $0.06 per share, compared with net income of approximately $0.9
million, or $0.12 per share in the same period 1996.
The weighted average number of common equivalent shares outstanding used
to calculate diluted earnings per share, reflects the addition during 1997 of
approximately 800,000 shares pursuant to the Company's application of the
treasury stock method as required for the calculation of diluted earnings per
share by Statement of Financial Accounting Standards #128. 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.
John N. Andrea, Co-president of Andrea Electronics Corporation, said,
"The successful execution of our long-term business strategy is very evident
in our 1997 results. The Company introduced new products and technologies to
meet market requirements, and established and strengthened strategic
partnerships with industry leaders. We signed key licensing and procurement
agreements to further our OEM/software publisher relationships and devoted
considerable attention to expanding our channels of distribution, including
building the direct-to-consumer retail market.
"We have positioned Andrea Electronics to take advantage of future
growth opportunities in rapidly growing markets by entering into strategic
relationships, providing excellent products and technologies, continually
investing in research and development, and supporting our long-term business
and financial model with an exceptional balance sheet."
In commenting on the Company's positive results, Patrick D. Pilch,
Executive Vice President and Chief Financial Officer, said, "By all
accounts, 1997 was a year of very strong growth for Andrea Electronics. The
Company's revenues, driven by strong sales of Andrea Anti-Noise/TM/ products
under several agreements with leading original equipment manufacturers (OEMs)
and software publishers, close to tripled in 1997 versus the previous year.
In addition, the Company was able to achieve this growth through efficient
asset management, self-funding our business with no draw down on our $12
million revolving credit facility."
Andrea Electronics has fostered its growth within the computer audio
market based on a three-pronged strategy, which it implemented in 1997,
involving: 1) the identification of emerging market needs and development of
high-quality, cost-effective patented technologies to meet those needs; 2)
leverage of the price/performance strength of its technologies and products
to establish solid relationships with industry leaders; and 3) the expansion
of industry relationships to establish, and deepen channels of distribution,
and broaden brand recognition.
ANDREA ELECTRONICS IDENTIFIED EMERGING MARKET NEEDS AND DEVELOPED
TECHNOLOGIES TO MEET THEM
Andrea Electronics' strong performance in 1997 was propelled by the
growing acceptance of speech-driven computer applications, which have gained
widespread attention and support from industry leaders who believe they will
be the platforms for the next-generation computer-human interface -- the
voice.
In the third quarter of 1997, Andrea Electronics received a notice of
allowance for several unique embodiments of the Company's proprietary ANR
carphone technology and ANC, which the Company has incorporated into Andrea
QuietWare/TM/ 1000 with ANC headsets to produce the highest quality sound by
canceling background noise with ANC microphone and reducing ambient noise
with ANR earphone technology. The headsets range from light-weight form
factors for use with PCs to heavy-duty headsets for military and industrial
use. Most recently, the Company introduced Andrea WirelessSolutions, which
uses infra-red microphone technology.
In the third quarter of 1997, Andrea Electronics introduced six new
retail packages that include various software bundled with application-
specific Andrea Anti-Noise products. These include: ANDREA
VOICESOLUTIONS/TM/ for speech recognition; ANDREA NETSET/TM/ for Internet
telephony; and ANDREA GAMEWARE/TM/ for Internet gaming.
ANDREA ELECTRONICS LEVERAGED PRICE/PERFORMANCE STRENGTH TO ESTABLISH
RELATIONSHIPS WITH INDUSTRY LEADERS
By promoting Andrea Anti-Noise products as price/performance leaders in
the PC communications industry, in 1997 the Company succeeded in signing key
marketing, licensing and procurement agreements with leading voice-related
computer software companies, including:
- - IBM CORPORATION - In August 1997, 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(Registered Trademark)
PC headsets, handsets and microphones to IBM for packaging with a full line
of IBM's speech recognition software, including VoiceType/TM/ Simply Speaking
and VoiceType Simply Speaking Gold, as well as the new IBM ViaVoice/TM/ and
ViaVoice Gold continuous speech recognition programs.
- - MICROSOFT CORPORATION -- In April 1997, Andrea Electronics announced that
it had signed a licensing agreement with Microsoft allowing the Company to
sell Microsoft's NetMeeting/TM/ software with Andrea Anti-Noise headsets,
which have been endorsed and recommended by Microsoft's NetMeeting Group.
