As filed with the Securities and Exchange Commission on March 8, 2000.
REGISTRATION NO. 333-
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM S-8
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 identification No.)
incorporation or organization)
45 MELVILLE PARK ROAD
MELVILLE, NEW YORK 11747
(Address of principal executive offices)
1991 PERFORMANCE EQUITY PLAN
(Full title of the Plan)
JOHN N. ANDREA
Co-Chairman and Co-Chief Executive Officer
Andrea Electronics Corporation
45 Melville Park Road
Melville, New York 11747
(516) 719-1800
(Name, address 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
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
Title of Securities Amount to be Proposed Maximum Proposed Maximum Amount of
to be Registered Offering Aggregate Offering Registration
Registered Price Per Share/(1)/ Price/(1)/ Fee/ (2)/
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock 119,000 shares $14.875 $1,770,125 $470.00
- ----------------------------------------------------------------------------------------------------
</TABLE>
(1) Estimated solely for the purpose of calculating the amount of the
registration fee pursuant to Rule 457(c) of the Securities Act of 1933,
as amended.
(2) Of this amount, $218 was previously paid.
<PAGE>
EXPLANATORY NOTE
Under cover of this Form S-8 is a Reoffer Prospectus prepared in
accordance with Part I of Form S-3 under the Securities act of 1933, as
amended. The Reoffer Prospectus may be utilized for reofferings and resales
of up to 119,000 shares of common stock acquired by the selling shareholders
pursuant to the 1991 Performance Equity Plan of Andrea Electronics
Corporation.
PART I --INFORMATION REQUIRED IN THE SECTION 10(a) PROSPECTUS
ITEM 1. PLAN INFORMATION*
ITEM 2. REGISTRANT INFORMATION AND EMPLOYEE PLAN ANNUAL INFORMATION*
* Information required by Items 1 and 2 of Part I to be contained in
the Section 10(a) Prospectus is omitted from the Registration
Statement in accordance with Rule 428 under the Securities Act of
1933, as amended, and the Note to Part I of Form S-8.
<PAGE>
PROSPECTUS
ANDREA ELECTRONICS CORPORATION
45 Melville Park Road
Melville, New York 11747
119,000 Shares
COMMON STOCK
(Par Value $.50 Per Share)
This Prospectus relates to 119,000 shares of common stock of Andrea
Electronics Corporation, a New York corporation, which may be sold from
time to time by the selling shareholders named under the caption "Selling
Shareholders."
The common stock is issuable upon the exercise of options granted to the
selling shareholders pursuant to our 1991 Performance Equity Plan. 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.
The shares are being registered to permit public secondary trading of them
and may be offered and sold from time to time by the selling shareholders. The
selling shareholders, or 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."
We can not assure you that the selling shareholders will sell all or any
portion of the common stock offered hereby.
Our principal executive offices are located at 45 Melville Park Road,
Melville, New York, 11747. Our telephone number is (516) 719-1800. The closing
price of our common stock on the American Stock Exchange on March 7, 2000
was $16.25.
INVESTING IN THE COMMON STOCK INVOLVES A HIGH DEGREE OF RISK. YOU SHOULD
CAREFULLY READ THE "RISK FACTORS" SECTION OF THIS PROSPECTUS. IT BEGINS ON
PAGE 7.
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 March 8, 2000.
<PAGE>
TABLE OF CONTENTS
Where You Can Find More Information.. 3
Incorporated Documents............... 4
The Company.......................... 5
Forward-Looking Statements........... 6
Risk Factors......................... 7
Use of Proceeds...................... 16
Selling Shareholders................. 16
Plan of Distribution................. 17
Legal Matters........................ 19
Experts.............................. 19
Additional Information............... 19
__________
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 information that is different. 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" is a registered trademark of Andrea. All other trademarks
in this Prospectus are the trademarks of their respective owners.
Page 2
<PAGE>
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and periodic reports, proxy statements and
other information with the Securities and Exchange Commission (the "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 shareholders 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 3
<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; and
(2) 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 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 at (516)
719-1800.
