ANDREA ELECTRONICS CORPORATION ANNOUNCES RESULTS FOR THIRD QUART
20% Sequential Growth in Revenues Marks Significant Improvement in Sales
LONG ISLAND CITY, N.Y., Oct. 30 /PRNewswire/ -- Andrea Electronics Corporation (Amex: AND) today announced revenues for the three months ended September 30, 1998 of $5.3 million, compared to revenues of $7.2 million in the same period last year. For the three months ended September 30, 1998, the Company reported a net loss of $1.68 million, or $0.15 per share, compared to net income of $1.6 million or $0.17 per share on a diluted basis in the same period last year. For the nine months ended September 30, 1998, the Company reported revenues of $14.2 million, compared to revenues of $18.7 million in the first nine months of 1997. For the nine months ended September 30, 1998, the Company reported a net loss of $3.1 million, or $0.31 per share, compared to net income of $2.8 million or $0.33 per share on a diluted basis over the same period in 1997 .
As reported earlier in the month by management, the principal factors that contributed to the $1.68 million loss for the third quarter of 1998 included higher volume, lower price/lower margin sales to the Company's OEM customers, continued significant investments in research and development, increases in promotional/advertising activities, significant goodwill amortization expense associated with the acquisition of Lamar Signal Processing, Ltd. and significant operating expenses relative to the Company's efforts in marketing its Digital Super Directional Array (DSDA(TM)) technology.
"We are encouraged by our success in growing sequential revenues following two flat quarters," said Patrick D. Pilch, Executive Vice President & Chief Financial Officer at Andrea Electronics Corporation.
Specifically, headset unit shipments increased approximately 39% and 7% over the second quarter 1998 and third quarter 1997, respectively. Also, the Company experienced an approximate 360% increase in retail sales for the third quarter 1998 over the second quarter 1998, primarily representing initial demand among retailers for the holiday season.
"Andrea continues to seek to diversify its OEM and retail customer base, introducing new products to the market to meet growing demand and penetrating the business-to-business channel with higher margin products. We are also committed to continued investments in research and development to maintain a leading competitive stance in the marketplace."
Concerning product development, during the third quarter and first nine months of 1998, research and development expenses increased approximately 95% and 215% over the third quarter and first nine months of 1997, respectively. These increases are a result of the Company's continuing efforts in developing its digital signal processing technology, coupled with efforts in computer/telephony headset technologies, which resulted in six new products during the third quarter of 1998. In addition, during 1998, Andrea Digital Technologies ("ADT") was formed specifically for research efforts focused on the pursuit of commercializing a natural language-driven, human/machine interface. ADT is developing an optimal far-field microphone solution for various voice-driven applications, incorporating the DSDA(TM) technology obtained through the acquisition of Lamar in early May of this year. The DSDA(TM) technology strengthens the Company's position in digital signal processing by broadening Andrea's exposure to other industries including the consumer electronics and professional audio markets, among others. Considering all of the foregoing, through the third quarter of 1998, total research and development expenses approximate 123% of the entire research and development expense for fiscal 1997. Management anticipates continued significant spending in research and development during the fourth quarter of 1998.
KEY THIRD QUARTER 1998 EVENTS -- Extending its existing relationship with IBM Corporation (NYSE: IBM), Andrea announced an agreement with IBM to package its headsets with IBM's flagship speech recognition software product, ViaVoice 98(TM), in addition to a separate agreement to provide IBM with headsets to be sold with certain of its Aptiva Personal Computers. -- Increasing its market presence on the Internet, Andrea announced an agreement with Conversational Computing to jointly package and sell its Conversa Web(TM) voice-enabled Internet browser software with Andrea's Active Noise Cancellation (ANC) headsets to retail stores nationwide. -- Extending its push into the retail channel, Andrea announced that Office Max Superstores (NYSE: OMX) selected three of Andrea's retail products to be sold in its 700 stores nationwide. -- Tapping the business-to-business market for the first time, Andrea Electronics announced agreements with S.P. Richards and CommuniTech, Inc. to sell Andrea's higher-end products offering productivity solutions for the computer telephony integration (CTI), small office/home office (SOHO) and call center markets. -- In July 1998, Andrea Electronics announced that it had issued and sold, in a private placement, $10,753,000 aggregate principal amount of 6% Convertible Notes ("Notes") due June 10, 2000. The Company is using the proceeds from the issuance of the Notes for technology acquisition and development, tooling costs, relocation costs, a new management information system and working capital requirements. -- Increasing its patent portfolio, Andrea Electronics announced that the U.S. Patent and Trademark Office issued the Company a Notice of Allowance of patent claims directed to its Digital Super Directional Array (DSDA(TM)) microphone technology of Lamar Signal Processing, Ltd., a wholly owned subsidiary of Andrea Electronics Corporation.