Andrea Active Noise Cancellation technology's ability to enhance the
performance of Microsoft's premiere videoconferencing software. NetMeeting
2.0 was a key factor in Microsoft's recommendation in August 1997 of Andrea
ANC headsets for use with Internet Explorer 4.0(Registered Trademark) (which
includes NetMeeting 2.0). As well, Microsoft Windows Hardware Qualification
Lab has certified Andrea ANC products for use with Windows 95(Registered
Trademark) and Windows NT(Registered Trademark), which incorporates
NetMeeting 2.0.
- - LERNOUT & HAUSPIE ("L&H")-- In December 1997, Andrea Electronics announced
that it has signed a joint licensing and marketing agreement with L&H
covering two key elements: first, for L&H to bundle various Andrea Anti-Noise
products with its continuous speech recognition software products, such as
Voice Xpress/TM/ and VoiceCommands/TM/, and second, for L&H to resell various
Andrea Anti-Noise products through its direct sales group to OEM, corporate
and retail customers for use with L&H speech recognition dictation, voice
verification and telecommunications software programs. The agreement
complements Andrea Electronics' existing agreement with L&H, under which
Andrea Electronics bundles various L&H/Kurzweil Applied Intelligence (a
subsidiary of L&H) speech recognition products with its Andrea Anti-Noise
products.
- - DRAGON SYSTEMS -- In July 1997, Andrea Electronics announced that it had
signed an agreement with Dragon to supply the Company's Noise Cancellation PC
headsets to Dragon Systems for use with Dragon NaturallySpeaking/TM/, the
first-ever general purpose large vocabulary continuous speech program.
Andrea Electronics Enters Internet Online Gaming Market
The voice-related computer applications that Andrea Electronics'
technologies enhance are extremely broad, and they are rapidly evolving as
speech recognition and network communications technology advances, bolstered
by the consumer acceptance of speech-to-text dictation and Internet telephony
in recent years. Andrea Electronics continues to identify markets of
exceptional growth and align itself with developmental pioneers in those
markets. For example, the Company has begun to establish a solid base from
which grow within the emerging online gaming industry, establishing marketing
and promotional relationships with online gaming software developers Mpath
and Imagic, developer of the number one online action game, WarBirds.
On January 26, 1998, the Company announced that it had signed an
agreement allowing Multitude Inc. to bundle both Andrea Electronics' NC-65
GameWare headset and Andrea AudioCOMMANDER(Registered Trademark) software
with its online game, FireTeam(Registered Trademark). Multitude's unique,
team-oriented game is made possible by technology developments centering on
patent-pending voice technology that enables real-time, hands-free
communication among team members. Andrea Electronics' noise canceling
headsets provide clarity to enhance the gaming experience in a form factor
specifically designed for gamers' comfort and ease of use.
Andrea Electronics Expanded on Relationships to Establish and Deepen Channels
of Distribution
While expanding its industry relationships, Andrea Electronics is also
turning its attentions increasingly towards establishing and broadening
channels of distribution towards the ultimate goal of becoming the recognized
audio technology standard worldwide. The Company made significant progress
in 1997 by using several strategies to penetrate applicable markets,
including targeting OEMs and software publishers to form strategic
partnerships, entering into co-licensing and marketing contracts and
participating in joint promotional efforts. In addition, in the latter part
of 1997 Andrea Electronics entered the retail market, pursuing direct to-
consumer sales at leading office supply and computer superstores, including
CompUSA and Staples, Inc. (Nasdaq:SPLS).
In September 1997, Andrea Electronics announced that CompUSA would begin
offering the Company's five retail products -- including Andrea NC-50 NetSet,
Andrea NC-65 GameWare and Andrea ANC-100, ANC-200 and ANC-550 VoiceSolutions
- --nationwide in CompUSA's 153 stores. While sell-through of initial shipments
in CompUSA stores were strong, the timing of anticipated subsequent orders,
which Andrea Electronics expected to book during the fourth quarter of 1997,
due to the disparate characteristics of the direct retail industry are
expected to be realized during the first half of 1998. Primarily for this
reason, revenues and earnings were below expectations in the fourth quarter
of 1997.
Andrea Electronics, however, announced on January 26 that the Company
is shipping two retail PC headset products to Staples, Inc. to launch Andrea
Electronics' presence in Staples 600 stores nationwide. Sales of Andrea
Electronics' retail products are scheduled to begin in early February 1998,
and coinciding advertisements will commence immediately thereafter. With
average annual sales of approximately $4.8 billion, Staples currently ranks
as the second largest office supply retail superstore in the United States.