Page 4
<PAGE>
THE COMPANY
We develop, manufacture and market two lines of voice communications
products: our Andrea Anti-Noise line of electronic headsets and handsets; and
our recently introduced Andrea DSP Microphone and Software line of digital
signal processing microphone array products and related software.
Our Andrea AntiNoise Products have "near field" noise canceling and
noise reducing features for use in headsets and handsets where the user is very
near the microphone. Noise cancellation enhances voice-activated computing,
computerized speech recognition, and computer and Internet telephony. Noise
reduction enhances the quality of sound heard in noisy environments and can
also be used as a means of environmental sound control.
Our Andrea DSP Microphone and Software Products use "far field"
digital signal processing technology to provide high quality transmission of
voice where the user is at a distance from the microphone. Digital signal
processing, also called DSP, converts voice and other audio signals from analog
form into digital form and then processes the signals to improve their quality.
Applications for these "far field" microphones include voice-activated
computing and mobile telephony for automobiles, as well as other settings where
speakers need to be free from the constraint of having a microphone tethered to
a headset.
Our strategic objective is to use our expertise in voice-based
audio technology to meet the needs of the emerging markets for voice-activated
computing applications, including speech recognition programs, Internet
telephony, video/audio conferencing, in-vehicle computing, home automation
systems, hand-held devices and multiplayer online games, among others. We
believe that these markets require enhanced levels of voice intelligibility
and sound quality at increasingly cost-effective prices. Our strategy for
achieving this objective includes the following elements:
- maintain and extend our market position with our Andrea Anti-Noise
Products and Andrea DSP Microphone and Software Products through
our direct sales force, our collaborative partnerships with
software publishers and original equipment manufacturers of
computers, microprocessors and related equipment, our e-commerce
channel and our retail channels, some of which are national or
global in their scope of operations;
- broaden our Andrea Anti-Noise Products and our Andrea DSP
Microphone and Software Products 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 our Andrea Anti-Noise Products and
Andrea DSP Microphone and Software Products in order to achieve
economies of scale.
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, introduce additional
Andrea Anti-Noise Products and Andrea DSP Microphone and Software Products,
maintain the competitiveness of our technologies through increasing levels of
research and development, and achieve widespread adoption of our products and
technologies. We cannot assure that we will be able to accomplish these
objectives.
Andrea Electronics Corporation was established in 1934. After several
decades of manufacturing radios, televisions and high fidelity audio systems, we
were engaged primarily in the manufacture of intercom communications products
for military and industrial use. We introduced our first Andrea Anti-Noise
microphone products in 1995. Since that time, sales of our Andrea Anti-Noise
Products have become our largest source of revenue, and our sales of intercom
products have declined. We are currently seeking to apply our knowledge of the
military and industrial markets to develop applications of our Andrea DSP
Microphone and Software Products for those markets, but we cannot assure that
these efforts will succeed and we do not expect material revenues from new
military and industrial products during the year 2000.
Page 5
<PAGE>
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 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.
Page 6
<PAGE>
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:
- - the volume of sales of our products under our collaborative marketing
arrangements;
- - the cost of development of our products under our collaborative
development arrangements;
- - the mix of products we sell;
- - the mix of distribution channels we use;
- - the timing of our new product releases and those of our competitors;
- - fluctuations in the computer and communications hardware and software
marketplace; and
- - 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 fourth quarter ended December 31, 1999, our revenues were
approximately $3.8 million versus $7.1 million in the same period in 1998. For
the fourth quarter of 1999, we had a net loss of approximately $2.0 million
compared to net loss of approximately $3.3 million in the same period in 1998.
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.
Page 7
<PAGE>
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 Report. 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:
- - the costs associated with developing, manufacturing and commercializing
our products;
- - maintaining existing, or entering into future, collaborative development,
collaborative marketing and distribution agreements;
- - protecting intellectual property rights; and
- - 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 and,
under certain conditions, we have the right to sell up to an additional $7.5
million of Series B Convertible Preferred Stock and warrants for up to 75,000
shares of our common stock. We cannot assure that such conditions will be
satisfied or, if they are, that we will sell any additional Series B Convertible
Preferred Stock or warrants.