Since the close of the third quarter 1998, other key announcements made by the Company include:
-- The Company announced the opening of its new headquarters in Melville, Long Island. -- Andrea Electronics announced patents issued for its Digital Super Directional Array (DSDA(TM)) technology and for its Active Noise Reduction (ANR) technologies covering open and closed loop systems. -- Andrea announced an agreement with IBM, Lernout & Hauspie Speech Products ("L&H") (Nasdaq: LHSPF)(Easdaq: LHSP-ED) and Lotus Development Corporation ("Lotus") to include Andrea's NC-60 series headsets to be sold with each software publisher's high-end continuous speech recognition software. -- The Company announced its first online distribution agreement with Wal-Mart Online, the e-commerce division of Wal-Mart Stores Inc. This agreement is one of many steps which Andrea has taken to expand its channels of distribution, targeting customers seeking a high-end audio computing solution and bringing the Company's cost-effective and innovative office productivity solutions to a broader range of users, particularly on the Internet. -- The Company announced an agreement with Hi-Val, Inc. for its headsets to be used in conjunction with IBM's speech recognition software, distributed by Hi-Val, a high-tech company offering a wide range of multimedia solutions. -- Andrea also announced an agreement to supply Andrea's PC Headsets/Microphones to be included with International Microcomputer Software's (IMSI) Voice-Activated Software to Provide Major Value-Add for Consumers.
"Andrea's success in creating the most innovative voice-driven microphone technologies is a result of its commitment to investing in research and development," said John N. Andrea, Co-president of Andrea Electronics Corporation. "Our development of products that incorporate the DSDA(TM) technology will be one of the most significant achievements during the coming months for the Company. We anticipate that we will be the first to introduce a far-field digital array microphone product, which optimizes various voice interface applications, opening the door to many new emerging communication opportunities. We are excited about the future and look forward to achieving our full potential as a leading voice technology innovator."
Andrea Electronics Corporation designs, develops and manufactures audio technologies and equipment for applications incorporating natural language interfaces. The Company's patented Active Noise Reduction (ANR) earphone, Active Noise Cancellation (ANC) near-field and Digital Super Directional Array DSDA(TM) far-field microphone technologies are incorporated into a wide range of audio products to eliminate background noise and ensure the optimum performance of voice applications. Applications for the Company's technologies include: speech recognition programs, Internet telephony, video/audio conferencing, automobile PCs, home automation systems, hand-held devices and multiplayer online games, among others. Key OEM and software publisher customers and strategic partners who have endorsed Andrea Electronics' technologies and products include: Microsoft Corporation, IBM Corporation, Lernout & Hauspie Speech Products, Lotus Development Corporation, Dragon Systems, NEC, Mpath, Multitude, IDT, HyperGraphics, ILINC and ViAInc., among others.
To receive Andrea Electronics' latest news release and other corporate documents via FAX -- no cost -- please dial 1-800-PRO-INFO and input the Company's symbol AND. Or visit Andrea Electronics' website at www.andreaelectronics.com.
This press release contains "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements involve known and unknown risks, uncertainties or other factors that could cause actual results, performance or achievements of the Company to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Factors that might cause such a difference include, but are not limited to, those discussed under the heading "Cautionary Statement Regarding Forward-Looking Statements" included in the Management's Discussion and Analysis of Financial Condition and Results of Operations in the Company's Annual Report on Form 10-K and in the Company's Annual Report to Stockholders, and in documents subsequently filed by the Company with the Securities and Exchange Commission.
"Andrea Anti-Noise" is a registered trademark, and "AndreaVoiceSolutions" and "Andrea QuietWare" are trademarks of Andrea Electronics Corporation.
