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Closing in on Breakeven Operating Performance
Current Quarter Financials Prepared on a Going Concern Basis
MELVILLE, N.Y.--(BUSINESS WIRE)--Nov. 11, 2004--Andrea Electronics Corporation (AMEX: AND - News) today reported that net revenues for the quarter ended September 30, 2004 were approximately $1.3 million as compared to net revenues of $1.2 million for the same quarter in 2003. Net loss for the quarter ended September 30, 2004 was approximately $0.3 million, and a basic and diluted loss attributable to common shareholders of $0.01 per share, as compared to a net loss of approximately $1.1 million, or a basic and diluted loss attributable to common shareholders of $0.05 per share, for the three months ended September 30, 2003.
Net revenues for the nine months ended September 30, 2004 were approximately $4.2 million, inclusive of sales returns recovery - restructuring of $0.2 million, versus net revenues of $3.7 million for the same nine month period in 2003. Net loss for the nine month period ended September 30, 2004 was approximately $1.3 million, and a basic and diluted loss attributable to common shareholders of $0.06 per share, as compared to a net loss of approximately $0.7 million, and a basic and diluted loss attributable to common shareholders of $0.05 per share, for the nine month period ended September 30, 2003. The net loss for the nine month period ended September 30, 2003 included income from discontinued operations of approximately $2.5 million, or basic and diluted income attributable to common shareholders of $0.11 per share.
"While sequential quarterly net revenues increased modestly in the current quarter, net revenues in the first nine months of 2004, inclusive of sales returns recovery - restructuring of $0.2 million, represented a 13% increase as compared to the first nine months of last year," stated Corisa L. Guiffre, Vice President and Chief Financial Officer. "Additionally, research and development and general, administrative and selling expenses combined for the three and nine month periods ended September 30, 2004 decreased 33% and 28%, respectively, as compared to the same periods last year. Andrea has now put forth five consecutive quarters of declining non-impairment related operating losses, which continues to evidence the Company's overall fiscal progress," Ms. Guiffre concluded.
"During the third quarter of 2004, we continued to close in on our strategic goal of minimally achieving breakeven operating performance," stated Paul E. Donofrio, President and Chief Executive Officer. "While current quarter net revenues grew modestly, Andrea's operating expenses have continued to decline especially in the research and development area. Overall, the Company's current quarter net loss has been reduced by nearly 70% as compared to the same period last year. Notwithstanding these notable strides, a concerted and dedicated effort still remains in terms of securing greater market penetration of our computer headset and digital products," Mr. Donofrio concluded.
For the third quarter of 2004, Andrea Anti-Noise Products revenues were approximately $0.6 million, as compared to $0.6 million for the third quarter of 2003. For the third quarter of 2004, Andrea DSP Microphone and Audio Software Products revenues were approximately $0.7 million as compared to $0.6 for the third quarter of 2003. The increase in the Andrea DSP Microphone and Audio Software Products revenues is primarily attributable to increased product shipments to several of our OEM customers.
For the first nine months of 2004, Andrea Anti-Noise Products revenues were approximately $2.1 million, inclusive of sales returns recovery - restructuring of $0.2 million, as compared to $1.9 million for the first nine months of 2003. For the first nine months of 2004, Andrea DSP Microphone and Audio Software Products revenues were approximately $2.1 million as compared to $1.8 for the first nine months of 2003. The increase in the Andrea DSP Microphone and Audio Software Products revenues is primarily attributable to increased product shipments to several of our OEM customers.
At September 30, 2004, we had total cash and cash equivalents and short-term investments of approximately $1.4 million. Total assets were approximately $8.4 million with total current assets of approximately $3.5 million. Total liabilities were approximately $2.6 million with total current liabilities of approximately $2.3 million. Total shareholders' equity at September 30, 2004 was approximately $5.8 million, which increased approximately $8.3 million from the December 31, 2003 total shareholders' deficiency of approximately $2.5 million. This increase is primarily due to the reclassification of previously redeemable preferred stock from temporary equity to permanent equity as a result of the balance sheet restructuring and capital infusions that took place during the first half of 2004.
