EX-99.1 2 a4697491ex991.txt ANDREA ELECTRONICS CORPORATION EXHIBIT 99.1 Exhibit 99.1 Andrea Electronics Announces Second Quarter 2004 Financial Results; Positive Strides Continue Towards the Achievement of Breakeven or Better Operating Performance MELVILLE, N.Y.--(BUSINESS WIRE)--Aug. 9, 2004--Andrea Electronics Corporation (AMEX:AND) today reported that net revenues for the quarter ended June 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 June 30, 2004 was approximately $0.4 million, and a basic and diluted loss attributable to common shareholders of $0.01 per share, as compared to net income of approximately $1.1 million, and a basic and diluted income attributable to common shareholders of $0.04 per share, for the same quarter in 2003. The net income for the quarter ended June 30, 2003 included income from discontinued operations of approximately $2.2 million, or basic and diluted income attributable to common shareholders of $0.10 per share. Net revenues for the six months ended June 30, 2004 were approximately $2.8 million, inclusive of sales returns recovery - restructuring of $0.2 million, as compared to net revenues of $2.5 million for the same six month period in 2003. Net loss for the period ended June 30, 2004 was approximately $0.9 million, and a basic and diluted loss attributable to common shareholders of $0.05 per share, as compared to net income of approximately $0.4 million, and a basic and diluted income attributable to common shareholders of $0.01 per share, for the same six month period in 2003. The net income for the period ended June 30, 2003 included income from discontinued operations of approximately $2.5 million, or basic and diluted income attributable to common shareholders of $0.12 per share. "While sequential quarterly net revenues declined in the current quarter, net revenues in the first six months of 2004, inclusive of sales returns recovery - restructuring of $0.2 million, still represented a 13% increase as compared to the first six 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 six month periods ended June 30, 2004 decreased 33% and 25%, respectively, as compared to the same periods last year. Andrea has experienced four consecutive quarters of declining non-impairment related operating losses, which continues to show the Company's overall and continued fiscal accomplishments," Ms. Guiffre concluded. "During the second quarter of 2004, our balance sheet restructuring initiative was completed successfully when the new investor group funded the second $1.25 million capital infusion upon shareholder approval and effective registration of the underlying securities," stated Paul E. Donofrio, President and Chief Executive Officer. "We continue to make very positive strides towards the achievement of breakeven or better operating performance. While net revenues in the current quarter came in a bit lower than anticipated, due to sluggish demand for our digital and, to a lesser extent, our computer headset products, Andrea's period expenses have continued to decline with the most comprehensive reductions taking place in the overall research and development area. Although these are certainly encouraging trends, garnering a sustainable higher level of net revenues remains the key strategic goal for the company. We thank the new investors for their follow through as we remain focused on our sales and marketing initiatives and committed to making requisite investments to further enhance our top line growth," Mr. Donofrio concluded. For the second quarter of 2004, Andrea Anti-Noise Products revenues were approximately $0.6 million, as compared to $0.5 million for the second quarter of 2003. For the second quarter of 2004, Andrea DSP Microphone and Audio Software Products revenues were approximately $0.7 million as compared to $0.7 for the second quarter of 2003. The increase in the Andrea Anti-Noise Products revenues is primarily attributable to increased product shipments to several of our on-line collaboration and distance learning customers. For the first six months of 2004, Andrea Anti-Noise Products revenues were approximately $1.4 million, inclusive of sales returns recovery - restructuring of $0.2 million, as compared to $1.3 million for the first six months of 2003. For the first six months of 2004, Andrea DSP Microphone and Audio Software Products revenues were approximately $1.4 million as compared to $1.2 for the first six 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 June 30, 2004, we had total cash and cash equivalents of approximately $2.4 million. Total assets were approximately $9.5 million with total current assets of approximately $4.5 million. Total liabilities were approximately $3.5 million with total current liabilities of approximately $3.2 million. Total shareholders' equity at June 30, 2004 was approximately $6.0 million, which increased approximately $8.5 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. 