"DSDA" is a trademark of Andrea Electronics Corporation. Andrea Electronics Corporation And Subsidiaries Consolidated Balance Sheets ASSETS September 30, 1998 December 31, 1997 (unaudited) (audited) CURRENT ASSETS: Cash and cash equivalents $8,155,496 $2,059,338 Marketable securities - 102,717 Accounts receivable, net 4,289,676 4,568,433 Inventories, net 8,017,441 5,766,927 Deferred income taxes 909,569 909,569 Prepaid expenses and other current assets 1,548,697 1,023,661 Total current assets 22,920,879 14,430,645 PROPERTY, PLANT AND EQUIPMENT, net 1,177,659 1,022,342 DEFERRED INCOME TAXES 897,046 897,046 OTHER ASSETS 2,049,818 1,439,151 INTANGIBLE ASSET 26,845,616 - Total assets $53,891,018 $17,789,184 LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES: Trade accounts payable $1,527,209 $966,783 Current portion of long term debt 1,051,518 - Other current liabilities 2,202,725 483,731 Convertible notes current portion - 1,193,472 Total current liabilities 4,781,452 2,643,986 CONVERTIBLE NOTES, net 10,116,088 - LONG TERM DEBT 1,104,457 - OTHER LIABILITIES - 38,500 Total liabilities 16,001,997 2,682,486 SHAREHOLDERS' EQUITY: Common stock, $.50 par value; authorized: 15,000,000 shares; issued and outstanding: 11,105,730 and 8,706,692 shares, respectively 5,552,865 4,353,346 Additional paid-in capital 34,595,924 9,881,915 Retained earnings (deficit) (2,259,768) 871,437 Total shareholders' equity 37,889,021 15,106,698 Total liabilities and shareholders' equity $53,891,018 $17,789,184 ANDREA ELECTRONICS CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) For the Three For the Nine Months Ended Months Ended September 30, September 30 1998 1997 1998 1997 SALES $5,341,719 $7,210,911 $14,187,148 $18,676,055 COST OF SALES 3,466,280 4,247,121 9,040,435 11,022,262 Gross Profit 1,875,439 2,963,790 5,146,713 7,653,793 RESEARCH AND DEVELOPMENT EXPENSES 369,806 189,798 1,359,905 431,431 GENERAL, ADMINISTRATIVE AND SELLING EXPENSES 3,302,466 1,679,168 8,592,915 4,478,410 Income (loss) from operations (1,796,833) 1,094,824 (4,806,107) 2,743,952 OTHER INCOME (EXPENSE) Interest income 113,554 10,889 186,870 52,173 Interest expense (326,816) (71,314) (436,935) (198,221) Rent and miscellaneous income - 62,940 1,924,967 178,723 (213,262) 2,515 1,674,902 32,675 INCOME (LOSS) BEFORE INCOME TAX BENEFIT (2,010,095) 1,097,339 (3,131,205) 2,776,627 INCOME TAX (PROVISION) BENEFIT (329,043) 471,000 - 76,189 NET INCOME (LOSS) $(1,681,052)$1,568,339 $(3,131,205) $2,852,816 NET INCOME (LOSS) PER SHARE $(.15) $.17 $(.31) $.33 WEIGHTED AVERAGE COMMON AND COMMON EQUIVALENT SHARES OUTSTANDING 11,105,730 9,244,113 10,130,198 8,708,335
SOURCE Andrea Electronics
/CONTACT: Patrick D. Pilch, EVP & CFO, or Molly M. Jahncke and Carolynne O'Grady, both of Corporate Communications, 800-442-7787, all of Andrea Electronics; or General Info, Paula Schwartz, or Analyst Info, Elisa Mailman, or Media Info, Judith Sylk-Siegel, 212-661-8030, all of The Financial Relations Board/
/Web site: http://www.andreaelectronics.com/
(AND IBM OMX LSHPF) CO: Andrea Electronics; Microsoft Corporation; IBM Corporation; Lernout & Hauspie Speech Products; Lotus Development Corporation;
Dragon Systems; NEC; Mpath; Multitude; IDT; HyperGraphics; ILINC; ViAInc. ST: New York IN: CPR SU: ERN
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