As filed with the Securities and Exchange Commission on December 7, 2000
Registration No.
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-------------------
FORM S-3
REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933
-------------------
ANDREA ELECTRONICS CORPORATION
(Exact name of registrant as specified in its charter)
NEW YORK 11-0482020
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
45 MELVILLE PARK ROAD
MELVILLE, NEW YORK 11747
(631) 719-1800
-------------------
(Address, including zip code, and telephone number, including area
code, of registrant's principal executive offices)
JOHN N. ANDREA
CO-CHAIRMAN AND CO-CHIEF EXECUTIVE OFFICER
ANDREA ELECTRONICS CORPORATION
45 MELVILLE PARK ROAD
MELVILLE, NEW YORK 11747
(631) 719-1800
-------------------
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
with a copy to:
ALAN L. JAKIMO, ESQ.
BROWN & WOOD LLP
ONE WORLD TRADE CENTER
NEW YORK, NEW YORK 10048
(212) 839-5300
-------------------
Approximate date of commencement of proposed sale to the public: FROM TIME
TO TIME AFTER THE EFFECTIVE DATE OF THIS REGISTRATION STATEMENT.
-------------------
<PAGE>
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the
following box. | |
If any of the Securities being registered on this Form are to be offered
on a delayed or continuous basis pursuant to Rule 415 under the Securities Act
of 1933, as amended (the "Securities Act"), other than securities offered only
in connection with dividend or interest reinvestment plans, check the
following box. |X|
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement from the same offering. | |
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. | |
If delivery of the prospectus is expected to be made pursuant to Rule
434, check the following box. | |
<TABLE>
<CAPTION>
Calculation of Registration Fee
Proposed Maximum Proposed Maximum
Amount to be Offering Price Per Aggregate Offering Amount of
Title of Shares to be Registered Registered Unit Price Registration Fee
---------------------------------- ----------------- -------------------- --------------------- ------------------
<S> <C> <C> <C> <C>
Common Stock................. 320,760 $3.325(1) $1,066,527 $282
Common Stock Issuable Upon 2,142,298(2) $3.325(1) $7,123,141 $1,881
Conversion of Series C
Convertible Preferred Stock
--------------------------- ----------------- -------------------- --------------------- ------------------
Totals 2,463,058 $8,189,668 $2,163
</TABLE>
(1) Estimated solely for the purpose of computing the registration fee
pursuant to Rule 457(c) of the Securities Act of 1933, as amended,
and based on the average of the high and low prices as quoted on the
American Stock Exchange on November 30, 2000.
(2) Shares of Common Stock that may be offered pursuant to this registration
statement consist of shares that may be issuable upon conversion of
Series C convertible preferred stock. For purposes of estimating the
number of shares of Common Stock to be included in this registration
statement, we included 2,142,298 shares, representing 200% of the number
of shares of Common Stock issuable upon conversion in full of the
outstanding Series C convertible preferred stock as of December 5, 2000
at a conversion price of $7.0565 per share, plus shares that may be
issued as the result of any stock split, stock dividend or similar
transaction as provided by Rule 416 of the Securities Act.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(a) OF THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION
STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE
COMMISSION, ACTING PURSUANT TO SECTION 8(a), MAY DETERMINE.
(Subject to Completion, December 7, 2000)
<PAGE>
Prospectus
ANDREA ELECTRONICS CORPORATION
45 Melville Park Road
Melville, New York 11747
2,463,058 Shares
COMMON STOCK
(Par Value $.50 Per Share)
This prospectus relates to 2,463,058 shares of our common stock which may
be sold from time to time by the selling stockholders, including their
transferees, pledgees, donees or successors.
The shares of common stock are comprised of (i) 2,142,298 shares that may
may be issued upon the conversion of our Series C convertible preferred stock
and (ii) 320,760 shares of common stock which are currently outstanding and
were issued in connection with the our acquisition in May 1998 of Lamar Signal
Processing, Ltd. The Series C convertible preferred stock was issued and sold
on October 10, 2000 to the selling stockholders pursuant to a Securities
Purchase Agreement, dated October 5, 2000, in a private placement exempt from
the registration requirements of the Securities Act of 1933. The holder of the
Series C convertible preferred stock and the holders of the common stock that
are outstanding are described in the section "Selling Stockholders" beginning
on page 18.
The shares are being registered to permit the selling stockholders to
sell the shares from time to time in the public market. The selling
stockholders, or their pledgees, donees, transferees, or other successors in
interest, may sell the common stock from time to time on the American Stock
Exchange, in the over-the-counter market, in a negotiated transaction or in a
combination of such methods of sale, at market prices prevailing at the time
of sale, at prices related to such prevailing market prices or at prices
otherwise negotiated. See "Plan of Distribution" beginning on page 29. We can
not assure you that the selling stockholders will sell all or any portion of
the common stock offered hereby.
We will not receive any of the proceeds from the sale of these shares,
although we have paid the expenses of preparing this prospectus and the
related Registration Statement.
Our common stock is quoted on the American Stock Exchange under the
symbol "AND." On November 30, 2000, the last reported sale price for the
common stock on the American Stock Exchange was $3.29 per share.
Our principal executive offices are located at 45 Melville Park Road,
Melville, New York, 11747. Our telephone number is (631) 719-1800.
INVESTING IN THE COMMON STOCK INVOLVES A HIGH DEGREE OF RISK. YOU SHOULD
CAREFULLY READ THE "RISK FACTORS" SECTION OF THIS PROSPECTUS BEGINNING ON PAGE
7 OF THIS PROSPECTUS.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED THESE SECURITIES OR DETERMINED WHETHER
THIS PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
The date of this prospectus is December __, 2000
<PAGE>
TABLE OF CONTENTS
SUMMARY......................................................................1
WHERE YOU CAN FIND MORE INFORMATION..........................................1
INCORPORATED DOCUMENTS.......................................................2
CERTAIN INFORMATION REGARDING THE SERIES C CONVERTIBLE
CONVERTIBLE PREFERRED STOCK..............................................3
THE COMPANY..................................................................5
FORWARD LOOKING STATEMENTS...................................................7
RISK FACTORS.................................................................7
USE OF PROCEEDS.............................................................18
SELLING STOCKHOLDERS........................................................18
DESCRIPTION OF CAPITAL STOCK................................................19
NEW YORK ANTI-TAKEOVER LAW..................................................28
PLAN OF DISTRIBUTION........................................................29
LEGAL MATTERS...............................................................31
EXPERTS.....................................................................31
You should only rely on the information incorporated by reference or
provided in this prospectus or any supplement. We have not authorized any
person to provide you with any different information. If anyone provides you
with different or inconsistent information you should not rely on it. The
common stock is not being offered in any state where the offer is not
permitted. You should not assume that the information in this prospectus or
any supplement is accurate as of any date other than the date on the front of
this prospectus.
The information in this prospectus may not contain all of the information
that may be important to you. You should read the entire prospectus, as well
as the documents incorporated by reference in the prospectus, before making an
investment decision.
All references to "we," "us," "our," "Andrea" or the "Company" in this
prospectus mean Andrea Electronics Corporation and its subsidiaries.
"Andrea Anti-Noise," "Andrea QuietWare," and "Technology Enhancing
Communications" are registered trademarks of Andrea. "Andrea DSDA" and "Andrea
DSP Microphone and Software Products" are trademarks of Andrea. All other
trademarks in this prospectus are the trademarks of their respective owners.
<PAGE>
Summary
On behalf of the selling stockholders identified later in this
prospectus, we are registering for resale 2,463,058 shares of common stock
comprised of (i) 2,142,298 shares which are issuable in connection with the
potential conversion of up to 750 shares of Series C convertible preferred
stock, par value $0.01 per share and (ii) 320,760 shares of common stock which
are currently outstanding and were issued in connectionwith the our
acquisition in May 1998 of Lamar Signal Processing, Ltd.
The number of shares of common stock that we will issue in connection
with the conversion of the Series C convertible preferred stock may vary from
time to time depending on the prevailing market price of our common stock.
You should read the following information about our company, together
with the more detailed information about the securities underlying this
offering, contained elsewhere in this prospectus. In particular, you should
read the section entitled "Risk Factors," which explains that your investment
in shares of our common stock involves a high degree of risk. Our financial
statements and related notes are not included in this prospectus, but are
incorporated by reference in the exhibits located at the end of this
prospectus.
Where You Can Find More Information
We file annual, quarterly and periodic reports, proxy statements and
other information with the Securities and Exchange Commission using the
Commission's EDGAR system. You may inspect these documents and copy
information from them at the Commission's public reference facilities at 450
Fifth Street, N.W., Washington, D.C. 20549 or at the regional offices of the
Commission at Citicorp Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661 and Seven World Trade Center, Suite 1300, New York, New York
10048. Copies of such material can be obtained at prescribed rates from the
Public Reference Section of the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549. The Commission maintains a Web site that contains
reports, proxy and information statements and other information regarding
registrants that file electronically with the Commission. The address of such
site is http//www.sec.gov.
We have filed a registration statement with the Commission relating to
the offering of the common stock. The registration statement contains
information which is not included in this prospectus. You may inspect or copy
the registration statement at the Commission's public reference facilities or
its Web site.
We furnish our stockholders with annual reports containing audited
financial statements and with such other periodic reports as we from time to
time deem appropriate or as may be required by law.
Our common stock is listed on AMEX under the symbol "AND."
<PAGE>
Incorporated Documents
We have filed the following documents with the Commission. We are
incorporating these documents in this prospectus, and they are a part of this
prospectus.
(1) Our Annual Report on Form 10-K for the fiscal year ended December
31, 1999 (including information specifically incorporated by
reference into our Form 10-K from our definitive Proxy Statement for
our 2000 Annual Meeting of Stockholders);
(2) Our Quarterly Reports on Form 10-Q for the quarters ended March 31,
2000, June 30, 2000 and September 30, 2000;
(3) Our Current Report on Form 8-K dated October 12, 2000; and
(4) The description of our common stock, par value $.50 per share,
contained in (i) our registration statement filed under the Exchange
Act of 1934, as amended, No. 1-4324, as declared effective on
February 28, 1967, (ii) Article Third of our Restated Certificate of
Incorporation filed as Exhibit 3.1 to our Current Report on Form 8-K
dated November 30, 1998 as amended by our certificate of Amendment
dated June 10, 1999 filed as Exhibit 3.1 to our Current Report on
Form 8-K dated June 18, 1999 and as subsequently amended by our
Certificate of Amendment dated October 5, 2000 filed as Exhibit 3.1
to our Current Report on Form 8-K dated October 12, 2000 and (iii)
any subsequent amendment(s) or report(s) filed for the purpose of
updating such description.
We are also incorporating by reference in this prospectus all documents
which we file pursuant to Section 13(a), 13(c), 14 or 15 of the Securities
Exchange Act of 1934, as amended after the date of this prospectus. Such
documents are incorporated by reference in this prospectus and are a part of
this prospectus from the date we file the documents with the Commission.
If we file with the Commission any document that contains information
which is different from the information contained in this prospectus, you may
rely only on the most recent information which we have filed with the
Commission.
We will provide a copy of the documents referred to above without charge
if you request the information from us. Requests for such copies should be
directed to us at our principal executive offices at Andrea Electronics
Corporation, 45 Melville Park Road, Melville, New York, 11747, attention:
Secretary or (631) 719-1800.
<PAGE>
Certain Information Regarding the Series C Convertible Preferred Stock
The 750 shares of Series C convertible preferred stock were issued and
sold on October 10, 2000 to HFTP Investment L.L.C., pursuant to a Securities
Purchase Agreement, dated October 5, 2000, in a private placement exempt from
the registration requirements of the Securities Act of 1933. See "Selling
Stockholders" beginning on Page 18.