Page 8
<PAGE>
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 our
common stock. Of the 25,000,000 shares of common stock presently authorized,
13,313,788 were outstanding as of March 3, 2000. This does not include (i)
4,581,750 shares of our common stock reserved for issuance upon exercise of
outstanding options granted under our 1991 Performance Equity Plan and 1998
Stock Plan and shares of our common stock reserved for further option grants
under the 1998 Stock Plan and (ii) 2,209,771 shares of common stock reserved for
issuance upon conversion of the Series B Convertible Preferred Stock and
exercise of the related warrant. To the extent that Series B Convertible
Preferred Stock is converted, the related warrant is exercised, 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 and, subject to certain conditions
and limitations, we have the right during the six month period beginning March
14, 2000 to sell to the current holder of Series B Convertible Preferred Stock
up to an additional 750 shares of Series B Convertible Preferred Stock and a
warrant for up to an additional 75,000 shares of common stock. 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 shortly before the date of conversion. We cannot predict
the price of the common stock in the future. 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. On February 25, 2000, 250 shares of the Series B Convertible
Preferred Stock were converted into 371,909 shares of common stock.
In addition, in May 1998, we issued 1,800,000 shares of common stock as
part of the consideration for our acquisition of Lamar Signal Processing, Ltd.,
of which 1,200,000 shares of common stock are subject to trading restrictions
that expire with respect to 600,000 shares in May 2000 and 600,000 in May 2001.
As the restrictions expire, the shares are subject to demand and piggyback
registration rights.
Page 9
<PAGE>
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 Andrea DSP
Microphone and Software Products. 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:
- - increase market acceptance of our Andrea Anti-Noise Products and Andrea
DSP Microphone and Software Products;
- - respond effectively to competitive pressures with the timely introduction
of new Andrea Anti-Noise Products and Andrea DSP Microphone and Software
Products; and
- - 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 and Andrea DSP Microphone and
Software 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, Andrea DSP
Microphone and Software Products and Aircraft Communications Products
are highly competitive. Competition in the markets for our Andrea Anti-Noise
Products, Andrea DSP Microphone and Software Products and Aircraft
Communications Products is based on:
- - varying combinations of product features;
- - quality and reliability of performance;
- - price;
- - marketing and technical support;
- - ease of use;
- - compatibility with evolving industry standards and other systems and
equipment;
- - brand recognition; and
- - 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.
Page 10
<PAGE>
In the markets for our Aircraft Communications 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:
- - dependence on government appropriations;
- - the time required for design and development;
- - the complexity of product design;
- - the rapidity with which product designs and technology become obsolete;
- - the intense competition for available business; and
- - the acceptability of manufacturing contracts by government administrators.
We believe that our ability to compete successfully will depend upon our
capability to:
- - develop and maintain advanced technology;
- - develop proprietary products;
- - attract and retain qualified personnel;
- - obtain patent or other proprietary protection for our products and
technologies; and
- - develop, manufacture, assemble and successfully market products, either
alone, in collaboration or with other 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.
Page 11
<PAGE>
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 and commercialization of our Andrea DSP Microphone and Software
Products and related DSP technolgies 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 or will be 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, 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 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 to IBM would have a material adverse effect on our business,
results of operations and financial condition.
Page 12
<PAGE>
WE MAY NOT BE ABLE TO MAINTAIN NEEDED CONTRACT MANUFACTURING
We conduct assembly operations at our facility in New York 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 and Andrea DSP Microphone and Software
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 Communications Products at our New York facility
from purchased components. Certain highly specialized components for our
Aircraft Communcations Products sold for military and industrial use have
limited sources of supply, the availability of which can affect certain of
our projects. While we do not believe that our results of operations have been,
or will be, materially affected if such components are unavailable, we cannot
assure that this will continue to be the case.
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 16 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, digital signal processing, 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:
- - that any patents issued to us will provide us with competitive
advantages or will not be infringed, challenged, invalidated, or
circumvented by others;
- - that the patents or proprietary rights of others will not have an adverse
effect on our ability to do business;
- - that we will be able to obtain licenses to patents of others, if needed,
on acceptable terms or at all; or
- - that we will be able to develop additional patentable technology that
may be needed to successfully commercialize our existing technologies.