The Company has implemented several measures in an effort to reduce expenses and to help preserve cash. The Company continues to pursue additional financial as well as strategic sources of capital. These efforts could include the sale of assets of the Company. There can be no assurances that the Company will be successful in its attempts to raise sufficient capital essential to the Company's survival. To the extent that the Company is unable to raise the necessary operating capital, it will not be able to develop and implement a business plan, and it will become necessary to curtail or cease operations. Additionally, even if the Company does raise sufficient operating capital, there can be no assurances that the net proceeds will be sufficient enough to enable it to develop its business to a level where it will generate profits and cash flows from operations. These matters raise substantial doubt about its ability to continue as a going concern. As such, the Company's third quarter condensed consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. The financial statements do not include any adjustments relating to the recoverability of the recorded assets or the classification of the liabilities that might be necessary should the Company be unable to continue as a going concern.
About Andrea Electronics
Andrea Electronics Corporation designs, develops and manufactures
audio technologies and equipment for enhancing applications
that require high performance and high quality voice input.
The Company's patented Digital Super Directional Array (DSDA®),
patent-pending Directional Finding and Tracking Array (DFTA®),
patented PureAudio®, and patented EchoStop(TM) far-field
microphone technologies enhance a wide range of audio products
to eliminate background noise and ensure the optimum performance
of voice applications. Visit Andrea Electronics' website at
www.AndreaElectronics.com
or call 1-800-442-7787.
This press release may contain "forward-looking statements"
within the meaning of the Private Securities Litigation Reform
Act of 1995. The words "anticipates," "believes," "estimates,"
"expects," "intends," "plans," "seeks," variations of such
words, and similar expressions are intended to identify forward-looking
statements. These statements are not guarantees of future
performance and involve matters that are subject to certain
risks, uncertainties and assumptions that are difficult to
predict, including economic, competitive, governmental, technological
and other factors, that may affect the business and prospects
of Andrea Electronics Corporation (the "Company"). The Company
cautions investors about the following significant factors,
which, among others, have in some cases affected the Company's
actual results and are in the future likely to affect the
Company's actual results and could cause them to differ materially
from those expressed in any forward- looking statements: the
rate at which Andrea Anti-Noise, DSDA, DFTA and other Andrea
technologies are accepted in the marketplace; the competitiveness
of Andrea Anti-Noise, DSDA, DFTA and other Andrea products
in terms of technical specifications, quality, price, reliability
and service; the sufficiency of the Company's funds for research
and development, marketing and general and administrative
expenses; infringement and other disputes relating to patents
and other intellectual property rights held or licensed by
the Company or third parties; the Company's continuing ability
to enter and maintain collaborative relationships with other
manufacturers, software authoring and publishing companies,
and distributors; the emergence of new competitors in the
marketplace; the Company's ability to compete successfully
against established competitors with greater resources; the
uncertainty of future governmental regulation; the Company's
ability to obtain additional funds; and general economic conditions.
No assurance can be given that the Company will achieve any
material sales or profits from the products introduced in
this release. These and other similar factors are 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-KSB and in the Company's Annual Report
to shareholders, and in documents subsequently filed by the
Company with the Securities and Exchange Commission.
ANDREA ELECTRONICS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Three Months For the Nine Months
Ended Ended
--------------------- ---------------------
September September September September
30, 30, 30, 30,
2004 2003 2004 2003
--------- --------- --------- ---------
Revenues
Product revenues $886,991 $749,888 $2,687,210 $2,440,802
License revenues 416,670 416,670 1,250,010 1,250,010
--------- --------- --------- ---------
Revenues 1,303,661 1,166,558 3,937,220 3,690,812
Sales returns recovery
- restructuring - - 215,325 -
--------- --------- --------- ---------
Net revenues 1,303,661 1,166,558 4,152,545 3,690,812
Cost of revenues 554,090 653,251 1,832,677 1,941,979
--------- --------- --------- ---------
Gross margin 749,571 513,307 2,319,868 1,748,833
Research and