Conversion
Each share of Series C convertible preferred stock is convertible into
that number of shares of our common stock equal to (i) $10,000, plus any
accrued premium of 5% per annum, divided by (ii) the applicable conversion
price described below. Until the nine month anniversary of the initial
issuance of the Series C convertible preferred stock, the applicable
conversion price is equal to $7.0565, which is 110% of the average of the two
lowest closing bid prices of our common stock during the five consecutive
trading days immediately preceding the initial issuance date. After the first
nine months, the conversion price will be reset every six months to the lesser
of the then applicable conversion price and the average of the two lowest
closing bid prices of our common stock during the five consecutive trading days
immediately preceding the six-month reset dates. For the period beginning on
the day two years after the initial issuance and ending on the maturity of the
Series C convertible preferred stock, the conversion price will equal the
least of (i) the then applicable conversion price, (ii) the average of the two
lowest closing bid prices of our common stock during the 15 consecutive
trading days immediately preceding such two year date, and (iii) the closing
bid price on the date of conversion. The applicable conversion price during
all periods is subject to adjustment, as provided in the Certificate of
Amendment setting forth the rights, privileges and limitations of the Series C
convertible preferred stock. If we or the transfer agent does not timely effect
a conversion or reissuance of the remaining shares of Series C convertible
preferred stock, we are subject to certain cash penalties, adjustments to the
applicable conversion price and certain other penalties as more fully described
in the Certificate of Amendment.
In addition, if the holders of the Series C convertible preferred stock
submit a conversion request and we are not able to issue the required amount
of shares of common stock due to our inability to comply with the rules of the
American Stock Exchange, under the Certificate of Amendment, a "Triggering
Event" would occur. In such event, the Company could be required by the
holders to redeem all or a portion of such holder's shares of Series C
convertible preferred stock at a price equal to the greater of (i) 120% of the
liquidation value of the Series C convertible preferred stock, which per share
is $10,000 plus an additional accrued premium, and (ii) the product of (A) the
conversion rate at such time, and (B) the greater of (I) the closing bid price
of our common stock on the trading day immediately preceding such Triggering
Event or (II) the closing bid price of our common stock on the date of the
holder's delivery to us of a notice or, if such date of delivery is not a
trading day, the next date on which the exchange or market on which our common
stock is traded is open. In addition, if we fail to redeem at the holder's
request upon the Triggering Event, we shall, if so directed by the holders of
a majority of the shares of Series C convertible preferred stock then
outstanding, issue to each holder of shares of Series C convertible preferred
stock in exchange for such holder's shares of Series C convertible preferred
stock a senior secured note in the amount of the applicable redemption price
of such holder's shares of Series C convertible preferred stock. The senior
secured notes shall have a term of one week, shall be senior to any other of
our indebtedness and shall contain other mutually acceptable credit terms.
The shares of Series C convertible preferred Stock are presently
convertible. The holders of the Series C convertible preferred stock are
prohibited in the Certificate of Amendment from converting their respective
holdings of the Series C convertible preferred stock if after giving effect to
such conversion the holder would beneficially own in excess of 4.99% or, over
any sixty day period, 9.99% of the outstanding shares of our common stock
following such conversion. This calculation excludes the number of shares of
common stock which would be issuable upon (1) conversion of the remaining,
nonconverted shares of Series C convertible preferred stock beneficially owned
by the holder and its affiliates, (2) conversion of any of our Series B
convertible preferred stock or exercise of the warrants issued in connection
with the Series B convertible preferred stock beneficially owned by the
holders and its affiliates and (3) the exercise or conversion of any of the
unexercised or unconverted portion of any of our other securities (including,
without limitation, any warrants or convertible preferred stock) subject to a
limitation on conversion or exercise analogous to this limitation beneficially
owned by the holder and its affiliates. The Series C convertible preferred
stock will convert automatically into shares of our common stock at the
applicable conversion price then in effect on the date two years after the
initial issuance, to the extent any shares of the applicable issuance of
Series C convertible preferred stock remain outstanding. In the event we are
unable to convert any Series C convertible preferred stock due to restrictions
set forth in the Certificate of Amendment, we shall redeem the shares that
could not be converted due to certain of such restrictions for an amount in
cash per share equal to $10,000, plus the accrued premium of 5% per annum to
the two year anniversary of the initial issuance. The maturity date for the
Series C convertible preferred stock may be extended beyond the two year
anniversary of the initial issuance under certain circumstances set forth in
the Certificate of Amendment.
The table below sets forth the identity of the holder of the outstanding
Series C convertible preferred stock, the number of shares of Series C
convertible preferred stock owned by the holder, the number of shares of
common stock issuable upon conversion of all the outstanding Series C
convertible preferred stock (without regard to any limitations on conversion)
and the percentage of outstanding common stock represented by the shares
issuable upon conversion. The "Shares of Common Stock Issuable Upon
Conversion" column assumes a conversion date of November 30, 2000. The
"Percentage of Outstanding Common Stock" column is based on 13,897,572 shares
of common stock outstanding as of November 30, 2000 and does not give effect
to any limitations on conversion.
<TABLE>
<CAPTION>
Shares of Series C Shares of Common Percentage of
Stock Beneficially Stock Issuable Outstanding Common
Series C Stockholder Owned Upon Conversion(1) Stock
-------------------------------------------------------- -------------------- -------------------- -------------------
<S> <C> <C> <C>
HFTP Investment L.L.C.(2) 750 1,070,275 7.7
</TABLE>
(1) Computed by dividing the per share stated value of $10,000 plus an
additional amount of 5% per annum, by a conversion price of $7.0565, the
initial conversion price. This column also assumes that the additional
amount per share is paid in common stock, rather than in cash. See
"Description of Capital Stock -- Series C Convertible Preferred Stock."
(2) Promethean Asset Management, LLC, a New York limited liability company,
serves as investment manager to HFTP Investment L.L.C. and may be deemed
to share beneficial ownership of the shares beneficially owned by HFTP by
reason of shared power to vote and to dispose of the shares beneficially
owned by HFTP. Promethean disclaims beneficial ownership of the shares
beneficially owned by HFTP. Mr. James F. O'Brien, Jr. indirectly controls
Promethean. Mr. O'Brien disclaims beneficial ownership of the shares
beneficially owned by Promethean and HFTP.
The following table illustrates, as of any reset date and assuming the
conversion price indicated is lower than the then applicable conversion price
on that date, the varying amounts of shares of common stock that would be
issuable upon conversion of all outstanding 750 shares of Series C convertible
preferred stock at the indicated conversion prices (without regard to any
limitations on conversion) and assuming that the 5% additional amount is paid
in cash:
<TABLE>
<CAPTION>
Number of Shares of Common Stock Percentage of Outstanding Common
Conversion Price Issuable Upon Conversion Stock(1)
----------------------------------------- -------------------------------------- -------------------------------------
<S> <C> <C>
$4.00 1,875,000 13.5
$5.00 1,500,000 10.8
$6.00 1,250,000 9.0
$7.00 1,071,429 7.7
$8.00 937,500 6.7
----------------------
(1) Based on 13,897,572 shares of common stock outstanding as of November 30,
2000.
</TABLE>
The holders of the Series C convertible preferred stock are prohibited in
the Certificate of Amendment from converting their respective holdings of the
Series C convertible preferred stock if after giving effect to such conversion
the holder would beneficially own in excess of 4.99% or, over any sixty day
period, 9.99% of the outstanding shares of our common stock following such
conversion. This calculation excludes the number of shares of our common stock
which would be issuable upon (1) conversion of the remaining, nonconverted
shares of Series C convertible preferred stock beneficially owned by the
holder and its affiliates, (2) conversion of any of our Series B convertible
preferred stock or exercise of the warrants issued in connection with the
Series B convertible preferred stock beneficially owned by the holders and its
affiliates and (3) the exercise or conversion of any of the unexercised or
unconverted portion of any of our other securities (including, without
limitation, any warrants or convertible preferred stock) subject to a
limitation on conversion or exercise analogous to this limitation beneficially
owned by the holder and its affiliates.
For a description of other important terms of the Series C convertible
preferred stock, see "Description of Capital Stock-Series C Convertible
Preferred Stock."
The Company
Our mission is to provide the emerging "voice interface" markets with
state-of-the-art communications products that facilitate natural language,
human/machine interfaces.
Examples of the applications and interfaces for which Andrea Anti-Noise
Products and Andrea digital signal processing, or DSP, Microphone and Software
Products provide benefits include: Internet and other computer-based speech;
telephony communications; telematics; multi-point conferencing; speech
recognition; multimedia; multi-player Internet and CD ROM interactive games;
military and commercial aircraft communications; and other applications and
interfaces that incorporate natural language processing. We believe that end
users of these applications and interfaces will require high quality
microphone and earphone products that enhance voice transmission, particularly
in noisy environments, for use with personal computers, mobile personal
computing devices, military and commercial aircraft systems, cellular and
other wireless communication devices and automotive communication systems.
High quality audio communication technologies will also be required for
emerging "far-field" voice applications, ranging from continuous speech
dictation, to multiparty video teleconferencing and collaboration, to natural
language-driven interfaces for automobiles, home and office automation and
other machines and devices into which voice-controlled microprocessors are
expected to be introduced during the next several years.
Our strategy is to maintain and extend our market position with our
Andrea Anti-Noise Products; broaden our Andrea Anti-Noise Product lines and
Andrea DSP Microphone and Software Product lines through internal research and
development and, from time to time, strategic acquisitions; design our
products to satisfy specific end-user requirements identified by our
collaborative partners; and outsource manufacturing of certain products in
order to achieve economies of scale. An important element of our strategy for
expanding the channels of distribution and broadening the base of users for
our products is our collaborative arrangements with OEMs, software publishers,
and distributors and retailers actively engaged in the various markets in
which our products have application. Under some of these arrangements, we
supply our products for sale by our collaborative partners. Under others, the
collaborative partners supply us with software that we include with our
products. In addition, we have been increasing our own direct marketing
efforts.
The success of our strategy will depend on our ability to, among other
things, increase sales of our line of existing Andrea Anti-Noise Products and
Andrea DSP Microphone and Software Products, contain costs, manage growth,
introduce additional Andrea Anti-Noise Products and Andrea DSP Microphone and
Software Products, maintain the competitiveness of our technologies through
successful research and development, and achieve widespread adoption of our
products and technologies.
In order to complement our internal efforts to develop DSP technology, in
May 1998, we acquired Lamar Signal Processing, Ltd., an Israeli corporation
engaged in the development of DSP noise cancellation microphone solutions for
voice-driven interfaces covering a wide range of audio and acoustic
applications. This acquisition resulted in a substantial amount of goodwill.
The amortization of this goodwill had, and will continue to have, a negative,
non-cash impact on our results of operations.
We outsource the assembly of most of our Andrea Anti-Noise Products from
purchased components, and we are currently assembling our Andrea DSP
Microphone and Software Products from purchased components at our New York and
Israeli facilities. We manufacture our Aircraft Communications Products at our
New York facility.
The interim results of operations of the Company presented in this report
are not necessarily indicative of the actual sales or results of operations to
be realized for the full year.
We cannot assure you that we will be able to accomplish these objectives.
We have been engaged in the electronic communications industry since
1934. For several decades prior to our entry into the voice-activated
computing market in the 1990's, our primary business was selling intercom
systems for military and industrial use. We continue to manufacture
replacement parts for these systems, but we do not expect revenue from this
business to increase materially. We are seeking to apply our knowledge of the
military and industrial markets to develop applications of our Andrea
Anti-Noise technologies for these markets. We cannot, however, assure you that
these efforts will succeed, and we do not expect any material revenues from
such new products for the foreseeable future.
