As filed with the Securities and Exchange Commission on January 16, 2001
Registration No.333-51424
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Amendment No. 1
To
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 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.
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. |_|
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.
The information in this prospectus is not complete and may be changed. We
may not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an
offer to sell securities, and we are not soliciting offers to buy these
securities in any state where the offer or sale is not permitted.
Subject to Completion, January 16, 2001
Prospectus
Andrea Electronics Corporation
2,463,058 Shares
Common Stock
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.
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 January 12, 2001, the last reported sale price for the common
stock on the American Stock Exchange was $3.50 per share.
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
4 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 January __, 2001
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TABLE OF CONTENTS
PROSPECTUS SUMMARY..........................................................2
RISK FACTORS................................................................4
ANDREA ELECTRONICS.........................................................11
FORWARD LOOKING STATEMENTS.................................................12
USE OF PROCEEDS............................................................13
SELLING STOCKHOLDERS.......................................................13
DESCRIPTION OF CAPITAL STOCK...............................................15
PLACEMENT AGENT COMPENSATION...............................................25
USE OF PROCEEDS............................................................25
INTERESTS OF CERTAIN PERSONS...............................................25
NEW YORK ANTI-TAKEOVER LAW.................................................25
PLAN OF DISTRIBUTION.......................................................26
MANAGEMENT.................................................................29
LEGAL MATTERS..............................................................37
EXPERTS....................................................................37
WHERE YOU CAN FIND MORE INFORMATION........................................37
INCORPORATED DOCUMENTS.....................................................38
1
PROSPECTUS SUMMARY
This summary may not contain all of the information that may be
important to you. You should read the entire prospectus before making an
investment decision. Our financial statements and related notes are not
included in this prospectus, but are incorporated by reference from the
documents listed under the caption "Incorporated Documents" located at the end
of this prospectus.
Andrea Electronics
Andrea Electronics designs, develops and manufacturers
state-of-the-art audio technologies and equipment for enhancing applications
that require high performance and high quality voice input.
Andrea's product and technologies optimize the performance of
speech-based applications software in markets such as speech recognition,
Internet Telephony, desktop dictation, audio/video conferencing, automobile
PC's, embedded devices, home automation systems and multiplayer online games.
Our patented Active Noise Cancellation microphone and Active Noise Reduction
earphone technologies help to ensure clear speech in PC and telephone headset
applications. Our patented Digital Super Directional Array far-field
microphone technology enables a hands-free communicating experience by
canceling background noise and transmitting a clear voice signal, even where
the speaker is at a distance from the microphone. We are initially targeting
our Andrea DSDA Microphone products at the automobile telematics market. This
market is based on the hands-free use of personal computers specially designed
for applications in automobiles, such as use and control of sound systems,
mobile telephones, satellite-based navigation systems, windows, door locks and
other automotive apparatus.
Active Noise Cancellation microphone technology uses electronic
circuits that distinguish a speaker's voice from background noise in the
speaker's environment and then cancels the noise from the signal to be
transmitted by the microphone. Active Noise Reduction technology uses
electronic circuits that distinguish the signal coming through an earphone
from background noise in the listener's environment and then reduces the noise
heard by the listener. Our DSDA far-field microphone products employ our
digital signal processing technology to convert sound received by the array of
microphones in the product into digital signals that are then processed to
cancel background noise from the signal to be transmitted.
Customers and strategic partners who have endorsed or purchased
Andrea's products include: IBM Corporation, Microsoft Corporation, NEC, Mpath,
Multitude, IDT, HyperGraphics, and ILINC, among others. Additionally, Andrea's
Active Noise Cancellation and Noise Canceling technology is the only
microphone technology certified by the Windows Hardware Quality Labs for use
with Windows(R) 95, 98 and NT operating systems.
Our common stock is listed on AMEX under the symbol "AND."
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The Offering
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:
o 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
o 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 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 Andrea, 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.
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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 results of operations have been declining and we expect further losses in
2001.
Our revenue for the year ended December 31, 1999 was 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 revenue was
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. To
remain competitive, we intend to continue incurring substantial research and
development, marketing and general and administrative expenses.
If we fail to obtain additional capital, we may be required to significantly
reduce, or refocus, our operations and our business, results of operations and
financial condition could be materially adversely effected.
From time to time during the past several years, we have raised
additional capital from external sources. We expect to 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. Additional capital may not be available
on favorable terms, if at all. Additionally, we may only be able to obtain
funds through arrangements that require us to relinquish rights to certain of
our products, technologies or potential markets.
Shares eligible for future sale upon the conversion of our outstanding
convertible preferred stock and stock options may have an adverse effect on
the market price of our common stock and may result in substantial dilution to
existing shareholders.
Our authorized capital stock of Andrea consists of:
o 35,000,000 shares of common stock, of which as of January 12,
2001, 14,464,396 shares were issued and outstanding and
5,243,125 shares were issuable and reserved for issuance
pursuant to Andrea's stock option and purchase plans; and
o 5,000,000 shares of preferred stock, of which as of
January 12, 2001, (a) 1,500 shares were designated as Series B
convertible preferred stock, of which 400 shares were issued and
outstanding, (b) 25,000 shares are issuable and reserved for
issuance pursuant to Andrea'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 any of these options, convertible preferred stock
or warrants are exercised or converted into common stock, the ownership
interests of holders of common stock would be
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diluted. 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 functions of the market price of the common
stock, if the price of our common stock decreases over time, the number of
shares of common stock issuable upon conversion of each series will increase.
Sales of these newly issued shares could cause a further decrease in the
market price of the common stock which, in turn, could further reduce the
market price of the common stock and reduce further the conversion price for
any remaining shares of Series B or Series C convertible preferred stock. The
result of conversions of the Series B and Series C convertible preferred stock
at declining conversion prices would be substantial dilution of the interests
of the other holders of common stock.
The varying numbers of shares of common stock issuable upon
conversion of the Series B convertible preferred stock and the Series C
preferred stock are illustrated in tables set forth elsewhere in this
prospectus respectively under the captions "Description of Capital
Stock--Preferred Stock--Series B Convertible Preferred Stock" and "Description
of Capital Stock--Preferred Stock--Series C Convertible Preferred Stock".