Page 13
<PAGE>
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.
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";
formerly Noise Cancellation Technologies, Inc.) and NCT Hearing Products,
Inc., one of NCT's subsidiaries. The complaint involves two of Andrea's
patents, U.S. Patent No. 5,732,143 and U.S. Patent No. 5,825,897. These
patents relate to certain active noise reduction technology that is
particularly applicable to aircraft passenger headphones. Andrea does not
currently derive any sales or licensing revenue from aircraft passenger
headphones. The complaint requests a declaration that these two patents are
invalid and unenforceable and that NCT's products do not infringe upon these
two patents. The complaint alleges that Andrea has engaged in unfair
competition by misrepresenting the scope of the two patents, tortuously
interfering with prospective contractual rights between NCT and its existing
and potential customers, making false and disparaging statements about NCT and
its products, and falsely advertising Andrea's ANR products. The complaint
seeks to enjoin Andrea from engaging in these 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. Our
counterclaims allege that NCT has infringed U.S. Patents Nos. 5,732,143 and
5,825,897, and that NCT has engaged in trademark infringement, false
designation of origin, and unfair competition. The counterclaims also allege
that NCT's patent infringement has been and is willful. The counterclaims seek
injunctive relief with respect to the allegations of 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 anticipate that the
Court will issue a decision on this question by the middle of 2000, but we
cannot assure this. 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
Claimants' property and objected to the claim made by the Claimants 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.
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:
- - trade restrictions in the form of license requirements;
- - restrictions on exports and imports and other government controls;
- - changes in tariffs and taxes;
- - difficulties in staffing and managing international operations; problems
in establishing or managing distributor relationships;
- - general economic conditions; and
- - 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.
Page 14
<PAGE>
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 SHAREHOLDERS
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 4,974,250 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.
Page 15
<PAGE>
USE OF PROCEEDS
All of the shares of common stock offered hereby are being offered for the
account of the selling shareholders. We will not receive any proceeds
from the sale by the selling shareholders of the common stock hereunder.
SELLING SHAREHOLDERS
The following table sets forth as of March 3, 2000 the name of each
selling shareholder, the nature of his position, office or other material
relationship to Andrea and the number of shares of common stock
which such selling shareholder (1) owned of record, (2) acquired or may
acquire pursuant to the exercise of previously granted options under the 1991
Performance Equity Plan and is offering to sell pursuant to this Prospectus,
and (3) the amount of common stock to be owned by such selling stockholder
assuming the exercise of such options and the sale of such shares.
<TABLE>
<CAPTION>
Acquired Pursuant to
the 1991 Performance Stock to be
Name and Relationship to Owned as of Equity Plan and Owned After
Andrea Electronics Corporation March 3, 2000 Offered Hereby Exercise and Sale
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Patrick D. Pilch(1) 138,650 50,000 88,650
Senior Vice President of
Strategy and Director
Gary A. Jones(2) 86,500 69,000 17,500
Director
</TABLE>
(1) Includes (i) 1,150 shares owned by Mr. Pilch's minor children and (ii)
137,500 shares issuable upon the exercise of options which are currently
exercisable and exercisable within 60 days from the date hereof. Does not
include 112,500 shares issuable upon exercise of options that are not currently
exercisable and would not be exercisable within 60 days from the date hereof.
(2) Includes 86,500 shares issuable upon the exercise of options which are
currently exercisable and exercisable within 60 days from the date hereof.
Does not include 42,500 shares issuable upon exercise of options that are not
currently exercisable or exercisable within 60 days from the date hereof.
Page 16
<PAGE>
PLAN OF DISTRIBUTION
The selling shareholders, or 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 privately negotiated
transactions or otherwise, at fixed prices that may be changed, at market prices
prevailing at the time of sale, at prices related to such prevailing market
prices or at prices otherwise negotiated. The common stock may be sold by the
selling shareholders by one or more of the following methods, without
limitation:
(a) block trades in which the broker or dealer so engaged will
attempt to sell the shares as agent but may position and resell a
portion of the block as principal to facilitate the transaction;
(b) purchases by a broker or dealer as principal and resale by such
broker or dealer for its account pursuant to this Prospectus;
(c) an exchange distribution in accordance with the rules of such
exchange;
(d) ordinary brokerage transactions and transactions in which the
broker solicits purchases;
(e) privately negotiated transactions;
(f) short sales;
(g) through the writing of options on the shares;
(h) one or more underwritten offerings on a firm commitment or best
efforts basis; and
(i) any combination of such methods of sale.