Forward Looking Statements
We make certain "forward-looking statements" within the meaning of
Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended, throughout this prospectus and in
the documents we incorporate by reference into this prospectus. The words
"anticipates," "believes," "estimates," "expects," "intends," "plans,"
"seeks," variations of such words, and similar expressions are intended to
identify forward-looking statements. We have based these forward-looking
statements on our current expectations, estimates and projections about our
business and industry, our beliefs and certain assumptions made by our
management. Investors are cautioned that matters subject to forward-looking
statements involve risks and uncertainties including economic, competitive,
governmental, technological and other factors which may affect our business
and prospects. These statements are not guarantees of future performance and
are subject to certain risks, uncertainties and assumptions that are difficult
to predict. Important factors which could cause our actual results to differ
materially from the forward-looking statements in this prospectus include, but
are not limited to, those identified in this prospectus under "Risk Factors"
and those described in Management's Discussion and Analysis of Financial
Conditions and Results of Operations in our Form 10-K for the fiscal year
ended December 31, 1999, the Form 10-Q for the quarter ended March 31, 2000,
the Form 10-Q for the quarter ended June 30, 2000, the Form 10-Q for the
quarter ended September 30, 2000 and in any other filings which are
incorporated by reference in this prospectus.
You should read this prospectus and the documents that we incorporate by
reference into this prospectus completely and with the understanding that our
actual future results may be materially different from what we expect. We may
not update these forward-looking statements, even though our situation will
change in the future. All forward-looking statements attributable to us are
expressly qualified by these cautionary statements.
Risk Factors
An investment in our common stock involves a high degree of risk. You
should consider carefully, along with other factors, the following risks and
should consult with your own legal, tax and financial advisors.
Our Operating Results are Subject to Significant Fluctuation
Our results of operations have historically been and are subject to
continued substantial annual and quarterly fluctuations. The causes of these
fluctuations include, among other things:
o the volume of sales of our products under our collaborative
marketing arrangements;
o the cost of development of our products under our collaborative
development arrangements;
o the mix of products we sell;
o the mix of distribution channels we use;
o the timing of our new product announcements and releases and those
of our competitors;
o fluctuations in the computer and communications hardware and
software marketplace; and
o general economic conditions.
We cannot assure that the level of sales and gross profit, if any, that
we achieve in any particular fiscal period will not be significantly lower
than in other fiscal periods. Our revenues for the year ended December 31,
1999 were approximately $17.1 million compared to approximately $21.3 million
in calendar 1998. For the year ended December 31, 1999, we had a net loss of
approximately $7.1 million versus a net loss of $6.4 million for the year
ended December 31, 1998. For the first nine months ended September 30, 2000,
our revenues were approximately $11.7 million compared to revenues of
approximately $13.3 million over the same period in 1999. For the first nine
months ended September 30, 2000, we had a net loss of approximately $7.0
million compared to a net loss of approximately $5.2 million in the same
period in 1999.
While we are examining opportunities for cost-reduction, production
efficiencies and further diversification of our business, we may continue to
accumulate losses and the market price of our common stock could decline. In
order to remain competitive, we intend to continue to incur substantial
research and development, marketing and general and administrative expenses.
These expenses may not be necessarily or easily reduced if sales revenue is
below expectations and, therefore, net income or loss may be
disproportionately affected by any reduction in sales revenue. Accordingly, we
believe that period-to-period comparisons of our results of operations may not
necessarily be meaningful and should not be relied upon as indications of
future performance.
Our Stock Price Has Been and May Continue to be Volatile
The market price of our common stock has historically been highly
volatile and could be subject to wide fluctuations in response to quarterly
and annual variations in our results of operations, losses of significant
customers, announcements of technological innovations or new products by us or
our competitors, changes in the outlook of our industry, our company and our
competitors by securities analysts, or other events or factors, including the
risk factors described in this prospectus. In addition, the stock market has
experienced significant price and volume fluctuations that have particularly
affected the market prices of equity securities of many high technology
companies and that often have been unrelated to the operating performance of
such companies.
Meeting Our Future Capital Needs May Adversely Affect Our Business and be
Dilutive to Existing Shareholders
Our future capital requirements will depend on numerous factors,
including:
o the costs associated with developing, manufacturing and
commercializing our products;
o maintaining existing, or entering into future, collaborative
marketing and distribution agreements;
o protecting intellectual property rights; and
o expanding facilities and consummating possible future acquisitions
of technologies, products or businesses.
From time to time during the past several years, we have raised
additional capital from external sources. We may continue to have to raise
additional capital from external sources. These sources may include private or
public financings through the issuance of debt, convertible debt or equity, or
collaborative arrangements. We cannot assure that additional capital will be
available on favorable terms, if at all. If adequate funds are not available,
we may be required to significantly reduce or refocus our operations or to
obtain funds through arrangements that may require us to relinquish rights to
certain of our products, technologies or potential markets, which would have a
material adverse effect on our business, results of operations and financial
condition. To the extent that additional capital is raised through the sale of
equity, the issuance of such securities would result in ownership dilution to
our existing stockholders. In June 1999, we sold $7.5 million of Series B
convertible preferred stock and a related warrant for 75,000 shares of our
common stock. In October 2000, we sold $7.5 million of Series C convertible
preferred stock and, under certain conditions, we may be obligated to sell up
to an additional $2.5 million of Series C convertible preferred stock. We
cannot assure you that such conditions will be satisfied or, if they are, that
we will sell any additional Series B convertible preferred stock, warrants or
Series C convertible preferred stock.
Shares Eligible for Future Sale May Have an Adverse Effect on Market Price; You
May Experience Substantial Dilution
Sales of a substantial number of shares of our common stock in the public
market could have the effect of depressing the prevailing market price of the
our common stock. The authorized capital stock of the Company consists of (i)
35,000,000 shares of Common Stock, of which as of November 30, 2000,
13,897,572 shares were issued and outstanding, and 5,243,125 shares were
issuable and reserved for issuance pursuant to the Company's stock option and
purchase plans and (ii) 5,000,000 shares of preferred stock, of which as of
November 30, 2000, (A) 1,500 shares were designated as Series B convertible
preferred stock, of which 500 shares were issued and outstanding, (B) 25,000
shares are issuable and reserved for issuance pursuant to the Company's Rights
Plan, and (C) 1,000 shares were designated as Series C convertible preferred
stock, of which 750 shares were issued and outstanding. To the extent that the
Series B convertible preferred stock is converted, the related warrant is
exercised, the Series C convertible preferred stock is converted, such options
are exercised or we issue additional shares of capital stock, the ownership
interests of holders of common stock would be diluted.
We have 500 shares of Series B convertible preferred stock and a warrant
for 75,000 shares of common stock outstanding. The number of shares of common
stock issuable upon the conversion of the Series B convertible preferred stock
depends on the prices of the common stock as quoted on the American Stock
Exchange immediately before the date of conversion. We cannot predict the
price of the common stock in the future. Based on an assumed conversion date
of November 30, 2000 the applicable conversion price for the Series B
convertible preferred stock would be $2.22. If all of the 500 shares of Series
B convertible preferred stock outstanding were converted at this conversion
price (without regard to any limitations on conversion) and assuming the 4%
additional amount were paid in shares of common stock, the Series B
convertible preferred stock would be convertible into 2,383,315 shares of
common stock, or 17.1% of the outstanding shares of common stock as of
November 30, 2000. If the price of our common stock decreases over time, the
number of shares of common stock issuable upon conversion of the Series B
convertible preferred stock will increase and the holders of common stock
would experience substantial dilution of their investment.
We have 750 shares of Series C convertible preferred stock outstanding
and, subject to certain conditions and limitations, the holder has the right
until April 11, 2002 to purchase up to an additional 250 shares of Series C
convertible preferred stock. After the nine month anniversary of the initial
issuance, the conversion price of the Series C convertible preferred stock
will be reset every 6 months and the number of shares of common stock issuable
upon the conversion of the Series C convertible preferred stock will depend on
the prices of the common stock as quoted on the American Stock Exchange
shortly before the 6 month reset dates. We cannot predict the price of our
common stock in the future. Based on an assumed conversion date of November
22, the applicable conversion price for the Series C convertible preferred
stock was $7.0565. If all of the 750 shares of Series C convertible preferred
stock outstanding and assuming all 250 shares subject to the option described
above were outstanding and converted at this conversion price (without regard
to any limitations on conversion) and assuming the 5% additional amount on the
750 shares of outstanding Series C were paid in shares of common stock and
assuming no additional amount was paid on the additional 250 shares, the
Series C convertible preferred stock would be convertible into 1,424,558
shares of common stock, or 10.3% of the outstanding shares of common stock as
of November 30, 2000. If the price of our common stock decreases over time,
the number of shares of common stock issuable upon conversion of the Series C
convertible preferred stock may increase and the holders of common stock would
experience substantial dilution of their investment.
In connection with the Series B convertible preferred stock and Series C
convertible preferred stock, the following risks are associated with
conversions:
o because the variable conversion price of the Series B convertible
preferred stock and any reset of the conversion price of the Series
C convertible preferred stock are a function of the market price of
the common stock upon conversion or as of a reset date, the lower
the price of the common stock at the time the holder converts or at
a reset date, the greater number of shares of common stock received
upon conversion;
o to the extent that common stock received upon conversion is sold
into the market, and disregarding the manner in which such shares
are sold as well as any other factors such as reactions to our
operating results and general market conditions which may be
operative in the market at such time, such sales may cause a
decrease in the market price of the common stock, which in turn,
relative to additional conversions of the Series B convertible
preferred stock and/or Series C convertible preferred stock, would
reduce the variable conversion price of the Series B preferred stock
and, if such variable conversion price were lower than the fixed
conversion price of the Series B preferred stock, increase the
number of shares of common stock issued upon future conversions, the
sales of which may further decrease the market price for the common
stock;
o short sales of the common stock may be attracted by or accompany
conversions and sales of common stock from conversions, which sales
in the aggregate could cause downward pressure upon the price of the
common stock, excluding the effect of other market factors possibly
operative at the time, thereby attracting additional short sales of
the common stock; and
o conversions of the Series B and Series C convertible preferred stock
may result in substantial dilution of the interests of the other
holders of common stock. In this regard, the ownership limitations
which prohibits the holders from owning more than 4.99% of the
outstanding shares of our common stock following such conversion
only applies to shares of common stock held at one time and, subject
to the ownership limitation which prohibits the purchasers from
owning more than 9.99% of the Common Stock of the Company over any
sixty-day period, does not prevent purchasers from converting and
selling some of their holdings and then later converting the rest of
the holdings.
We Must Increase Sales and Profitability of Our Products and Commercialize New
Products
Our business, results of operations and financial condition depend on
successful commercialization of our Andrea Anti-Noise products and
technologies. Sales of the initial Andrea Anti-Noise products began in 1995,
and since 1995 we have been expanding the number of products in this line. The
success of these products is subject to the risks frequently encountered by
companies in an early stage of product commercialization, particularly
companies in the computing and communications industries. To achieve increased
sales and profitability, we must, among other things:
o increase market acceptance of our Andrea Anti-Noise products;
o respond effectively to competitive pressures with the timely
introduction of new Andrea Anti-Noise products; and
o successfully market and support these products.
We cannot assure that we will achieve or sustain significant sales or
profitability of our Andrea Anti-Noise products. Failure to do so would have a
material adverse effect on our business, results of operations and financial
condition.
We Face Intense Competition
The markets in which we sell our Andrea Anti-Noise products and our
traditional line of military and industrial products are highly competitive.
Competition in the markets for our Andrea Anti-Noise products is based on:
o varying combinations of product features;
o quality and reliability of performance;
o price;
o marketing and technical support;
o ease of use;
o compatibility with evolving industry standards and other systems and
equipment;
o brand recognition; and
o development of new products and enhancements.
Most of our current and potential competitors have significantly greater
financial, technology development, marketing, technical support and other
resources than we do. Consequently, these competitors may be able to respond
more quickly to new or emerging technologies and changes in customer
requirements, or devote greater resources to the development, marketing, and
sale of their products than we can. We cannot assure that one or more of these
competitors will not independently develop technologies that are substantially
equivalent or superior to our technology.