Recently, Andrea Electronics retained Top Sales, a selling organization
in 16 states and Puerto Rico, to provide retail sales and relationship
management services through experienced sales representatives that bring
added value to Andrea Electronics' retail business strategy with their long-
term customer relationships throughout all major distribution segments.
"We are pleased to be working with Top Sales and are confident that the
extensive experience, knowledge, visibility and relationships Top Sales has
garnered in its 35+ years in the retail sales business will give us a
considerable edge in expanding our retail penetration smoothly and
successfully," said Mr. Andrea.
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.
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<CAPTION>
ANDREA ELECTRONICS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Years Ended December 31,
--------------------------------
1997 1996 1995
------------- -------------- --------------
<S> <C> <C> <C>
SALES $26,429,804 $9,244,109 $5,440,792
COST OF SALES 16,077,801 5,913,091 3,190,226
------------- -------------- --------------
Gross Profit 10,352,003 3,331,018 2,250,566
RESEARCH AND DEVELOPMENT EXPENSES 1,106,880 988,483 976,344
GENERAL, ADMINISTRATIVE AND
SELLING EXPENSES 5,753,130 3,872,919 2,925,460
------------- -------------- --------------
Income (loss) from operations 3,491,993 (1,530,384) (1,651,238)
------------- -------------- --------------
OTHER INCOME (EXPENSE)
Interest income 64,873 57,599 159,464
Interest expense (228,029) (293,290) (10,746)
Rent and miscellaneous income 240,020 221,858 226,605
------------- -------------- ---------------
76,864 (13,833) 375,323
------------- -------------- ---------------
INCOME (LOSS) BEFORE INCOME
TAX PROVISION BENEFIT 3,568,857 (1,544,217) (1,275,915)
INCOME TAX PROVISION (BENEFIT) 154,461 (1,222,000)
------------- -------------- ---------------
NET INCOME (LOSS) $3,414,396 $(322,217) $(1,275,915)
============= ============== ===============
PER SHARE INFORMATION
NET INCOME (LOSS) PER SHARE:
BASIC $ 0.42 $ (O.05) $ (0.21)
============= ============== ===============
DILUTED $ 0.39 $ (O.05) $ (0.21)
============= ============== ===============
SHARES USED IN COMPUTING NET
INCOME (LOSS) PER SHARE:
BASIC 8,148,153 7,129,534 6,259,080
============= ============== ===============
DILUTED 8,862,263 7,129,534 6,259,080
============= ============== ===============
</TABLE>
<TABLE>
<CAPTION>
ANDREA ELECTRONICS CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31,
--------------------------------------------------
1997 1996
---- ----
<S> <C> <C>
ASSETS
------
CURRENT ASSETS
Cash and cash equivalents $ 2,059,338 $ 921,065
Marketable securities 102,717 197,697
Accounts receivable, net of allowance
for doubtful accounts of $52,251 4,568,433 2,678,449
Inventories, net 5,766,927 4,774,175
Deferred income taxes 909,569 1,222,000
Prepaid expenses and other current assets 1,023,661 132,691
----------------- -----------------
TOTAL CURRENT ASSETS 14,430,645 9,926,077
PROPERTY, PLANT AND EQUIPMENT, net 1,022,342 868,173
DEFERRED INCOME TAXES 897,046 --
OTHER ASSETS 1,439,151 --
----------------- -----------------
TOTAL ASSETS $17,789,184 $10,794,250
================= =================
LIABILITIES AND
---------------
STOCKHOLDERS' EQUITY
--------------------
CURRENT LIABILITIES
Current maturities of capital lease obligations $ -- $ 4,685
Trade accounts payable 966,783 822,400
Accrued salaries and wages payable 57,991 62,920
Convertible debentures, net 1,193,472 --
Other current liabilities 425,740 199,998
----------------- -----------------
TOTAL CURRENT LIABILITIES 2,643,986 1,090,003
----------------- -----------------
CONVERTIBLE DEBENTURES -- 2,157,786
OTHER LIABILITIES 38,500 1,090,003
----------------- -----------------
TOTAL LIABILITIES 2,682,486 3,286,289
----------------- -----------------
SHAREHOLDERS' EQUITY
Common stock, $0.50 par value; authorized: 10,000,000
shares; issued and outstanding; 8,706,692 and
7,584,394 shares, respectively 4,353,346 3,792,198
Additional paid-in capital 9,881,915 6,258,722
Retained earnings (accumulated deficit) 871,437 (2,542,959)
----------------- -----------------
TOTAL SHAREHOLDERS' EQUITY $15,106,698 $7,507,961
================= =================
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $17,789,184 $10,794,250
================= =================
</TABLE>