The selling shareholders may also transfer shares by gift. We do not know
of any arrangements by the selling shareholders for the sale of any of the
common stock.
In effecting sales, brokers and dealers engaged by the selling shareholders
may arrange for other brokers or dealers to participate. Broker-dealers may
agree with the selling shareholders to sell a specified number of such shares at
a stipulated price per share. To the extent such broker-dealer is unable to do
so acting as agent for a selling shareholder, it may purchase as principal any
unsold shares at the stipulated price. Broker-dealers who acquire shares as
principals may thereafter resell such shares from time to time in transactions
in the American Stock Exchange at prices and on terms then prevailing at the
time of sale, at prices related to the then-current market price or in
negotiated transactions. Broker-dealers may use block transactions and sales to
and through broker-dealers, including transactions of the nature described
above. The selling shareholders may also sell the shares in accordance with Rule
144 under the Securities Act of 1933, as amended, rather than pursuant to this
prospectus, regardless of whether such shares are covered by this prospectus.
From time to time, one or more of the selling shareholders may pledge,
hypothecate or grant a security interest in some or all of the shares owned by
them. The pledgees, secured parties or persons to whom such securities have been
hypothecated will, upon foreclosure in the event of default, be deemed to be
selling shareholders. The number of a selling shareholder's shares offered under
this prospectus will decrease as and when it takes such actions. The plan of
distribution for such selling shareholder's shares will otherwise remain
unchanged. In addition, a selling shareholder may, from time to time, sell short
our common stock, and, in such instances, this prospectus may be delivered in
connection with such short sales and the shares offered under this prospectus
may be used to cover short sales.
Page 17
<PAGE>
To the extent required under the Securities Act of 1933, as amended, the
aggregate amount of selling shareholders' shares of common stock being offered
and the terms of the offering, the names of any such agents, brokers, dealers or
underwriters and any applicable commission with respect to a particular offer
will be set forth in an accompanying prospectus supplement. Any underwriters,
dealers, brokers or agents participating in the distribution of the common stock
may receive compensation in the form of underwriting discounts, concessions,
commissions or fees from a selling shareholder and/or purchasers of selling
shareholders' shares of common stock, for whom they may act (which compensation
as to a particular broker-dealer might be in excess of customary commissions).
The selling shareholders and any broker-dealers that participate in the
distribution of the common stock may be deemed to be "underwriters" within the
meaning of the Securities Act of 1933, as amended, and any commissions received
by them and any profit on the resale of the common stock sold by them may be
deemed be underwriting discounts and commissions.
A selling shareholder may enter into hedging transactions with
broker-dealers and the broker-dealers may engage in short sales of the common
stock in the course of hedging the positions they assume with such selling
shareholder, including, without limitation, in connection with distributions of
the common stock by such broker-dealers. A selling shareholder may enter into
option or other transactions with broker-dealers that involve the delivery of
the shares offered hereby to the broker-dealers, who may then resell or
otherwise transfer such shares. A selling shareholder may also loan or pledge
the shares offered hereby to a broker-dealer and the broker-dealer may sell the
shares offered hereby so loaned or upon a default may sell or otherwise transfer
the pledged shares offered hereby.
The selling shareholders and other persons participating in the sale or
distribution of the shares will be subject to applicable provisions of the
Securities Exchange Act of 1934, as amended, and the rules and regulations
thereunder, which provisions may limit the timing of purchases and sales of any
of the shares of the selling shareholders or any other such person. The
foregoing may affect the marketability of the shares.
We can not assure you that the selling shareholders will sell all or any
portion of the common stock offered hereby.
We will pay all expenses in connection with this offering and will not
receive any proceeds from sales of any common stock by the selling shareholders.