In the markets for our traditional products, we often compete with major
defense electronics corporations as well as smaller manufacturing firms which
specialize in supplying products and technologies for specific military
initiatives. Our performance in this market is further subject to several
factors, including:
o dependence on government appropriations;
o the time required for design and development;
o the complexity of product design;
o the rapidity with which product designs and technology become
obsolete;
o the intense competition for available business; and
o the acceptability of manufacturing contracts by government
administrators.
We believe that our ability to compete successfully will depend upon our
capability to:
o develop and maintain advanced technology; o develop proprietary
products;
o attract and retain qualified personnel;
o obtain patent or other proprietary protection for our products and
o technologies; and
o manufacture, assemble and successfully market products, either alone
or
o through third parties.
We cannot assure that we will be able to compete successfully, and
failure to do so would have a material adverse effect on our business, results
of operations and financial condition.
We May Be Unable to Obtain Market Acceptance of Our Voice Interface and
Internet Communications Products
We and our competitors are focused on developing and commercializing
products and technologies that enhance the use of voice, particularly in noisy
environments, for a broad range of computer and communications applications.
The markets for these products and technologies have only recently begun to
develop, are rapidly evolving, are characterized by a number of competitors,
and are subject to a high level of uncertainty. Broad market acceptance of
these products and technologies is critical to our success and ability to
generate revenues. We cannot assure that we, or our industry in general, will
be successful in obtaining market acceptance of products and technologies.
Failure to do so would have a material adverse effect on our business, results
of operations and financial condition.
We May be Unable to Develop and Successfully Introduce New Products and
Technologies
The markets for our products are characterized by rapidly changing
technology, and the introduction of products incorporating new technologies
could render our products obsolete and unmarketable and could exert price
pressures on existing products. In particular, we are currently engaged in the
development of digital signal processing products and technologies for the
voice, speech and natural language interface markets. As part of this effort,
we have established our Andrea Digital Technologies subsidiary in the United
States and have acquired Lamar Signal Processing Ltd., in Israel. We cannot
assure that we will succeed in developing these new DSP products and
technologies, or that any such new DSP products or technologies will gain
market acceptance. Further, the markets for our products and technologies are
characterized by evolving industry standards and specifications that may
require us to devote substantial time and expense to adapt our products and
technologies. We cannot assure that we will successfully anticipate and adapt
in a cost effective and timely manner to changes in technology and industry
standards, develop, introduce and gain market acceptance of new and enhanced
products and technologies, as well as additional applications for existing
products and technologies, or that the introduction of new products or
technologies by others will not render our products and technologies obsolete.
Our failure to develop new and enhanced products and technologies would have a
material adverse effect on our business, results of operations and financial
condition.
Our Success is Highly Dependent on our Collaborative Marketing Arrangements
We have entered into several collaborative and distribution arrangements
with software publishers and computer hardware manufacturers relating to the
marketing and sale of Andrea Anti-Noise products and Andrea DSP microphone and
software products. Under these collaborative arrangements, our products are
sold to end users through inclusion of the products of our collaborators. The
revenue derived by us from these arrangements will be based in large part upon
the sale of our collaborator's products. Our success will therefore be
dependent to a substantial degree on the efforts of these collaborators in
marketing existing products and new products under development with which to
include our products and technologies. We cannot assure that any product of
any of our collaborators incorporating our products and technologies will be
marketed successfully. Our collaborators generally are not contractually
obligated to any minimum level of sales of our products or technologies.
Furthermore, our collaborators may develop their own microphone or earphone
products or technologies that compete with our products and technologies. We
cannot assure that these collaborators will not replace our products or
technologies with, or give higher priority to, the sales of these competitive
products or technologies. We have also established direct arrangements with
large electronic and computer retail chains in the United States, as well as
with certain distributors in Europe and the Americas. We cannot assure that
any of these channels will devote sufficient resources to support the sale of
our products. We are also currently discussing additional arrangements with
other software companies, several major personal computer companies, consumer
electronic manufacturers, and electronic and computer retailers. We cannot
assure that any of these discussions will result in any definitive agreements.
We Depend on a Single Customer for a Substantial Portion of our Sales
We are substantially dependent on our product procurement relationship
with IBM. During the years ended December 31, 1997, 1998 and 1999, IBM and
certain of IBM's affiliates, distributors, licensees and integrators accounted
for 56%, 61% and 49%, respectively, and 59% during the first nine months of
2000, of our sales revenue. While we are a party to a procurement agreement
with IBM covering the purchase by IBM of certain of our Andrea Anti-Noise
Microphone and Earphone products and Andrea DSP Microphone and Software
products for inclusion with certain of IBM's personal computer products, IBM
is not obligated to purchase these products and is free to purchase microphone
and earphone products and technologies from our competitors. Our failure to
maintain sales of Andrea Anti-Noise products and Andrea DSP Microphone and
Software products to IBM would have a material adverse effect on our business,
results of operations and financial condition.
We May Not be Able to Maintain Needed Contract Manufacturing
We conduct assembly operations at our facilities in New York and Israel
and through subcontractors. During initial production runs of Andrea
Anti-Noise products, we perform assembly operations at our New York facility
from purchased components. As sales of any particular Andrea Anti-Noise
product increase, assembly operations are primarily transferred to a
subcontractor in Asia. Any failure on the part of this subcontractor to meet
our production and shipment schedules could have a material adverse effect on
our business, results of operations and financial condition.
Most of the components for the Andrea Anti-Noise products and Andrea DSP
Microphone and Software Products are available from several sources and are
not characteristically in short supply. However, certain specialized
components for the Andrea AntiNoise products, such as microphones and DSP
boards, are available from a limited number of suppliers and subject to long
lead times. While we have, to date, been able to obtain sufficient supplies of
these more specialized components, we cannot assure that we will continue to
be able to do so. Shortages of, or interruptions in, the supply of these more
specialized components could have a material adverse effect on our sales of
Andrea Anti-Noise products and Andrea DSP Microphone and Software Products.
We assemble our Aircraft Communication Products at our New York facility
from purchased components. Certain highly specialized components for our
Aircraft Communication Products sold for military and industrial use have
limited sources of supply, the availability of which can affect particular
products. We do not believe, however, that our earnings have been, or will be,
materially affected due to unavailability of these components.
We Rely on Patents and Proprietary Rights That May Fail to Protect our Business
We rely on a combination of patents, patent applications, trade secrets,
copyrights, trademarks, nondisclosure agreements with our employees, licensees
and potential licensees, limited access to and dissemination of our
proprietary information, and other measures to protect our intellectual
property and proprietary rights. We cannot assure, however, that the steps we
have taken to protect our intellectual property will prevent its
misappropriation or circumvention.
We have been granted 19 patents in the United States covering our Andrea
Anti-Noise and Andrea DSP Microphone and Software Products, and we have other
U.S. and non-U.S. patent applications currently pending. We cannot assure that
patents will be issued with respect to these applications or any patent
applications filed by us in the future.
Numerous patents have been granted in the fields of noise cancellation,
noise reduction, computer voice recognition and related subject matter. We
expect that products in these fields will increasingly be subject to claims
under these patents as the numbers of products and competitors in these fields
grow and the functionality of products overlap. Moreover, the laws of other
countries do not protect our proprietary rights to our technologies to the
same extent as the laws of the United States.
We cannot assure:
o that any patents issued to us will provide us with competitive
advantages or will not be infringed, challenged, invalidated, or
circumvented by others;
o that the patents or proprietary rights of others will not have an
adverse effect on our ability to do business;
o that we will be able to obtain licenses to patents of others, if
needed, on acceptable terms or at all; or
o that we will be able to develop additional patentable technology
that may be needed to successfully commercialize our existing
technologies.
We are Subject to Litigation Relating to our Business
From time to time to we are subject to litigation incidental to our
business. For example, we are subject to the risk of adverse claims,
interference proceedings before the U.S. Patent and Trademark Office,
oppositions to patent applications outside the United States, and litigation
alleging infringement of the proprietary rights of others. Litigation to
establish the validity of patents, to assert infringement claims against
others, and to defend against patent infringement claims can be expensive and
time-consuming, even if the outcome is in our favor. As more fully disclosed
in "Item 3. Legal Proceedings" in our Annual Report on Form 10-K for the year
ended December 31, 1999, on November 17, 1998 a complaint was filed against us
in the U.S. District Court for the Eastern District of New York by NCT Group,
Inc. ("NCT") and NCT Hearing products, Inc., one of NCT's subsidiaries,
requesting a declaration that two of our patents, which relate to certain
active noise reduction technology applicable to aircraft passenger headphones,
are invalid and unenforceable and that these patents are not being infringed
by NCT's products. The complaint also seeks to enjoin us from engaging in
certain alleged activities and seeks compensatory damages of not less than $5
million, punitive damages of not less than $50 million and plaintiffs' costs
and attorneys' fees. On December 30, 1998, we filed and served an answer to
the NCT complaint, denying the allegations and asserting affirmative defenses
and counterclaims. The counterclaims seek injunctive relief for patent
infringement, trademark infringement, false designation of origin and unfair
competition. We are also seeking exemplary and punitive damages, prejudgment
interest on all damages, costs, reasonable attorneys' fees and expenses.
During the second half of 1999, both NCT and Andrea submitted briefs to the
Court on whether to have an early hearing on the meaning of the claims in the
two Andrea patents. This type of hearing is called a "Markman Hearing." We are
unable to anticipate when the Court will issue a decision on this question. We
and NCT are proceeding with discovery, including document production and
depositions. If this suit is ultimately resolved in favor of NCT, we could be
materially adversely effected. We believe, however, that NCT's allegations are
without merit and we intend to vigorously defend Andrea and to assert against
NCT the claims described above.
On March 11, 1999, we were notified about a claim filed with the New York
State Environmental Protection and Spill Compensation Fund (the "Fund") by the
owners (Mark J. Mergler and Ann Mergler, the "Claimants") of property
adjoining our former Long Island City facility. This claim alleges property
damages arising from petroleum migrating from our former facility and was
purportedly detected in the basement of the Claimants' property. In their
claim to the Fund, the Claimants alleged that their property has been damaged
and that they have incurred remedial costs. In the event the Fund honors this
claim in whole or in part, we may be liable to reimburse the Fund. The New
York State Department of Environmental Conservation has asserted a demand that
we investigate and remediate the discharge of petroleum from a fuel oil
storage tank at our former Long Island City facility, and determine whether
the petroleum discharge has migrated to the Claimants' adjoining property. We
engaged environmental consultants to investigate the discharge from the fuel
oil storage tank and we are currently funding remediation work. We denied,
however, the allegations that any petroleum discharge has migrated to the
Claimant's property and objected to the claim made by the Claimant to the
Fund. On September 2, 1999, a civil action related to this matter was
commenced in the Nassau County Supreme Court by Mark J. Mergler and Ann
Mergler. The plaintiffs allege that the fuel oil released from the heating
system of our former facility has migrated beneath and onto the neighboring
property causing an excess of $1,000,000 in direct and consequential damages.
The Plaintiffs' allegations against us include, negligence, nuisance and
strict liability under the New York State Navigation Law. We have submitted an
answer denying the allegations and all liability relating to the alleged
property damage. This lawsuit is at an early stage and we are unable to
evaluate the likelihood of an unfavorable outcome or estimate the amount or
range of potential loss, if any.
In addition to the litigation described above, we are from time to time
subject to routine litigation incidental to our business.
Our International Operations may be Subject to Certain Risks
We have been seeking to increase our sales to regions outside the United
States, particularly in Europe and certain areas in the Americas and Asia. For
the year ended December 31, 1999, sales to customers outside the United States
accounted for approximately 35% of our sales revenue. International sales and
operations are subject to a number of risks, including:
o trade restrictions in the form of license requirements;
o restrictions on exports and imports and other government controls;
o changes in tariffs and taxes;
o difficulties in staffing and managing international operations;
o problems in establishing or managing distributor relationships;
o general economic conditions; and
o political and economic instability or conflict.