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(R)), patent-pending Directional Finding and Tracking Array (DFTA(R)), patented PureAudio(R), 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 Six Months Ended Ended ------------------------------------------------ June 30, June 30, June 30, June 30, 2004 2003 2004 2003 ------------------------------------------------ Revenues Product revenues $872,567 $826,509 $1,800,219 $1,690,914 License revenues 416,670 416,670 833,340 833,340 ------------------------------------------------ Revenues 1,289,237 1,243,179 2,633,559 2,524,254 Sales returns recovery - restructuring - - 215,325 - ------------------------------------------------ Net revenues 1,289,237 1,243,179 2,848,884 2,524,254 Cost of revenues 586,458 717,250 1,278,587 1,288,728 ------------------------------------------------ Gross margin 702,779 525,929 1,570,297 1,235,526 Research and development expenses 365,303 730,051 764,770 1,510,771 General, administrative and selling expenses 787,592 997,937 1,867,952 2,009,685 ------------------------------------------------ Loss from operations (450,116) (1,202,059) (1,062,425) (2,284,930) ------------------------------------------------ Other income Interest income, net 1,138 12,534 2,488 40,531 Rent and miscellaneous income 33,491 72,521 110,963 77,638 ------------------------------------------------ Other income 34,629 85,055 113,451 118,169 ------------------------------------------------ Loss from continuing operations (415,487) (1,117,004) (948,974) (2,166,761) Income from discontinued operations, net of $0 tax - 2,242,573 - 2,534,824 ------------------------------------------------ Net (loss) income $(415,487) $1,125,569 $(948,974) $368,063 ================================================ Basic and diluted (loss) income per share: Numerator for (loss) income per share: Loss from continuing operations $(415,487) $(1,117,004) $(948,974) $(2,166,761) Series C Redeemable Convertible Preferred Stock dividends - 109,771 45,518 220,290 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 dilute (415,487) (1,226,775) (2,216,969) (2,387,051) Income from discontinued operations, net of $0 tax - 2,242,573 - 2,534,824 ------------------------------------------------ Net (loss) income attributable to common shareholders - basic and diluted $ (415,487) $ 1,015,798 $ (2,216,969) $ 147,773 ================================================ Denominator for (loss) income per share: Basic and diluted weighted average shares 48,003,703 22,691,549 41,505,896 22,010,028 ================================================ Basic and diluted loss from continuing operations attributable to common shareholders per share $ (.01) $ (.06) $ (.05) $ (.11) Basic and diluted income from discontinued operations per share - .10 - .12 ------------------------------------------------ Basic and diluted net (loss) income attributable to common shareholders per share $ (.01) $ .04 $ (.05) $ .01 ================================================ ANDREA ELECTRONICS CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS June 30, December 31, ASSETS 2004 2003 (unaudited) (audited) ---------------------------------------------------------------------- Current Assets Cash and cash equivalents $2,376,087 $1,725,041 Accounts receivable, net of allowance for doubtful accounts of $24,789 and $56,697, respectively 522,530 611,422 Note receivable - 354,986 Inventories, net 1,056,711 1,301,791 Prepaid expenses and other current assets 578,037 181,018 ------------------------ Total current assets 4,533,365 4,174,258 Property and equipment, net 162,411 219,182 Intangible assets, net 4,574,260 4,805,630 Other assets, net 261,907 268,090 ------------------------ Total assets $9,531,943 $9,467,160 ======================== LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIENCY) ---------------------------------------------- Current Liabilities: Trade accounts payable $836,270 $731,092 Current portion of long-term debt 6,283 16,527 Accrued restructuring charges - 238,391 Deferred revenue 1,546,624 1,666,680 Other current liabilities 856,015 1,714,439 ------------------------ Total current liabilities 3,245,192 4,367,129 Deferred revenue - 713,284 Other liabilities 250,729 238,671 ------------------------ Total liabilities 3,495,921 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: 211 shares; liquidation value: $2,108,459 at June 30, 2004 2 - Series D Convertible Preferred Stock, net, $.01 par value; authorized: 2,500,000 and 0 shares, respectively; issued and outstanding: 2,164,286 and 0 shares, respectively; liquidation value: $2,164,286 and $0, respectively 21,643 - Common stock, $.01 par value and $.01 par value, respectively; authorized: 200,000,000 shares; issued and outstanding: 49,448,944 and 27,245,932 shares, respectively 494,489 272,459 Additional paid-in capital 76,109,305 65,578,653 Deferred stock compensation (25,000) (2,673) Accumulated deficit (70,564,417)(68,392,966) ------------------------ Total shareholders' equity (deficiency) 6,036,022 (2,544,527) ------------------------ Total liabilities and shareholders' equity (deficiency) $9,531,943 $9,467,160 ======================== CONTACT: Andrea Electronics Corporation Corisa L. Guiffre, 631-719-1800 or 800-707-5779