Page 18
<PAGE>
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.
ADDITIONAL INFORMATION
As of March 3, 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 13,313,788 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 750 shares were issued and
outstanding, and (C) 4,973,500 shares of preferred stock which have
not been designated.
Of the 13,313,788 shares of common stock outstanding on March 3,
2000, this amount does not include (i) 4,581,750 shares of our common stock
reserved for issuance upon exercise of outstanding options granted under our
1991 Performance Equity Plan and 1998 Stock Plan and shares of our common stock
reserved for further option grants under the 1998 Stock Plan and (ii) 2,209,771
shares of common stock reserved for issuance upon conversion of the Series B
Convertible Preferred Stock and exercise of the related warrant.
Further information concerning our common stock may be found in the
documents incorporated by reference above.
Page 19
<PAGE>
PART II--INFORMATION REQUIRED IN THE REGISTRATION STATEMENT
ITEM 3. INCORPORATION OF DOCUMENTS BY REFERENCE.
The following documents are hereby incorporated by reference in this
Registration Statement and are deemed to be a part hereof from the date of
filing such documents by the Registrant:
(1) The Registrant's Annual Report on Form 10-K for the
fiscal year ended December 31, 1999; and
(2) The description of the Registrant's common stock, par value $.50
per share, contained in (i) the Registrant's 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
the Registrant's Restated Certificate of Incorporation filed as
Exhibit 3.1 to the Registrant's Current Report on Form 8-K dated
November 30, 1998 and (iii) any subsequent amendment(s) or
report(s) filed for the purpose of updating such description.
All documents subsequently filed by the Registrant pursuant to Sections
13(a), 13(c), 14, and 15(d) of the Exchange Act of 1934, as amended, prior to
the filing of a post-effective amendment which indicates that all securities
offered have been sold or which deregisters all securities then remaining
unsold, shall be deemed to be incorporated by reference in this Registration
Statement and to be a part hereof from the date of filing of such documents.
Any statement contained herein or in a document, all or a portion of which
is incorporated by reference herein shall be deemed to be modified or
superseded for purposes of this Registration Statement to the extent that a
statement contained in any subsequently filed document which also is or is
deemed to be incorporated by reference herein modifies or supersedes such
statement. Any such statement so modified or superseded shall not be deemed,
except as so modified or superseded, to constitute a part of this
Registration Statement.
ITEM 4. DESCRIPTION OF SECURITIES.
Not applicable.
ITEM 5. INTERESTS OF NAMED EXPERTS AND COUNSEL.
Not applicable.
<PAGE>
ITEM 6. 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.
<PAGE>
ITEM 7. EXEMPTION FROM REGISTRATION CLAIMED.
Not Applicable.
ITEM 8. EXHIBITS.
A. Exhibits
Exhibit
Number Description
- -------- -----------
4* 1991 Performance Equity Plan of the Registrant
5 Opinion of Counsel
23.1 Consent of Arthur Andersen LLP
23.2 Consent of Counsel (contained in Exhibit 5)
24 Power of Attorney relating to subsequent amendments (contained in
signature page)
______________
* Incorporated by reference to Exhibit 4 of the Registrant's Registration
Statement on Form S-8, No. 333-45421, filed February 2, 1998
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 9. 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;
(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.
(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 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to 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.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing on Form S-8 and has duly caused this
registration statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the Town of Melville, State of New York on the
7th day of March, 2000.
ANDREA ELECTRONICS CORPORATION
By: /s/ 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 Richard A Maue, 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.
/s/Frank A.D. Andrea, Jr. Chairman Emeritus of the Board March 7, 2000
- ------------------------- and Director
Frank A.D. Andrea, Jr.