To date, we have invoiced our international sales in U.S dollars, and
have not engaged in any foreign exchange or hedging transactions. We cannot
assure that this will continue to be the case. If we are required to invoice
any material amount of international sales in non-U.S. currencies,
fluctuations in the value of non-U.S. currencies relative to the U.S. dollar
may adversely affect our business, results of operations and financial
condition or require us to incur hedging costs to counter such fluctuations.
Qualified Managerial and Technical Personnel are Scarce in our Industry
Our performance is substantially dependent on the performance of our
executive officers and key employees. We are dependent on our ability to
retain and motivate high quality personnel, especially management and product
and technology development teams. The loss of the services of any of our
executive officers or other key employees could have a material adverse effect
on our business, results of operations and financial condition. Our future
success also depends on our continuing ability to attract and retain
additional highly qualified technical personnel. Competition for qualified
personnel is intense and we cannot assure that we will be able to attract,
assimilate or retain qualified personnel in the future. Our inability to
attract and retain the necessary technical and other personnel could have a
material adverse effect on our business, results of operations and financial
condition.
Anti-Takeover Provisions in our Certificate of Incorporation and New York Law
May Adversely Affect our Stockholders
The New York Business Corporation Law, our Certificate of Incorporation
and our Series A Junior Participating Preferred Stock each contain certain
provisions which may, in effect, deter, or make difficult, a change in
control, merger or other acquisition of Andrea. For example, our Board of
Directors may issue up to 4,973,250 shares of preferred stock without any
stockholder vote or action. The preferred stock could have voting,
liquidation, dividend and other rights superior to those of our common stock,
and, therefore, any issuance of preferred stock could adversely affect the
rights of holders of our common stock.
We Do Not Anticipate Paying Cash Dividends on our Common Stock
We have not paid any cash dividends on our common stock and do not expect
to pay any cash dividends on our common stock in the foreseeable future.
Use of Proceeds
All of the shares of common stock offered hereby are being offered for
the account of the selling stockholders. We will not receive any proceeds from
the sale by the selling stockholders of the common stock hereunder.
Selling Stockholders
We are registering the shares in order to permit the selling stockholders
to offer the shares of common stock for resale from time to time. The shares
of common stock being offered by one of the selling stockholders, HFTP, are
issuable upon conversion of the Series C convertible preferred stock. For
additional information regarding the Series C convertible preferred stock, see
"Description of Capital Stock -- Preferred Stock." Except for the ownership by
HFTP of our Series B and Series C convertible preferred stock, and warrants
issued in connection with the Series B convertible preferred stock, the
selling stockholders has not had any material relationship with us within the
past three years.
The following table sets forth the names of the selling stockholders, the
number of shares of common stock owned beneficially by each of them as of
November 30, 2000, calculated in the nammer described below, the number of
shares which may be offered pursuant to this prospectus and the number of
shares and percentage of class to be owned by each selling stockholder after
this offering
The HFTP Invstment L.L.C. the second column lists the number of shares of
common stock held, plus the number of shares of common stock, based on its
ownership of Series C convertible preferred stock as well as Series B
preferred stock and related warrants, that would have been issuable to the
selling stockholder as of November 30, 2000 assuming conversion of all Series
B and Series C convertible preferred stock and exercise of the warrants issued
in connection with the Series B convertible preferred stock held by the
selling stockholder on that date, without regard to any limitations on
conversions or exercise. Because conversion of the Series B and Series C
convertible preferred stock is based on a formula that may depend on the
market price of our common stock, the numbers listed in the second column may
fluctuate from time to time. The third column lists the shares of common stock
being offered by this prospectus by the selling stockholders.
In accordance with the terms of the registration rights agreement with
the holder of the Series C convertible preferred stock, this prospectus covers
the resale of at least that number of shares of common stock equal to the
product of 2.0 and the number of shares of common stock issuable upon
conversion of the Series C convertible preferred stock, determined as if the
outstanding Series C convertible preferred stock was converted in full as of
the date immediately preceding the filing of this registration statement.
Because of adjustments at the reset dates, at maturity or upon dilutive
issuances, the number of shares that will actually be issued upon conversion
of the Series C convertible preferred stock may be more or less than the
2,142,298 shares being offered by this prospectus for the holder of the Series
C convertible preferred stock.
The fourth column assumes the sale of all of the shares offered by the
selling stockholders pursuant to this prospectus.
Under the Certificate of Amendment for the Series C convertible preferred
stock, the holder may not convert Series B or Series C convertible preferred
stock, or exercise the warrants issued in connection with the Series B
convertible preferred stock, to the extent such conversion or exercise would
cause the selling stockholder, together with its affiliates, to have acquired
a number of shares of common stock which would exceed 4.99%, or which during
the 60-day period ending on the date of conversion, when added to the number
of shares of common stock held at the beginning of such 60-day period, would
exceed 9.99%, of our then outstanding common stock, excluding for purposes of
such determination shares of common stock issuable upon conversion of the
Series B and C convertible preferred stock which have not been converted and
upon exercise of the warrants issued in connection with the Series B
convertible preferred stock which have not been exercised. The number of
shares in the second column for HFTP does not reflect this limitation.
The selling stockholders may sell all, some or none of their shares in
this offering. See "Plan of Distribution."
The 320,760 shares of common stock currently outstanding which are being
offered by the selling stockholders other than HFTP under this prospectus are
part of the 1,800,000 shares of common stock issued as consideration for our
acquisition of Lamar Signal Processing, Ltd.
The "Shares Beneficially Owned After the Offering" column assumes the
sale of all shares offered. The "Percentage of Class" column is based on
13,897,572 shares of common stock outstanding as of November 30, 2000.
<TABLE>
<CAPTION>
Shares
Shares Beneficially
Beneficially Shares Offered Owned
Owned Prior To By This After Percentage
Selling Stockholder The Offering Prospectus The Offering Of Class
--------------------------------- ---------------------- --------------------- -------------------- --------------
<S> <C> <C> <C> <C>
HFTP Investment L.L.C.(1) 3,528,590 2,142,298 2,458,315 17.7
Ventnor LLC(2) 92,835 61,890 30,945 *
Cherry Hill LLC(3) 144,738 96,492 48,246 *
Marla LLC(4) 144,663 96,442 48,221 *
Knighthawk Investment LLC(5) 98,904 65,936 32,968 *
</TABLE>
----------------
* Represents less than 1%.
(1) In addition to the 1,070,275 shares issuable as of November 30, 2000
upon conversion of the Series C preferred stock, includes up to
2,458,315 shares of common stock issuable upon conversion of the
Series B convertible preferred stock and exercise of related
warrants held of record by HFTP Investment LLC. Promethean Asset
Management, LLC, a New York limited liability company, serves as
investment manager to HFTP Investment L.L.C. and may be deemed to
share beneficial ownership of the shares beneficially owned by HFTP
by reason of shared power to vote and to dispose of the shares
beneficially owned by HFTP. Promethean disclaims beneficial
ownership of the shares beneficially owned by HFTP. Mr. James F.
O'Brien, Jr. indirectly controls Promethean. Mr. O'Brien disclaims
beneficial ownership of the shares beneficially owned by Promethean
and HFTP.
(2) Includes 30,945 shares of common stock subject to trading restrictions
that expire on May 5, 2001
(3) Includes 48,246 shares of common stock subject to trading restrictions
that expire on May 5, 2001
(4) Includes 48,221 shares of common stock subject to trading restrictions
that expire on May 5, 2001
(5) Includes 32,968 shares of common stock subject to trading restrictions
that expire on May 5, 2001
Description of Capital Stock
As of November 30, 2000 our authorized capital stock totaled 30,000,000
shares, consisting of:
(1) 25,000,000 shares of common stock, par value $.50 per share, of
which 13,897,572 shares were issued and outstanding; and
(2) 5,000,000 shares of preferred stock, par value $.01 per share, of
which (A) 25,000 shares were designated Series A Junior
Participating Preferred Stock, none of which were issued and
outstanding, (B) 1,500 shares were designated as Series B
convertible preferred stock, of which 500 shares were issued and
outstanding, (C) 1,000 shares were designated Series C Preferred
Stock, of which 750 Shares were issued and outstanding and (D)
4,973,500 shares of preferred stock which have not been designated.
Of the 13,897,572 shares of common stock outstanding on November 30, 2000,
this amount does not include 5,243,125 shares of common stock reserved for
issuance upon exercise of options granted under our 1991 Performance Equity
Plan and 1998 Stock Plan.
Common Stock
The holders of common stock are entitled to one vote per share on all
matters to be voted on by shareholders. The holders of shares of common stock
are entitled to receive such dividends, if any, as may be declared, from time
to time, by our board of directors, in its discretion, from funds legally
available therefor.
The holders of common stock are not entitled to preemptive, subscription
or conversion rights, and there are no redemption or sinking fund provisions
applicable to the common stock. Upon liquidation, dissolution or winding up,
the holders of shares of common stock are entitled to receive all assets
available for distribution to shareholders, subject to the rights of the
holders of the Series B convertible preferred stock, the Series C convertible
preferred stock and any holders of shares of other preferred stock that may be
then outstanding. The holders of common stock are not subject to further calls
or assessments by us. All outstanding shares of common stock are validly
issued, fully paid and nonassessable.
Preferred Stock
Shares of preferred stock are issuable in one or more series at such time
or times and for such consideration as our board of directors may determine,
with all shares of any one series equal in rank and identical in all respects.
Authority is expressly granted to our board of directors to fix from time to
time, by resolution or resolutions providing for the establishment and/or
issuance of any series of preferred stock, the designation of such series and
the powers, preferences and rights of the shares of such series, and the
qualifications, limitations or restrictions thereof.
We currently have designated three series of preferred stock, a summary
of the terms of which are set forth below. While we have no present intention
to issue shares of any additional series of preferred stock, any such issuance
could dilute the equity of the outstanding shares of common stock and could
have the effect of making it more difficult for a third party to acquire a
majority of our outstanding voting stock. In addition, such preferred stock
may have other rights, including economic rights senior to the common stock,
and, as a result, the issuance thereof could have a material adverse effect on
the market value of the common stock.
Series A Junior Participating Preferred Stock
---------------------------------------------
Under our Shareholder Rights Plan, preferred stock purchase rights were
distributed as a dividend at the rate of one right for each share of common
stock outstanding as of the close of business on May 7, 1999. Each purchase
right entitles the holder to purchase one-thousandth of a share of our Series
A Junior Participating Preferred Stock, par value $0.01 per share, at an
exercise price of $50. These purchase rights will not be exercisable unless a
person or group acquires, or announces the intent to acquire, beneficial
ownership of 20% or more of our common stock.
Each share of Series A Junior Participating Preferred Stock shall entitle
the holder thereof to one thousand (1,000) votes on all matters submitted to a
vote of our stockholders.
Subject to the rights of the holders of any series of preferred stock
ranking senior to the Series A Junior Participating Preferred Stock with
respect to dividends, each holder of a share of Series A Junior Participating
Preferred Stock, in preference to the holders of shares of common stock, will
be entitled to a dividend equal to one thousand times any dividend declared
per share of common stock.
Upon any liquidation, dissolution or winding up, no distribution shall be
made (1) to the holders of stock ranking junior to the Series A Junior
Participating Preferred Stock unless, prior thereto, the holders of Series A
Junior Participating Preferred Stock shall have received $1,000 per share,
plus an amount equal to accrued and unpaid dividends and distributions
thereon, to the date of such payment, provided that the holders of Series A
Junior Participating Preferred Stock shall be entitled to receive an aggregate
amount per share (subject to adjustment), equal to 1,000 times the aggregate
amount to be distributed per share to holders of common stock, or (2) to the
holders of stock ranking on a parity with the Series A Junior Participating
Preferred Stock, except distributions made ratably on the Series A Junior
Participating Preferred Stock and all such parity stock in proportion to the
total amounts to which the holders of all such stock are entitled.
In the case of any consolidation, merger, combination or other
transaction in which shares of common stock are exchanged, each share of
Series A Junior Participating Preferred Stock shall be similarly exchanged
into an amount per share equal to one thousand (1,000) times the aggregate
amount of stock, securities, cash and/or any other property (payable in kind),
as the case may be, into which each share of common stock is exchanged.
