(X) |
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
For the quarterly period ended September 30, 2013 |
( ) |
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
For the transition period from _________________ to _________________ |
New York | 11-0482020 | ||||||
(State or other jurisdiction of incorporation or organization) |
(I.R.S. employer identification no.) |
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65 Orville Drive, Bohemia, New York | 11716 | ||||||
(Address of principal executive offices) |
(Zip Code) |
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Registrants telephone number (including area code): |
631-719-1800 |
Large Accelerated Filer o |
Accelerated Filer o |
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Non-Accelerated Filer o (Do not check if a smaller reporting company) |
Smaller Reporting Company x |
PART I. |
FINANCIAL INFORMATION |
ITEM 1. |
FINANCIAL STATEMENTS |
September 30, 2013 |
December 31, 2012 |
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(unaudited) |
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ASSETS |
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Current assets: |
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Cash |
$ | 966,468 | $ | 1,746,363 | ||||||
Accounts receivable, net of allowance for doubtful accounts of $17,920 and $18,980, respectively |
598,209 | 229,025 | ||||||||
Inventories, net |
814,964 | 633,069 | ||||||||
Prepaid expenses and other current assets |
107,476 | 89,327 | ||||||||
Total current assets |
2,487,117 | 2,697,784 | ||||||||
Property and equipment, net |
197,383 | 266,137 | ||||||||
Intangible assets, net |
430,140 | 752,973 | ||||||||
Other assets, net |
13,198 | 12,864 | ||||||||
Total assets |
$ | 3,127,838 | $ | 3,729,758 | ||||||
LIABILITIES AND SHAREHOLDERS EQUITY |
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Current liabilities: |
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Trade accounts payable |
$ | 305,554 | $ | 197,954 | ||||||
Accrued Series C Preferred Stock Dividends |
73,921 | 73,921 | ||||||||
Other current liabilities |
174,230 | 163,286 | ||||||||
Total current liabilities |
553,705 | 435,161 | ||||||||
Series B Redeemable Convertible Preferred Stock, $.01 par value; authorized: 1,000 shares; issued and outstanding: 0
shares |
| | ||||||||
Commitments and contingencies |
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Shareholders equity: |
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Preferred stock, $.01 par value; authorized: 2,497,500 shares; none issued and outstanding |
| | ||||||||
Series C Convertible Preferred Stock, net, $.01 par value; authorized: 1,500 shares; issued and outstanding: 44.2 shares; liquidation value:
$442,314 |
1 | 1 | ||||||||
Series D Convertible Preferred Stock, net, $.01 par value; authorized: 2,500,000 shares; issued and outstanding: 907,144 shares; liquidation
value: $907,144 |
9,072 | 9,072 | ||||||||
Common stock, $.01 par value; authorized: 200,000,000 shares; issued and outstanding: 63,721,035 shares |
637,210 | 637,210 | ||||||||
Additional paid-in capital |
77,535,762 | 77,521,216 | ||||||||
Accumulated deficit |
(75,607,912 | ) | (74,872,902 | ) | ||||||
Total shareholders equity |
2,574,133 | 3,294,597 | ||||||||
Total liabilities and shareholders equity |
$ | 3,127,838 | $ | 3,729,758 |
For the Three Months Ended |
For the Nine Months Ended |
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September 30, 2013 |
September 30, 2012 |
September 30, 2013 |
September 30, 2012 |
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Revenues |
|||||||||||||||||||
Net product revenues |
$ | 529,402 | $ | 817,416 | $ | 1,400,771 | $ | 2,042,628 | |||||||||||
License revenues |
229,470 | 125,851 | 1,005,302 | 550,208 | |||||||||||||||
Revenues |
758,872 | 943,267 | 2,406,073 | 2,592,836 | |||||||||||||||
Cost of revenues |
340,755 | 456,871 | 897,122 | 1,170,739 | |||||||||||||||
Gross margin |
418,117 | 486,396 | 1,508,951 | 1,422,097 | |||||||||||||||
Research and development expenses |
176,577 | 189,822 | 522,801 | 574,871 | |||||||||||||||
General, administrative and selling expenses |
515,860 | 642,319 | 1,597,983 | 1,813,011 | |||||||||||||||
Loss from operations |
(274,320 | ) | (345,745 | ) | (611,833 | ) | (965,785 | ) | |||||||||||
Interest income, net |
1,342 | 2,053 | 5,214 | 6,392 | |||||||||||||||
Loss before provision for income taxes |
(272,978 | ) | (343,692 | ) | (606,619 | ) | (959,393 | ) | |||||||||||
Provision for income taxes |
128,391 | 154,621 | 128,391 | 154,637 | |||||||||||||||
Net loss |
$ | (401,369 | ) | $ | (498,313 | ) | $ | (735,010 | ) | $ | (1,114,030 | ) | |||||||
Basic and diluted weighted average shares |
63,721,035 | 63,721,035 | 63,721,035 | 63,721,035 | |||||||||||||||
Basic and diluted net loss per share |
$ | (.01 | ) | $ | (.01 | ) | $ | (.01 | ) | $ | (.02 | ) |
Series C Convertible Preferred Stock Outstanding |
Series C Convertible Preferred Stock |
Series D Convertible Preferred Stock Outstanding |
Series D Convertible Preferred Stock |
Common Stock Shares Outstanding |
Common Stock |
Additional Paid-In Capital |
Accumulated Deficit |
Total Shareholders Equity |
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Balance, January 1, 2013 |
44.231432 | $ | 1 | 907,144 | $ | 9,072 | 63,721,035 | $ | 637,210 | $ | 77,521,216 | $ | (74,872,902 | ) | $ | 3,294,597 | |||||||||||||||||||||||