/s/John N. Andrea Co-Chairman, Co-Chief Executive March 7, 2000
- ------------------------- Officer and Director
John N. Andrea
/s/Douglas J. Andrea Co-Chairman, Co-Chief Executive March 7, 2000
- ------------------------- Officer and Director
Douglas J. Andrea
/s/Christopher P. Sauvigne President and Chief Operating March 7, 2000
- ------------------------- Officer
Christopher P. Sauvigne
/s/Patrick D. Pilch Senior Vice President, Director March 7, 2000
- -------------------------
Patrick D. Pilch
/s/Richard A. Maue Senior Vice President, March 7, 2000
- ------------------------- Chief Financial and Chief
Richard A. Maue Accounting Officer
/s/Christopher Dorney Director March 7, 2000
- -------------------------
Christopher Dorney
/s/Gary A. Jones Director March 7, 2000
- -------------------------
Gary A. Jones
/s/Scott Koondel Director March 7, 2000
- -------------------------
Scott Koondel
/s/Paul M. Morris Director March 7, 2000
- -------------------------
Paul M. Morris
/s/Jack Lahav Director March 7, 2000
- -------------------------
Jack Lahav
/s/John Larkin Director March 7, 2000
- -------------------------
John Larkin
<PAGE>
EXHIBIT INDEX
(Pursuant to Item 601 of Regulation S-K)
Exhibit
Number Description
- -------- -----------
4* 1991 Performance Equity Plan of the Registrant
5 Opinion of Counsel
23.1 Consent of Arthur Andersen LLP
23.2 Consent of Counsel (contained in Exhibit 5)
24 Power of Attorney relating to subsequent amendments (contained in
signature page)
_____________
* Incorporated by reference to Exhibit 4 of the Registrant's Registration
Statement on Form S-8, No. 333-45421, filed February 2, 1998.
EXHIBIT 5
(LETTERHEAD)
March 7, 2000
Andrea Electronics Corporation
45 Melville Park Road
Melville, New York 11747
Re: Andrea Electronics Corporation
REGISTRATION STATEMENT ON FORM S-8
Ladies and Gentlemen:
We have acted as counsel to Andrea Electronics Corporation, a New
York corporation (the "Company"), in connection with the registration of
the resale of 119,000 shares of common stock, $.50 par value (the "Shares"),
with the Securities and Exchange Commission (the "Commission") under the
Securities Act of 1933, as amended (the "1933 Act") pursuant to a
registration statement on Form S-8 (the "Registration Statement"). The
Shares will be issued pursuant to the Company's 1991 Performance Equity
Plan (the "Plan").
This opinion is being delivered in accordance with the requirements
of Item 601(b)(5)(i) of Regulation S-K under the 1933 Act.
As counsel to the Company, we have examined such documents and
records as we deemed appropriate.
In rendering this opinion, we have relied, as to matters of fact,
upon representations and certificates of officers and employees of the
Company, and communications from, government authorities and public
officials; and we have assumed the genuineness of signatures of all persons
signing any documents, the authority of all persons signing any document,
the authority of all governmental authorities and public officials, the
truth and accuracy of all matters of fact set forth in all certificates
furnished to us, the authenticity of all documents submitted to us as
originals and the conformity to original documents of all documents
submitted to us as certified, conformed or photostatic copies.
Based upon the foregoing, we are of the opinion that the Shares
issuable upon exercise of options issued under the Plan, when issued and
delivered upon exercise of such options in accordance with the terms of the
Plan, will be validly issued, fully paid and non-assessable.
We are not admitted to practice in any jurisdiction other than the
State of New York. We do not purport to be expert on, and we are not
expressing an opinion with respect to, laws other than the laws of the
United States and the State of New York.
We hereby consent to the filing of this opinion as an exhibit to
the Registration Statement. In giving this consent, we do not
thereby admit that we are in the category of persons whose consent is
required under Section 7 of the 1933 Act or the rules and regulations of the
Commission thereunder.
Very truly yours,
/s/Brown & Wood LLP
EXHIBIT 23.1
Consent of Independent Public Accountants
----------------------
As independent public accountants, we hereby consent to the incorporation by
reference in this Form S-8 registration statement of our reports dated
January 31, 2000 (except with respect to the matter discussed in Note 16, as
to which the date is March 1, 2000) included in the Andrea Electronics
Corporation Form 10-K for the year ended December 31, 1999 and to all
references to our Firm included in this Form S-8 registration statement.
ARTHUR ANDERSEN LLP
Melville, New York
March 7, 2000