The Series A Junior Participating Preferred Stock shall rank, with
respect to the payment of dividends and the distribution of assets, junior to
all series of any other class of Preferred Stock. Whenever dividends or
distributions payable on the Series A Junior Participating Preferred Stock are
in arrears, thereafter and until all accrued and unpaid dividends and
distributions, whether or not declared, on the Series A Junior Participating
Preferred Stock outstanding shall have been paid in full, we cannot:
(i) declare or pay dividends, or make any other distributions, on any
stock ranking junior to the Series A Junior Participating Preferred Stock;
(ii) declare or pay dividends, or make any other distributions, on any
stock ranking on a parity with the Series A Junior Participating Preferred
Stock, except dividends paid ratably on the Series A Junior Participating
Preferred Stock and all such parity stock on which dividends are payable or in
arrears in proportion to the total amounts to which the holders of all such
shares are then entitled;
(iii) redeem or purchase or otherwise acquire any stock ranking junior to
the Series A Junior Participating Preferred Stock, provided that we may at any
time redeem, purchase or otherwise acquire shares of any such junior stock in
exchange for any of our stock ranking junior to the Series A Junior
Participating Preferred Stock; or
(iv) redeem or purchase or otherwise acquire any Series A Junior
Participating Preferred Stock, or any shares of stock ranking on a parity with
the Series A Junior Participating Preferred Stock, except in accordance with a
purchase offer made in writing or by publication to all holders of such shares
upon such terms as the Board of Directors shall determine in good faith will
result in fair and equitable treatment among the respective series or classes.
The shares of Series A Junior Participating Preferred Stock are also
subject to antidilution provisions which are triggered in the event of certain
stock splits, recapitalizations, or other dilutive transactions. The Series A
Junior Participating Preferred Stock shall not be redeemable.
Series B Convertible Preferred Stock
------------------------------------
As of November 30, 2000, we had outstanding 500 shares of Series B
convertible preferred stock.
Each share of Series B convertible preferred stock has a stated value of
$10,000 plus dividends of 4% per annum, which sum is convertible into common
stock at a conversion price equal to the lower of $8.775, the maximum
conversion price and the average of the two lowest closing bid prices of our
common stock during the 15 consecutive trading days immediately preceding the
conversion. The 4% dividends may, at our option, be paid in cash.
Upon the announcement of a major transaction the holder of the Series B
convertible preferred stock has the right to require us to redeem all or a
portion of its Series B convertible preferred shares at a redemption price
equal to the greater of 120% of (i) $10,000 plus any accrued dividends and
(ii) the product of (A) the conversion rate at such time and (B) the closing
bid price on the date of the public announcement of the major transaction. In
addition, upon the occurrence of certain triggering events, and depending on
our control over such events, the holder of the Series B convertible preferred
stock may have the right to require us to (a) redeem all or a portion of the
Series B convertible preferred shares at a redemption price equal to the
greater of 120% of $10,000 plus any accrued dividends and the closing bid
price immediately before the triggering event or on the date of the holder's
redemption notice, or (b) pay a penalty equal to 1% of the remaining
principal amount outstanding for a period not to exceed 20 days in any 365 day
period, and adjust the maximum conversion price.
As of November 30, 2000, the remaining 500 shares of Series B convertible
preferred stock are convertible into our common stock. Any unconverted Series
B convertible preferred share that remain outstanding on June 18, 2004, will
automatically convert into common stock. We have reserved 1,744,235 shares of
common stock for issuance upon conversion of the shares of the Series B
convertible preferred stock.
Series C Convertible Preferred Stock
------------------------------------
The following is a summary of the material terms of the Series C
convertible preferred stock, which terms are qualified by reference to the
full text of the underlying documents which are filed as exhibits to our Form
8-K dated October 12, 2000. The underlying documents for the Series C
convertible preferred stock are a Securities Purchase Agreement, Registration
Rights Agreement and a Certificate of Amendment, all filed as exhibits to our
Form 8-K dated October 12, 2000.
The Closings
The transaction consisted of one closing with, if necessary, up to two
additional closings to follow in the event the holder of the Series C
convertible preferred stock exercises its option to purchase additional
shares, as described below. At the initial closing of the transaction on
October 10, 2000 (the "Initial Closing"), the holder of the Series C
convertible preferred stock purchased from us an aggregate of 750 shares of
Series C convertible preferred stock for total gross proceeds to us of
$7,500,000. The Initial Closing was subject to various conditions, including
(a) that the representations, warranties and agreements of ours set forth in
the transaction documents are true and correct as of the Initial Closing, (b)
that we file the Certificate of Amendment for the Series C convertible
preferred stock with the New York Secretary of State, (c) that we deliver all
required certificates, opinions, and documents required under the Securities
Purchase Agreement, and (d) certain other terms and conditions, all as more
fully set forth in the Securities Purchase Agreement. The Initial Closing
occurred on October 10, 2000 (the "Initial Closing Date"). During the period
beginning on the Initial Closing Date and ending on April 11, 2002, the holder
of the Series C convertible preferred stock, on not more than two occasions,
may purchase from us up to an additional 250 shares of the Series C
convertible preferred stock for up to an additional $2,500,000 (the
"Additional Closing"). The conditions to the Additional Closing include (a)
that the representations, warranties and agreements of the Company as set
forth in the transaction documents are true and correct as of the date of the
Additional Closing, b) the Company's Common Stock is listed with The American
Stock Exchange, c) the Company delivers all required certificates, opinions,
and documents required under the Securities Purchase Agreement, and d) the
satisfaction of certain other terms and conditions, all as more fully set
forth in the Securities Purchase Agreement. The proceeds from the offering,
including the Initial Closing and any Additional Closing, will be used by the
Company for the purposes set forth on Schedule 4(d) to the Securities Purchase
Agreement.
Conversion
Each share of Series C convertible preferred stock is convertible into
that number of shares of Common Stock equal to (i) $10,000 (the "Stated
Value"), plus any accrued premium of 5% per annum (the "Conversion Amount"),
divided by (ii) the applicable Conversion Price. The applicable conversion
price is initially equal to $7.0565, which is 110% of the Market Price (as
defined below) on the initial issuance date, for the first nine months
thereafter and will be reset every six months thereafter to the lesser of the
then applicable conversion price and the average of the two lowest closing bid
prices of the Common Stock during the 5 consecutive trading days immediately
preceding the six-month reset dates or, for the period beginning on the day
two years after the initial issuance and ending on the maturity of the Series
C convertible preferred stock, the least of (i) the then applicable conversion
price, (ii) the average of the two lowest closing bid prices of the Common
Stock during the 15 consecutive trading days immediately preceding such two
year date, and (iii) the closing bid price on the date of conversion , subject
in each case to adjustment, including upon the announcement of a Major
Transaction (as defined below), all as provided in the Certificate of
Amendment (the "Conversion Price"). "Market Price" means the average of the
two lowest closing bid prices of the Common Stock during the 5 consecutive
trading days immediately preceding a date of determination. In the event that
the Company or the transfer agent does not timely effect a conversion or
reissuance of the remaining shares of Series C convertible preferred stock,
the Company is subject to certain cash penalties, adjustments to the
applicable conversion price and certain other penalties as more fully
described in the Certificate of Amendment.
In addition, if the holders of the Series C convertible preferred stock
submit a conversion request and the Company is not able to issue the required
amount of shares of Common Stock due the Company's inability to comply with
the rules of AMEX, then under the Certificate of Amendment a Triggering Event
would occur. In such event, the Company could be required by the holders to
redeem all or a portion of such holder's shares of Series C convertible
preferred stock at a price equal to the greater of (i) 120% of the Liquidation
Value (as defined below) and (ii) the product of (A) the Conversion Rate at
such time, and (B) the greater of (I) the closing bid price of the Common
Stock on the trading day immediately preceding such Triggering Event or (II)
the closing bid price of our Common Stock on the date of the holder's delivery
to the Company of a notice or, if such date of delivery is not a trading day,
the next date on which the exchange or market on which the Common Stock is
traded is open. In addition, if the Company fails to redeem at the holder's
request upon the Triggering Event, the Company shall, if so directed by the
holders of a majority of the shares of Series C convertible preferred stock
then outstanding, issue to each holder of shares of Series C convertible
preferred stock in exchange for such holder's shares of Series C convertible
preferred stock a senior secured note in the amount of the applicable
redemption price of such holder's shares of Series C convertible preferred
stock. The senior secured notes shall have a term of one week, shall be senior
to any other of the Company's indebtedness and shall contain other mutually
acceptable credit terms.
The shares of Series C convertible preferred stock are presently
convertible. The holders of the Series C convertible preferred stock are
prohibited in the Certificate of Amendment from converting their respective
holdings of the Series C convertible preferred stock if after giving effect to
such conversion the holder would beneficially own in excess of 4.99% or, over
any sixty day period, 9.99% of the outstanding shares of Common Stock of the
Company following such conversion. This calculation excludes the number of
shares of Common Stock which would be issuable upon (1) conversion of the
remaining, nonconverted shares of Series C convertible preferred stock
beneficially owned by the holder and its affiliates, (2) conversion of any of
the Company's Series B convertible preferred stock or exercise of the warrants
issued in connection with the Series B convertible preferred stock
beneficially owned by the holders and its affiliates and the (3) exercise or
conversion of any of the unexercised or unconverted portion of any other
securities of the Company (including, without limitation, any warrants or
convertible preferred stock) subject to a limitation on conversion or exercise
analogous to this limitation beneficially owned by the holder and its
affiliates. The Series C convertible preferred stock will convert
automatically into Common Stock at the applicable Conversion Price then in
effect on the second anniversary date of issuance (the "Two Year Date"), to
the extent any shares of the applicable issuance of Series C convertible
preferred stock remain outstanding. In the event the Company is unable to
convert any Series C convertible preferred stock due to restrictions set forth
in the Certificate of Amendment, the Company shall redeem the shares that
could not be converted due to certain of such restrictions for an amount in
cash per share equal to the Conversion Amount on the Two Year Date. The
maturity date for the Series C convertible preferred stock may be extended
beyond the Two Year Date under certain circumstances set forth in the
Certificate of Amendment.
Dividends
The holders of the Series C convertible preferred stock are not entitled
to receive dividends. The holders are entitled to receive upon conversion,
payable in cash or Common Stock at the election of the Company, an annual
premium of 5% on the aggregate "Stated Value" (i.e., $10,000 per share).
Voting Rights
The holders of the Series C convertible preferred stock have no voting
rights except as provided by law, except to the extent such holders own shares
of Common Stock.
Liquidation Value
In the event of any voluntary or involuntary liquidation, dissolution or
winding up of the Company, the holders of the Series C convertible preferred
stock shall be entitled to receive in cash out of the assets of the Company,
whether from capital or from earnings available for distribution to its
stockholders before an amount shall be paid to any class junior in rank to the
Series C convertible preferred stock an amount per share of Series C
convertible preferred stock equal to $10,000 plus any Additional Amount (the
"Liquidation Value").
Redemption
The holders of the Series C convertible preferred stock may require the
Company to redeem the Series C convertible preferred stock upon the
consummation of a "Major Transaction" or a "Triggering Event."
Major Transactions
Certain mergers, consolidations, tender offers, or the sale of
substantially all the assets of the Company.