If we fail to market and commercialize our Andrea Anti-Noise and Digital
Signal Processing products, our business, results of operations and financial
condition could be materially adversely affected.
Our business, results of operations and financial condition depend on
successful commercialization of our Andrea Anti-Noise and Andrea Digital
Signal Processing products and technologies. Since we began sales of the
initial Andrea Anti-Noise products in 1995, we have been expanding the number
of products in this line. We introduced our first Andrea Digital Super
Directional Array products in 1998 and we are initially targeting these
products at the automobile telematics market. 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.
If we are unable to obtain market acceptance of our voice interface and
internet communications products and technologies or if market acceptance of
these products and technologies occurs at a slow rate, then our business,
results of operations and financial condition will be materially adversely
affected.
o 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. These products and
technologies have been rapidly evolving and the number of our
competitors has grown, but the markets for these products and
technologies are subject to a high level of uncertainty and have
been developing slowly. We, alone or together with our industry,
may be unsuccessful in obtaining market acceptance of these
products and technologies.
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If we fail to develop and successfully introduce new products and technologies
in response to competition and evolving technology, our business, results of
operations and financial condition could be materially adversely affected.
The markets in which we sell our Andrea Anti-Noise and Andrea DSDA
Microphone products and our traditional line of military and industrial
products are highly competitive. 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. One or
more of these competitors may 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. We may
not compete successfully with any of our competitors.
The introduction of products incorporating new technologies could
render our products obsolete and unmarketable and could exert price pressures
on existing products. We are currently engaged in the development of digital
signal processing products and technologies for the voice, speech and natural
language interface markets. We may not succeed in developing these new DSP
products and technologies, and any of these new DSP products or technologies
may not 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 may not successfully anticipate and
adapt our products and technologies in a cost effective and timely manner to
changes in technology and industry standards or to introductions of new
products and technologies by others that render our then existing products and
technologies obsolete.
If our marketing collaborators do not effectively market those of their
products with which our products are included or incorporated, our sales
growth could be adversely affected.
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 through inclusion or incorporation with
the products of our collaborators. Our success will therefore be dependent to
a substantial degree on the efforts of these collaborators to market those of
their products with which our products are included or incorporated. Our
collaborators may not successfully market these products. In addition, our
collaborators generally are not contractually obligated to any minimum level
of sales of our products or technologies, and we have no control over their
marketing efforts. Furthermore, our collaborators may develop their own
microphone or earphone products that may replace our products or technologies
or to which they may give higher priority. We have also established direct
marketing arrangements with large electronic and computer retail chains in the
United States, as well as with certain distributors in Europe and the
Americas. These channels may not devote sufficient resources to support the
sale of our products.
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If we fail to maintain sales of Andrea Anti-Noise products and Andrea DSP
Microphone and Software products to IBM, we would experience a material
adverse effect on our business, results of operations and financial condition.
We are substantially dependent on our product procurement
relationship with IBM. During the years ended December 31, 1997, 1998 and
1999, IBM and several 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. IBM is not obligated to
purchase these products and is free to purchase microphone and earphone
products and technologies from our competitors.
Shortages of, or interruptions in, the supply of more specialized components
for our Andrea Anti-Noise products and Andrea DSDA Microphone Products could
have a material adverse effect on our sales of these products.
We conduct assembly operations at our facilities in New York and
Israel and through subcontractors using purchased components. Certain
specialized components for the Andrea AntiNoise and Andrea DSDA Microphone
products, such as microphones and DSP boards, are available from a limited
number of suppliers and subject to long lead times. We may not be able to
continue to obtain sufficient supplies of these more specialized components,
particularly if our sales of Andrea AntiNoise and Andrea DSDA Microphone
products increase substantially or market demand for these components
otherwise increases.
If our subcontractor fails to meet our production and shipment schedules, our
business, results of operations and financial condition would be materially
and adversely affected.
We conduct assembly operations at our facilities in New York and
Israel and through subcontracting. During initial production runs of Andrea
Anti-Noise and Andrea DSDA Microphone products, we perform assembly operations
at our New York facility from purchased components. As sales of any particular
product increase, assembly operations are primarily transferred to a
subcontractor in Asia.
Our ability to compete may be limited by our failure to adequately protect our
intellectual property or by patents granted to third parties.
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. However, the steps that we have taken to
protect our intellectual property may not prevent its misappropriation or
circumvention. In addition, numerous patents have been granted to other
parties in the fields of noise cancellation, noise reduction, computer voice
recognition, digital signal processing 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. Claims of this type could have an
adverse effect on our ability to manufacture and market our products or to
develop new products and technologies, because the parties holding these
patents may refuse to grant licenses or only grant licenses with onerous
royalty requirements. Moreover, the laws of other
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countries do not protect our proprietary rights to our technologies to the
same extent as the laws of the United States.
An unfavorable ruling in any current litigation proceeding or future
proceeding may adversely affect our business, results of operations and
financial condition.
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. 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 by the owners
(Mark J. Mergler and Ann Mergler 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.
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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 in 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.
Changes in economic and political conditions outside the United States could
adversely affect our business, results of operations and financial condition.
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 may not
continue to be able to invoice all our sales in U.S. dollars and to avoid
engaging in foreign exchange or hedging transactions. 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.
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If we are unable to attract and retain the necessary managerial, technical and
other personnel necessary for our business, then our business, results of
operations and financial condition will be harmed.
Our performance is substantially dependent on the performance of our
executive officers and key employees. The loss of the services of any of these
executive officers or key employees could have a material adverse effect on
our business, results of operations and financial condition. Our future
success depends on our continuing ability to attract and retain additional
highly qualified managers and technical personnel. Competition for qualified
personnel is intense and we may not be able to attract, assimilate or retain
qualified personnel in the future.