development expenses 321,083 667,207 1,085,853 2,177,978
General, administrative
and selling expenses 756,780 949,938 2,624,732 2,959,623
--------- --------- --------- ---------
Loss from
operations (328,292) (1,103,838) (1,390,717) (3,388,768)
--------- --------- --------- ---------
Other income (expense)
Interest (expense)
income, net (2,527) 508 (39) 41,039
Rent and
miscellaneous income
(expense) (2,536) 30,873 108,427 108,511
--------- --------- --------- ---------
Other income
(expense) (5,063) 31,381 108,388 149,550
--------- --------- --------- ---------
Loss from
continuing
operations (333,355) (1,072,457) (1,282,329) (3,239,218)
Income from
discontinued
operations, net of $0
tax - - - 2,534,824
--------- --------- --------- ---------
Net loss $(333,355)$(1,072,457)$(1,282,329) $(704,394)
========= ========= ========= =========
Basic and diluted loss
per share:
Numerator for loss per
share:
Loss from continuing
operations $(333,355)$(1,072,457)$(1,282,329)$(3,239,218)
Series C Redeemable
Convertible
Preferred Stock
dividends - 113,892 45,518 334,182
Series C
Convertible
Preferred Stock
deemed dividend - - 469,465 -
Series D
Convertible
Preferred Stock
beneficial
conversion feature - - 753,012 -
--------- --------- --------- ---------
Loss from
continuing
operations
attributable to
common
shareholders -
basic and diluted (333,355) (1,186,349) (2,550,324) (3,573,400)
Income from
discontinued
operations, net of
$0 tax - - - 2,534,824
--------- --------- --------- ---------
Net loss
attributable to
common
shareholders -
basic and
diluted $(333,355)$(1,186,349)$(2,550,324)$(1,038,576)
========= ========= ========= =========
Denominator for loss
per share:
Basic and diluted
weighted average
shares 52,231,554 24,310,003 45,107,212 22,785,111
========= ========= ========= =========
Basic and diluted
loss from continuing
operations
attributable to
common shareholders
per share $(.01) $(.05) $(.06) $(.16)
Basic and diluted
income from
discontinued
operations per share - - - .11
--------- --------- --------- ---------
Basic and diluted net
loss attributable to
common shareholders
per share $(.01) $(.05) $(.06) $(.05)
========= ========= ========= =========
ANDREA ELECTRONICS CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS September 30, December 31,
2004 2003
(unaudited) (audited)
------------- ------------
Current Assets
Cash and cash equivalents $761,326 $1,725,041
Short-term investments 600,000 -
Accounts receivable, net of allowance for
doubtful accounts of $23,706 and $56,697,
respectively 445,650 611,422
Note receivable - 354,986
Inventories, net 1,167,611 1,301,791
Prepaid expenses and other current assets 532,575 181,018
------------- ------------
Total current assets 3,507,162 4,174,258
Property and equipment, net 139,335 219,182
Intangible assets, net 4,461,832 4,805,630
Other assets, net 258,678 268,090
------------- ------------
Total assets $8,367,007 $9,467,160
============= ============
LIABILITIES AND SHAREHOLDERS' EQUITY
(DEFICIENCY)
------------------------------------
Current Liabilities:
Trade accounts payable $395,649 $731,092
Current portion of long-term debt 1,161 16,527
Accrued restructuring charges - 238,391
Deferred revenue 1,154,954 1,666,680
Other current liabilities 780,785 1,714,439
------------- ------------
Total current liabilities 2,332,549 4,367,129
Deferred revenue - 713,284
Other liabilities 230,361 238,671
------------- ------------
Total liabilities 2,562,910 5,319,084
------------- ------------
Series B Redeemable Convertible Preferred
Stock, net, $.01 par value; authorized:
1,000 shares; issued and outstanding: 0
shares - -
Series C Redeemable Convertible Preferred
Stock, net, $.01 par value; authorized:
1,500 shares; issued and outstanding: 677
shares; liquidation value: $6,771,876 at
December 31, 2003 - 6,692,603
------------- ------------
Commitments and contingencies
Shareholders' equity (deficiency):
Preferred stock, $.01 par value;
authorized: 2,497,500 and 4,997,500
shares, respectively; none issued and
outstanding - -
Series C Convertible Preferred Stock, net,
$.01 par value; authorized: 1,500 shares;
issued and outstanding: 145 shares;
liquidation value: $1,454,791 at
September 30, 2004 1 -
Series D Convertible Preferred Stock, net,
$.01 par value; authorized: 2,500,000 and
0 shares, respectively; issued and
outstanding: 1,707,143 and 0 shares,
respectively; liquidation value:
$1,707,143 and $0, respectively 17,071 -
Common stock, $.01 par value; authorized:
200,000,000 shares; issued and
outstanding: 54,268,149 and 27,245,932
shares, respectively 542,681 272,459
Additional paid-in capital 76,159,616 65,578,653
Deferred stock compensation (17,500) (2,673)
Accumulated deficit (70,897,772) (68,392,966)
------------- ------------
Total shareholders' equity (deficiency) 5,804,097 (2,544,527)
------------- ------------
Total liabilities and shareholders'
equity (deficiency) $8,367,007 $9,467,160
============= ============
AT ANDREA
ELECTRONICS CORPORATION
Corisa L. Guiffre
Chief Financial Officer
1-800-447-7787
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