Triggering Events
o failure of the registration statement covering the resale of the
conversion shares to be declared effective within 180 days after the
Initial Closing Date;
o the effectiveness of the registration statement lapses for ten
consecutive trading days or for an aggregate of fifteen trading days
per year;
o the registration statement is unavailable for the sale of all of the
"Registrable Securities" (as defined in the Certificate of
Amendment) for a period of ten consecutive trading days or an
aggregate of fifteen trading days per year in accordance with the
terms of the applicable registration rights agreement;
o the delisting of the Company's common Stock by AMEX for five
consecutive trading days or for an aggregate of ten trading days per
year;
o certain failures of the Company or its transfer agent to comply with
conversions of the Series C convertible preferred stock within ten
business days after a conversion notice is submitted.
o the inability of the Company to issue conversion shares due to
limitations imposed by the requirements of AMEX;
o failure of the Company to make any Excluded Redemption Event Daily
Payment (as defined in Certificate of Amendment); and
o certain breaches of representations, warranties, covenants (that are
not cured in fewer than ten days) or terms of the transaction
documents which would have a Material Adverse Effect (as defined in
the Certificate of Amendment).
Redemption And Other Remedies
The holders can send a notice of redemption upon the occurrence of a
Triggering Event or Major Transaction and require the Company to redeem the
Series C convertible preferred stock at the greater of (a) 120% of the
Liquidation Value of the Series C convertible preferred stock, or (b) (i) the
product of the applicable conversion rate in effect and the closing bid price
on the date of the announcement of the Major Transaction or, (ii) in the case
of a Triggering Event, the product of the applicable conversion rate in effect
and the closing bid price of the Common Stock on the trading day immediately
preceding the Triggering Event or the closing bid price of the Common Stock on
the date of the holder's delivery to the Company of notice, unless such date
is not a trading day, then on the next date on which the exchange or market on
which the Common Stock is traded is open.
o If the Company is unable to effect a redemption, interest will
accumulate on the value of the shares that the Company in unable to
redeem at the rate of 2.0% per month.
o If the Company is unable to effect a redemption, the holders are
also entitled to void their redemption notices and receive a reset
of their applicable Conversion Price. The Conversion Price on the
Series C convertible preferred stock would be reset to the lesser of
(A) the Conversion Price as in effect on the date the notice is
delivered to the Company and (B) the lowest closing bid price during
the period beginning on the date on which the notice of redemption
is delivered to the Company and ending on the date on which the
notice is received.
Registration Of Shares
The Company is required by agreement to initially register with the
Commission the resale of at least the number of Shares equal to the product of
(i) 2.0 and (ii) the number of initial registrable securities (without regard
to any limitation on conversion). The Company is also required by agreement to
initially register with the SEC the resale of at least the number of shares of
Common Stock equal to the product of (i) 2.0 and (ii) the number of additional
registrable securities (without regard to any limitation on conversion) as of
the date immediately preceding the date the Registration Statement is
initially filed. The Company has agreed to use its best efforts to file the
registration statement as soon as possible but no later than 60 days after the
Initial Closing Date (the "Initial Filing Deadline") and have the registration
statement declared effective by the Commission no later than 120 days after
the Initial Closing (the "Initial Effectiveness Deadline").
If the Company is unable to have the registration statement filed or
declared effective in the time required, the Company shall pay to each holder
of Registrable Securities an amount in cash per Registrable Security held
equal to the product of (i) $10,000 multiplied by (ii) the sum of (A) .01, if
the Registration Statement is not filed by the Scheduled Filing Date (as
defined in the Registration Rights Agreement), plus (B) .01, if the
Registration Statement is not declared effective by the Scheduled Effective
Date (as defined in the Registration Rights Agreement), plus (C) the product
of (I) .0005 multiplied by (II) the sum of (x) the number of days after the
Scheduled Filing Date that such Registration Statement is not filed with the
Commission, plus (y) the number of days after the Scheduled Effective Date
that the Registration Statement is not declared effective by the Commission,
plus (z) the number of days that sales cannot be made pursuant to the
Registration Statement after the Registration Statement has been declared
effective by the Commission (excluding days during any Allowable Grace Period
(as defined in the Registration Rights Agreement)).
Conversion At Company's Option
As more fully set forth in the applicable Certificate of Amendment, after
one year the Company may require that the shares of Series C convertible
preferred stock be submitted for conversion but only if the last reported sale
price (as reported by Bloomberg) for the Common Stock is at least 250% of the
Conversion Price on the initial issuance date of such shares and certain other
conditions are met.
Other Terms
The transaction documents relating to the Series C convertible preferred
stock also contain certain other representations, warranties, agreements, and
indemnification obligations of the Company. The operative agreements also (i)
contain a right of first refusal in favor of the investors which applies to
certain private equity financings of the Company and would commence on the
Initial Closing and ends one year thereafter, (ii) restrict the Company's
ability to redeem any of its Common Stock, pay any cash dividends on its
Common Stock, and make certain distributions on its Common Stock, (iii) limit
the ability of the Company to issue any senior preferred stock, and (iv)
prohibit the Company from entering into certain related party transactions
except as set forth in the Securities Purchase Agreement. The shares of Series
C convertible preferred stock are also subject to antidilution provisions
which are triggered in the event of certain stock splits, recapitalizations,
or other dilutive transactions, as well as issuances of Common Stock at a
price below the Conversion Price in effect, or the issuance of warrants,
options, rights, or convertible securities which have an exercise price or
conversion price less than the Conversion Price, other than for certain
previously outstanding securities and certain "excluded securities" (as
defined in the Certificate of Amendment). In the event that the Company issues
securities in the future which have a conversion price or exercise price which
varies with the market price and the terms of such variable price are more
favorable than the Conversion Price in the Series C convertible preferred
stock, the Purchasers may elect to substitute the more favorable variable
price when making conversions of the Series C convertible preferred stock.
Placement Agent Compensation
The Company and the Purchaser each acknowledges that it has not engaged
any placement agent in connection with the sale of the Series C convertible
preferred stock.
Use of Proceeds
The net proceeds of the Series C convertible preferred stock will be used
for the purposes set forth on Schedule 4(d) to the Securities Purchase
Agreement.
Interests of Certain Persons
None of the investors in the Series C convertible preferred stock
transactions is a director, executive officer or five percent or greater
shareholder of the Company or an affiliate of any such person or entity.
New York Anti-Takeover Law
We are also subject to certain provisions of the New York Business
Corporation Law (the "NYBCL") which relate to certain business combinations
with an "interested shareholder" and prohibit any person from making a
takeover bid for a New York corporation unless certain prescribed disclosure
requirements are satisfied.
Section 912 of the NYBCL provides, with certain exceptions, that a New
York corporation may not engage in a "business combination," such as a merger,
consolidation, recapitalization or disposition of stock, with any "interested
shareholder" for a period of five years from the date that such persons first
became an interested shareholder unless: (a) the transaction resulting in a
person becoming an interested shareholder, or the business combination, was
approved by the board of directors of the corporation prior to that person
becoming an interested shareholder, (b) the business combination is approved
by the holders of a majority of the outstanding voting stock not beneficially
owned by such interested shareholder, or (c) the business combination meets
certain valuation requirements for the stock of the New York corporation. An
"interested shareholder" is defined as any person that (x) is the beneficial
owner of 20% or more of the outstanding voting stock of a New York corporation
or (y) is an affiliate or associate of the corporation that at any time during
the prior five years was the beneficial owner, directly or indirectly, of 20%
or more of the corporation's then outstanding voting stock. The provisions of
Section 912 of the NYBCL apply if and for so long as a New York corporation
has a class of securities registered under Section 12 of the Exchange Act, at
least 25% of its total employees are employed primarily within New York, or at
least 250 employees are so employed and at least 10% of our voting stock is
owned beneficially by residents of the State of New York. We expect to
continue to meet one or more of these tests and, accordingly, to be subject to
Section 912 of the NYBCL. Article 16 of the NYBCL provides that persons
seeking to make takeover bids comply with certain registration and disclosure
requirements .
Plan of Distribution
We are registering the shares of common stock issuable upon conversion of
the Series C convertible preferred stock and the 320,760 shares issued as
consideration for our acquisition of Lamar to permit the resale of the shares
of common stock by the holders from time to time after the date of this
prospectus. We will not receive any of the proceeds from the sale by the
selling stockholders of the shares of common stock. We will bear all fees and
expenses incident to our obligation to register the shares of common stock.
The selling stockholders may sell all or a portion of the common stock
beneficially owned by it and offered hereby from time to time directly or
through one or more underwriters, broker-dealers or agents. If the common
stock is sold through underwriters or broker-dealers, the selling stockholders
will be responsible for underwriting discounts or commissions or agent's
commissions. The common stock may be sold in one or more transactions at fixed
prices, at prevailing market prices at the time of the sale, at varying prices
determined at the time of sale, or at negotiated prices. These sales may be
effected in transactions, which may involve crosses or block transactions,
(1) on any national securities exchange or quotation service on which
the securities may be listed or quoted at the time of sale,
(2) in the over-the-counter market,
(3) in transactions otherwise than on these exchanges or systems or in
the over-the-counter market,
(4) through the writing of options, whether such options are listed on
an options exchange or otherwise, or
(5) through the settlement of short sales.
If the selling stockholders effects such transactions by selling shares of
common stock to or through underwriters, broker-dealers or agents, such
underwriters, brokers-dealers or agents may receive commissions in the form of
discounts, concessions or commissions from the selling stockholders or
commissions from purchasers of the shares of common stock for whom they may
act as agent or to whom they may sell as principal (which discounts,
concessions or commissions as to particular underwriters, brokers-dealers or
agents may be in excess of those customary in the types of transactions
involved). In connection with sales of the common stock or otherwise, the
selling stockholders may enter into hedging transactions with broker-dealers,
which may in turn engage in short sales of the common stock in the course of
hedging in positions they assume. The selling stockholders may also sell shares
of common stock short and deliver shares of common stock covered by this
prospectus to close out short positions, provided that the short sale is made
after the registration statement is declared effective and a copy of this
prospectus is delivered in connection with the short sale. The selling
stockholders may also loan or pledge shares of common stock to broker-dealers
that in turn may sell such shares.
The selling stockholders may pledge or grant a security interest in some
or all of the shares of common stock owned by them and, if they default in the
performance of their secured obligations, the pledgees or secured parties may
offer and sell the shares of common stock from time to time pursuant to the
prospectus. The selling stockholders also may transfer and donate the shares of
common stock in other circumstances in which case the transferees, donees,
pledgees or other successors in interest will be the selling beneficial owners
for purposes of the prospectus.
The selling stockholders and any broker-dealer participating in the
distribution of the shares of common stock may be deemed to be "underwriters"
within the meaning of the Securities Act, and any commissions paid, or any
discounts or concessions allowed to any such broker-dealer may be deemed to be
underwriting commissions or discounts under the Securities Act. At the time a
particular offering of the shares of common stock is made, a prospectus
supplement, if required, will be distributed which will set forth the
aggregate amount of shares of common stock being offered and the terms of the
offering, including the name or names of any broker-dealers or agents, any
discounts, commissions and other terms constituting compensation from the
selling stockholders and any discounts, commissions or concessions allowed or
reallowed or paid to broker-dealers.
Under the securities laws of some states, the shares of common stock may
be sold in such states only through registered or licensed brokers or dealers.
In addition, in some states the shares of common stock may not be sold unless
such shares have been registered or qualified for sale in such state or an
exemption from registration or qualification is available and is complied
with.
There can be no assurance that any selling stockholder will sell any or
all of the shares of common stock registered pursuant to the shelf
registration statement, of which this prospectus forms a part.
The selling stockholders and any other person participating in such
distribution will be subject to applicable provisions of the Exchange Act and
the rules and regulations thereunder, including, without limitation,
Regulation M of the Exchange Act, which may limit the timing of purchases and
sales of any of the shares of common stock by the selling stockholder and any
other participating person. Regulation M may also restrict the ability of any
person engaged in the distribution of the shares of common stock to engage in
market-making activities with respect to the shares of common stock. All of
the foregoing may affect the marketability of the shares of common stock and
the ability of any person or entity to engage in market-making activities with
respect to the shares of common stock.
We will pay all expenses of the registration of the shares of common
stock pursuant to the registration rights agreement estimated to be $50,000
in total, including, without limitation, Commission filing fees and expenses
of compliance with state securities or "blue sky" laws; provided, however,
that the selling stockholders will pay all underwriting discounts and selling
commissions, if any.