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ANDREA ELECTRONICS
Our mission is to provide the emerging "voice interface" markets with
state-of-the-art communications products. The idea underlying these markets is
that natural language spoken by the human voice will become an important means
by which to control many types of computing devices and other appliances that
contain microprocessors. We are designing and marketing our products and
technologies to be used for these "natural language, human/machine"
interfaces.
Examples of the applications and interfaces for which Andrea
Anti-Noise Products and Andrea Digital Signal Processing, Microphone and
Software Products provide benefits include: Internet and other computer-based
speech; telephonic communications; automotive telematics; computer-assisted
conference calls; speech recognition; multimedia use of computers that involve
combinations of text, video, audio, graphics and data; Internet and CD ROM
interactive games where two or more players participate; 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 software
that allows participants to see and cooperatively edit documents, spreadsheets
and other information, to natural language-driven interfaces for automobiles,
home and office automation and other machines and devices into which
microprocessors that are controlled by voice 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 manufacturers of computing
and communications equipment, 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.
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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 Andrea that are presented in
this report are not necessarily indicative of the actual sales or results of
operations to be realized for the full year.
We are incorporated under the laws of the State of New York and 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. Our efforts may not 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.
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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.
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 made pursuant to
this registration statement.
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." None of the
selling stockholders has had any material relationship with us in 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
January 12, 2001, calculated in the manner 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.
For HFTP Investment 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 January 12, 2001 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 the registration statement of
which this prospectus is a part. Because of
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<PAGE>
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 stockholder 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 holder, 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 and fourth column and the percentage in the fifth 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
14,464,396 shares of common stock outstanding as of January 12, 2001.
<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) 3,985,889 2,142,298 2,909,353 16.3
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 *
------------
* Represents less than 1%.
</TABLE>
14
<PAGE>
(1) In addition to the [1,076,536] shares issuable as of January 12, 2001
upon conversion of the Series C preferred stock, includes up to
[2,342,529] 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, without regard to any
limitations on conversions or exercises. 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 January 12, 2001 our authorized capital stock totaled
40,000,000 shares, consisting of:
(1) 35,000,000 shares of common stock, par value $.50 per share,
of which 14,464,396 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 400 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 14,464,396 shares of common stock outstanding on January 12,
2001, 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 or dissolution,
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
15
<PAGE>
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 the
time or times and for the consideration as our board of directors may
determine. All shares of each series of preferred stock shall be 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. Each
series of preferred stock is summarized 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, any newly
issued 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 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 or dissolution, no distribution shall be made
(1) to the holders of stock ranking junior to the Series A junior
participating preferred stock unless, prior to the liquidation or dissolution,
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 on the Series A junior participating preferred
stock, 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
16
<PAGE>
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, we cannot, until all accrued and unpaid dividends and
distributions, whether or not declared, on the Series A junior participating
preferred stock outstanding have been paid:
o declare or pay dividends, or make any other distributions, on
any stock ranking junior to the Series A junior participating
preferred stock;
o 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;
o 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
o 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 January 12, 2001, we had outstanding 400 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
17
<PAGE>
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:
o $10,000 plus any accrued dividends; and
o the product of the conversion rate at such time and 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 (1) 120% of $10,000 plus any accrued dividends and (2)
the product of the conversion rate 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 January 12, 2001, the remaining 400 shares of Series B
convertible preferred stock are convertible into our common stock. Any
unconverted Series B convertible preferred shares that remain outstanding on
June 18, 2004, will automatically convert into common stock. We have reserved
[4,916,630] shares of common stock for issuance upon conversion of the shares
of the Series B convertible preferred stock.
The following table illustrates the varying amounts of shares of
common stock issuable upon conversion of all 400 shares of Series B
Convertible Preferred Stock at the indicated conversion prices (without regard
to any limitations on conversion) and assuming that the 4% additional amount
is paid in cash:
Number of Shares of Percentage of
Common Stock Outstanding
Conversion Price Issuable Upon Conversion(1) Common Stock(2)
------------------ -------------------------- ------------------
$1.00 4,000,000 21.7
$2.00 2,000,000 12.1
$3.00 1,333,333 8.4
$4.00 1,000,000 6.5
$5.00 800,000 5.2
$6.00 666,667 4.4
$7.00 571,429 3.8
$8.00 500,000 3.3
-----------------------
(1) The Series B holder is prohibited from converting the Series C or Series B
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 holder, together with its
affiliates, to have acquired a number of shares of common stock which
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
18
<PAGE>
have not been converted and upon exercise of the warrants issued in
connection with the Series B convertible preferred stock which have been
exercised.
(2) Based on 14,464,396 shares of common stock outstanding as of
January 12, 2001.
Series C Convertible Preferred Stock
The following is a summary of the material terms of the Series C
convertible preferred stock. 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:
o that our representations set forth in the transaction documents
were true and correct as of the initial closing;
o that we file the certificate of amendment for the Series C
convertible preferred stock with the New York Secretary of
State;
o that we deliver all required certificates, opinions, and
documents required under the securities purchase agreement; and
o certain other terms and conditions, all as more fully set forth
in the securities purchase agreement.
The initial closing occurred on October 10, 2000. 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 conditions
to the additional closings include (a) that the representations of Andrea as
set forth in the transaction documents are true and correct as of the date of
the additional closing, b) Andrea's common stock is listed with The American
Stock Exchange, c) Andrea 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
Andrea for working capital and general corporate purposes, including the
expansion of our sales and marketing capabilities for the commercialization of
our anti-noise products and the expansion of our research and development
activities.