In connection with sales made pursuant to this prospectus, we will
indemnify the selling stockholders against liabilities, including some
liabilities under the Securities Act, or the selling stockholders will be
entitled to contribution. We will be indemnified by the selling stockholders
against civil liabilities, including liabilities under the Securities Act that
may arise from any written information furnished to us by the selling
stockholders for use in this prospectus, or we will be entitled to
contribution.
Once sold under the shelf registration statement, of which this
prospectus forms a part, the shares of common stock will be freely tradable in
the hands of persons other than our affiliates.
Legal Matters
Legal matters with respect to our common stock being offered hereby have
been passed upon for us by our counsel, Brown & Wood LLP, New York, New York.
Experts
The consolidated financial statements and schedules of the Company
included in our Form 10-K and incorporated by reference herein have been
audited by Arthur Andersen LLP, independent public accountants, as indicated
in their reports with respect thereto, and are incorporated herein by
reference in reliance upon the authority of said firm as experts in accounting
and auditing in giving said reports.
<PAGE>
NO DEALER, SALESMAN, OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS IN CONNECTION WITH THE OFFERING HEREIN CONTAINED AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING
BEEN AUTHORIZED BY US OR THE SELLING STOCKHOLDERS. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, THE
SECURITIES OFFERED HEREBY IN ANY JURISDICTION TO ANY PERSON TO WHOM IT IS
UNLAWFUL TO MAKE AN OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS
PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE
AN IMPLICATION THAT THERE HAS BEEN NO CHANGE IN OUR AFFAIRS SINCE THE DATE
HEREOF OR THAT ANY INFORMATION CONTAINED HEREIN IS CORRECT AS TO ANY OF THE
TIME SUBSEQUENT TO ITS DATE. HOWEVER, WE HAVE UNDERTAKEN TO AMEND THE
REGISTRATION STATEMENT OF WHICH THIS PROSPECTUS IS A PART TO REFLECT ANY FACTS
OR EVENTS ARISING AFTER THE EFFECTIVE DATE THEREOF WHICH INDIVIDUALLY OR IN
THE AGGREGATE REPRESENT A FUNDAMENTAL CHANGE IN THE INFORMATION SET FORTH IN
THE REGISTRATION STATEMENT. IT IS ANTICIPATED, HOWEVER, THAT MOST UPDATED
INFORMATION WILL BE INCORPORATED HEREIN BY REFERENCE TO OUR REPORTS FILED
UNDER THE SECURITIES EXCHANGE ACT OF 1934. SEE "DOCUMENTS INCORPORATED BY
REFERENCE."
ALL DEALERS EFFECTING TRANSACTIONS IN THE COMMON STOCK OFFERED HEREBY,
WHETHER OR NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER
A PROSPECTUS. THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A
PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD
ALLOTMENTS OR SUBSCRIPTIONS.
2,463,058 SHARES
ANDREA ELECTRONICS CORPORATION
COMMON STOCK
---------------------
PROSPECTUS
---------------------
December __, 2000
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution
Registration Fee - Securities and Exchange Commission $ 2,163
American Stock Exchange Listing Fee 17,500
Legal Fees and Disbursements* 20,000
Accounting Fees and Disbursements* 3,000
Legal Fees and Expenses in Connection with Blue Sky Filings* $ 2,000
Miscellaneous* 5,337
---------
Total $ 50,000
*Estimated.
<PAGE>
Item 15. Indemnification Of Directors And Officers.
Section 722 of the Business Corporation Law of the State of New York
empowers a New York corporation to indemnify any person made, or threatened to
be made, a party to any action or proceeding (other than an action by or in
the right of the corporation to procure a judgment in its favor), whether
civil or criminal, including an action by or in the right of any other
corporation of any type or kind, domestic or foreign, or any partnership,
joint venture, trust, employee benefit plan or other enterprise, which any
director or officer of the corporation served in any capacity at the request
of the corporation, by reason of the fact that such person, such person's
testator or such person's intestate is or was a director or officer of the
corporation, or was serving at the request of the corporation as a director or
officer of another corporation, partnership, joint venture, trust, employee
benefit plan or other enterprise in any capacity, against judgments, fines,
amounts paid in settlement and reasonable expenses, including attorneys' fees
actually and necessarily incurred as a result of such action or proceeding or
any appeal therein, if such person acted in good faith, for a purpose which
such person reasonably believed to be in, or, in the case of services for any
other corporation or other enterprise, not opposed to, the best interests of
the corporation, and with respect to any criminal action or proceeding, had no
reasonable cause to believe that such person's conduct was unlawful. The
termination of any action or proceeding by judgment, settlement, conviction,
or upon plea of nolo contendere or its equivalent, does not, of itself, create
a presumption that such person did not act in good faith, for a purpose which
such person reasonably believed to be in, or, in the case of services for any
other corporation or other enterprise not opposed to, the best interests of
the corporation, or had reasonable cause to believe that such person's conduct
was unlawful.
In the case of an action by or in the right of the corporation, Section
722 empowers a corporation to indemnify any person made or threatened to be
made a party to any action in any of the capacities set forth above against
amounts paid in settlement and reasonable expenses, including attorneys' fees,
actually and necessarily incurred by such person in connection with the
defense or settlement of such action or an appeal therein, if such person
acted in good faith, for a purpose which such person reasonably believed to be
in, or, in the case of services for any other corporation or other enterprise,
not opposed to, the best interests of the corporation, except that
indemnification is not permitted in respect of (1) a threatened action or
pending action which is settled or otherwise disposed of or (2) any claim,
issue, or matter as to which such person is adjudged to be liable to the
corporation unless and only to the extent that the court in which such action
was brought, or if no action was brought, any court of competent jurisdiction,
determines upon application that, in view of all the circumstances of the
case, such person is fairly and reasonably entitled to indemnity for such
portion of the settlement amount and expenses as the court deems proper.
Section 723 provides that a New York corporation is required to indemnify
a person who has been successful, on the merits or otherwise, in the defense
of an action described in Section 722.
Section 721 provides that indemnification provided for by Section 722
shall not be deemed exclusive of any other rights to which the indemnified
party may be entitled, whether contained in the certificate of incorporation
or the by-laws or, when authorized by such certificate of incorporation or
by-laws, (i) a resolution of shareholders, (ii) a resolution of directors, or
(iii) an agreement providing for such indemnification, provided that no
indemnification may be made to or on behalf of any director or officer if a
judgment or other final adjudication adverse to the director or officer
establishes that such person's acts were committed in bad faith or were the
result of active and deliberate dishonesty and were material to the cause of
action so adjudicated.
The Company's Certificate of Incorporation provides that the personal
liability of the directors of the Company is eliminated to the fullest extent
permitted by Section 402(b) of the Business Corporation Law of the State of
New York. In addition, the By-Laws of the Company provide in substance that,
to the fullest extent permitted by New York law, each director and officer
shall be indemnified by the Company against reasonable expenses, including
attorneys' fees, and any liabilities which such officer may incur in
connection with any action to which such officer may be made a party by reason
of being or having been a director or officer of the Company. The
indemnification provided by the Company's By-Laws is not deemed exclusive of
or in any way to limit any other rights which any person seeking
indemnification may be entitled.
Item 16. Exhibits.
A. Exhibits
Exhibit
Number Description
------- -----------
3.1* Certificate of Amendment to the Certificate of Incorporation of
the Registrant.
4.1* Securities Purchase Agreement, dated October 5, 2000 by and
between HFTP Investment L.L.C. and the Registrant.
4.2* Registration Rights Agreement, dated October 5, 2000 by and
between HFTP Investment L.L.C. and the Registrant.
5.1 Opinion of Counsel
23.1 Consent of Arthur Andersen LLP
23.2 Consent of Counsel (contained in Exhibit 5.1)
24.1 Power of Attorney relating to subsequent amendments (contained
in a signature page)
----------------
* Incorporated by reference to the Registrant's Current Report on Form
8-K, dated October 12, 2000.
B. Financial Statements & Schedules
All schedules for which provision is made in Regulation S-X of the
Securities and Exchange Commission either are not required under the related
instructions or the information required to be included therein has been
included in the financial statements of the Company.
Item 17. Undertakings.
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after the
effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
registration statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum offering range may
be reflected in the form of prospectus filed with the Commission pursuant to
Rule 424(b), if, in the aggregate, the changes in volume and price represent
no more than 20 percent change in the maximum aggregate offering price set
forth in the "Calculation of Registration Fee" table in the effective
registration statement;
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement; provided,
however, that paragraphs (a)(1)(i) and (a)(1)(ii) do not apply if the
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed with or furnished to the
Securities and Exchange Commission by the registrant pursuant to Section 13 or
Section 15(d) of the Securities Exchange Act of 1934 that are incorporated by
reference in this registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed to
be a new registration statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the termination
of the offering.
(b) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.
(c) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Securities Act of 1933 and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
the registrant of expenses incurred or paid by a director, officer or
controlling person of the registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the registrant
will, unless in the opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate jurisdiction the
question of whether such indemnification by it is against public policy as
expressed in the Securities Act of 1933 and will be governed by the final
adjudication of such issue.
(d) The undersigned registrant hereby undertakes that:
(1) For the purposes of determining any liability under the Securities
Act, the information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or 497(h)
under the Securities Act shall be deemed to be part of the registration
statement as of the time it was declared effective.
(2) For the purposes of determining any liability under the Securities
Act, each post-effective amendment that contains a form of prospectus shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to
be the initial bona fide offering thereof.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as
amended, the registrant certifies that it has reasonable grounds to believe
that it meets all of the requirements for filing on Form S-3 and has duly
caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of New York, State of New
York on the 5th day of December, 2000.
ANDREA ELECTRONICS CORPORATION
By: /s/ John N. Andrea
--------------------------------------
John N. Andrea
Co-Chairman and Co-Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature
appears below under "SIGNATURES" constitutes and appoints, John N. Andrea,
Douglas J. Andrea, Christopher P. Sauvigne and Patrick D. Pilch, his true and
lawful attorneys-in-fact and agents, each acting alone, with full powers of
substitution and resubstitution, for him and in his name, place and stead, in
any and all capacities, to sign any or all amendments to this registration
statement, and to file the same, with all exhibits thereto, and other
documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents, each acting
alone, full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises, as fully to all
intents and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents, each acting alone, or
his substitute or substitutes, may lawfully do or cause to be done by virtue
hereof.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed below by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
<S> <C> <C>
/s/ John N. Andrea Co-Chairman, Co-Chief
--------------------------- Executive Officer and Director December 5, 2000
John N. Andrea
/s/ Douglas J. Andrea Co-Chairman, Co-Chief
--------------------------- Executive Officer and Director December 5, 2000
Douglas J. Andrea
/s/ Christopher P. Sauvigne President and Chief Operating
--------------------------- Officer and Director December 5, 2000
Christopher P. Sauvigne
/s/ Richard A. Maue Chief Financial Officer and
--------------------------- Corporate Secretary December 5, 2000
Richard A. Maue
/s/ Gary A. Jones Director December 5, 2000
--------------------------
Gary A. Jones
/s/ Paul M. Morris Director December 5, 2000
--------------------------
Paul M. Morris
</TABLE>
<PAGE>
EXHIBIT INDEX
(Pursuant to Item 601 of Regulation S-K)
Exhibit
Number Description
------ -----------
3.1* Certificate of Amendment to the Certificate of Incorporation of
the Registrant.
4.1* Securities Purchase Agreement, dated October 5, 2000 by and
between HFTP Investment L.L.C. and the Registrant.
4.2* Registration Rights Agreement, dated October 5, 2000 by and
between HFTP Investment L.L.C. and the Registrant.
5.1 Opinion of Counsel
23.3 Consent of Arthur Andersen LLP
23.4 Consent of Counsel (contained in Exhibit 5.1)
24.1 Power of Attorney relating to subsequent amendments (contained
in a signature page)