19
<PAGE>
Conversion
Each share of Series C convertible preferred stock is convertible
into that number of shares of common stock equal to $10,000, the stated value,
plus any accrued premium of 5% per annum divided by 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. After the first nine months the applicable 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 the
common stock during the five consecutive trading days immediately preceding
the six-month reset dates. However, 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 applicable conversion price shall be the
least of (1) the then applicable conversion price, (2) 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 (3) the closing bid
price on the date of conversion. The applicable conversion price during all
time periods is subject to adjustment, as provided in the certificate of
amendment setting forth the rights, privileges and preferences of the Series C
convertible preferred stock. "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. If Andrea or the transfer
agent does not timely effect a conversion or reissuance of the remaining
shares of Series C convertible preferred stock, Andrea 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 Andrea is not able to issue the required
amount of shares of common stock due to Andrea's inability to comply with the
rules of AMEX, then under the certificate of amendment a triggering event
would occur. In such event, Andrea 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:
o 120% of the liquidation value (as defined below); and
o the product of (1) the conversion rate at such time, and (2) the
greater of (a) the closing bid price of the common stock on the
trading day immediately preceding such triggering event or (b)
the closing bid price of our common stock on the date of the
holder's delivery to Andrea 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 Andrea fails to redeem the Series C convertible
preferred stock at the holder's request upon the triggering event, Andrea
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 a senior
secured note in the amount of the applicable redemption price of such holder's
shares of Series C convertible preferred stock in exchange for each holder's
Series C convertible preferred stock. The senior secured notes shall have a
term of one week, shall be senior to any other of the Andrea's indebtedness
and shall contain other mutually acceptable credit terms.
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<PAGE>
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
Andrea 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 Andrea'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 Andrea (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. If Andrea is unable to convert any Series C convertible
preferred stock due to restrictions set forth in the certificate of amendment,
Andrea shall redeem the shares that could not be converted due to the
restrictions for an amount in cash per share equal to the stated value plus
any 5% additional amounts owed 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.
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:
Number of Shares of Percentage of
Common Stock Outstanding
Conversion Price Issuable Upon Conversion(1) CommonStock(2)
----------------- --------------------------- -----------------
$1.00 7,500,000 34.1
$2.00 3,750,000 20.6
$3.00 2,500,000 14.7
$4.00 1,875,000 11.5
$5.00 1,500,000 9.4
$6.00 1,250,000 8.0
$7.00 1,071,429 6.9
------------------------------
(1) The Series C holder is prohibited from converting the Series C or Series
B 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 holder, 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.
21
<PAGE>
(2) Based on 14,464,396 shares of common stock outstanding as of
January 12, 2001.
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 Andrea, 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 liquidation or dissolution of Andrea, the holders
of the Series C convertible preferred stock shall be entitled to receive in
cash out of the assets of Andrea, 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
Andrea 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 Andrea.
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;
22
<PAGE>
o the delisting of Andrea's common Stock by AMEX for five
consecutive trading days or for an aggregate of ten trading days
per year;
o certain failures of Andrea 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 Andrea to issue conversion shares due to
limitations imposed by the requirements of AMEX;
o failure of Andrea 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 Andrea 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) (1) 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, (2) 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 Andrea 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 Andrea is unable to effect a redemption, interest will
accumulate on the value of the shares that Andrea in unable to
redeem at the rate of 2.0% per month.
o If Andrea 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 Andrea and (b) the lowest closing bid
price during the period beginning on the date on which the
notice of redemption is delivered to Andrea and ending on the
date on which the notice is received.
Registration of shares
Andrea is required by agreement to initially register with the
Commission the resale of at least the number of shares of common stock equal
to the product of (a) 2.0 and (b) the number of initial registrable securities
(without regard to any limitation on conversion). Andrea is also required by
agreement to initially register with the Commission the resale of at least the
number of shares of common stock equal to the product of (a) 2.0 and (b) the
number of additional registrable securities (without regard to any limitation
on conversion) as of the date immediately preceding the
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<PAGE>
date the registration statement is initially filed. Andrea 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 Andrea is unable to have the registration statement filed or
declared effective in the time required, Andrea shall pay to each holder of
Registrable Securities an amount in cash per Registrable Security held equal
to the product of (a) $10,000 multiplied by (b) the sum of (1) .01, if the
registration statement is not filed by the Scheduled Filing Date (as defined
in the Registration Rights Agreement), plus (2) .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 (1)
.0005 multiplied by (2) 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 Andrea's option
As more fully set forth in the certificate of amendment, after one
year Andrea 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 Andrea. The operative
agreements also (a) contain a right of first refusal in favor of the investors
which applies to certain private equity financings of Andrea and would
commence on the initial closing and ends one year thereafter, (b) restrict
Andrea'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, (c)
limit the ability of Andrea to issue any senior preferred stock, and (d)
prohibit Andrea 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
Andrea 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.
24
<PAGE>
Placement agent compensation
Andrea 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 received
by Andrea on October 10, 2000 will be used by Andrea for working capital and
general corporate purposes, including the expansion of our sales and marketing
capabilities for the commercialization of our anti-noise products and the
expansion of our research and development activities. Andrea will not receive
any of the proceeds from the sale of common stock by the selling stockholders.
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 Andrea 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
25
<PAGE>
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 short sales.
If the selling stockholders effect 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.
26
<PAGE>
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 Exchange Act's rules and regulations, 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 stockholders 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 stockholder 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, in accordance with the registration
rights agreement or the selling stockholder will be entitled to contribution.
We will be indemnified by the selling stockholders against civil liabilities,
including liabilities under the
27
<PAGE>
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.
MANAGEMENT
The directors and key executive officers of Andrea are as follows:
Name Title
John N. Andrea Co-Chairman and Co-Chief Executive Officer
Douglas J. Andrea Co-Chairman and Co-Chief Executive Officer
Christopher P. Sauvigne President and Chief Operating Officer, Director
Richard A.. Maue Chief Financial Officer, Secretary and Treasurer
Gary A. Jones Director
Scott Koondel Director
Jack Lahav Director
John R. Larkin Director
Paul M. Morris Director
John N. Andrea, age 42, has been Co-Chairman and Co-Chief Executive
Officer since November 1998 and a Director of Andrea since 1992. He served as
Co-President of Andrea from November 1992 to November 1998, as Executive Vice
President of Andrea from January 1992 to November 1992, and as Sales &
Marketing Director from September 1991 to November 1992. Mr. Andrea is the son
of Frank A.D. Andrea, Jr. and the brother of Douglas J. Andrea.
Douglas J. Andrea, age 37, has been Co-Chairman and Co-Chief Executive
Officer since November 1998 and a Director of Andrea since 1991. He served as
Co-President of Andrea from November 1992 to November 1998, as Vice President
- Engineering of Andrea from December 1991 to November 1992, and as Secretary
of Andrea from 1989 to January 1993. Mr. Andrea is the son of Frank A.D.
Andrea, Jr. and the brother of John N. Andrea.
Christopher P. Sauvigne, age 40, has been President and Chief
Operating Officer of Andrea since November 1998, and has been a Director .
From 1982 until joining Andrea in November 1998, Mr. Sauvigne was employed by
Arthur Andersen LLP, where he served in various capacities, the last of which
was as Partner.
Richard A. Maue, age 30, has been Chief Financial Officer of Andrea
since November 1999, Secretary since June 1997, and Treasurer since May 1997.
From May 1997 to November 1999, he served as Controller. From 1992 to 1997,
Mr. Maue was part of the Audit and Business Advisory division at Arthur
Andersen LLP. Mr. Maue has a Bachelor of Science degree in Accounting from
Villanova University. He is a Certified Public Accountant, a member of the
American Institute of Certified Public Accountants and a member of the New
York State Society of Certified Public Accountants
28
<PAGE>
Gary A. Jones, age 54, has been a Director of Andrea since April 1996. He
has served as President of Digital Technologies, Inc. since 1994 and was Chief
Engineer, Allied Signal Ocean Systems from 1987 to 1994. In March 1998, Mr.
Jones became Managing Director of Andrea Digital Technologies, Inc.
Scott Koondel, age 36, has been a Director of Andrea since April
1995. He has been the Eastern Manager, Off-Network Television, Paramount
Pictures, a subsidiary of Viacom International since June 1993, and was the
National Sales Manager for WPIX-TV, a division of Tribune Broadcasting, from
June 1990 to June 1993.
Jack Lahav, age 52, has been a Director of Andrea since November 1998. He
co-founded Lamar Signal Processing Ltd., a subsidiary of Andrea that was
acquired in May 1998. Since August 1996, he has been the President of Advanced
Technology Inc., a manufacturer of robotic routing equipment used in
manufacturing printed circuit boards for advanced semiconductors, and from
1990 to 1996, was a Director of Vocaltec Communications Ltd., an Israeli
Internet telephony software company. In 1980, he founded Remarkable Products,
Inc., a direct mail company, and served as its President until the company was
sold by him in 1993.
John R. Larkin, age 56, has been a Managing Director of
Shields/Alliance, a division of Alliance Capital Management LP, a global asset
management company, since 1994. He joined Shields Asset Management Inc., the
predecessor of Shields/Alliance, in 1986 and held various positions at that
company, the last of which was Managing Director, until that company was sold
by Xerox Corporation to Alliance Capital Management in 1994. Prior to 1986,
Mr. Larkin was a Principal of Smilen & Safian Inc., a New York-based economic
consulting firm, and a Director and Member of the Investment Committee of the
Sector Investment Fund, a publicly held mutual fund. Mr. Larkin has over 25
years experience in the investment management community in both investment and
marketing capacities.
Paul M. Morris, age 38, has been a Director of Andrea since 1992. He
has been a Senior Managing Director at Schroder Capital Management since
December 1996. From July 1995 to December 1996, he was a Partner at Weiss,
Peck & Greer, and from 1987 to June 1995 he was employed by Union Bank of
Switzerland, where his last position was Managing Director - Equities.
The Board is served by an Audit Committee, a Compensation Committee and a
Nominating Committee. The Audit Committee is comprised of Messrs. Jones, Lahav
and Morris. The Compensation Committee is comprised of Messrs. Koondel, Larkin
and Morris. The Nominating Committee is comprised of Messrs. Koondel, Larkin
and Morris.
Security Ownership of Certain Beneficial Owners and Management
The following table sets forth certain information as of April 21,
2000 with respect to the stock ownership of (a) those persons or groups who
beneficially own more than 5% of Andrea's Common Stock, (b) each director and
director-nominee of Andrea, (c) each executive officer named in the Summary
Compensation Table and (d) all directors and executive officers of Andrea as
a group. The total number of shares of Common Stock outstanding on January __,
2001 was ________.
29
<PAGE>
Amount And Nature Of
Beneficial Ownership
Number Percent
Name of Beneficial Owner (1) of Shares of Class
------------------------ --------- --------
Camille Andrea Casling (2) 753,507 5.2%
Frank A. D. Andrea, Jr.(2) 514,800 (3) 3.5%
ANC-I Limited Partnership(2) 247,000 1.7%
Douglas J. Andrea (2) 588,588 (4) 4.0%
John N. Andrea (2) 427,742 (5) 2.9%
Christopher P. Sauvigne 176,250 (6) 1.2%
Patrick D. Pilch 155,900 (7) 1.0%
Richard A. Maue 80,750 (8) *
Paul M. Morris 19,750 (9) *
Christopher Dorney 22,500 (10) *
Scott Koondel 28,750 (11) *
Gary A. Jones 28,750 (12) *
Jack Lahav - -
John R. Larkin 29,250 (13) *
Directors and Executive
Officers as a group 2,073,030 (14) 14.3%
11 persons)
-------------
*Less than 1%
(1) Beneficial ownership is determined in accordance with Rule 13d-3
promulgated under the Securities Exchange Act of 1934. The information
concerning the shareholders is based upon information furnished to Andrea by
such shareholders. Except as otherwise indicated, all of the shares next to
each identified person or group are owned of record and beneficially by such
person or each person within such group and such persons have sole voting and
investment power with respect thereto.
(2) Camille Andrea Casling is a sister of Frank A.D. Andrea, Jr.,
Chairman Emeritus of Andrea . Mary Louise Andrea is the spouse of Frank A.D.
Andrea, Jr. Douglas J. Andrea and John N. Andrea, Co-Chairman and Co-Chief
Executive Officers, are the sons of Frank A.D. Andrea, Jr. and Mary Louise
Andrea. ANC-I Limited Partnership is a Delaware limited partnership, of which
the General Partners are Frank A. D. Andrea, Jr. and Mary Louise Andrea. John
N. Andrea and Douglas J. Andrea are limited partners of this partnership. The
address of each of these individuals and the ANC-I Limited Partnership is c/o
Andrea Electronics Corporation, 45 Melville Park Road, Melville, New York
11747.
(3) Includes (a) 148,086 shares owned directly by Frank A.D. Andrea, Jr.
and Mary Louise Andrea, his spouse, (b) 67,714 shares owned by a son of Mr.
and Mrs. Andrea, beneficial ownership of which is disclaimed by Mr. and Mrs.
Andrea, (c) 199,000 of the 247,000 shares owned by ANC-I Limited Partnership,
and (d) 100,000 shares issuable upon the exercise of options which are
currently exercisable and exercisable within 60 days from the date hereof.
(4) Includes (a) 54,088 shares owned directly by Douglas J. Andrea and Mr.
Andrea's spouse, (b) 12,000 of the 247,000 shares owned by ANC-I Limited
Partnership, and (c) 522,500 shares issuable upon the exercise of options
which are currently exercisable and exercisable within 60 days from the date
hereof. Does not include 287,500 shares issuable upon exercise of options that
are not currently exercisable or exercisable within 60 days from the date
hereof.
(5) Includes (a) 438 shares owned directly by John N. Andrea and Mr. Andrea's
spouse, (b) 39,804 shares owned by Mr. Andrea's minor children, and (c)
387,500 shares issuable upon the exercise of options which are currently
exercisable and exercisable within 60 days from the date hereof. Does not
include 287,500 shares issuable upon exercise of options that are not
currently exercisable or exercisable within 60 days from the date hereof.
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<PAGE>
(6) Includes (a) 20,000 shares owned directly by Christopher P. Sauvigne and
(b) 156,250 shares issuable upon the exercise of options which are currently
exercisable and exercisable within 60 days from the date hereof. Does not
include 343,750 shares issuable upon the exercise of options that are not
currently exercisable or exercisable within 60 days from the date hereof.
(7) Includes (a) 1,150 shares owned by Patrick D. Pilch's minor children and
(b) 154,750 shares issuable upon the exercise of options that are currently
exercisable and exercisable within 60 days from the date hereof. Does not
include 91,250 shares issuable upon exercise of options that are not currently
exercisable or exercisable within 60 days from the date hereof.
(8) Includes (a) 2,000 shares owned directly by Richard A. Maue and (b) 78,750
shares issuable upon the exercise of options which are currently exercisable
and exercisable within 60 days from the date hereof. Does not include 113,750
shares issuable upon the exercise of options that are not currently exercisable
or exercisable within 60 days from the date hereof.
(9) Includes (a) 1,000 shares owned directly by Paul M. Morris, and (b) 18,750
shares issuable upon the exercise of options which are currently exercisable
and exercisable within 60 days from the date hereof. Does not include 41,250
shares issuable upon exercise of options that are not currently exercisable or
exercisable within 60 days from the date hereof.
(10) Includes 22,500 shares issuable upon the exercise of options that are
currently exercisable and exercisable within 60 days from the date hereof.
Does not include 12,500 shares issuable upon exercise of options that are not
currently exercisable or exercisable within 60 days from the date hereof.
(11) Includes 28,750 shares issuable upon the exercise of options that are
currently exercisable and exercisable within 60 days from the date hereof.
Does not include 41,250 shares issuable upon exercise of options that are not
currently exercisable or exercisable within 60 days from the date hereof.
(12) Includes 28,750 shares issuable upon the exercise of options which are
currently exercisable and exercisable within 60 days from the date hereof.
Does not include 31,250 shares issuable upon exercise of options that are not
currently exercisable or exercisable within 60 days from the date hereof.
(13) Includes (a) 23,000 shares owned directly by John R. Larkin, and (b) 6,250
shares issuable upon the exercise of options which are currently exercisable
and exercisable within 60 days from the date hereof. Does not include 28,750
shares issuable upon exercise of options that are not currently exercisable or
exercisable within 60 days from the date hereof.
(14) Includes the shares directly owned and the shares issuable upon the
exercise of the options, which are currently exercisable and exercisable
within 60 days from the date hereof, discussed in notes (3) through (10)
above.
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<PAGE>
Executive Compensation
The following table sets forth information for the last three fiscal
years relating to compensation earned by the Co-Chief Executive Officers and
the other most highly compensated executive officers who received salary and
bonuses over $100,000 during the year ended December 31, 1999.
<TABLE>
<CAPTION>
Name and Principal Position Year Salary ($) Bonus ($) Stock Options (#)
------------------------------------------- ---- ---------- -------- ----------------
<S> <C> <C> <C> <C>
John N. Andrea, Co-Chairman and
Co-Chief Executive Officer 1999 208,505 150,000 (1) 150,000
1998 203,846 150,000 150,000
1997 175,000 75,000 150,000
Douglas J. Andrea, Co-Chairman and
Co-Chief Executive Officer 1999 208,505 150,000 (1) 150,000
1998 203,846 150,000 150,000
1997 175,000 79,000 150,000
Christopher P. Sauvigne, President and
Chief Operating Officer 1999 208,409 75,000 (1) 125,000
1998 (2) 19,230 16,849 (1) 250,000
Patrick D. Pilch, Executive Vice President
and Chief Financial Officer 1999 (3) 181,515 3,366 75,000
1998 178,365 150,000 75,000
1997 152,503 50,000 100,000
Richard A. Maue, Vice President, Controller,
Treasurer and Corporate Secretary 1999 (4) 93,815 27,115 25,000
--------------
</TABLE>
(1) Total bonus received by each of John N. Andrea, Douglas J. Andrea,
and Christopher P. Sauvigne was the minimum bonus payment pursuant to his
employment agreement. See "Employment Agreements and Change in Control
Arrangements."
(2) Christopher P. Sauvigne joined Andrea on November 20, 1998.
(3) Patrick D. Pilch served as Executive Vice President and Chief
Financial Officer until November 4, 1999. From November 4, 1999, has Mr. Pilch
served as Andrea's Senior Vice President of Strategy.
(4) Richard A. Maue joined Andrea in April 1997 and served as Vice
President, Controller, Treasurer and Secretary until November 4, 1999. From
November 4, 1999, Mr. Maue has served as Andrea's Senior Vice President, Chief
Financial Officer, Treasurer and Secretary.
The Company granted stock options covering an aggregate of 525,000
shares of Common Stock during year 1999 to the named executive officers as
indicated in the above table.
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<PAGE>
The following table summarizes for each of the named executive
officers the number of shares covered by options granted during 1999, the
percent of total options granted to employees of Andrea in 1999, the exercise
price of such options, the expiration date, and the potential realizable value
of such options assuming appreciation rates of 5% and 10% per year through the
expiration date of such options.
Option/SAR Grants in Last Fiscal Year
Individual Grants
<TABLE>
<CAPTION>
Percentage Potential
of total Realizable Value at
Number of options Assumed Annual
securities granted to Rates of Stock
underlying employees Exercise Price Appreciation
Date of options in fiscal Price Expiration for Option Term
Name Grant granted year ($/share) Date 5% (1) 10%(1)
------------- ------- ----------- --------- -------- -------- -------------------
<S> <C> <C> <C> <C> <C> <C> <C>
John N. Andrea 3/22/99 100,000 7% $6.25 3/22/09 $393,059 $996,089
8/17/99 50,000 4% $5.375 8/17/09 $169,015 $428,318
Douglas J. Andrea 3/22/99 100,000 7% $6.25 3/22/09 $393,059 $996,089
8/17/99 50,000 4% $5.375 8/17/09 $169,015 $428,318
Christopher P. Sauvigne 3/22/99 75,000 6% $6.25 3/22/09 $294,794 $747,067
8/17/99 50,000 4% $5.375 8/17/09 $169,015 $428,318
Patrick D. Pilch 3/22/99 50,000 4% $6.25 3/22/09 $196,530 $498,045
8/17/99 25,000 2% $5.375 8/17/09 $84,508 $214,159
Richard A. Maue 8/17/99 25,000 2% $5.375 8/17/09 $84,508 $214,159
-------------
</TABLE>
(1) The dollar amounts represent certain assumed rates of appreciation.
Actual gains, if any, on stock option exercises and common stock
holdings are dependent upon future performance of Andrea's common
stock and overall stock market conditions. There can be no assurance
that the amounts reflected in this table will be realized.
33
<PAGE>
The following table summarizes for each of the named executive
officers the number of shares acquired and value realized upon exercise of
options during fiscal 1999 and the aggregate dollar value of in-the-money,
unexercised options at December 31, 1999. None of the named executive officers
exercised or held any SARs during the year.
Aggregated Option Exercises in Last Fiscal Year and
Fiscal Year End Option Values
<TABLE>
<CAPTION>
Number of
Securities
Underlying Value of Unexercisable
Shares Unexercised Options In-the-Money Options at
Acquired at Fiscal Year End Fiscal Year End -
on Exercisable/ Exercisable/
Name Exercise Value Realized Unexercisable Unexercisable (1)
---- -------- -------------- --------------------- -----------------------
<S> <C> <C> <C> <C>
John N. Andrea - $ - 212,500 / 337,500 (2) $342,100 / $432,700
(7)
Douglas J. Andrea - $ - 362,500 / 337,500 (3) $1,393,150 / $432,700
(7)
Christopher P. Sauvigne - $ - 62,500 / 312,500 (4) $ - / $223,375
(7)
Patrick D. Pilch - $ - 68,750 / 181,250 (5) $115,600 / $245,250
(7)
Richard A. Maue - $ - 27,500 / 95,000 (6) $28,900 / $115,600
(7)
--------------
</TABLE>
(1) Values were based on a closing trade price for Andrea's common stock
on December 31, 1999 of $7.687 per share.
(2) John N. Andrea was granted options to purchase: 100,000 shares at a price
of $6.00 per share on September 12, 1994; 150,000 shares at a price of $5.375
per share on April 1, 1997; 50,000 shares at a price of $14.625 per share on
March 3, 1998; 100,000 shares at a price of $14.125 per share on June 8, 1998;
100,000 shares at a price of $6.25 per share on March 22, 1999; and 50,000
shares at a price of $5.375 per share on August 17, 1999.
(3) Douglas J. Andrea was granted options to purchase: 300,000 shares at $.675
per share on June 26, 1992; 100,000 shares at a price of $6.00 per share on
September 12, 1994; 150,000 shares at a price of $5.375 per share on April 1,
1997; 50,000 shares at a price of $14.625 per share on March 3, 1998; 100,000
shares at a price of $14.125 per share on June 8, 1998; 100,000 shares at a
price of $6.25 per share on March 22, 1999; and 50,000 shares at a price of
$5.375 per share on August 17, 1999.
(4) Christopher P. Sauvigne was granted options to purchase: 250,000 shares at
$8.875 per share on November 20, 1998; 75,000 shares at $6.25 per share on
March 22, 1999; and 50,000 shares at a price of $5.375 per share on August 17,
1999.
(5) Patrick D. Pilch was granted options to purchase: 100,000 shares at a
price of $5.375 per share on April 1, 1997; 25,000 shares at a price of
$14.625 per share on March 3, 1998; 50,000 shares at a price of $14.125 per
share on June 8, 1998; 50,000 shares at a price of $6.25 per share on March22,
1999; and 25,000 shares at a price of $5.375 per share on August 17, 1999.
(6) Richard A. Maue was granted options to purchase: 50,000 shares at a price
of $5.375 per share on April 1, 1997; 10,000 shares at a price of $14.625 per
share on March 3, 1998; 25,000 shares at a price of $14.125 per share on June
8, 1998; 25,000 shares at a price of $8.875 on November 20, 1998; and 25,000
shares at a price of $5.375 per share on August 17, 1999.
(7) Of the shares covered by each option granted, none can be purchased during
the first year following the grant; 25% can be purchased after the first
anniversary of the grant; an additional 25% can be purchased after the second
anniversary of the grant; and the remaining 50% can be purchased after the
third anniversary.
34
<PAGE>
Employment Agreements and Change in Control Arrangements
The Company entered into three-year employment agreements that
commenced on March 26, 2000 with John N. Andrea and Douglas J. Andrea, each as
Co-Chairman and Co-Chief Executive Officers of Andrea. Under these agreements,
the annual base salaries of John N. Andrea and Douglas J. Andrea are $200,000.
Each agreement provides for additional short-term incentive compensation in
the form of annual cash bonuses based on the achievement of performance goals
and which shall not be less than $150,000 per annum, and long-term incentive
compensation in the form of cash or equity-based awards.
The Company entered into a two-year employment agreement that
commenced on March 26, 2000 with Richard A. Maue, as Senior Vice President and
Chief Financial Officer of Andrea. The agreement provides an annual base
salary of not less than $150,000 per annum, plus additional short-term
incentive compensation in the form of annual cash bonuses, based on the
achievement of performance goals and which shall not be less than $25,000 per
annum, and long-term incentive compensation in the form of cash or
equity-based awards.
The Company entered into an employment agreement with Christopher P.
Sauvigne, as President and Chief Operating Officer of Andrea, that commenced
on November 20, 1998 and expires on December 31, 2001. The agreement provides
an annual base salary of not less than the greater of (a) $200,000 per annum
and (b) the higher of the base salaries of the Co-Chief Executive Officers of
Andrea, plus additional short-term incentive compensation in the form of
annual cash bonuses, based on the achievement of performance goals and which
shall not be less than $150,000 per annum, and long-term incentive
compensation in the form of cash or equity-based awards.
Under each of the aforementioned agreements, on the occurrence of a
Change in Control (as defined), Andrea shall pay the Executive, or in the
event of his subsequent death, his beneficiary or beneficiaries, or his
estate, as the case may be, a sum equal to the greater of (a) the payments due
for the remaining term of the agreement or (b) the product of (1) five (in the
case of John N. Andrea, Douglas J. Andrea and Christopher P. Sauvigne) and
three (in the case of Richard A. Maue) multiplied by (2) the Executive's
average annual total compensation for the five (in the case of John N. Andrea,
Douglas J. Andrea and Christopher P. Sauvigne) and three (in the case of
Richard A. Maue) preceding taxable years, or if his employment by Andrea is
then less than three years, the Executive's average annual compensation during
his employment by Andrea.
In addition, under each of the aforementioned employment agreements,
on the occurrence of a Change in Control, all restrictions on any restricted
stock then held by Executive will lapse immediately, incentive stock options
and stock appreciation rights then held will become immediately exercisable,
and any performance shares or units then held will vest immediately in full,
and the Executive will be entitled to receive benefits due him under or
contributed by Andrea on his behalf pursuant to any retirement, incentive,
profit sharing, bonus, performance, disability or other employee benefit plan
maintained by Andrea on his behalf to the extent such benefits are not
otherwise paid to him under a separate provision of the agreement. If, during
the term of the agreement, Andrea terminates Executive's employment other than
for Cause (as defined), or Executive resigns for Good Reason (as defined),
Andrea shall pay to him the product of (a) a sum equal to (1) the amount of
the remaining salary payments that he would have earned if he continued
35
<PAGE>
his employment with Andrea during the remaining unexpired term of his
employment agreement at his base salary at the date of termination, (2) the
highest amount of bonus and any other compensation paid to the executive, in
any year, during the term of his employment agreement times the remaining
number of years of the agreement and any fraction thereof and (3) an amount
equal to the highest amount of annual contributions that were made on
Executive' behalf, in any year, to any employee benefit plans of Andrea during
the term of the agreement, multiplied by (b) the remaining number of years of
the agreement and any fraction thereof.
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 Andrea
incorporated in this prospectus and registration statement by reference to our
annual report on Form 10-K have been audited by Arthur Andersen LLP,
independent public accountants, as indicated in their reports with respect
thereto, and are incorporated by reference in reliance upon the authority of
said firm as experts in accounting and auditing.
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.
36
<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;
(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 (a) our registration statement filed under the
Exchange Act of 1934, as amended, No. 1-4324, as declared
effective on February 28, 1967, (b) 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 (c) 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
that 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.
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.
37
<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
---------------------
January ___, 2001
<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.
II-1
<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, (a) a resolution of shareholders, (b) a resolution of directors, or
(c) 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
II-2
<PAGE>
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.
Andrea's Certificate of Incorporation provides that the personal
liability of the directors of Andrea 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 Andrea provide in substance that, to the
fullest extent permitted by New York law, each director and officer shall be
indemnified by Andrea 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 Andrea. The indemnification provided by Andrea'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.
** Previously filed.
B. Financial Statements & Schedules
II-3
<PAGE>
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 Andrea.
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.
II-4
<PAGE>
(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.
II-5
<PAGE>
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 16th day of January, 2001.
ANDREA ELECTRONICS CORPORATION
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.
By: /s/ John N. Andrea
---------------------------------------------------
John N. Andrea
Co-Chairman and Co-Chief Executive Officer
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
---------------------------
John N. Andrea Executive Officer and Director January 15, 2001
* Co-Chairman, Co-Chief
---------------------------
Douglas J. Andrea Executive Officer and Director January 15, 2001
* President and Chief Operating
---------------------------
Christopher P. Sauvigne Officer and Director January 15, 2001
* Chief Financial Officer, Secretary
---------------------------
Richard A. Maue and Chief Accounting Officer January 15, 2001
* Director January 15, 2001
---------------------------
Gary A. Jones
II-6
<PAGE>
* Director January 15, 2001
--------------------------
Paul M. Morris
* /s/ John N. Andrea
--------------------------
Attorney-in-Fact
</TABLE>
II-7
<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
23.1** 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.
** Previously filed.
1