Stock-based Compensation Expense related to Stock Option Grants |
| | | | | | 14,546 | | 14,546 | ||||||||||||||||||||||||||||||
Net loss |
| | | | | | | (735,010 | ) | (735,010 | ) | ||||||||||||||||||||||||||||
Balance, September 30, 2013 |
44.231432 | $ | 1 | 907,144 | $ | 9,072 | 63,721,035 | $ | 637,210 | $ | 77,535,762 | $ | (75,607,912 | ) | $ | 2,574,133 |
For the Nine Months Ended |
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September 30, 2013 |
September 30, 2012 |
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Cash flows from operating activities: |
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Net loss |
$ | (735,010 | ) | $ | (1,114,030 | ) | |||||
Adjustments to reconcile net loss to net cash used in operating activities: |
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Depreciation and amortization |
420,269 | 429,258 | |||||||||
Stock based compensation |
14,546 | 52,904 | |||||||||
Provision for income tax withholding |
128,391 | | |||||||||
Deferred income taxes |
| 154,621 | |||||||||
Change in: |
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Accounts receivable |
(497,575 | ) | 284,569 | ||||||||
Inventories |
(181,895 | ) | (40,166 | ) | |||||||
Prepaid expenses, other current assets and other assets |
(18,483 | ) | (6,866 | ) | |||||||
Trade accounts payable |
107,600 | 148,495 | |||||||||
Other current liabilities |
10,944 | (33,189 | ) | ||||||||
Net cash used in operating activities |
(751,213 | ) | (124,404 | ) | |||||||
Cash flows used in investing activities: |
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Purchases of property and equipment |
| (35,293 | ) | ||||||||
Purchases of patents and trademarks |
(28,682 | ) | (27,306 | ) | |||||||
Net cash used in investing activities |
(28,682 | ) | (62,599 | ) | |||||||
Net decrease in cash |
(779,895 | ) | (187,003 | ) | |||||||
Cash, beginning of year |
1,746,363 | 2,193,377 | |||||||||
Cash, end of period |
$ | 966,468 | $ | 2,006,374 | |||||||
Supplemental disclosures of cash flow information: |
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Cash paid for: |
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Income Taxes |
$ | 60,525 | $ | 4,041 |
Note 1. |
Basis of Presentation and Managements Liquidity Plans |
Note 2. |
Summary of Significant Accounting Policies |
For the Three and Nine Months Ended | |||||||||||
September 30, 2013 |
September 30, 2012 |
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Total potential common shares as of: |
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Options to purchase common stock (Note 6) |
17,205,821 | 17,375,821 | |||||||||
Series C Convertible Preferred Stock and related accrued dividends (Note 3) |
2,023,658 | 2,023,658 | |||||||||
Series D Convertible Preferred Stock and related warrants (Note 4) |
3,628,576 | 3,628,576 | |||||||||
Total potential common shares |
22,858,055 | 23,028,055 |
For the Three Months Ended |
For the Nine Months Ended |
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September 30, 2013 |
September 30, 2012 |
September 30, 2013 |
September 30, 2012 |
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Customer A
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27% |
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* |
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|
37% |
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|
* |
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| |
Customer B
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15% |
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|
32% |
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* |
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|
1% |
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| |
Customer C |
* | 13% | * | 20% |
* |
Amounts are less than 10% |
For the Three Months Ended |
For the Nine Months Ended |
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September 30, 2013 |
September 30, 2012 |
September 30, 2013 |
September 30, 2012 |
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Supplier A
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90% |
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|
94% |
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88% |
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|
67% |
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|
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| |
Supplier B
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|
|
* |
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|
|
* |
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|
|
* |
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|
15% |
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|
|
| |
* |
Amounts are less than 10% |
September 30, 2013 |
December 31, 2012 |
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Raw materials |
$ | 18,278 | $ | 25,484 | ||||||
Finished goods |
1,237,027 | 1,262,535 | ||||||||
1,255,305 | 1,288,019 | |||||||||
Less: reserve for obsolescence |
(440,341 | ) | (654,950 | ) | ||||||
$ | 814,964 | $ | 633,069 |
Note 3. |
Series C Convertible Preferred Stock |
Note 4. |
Series D Convertible Preferred Stock |
Note 5. |
Commitments And Contingencies |
2013 (October 1 December 31) |
$ | 31,232 | ||||
2014 |
123,994 | |||||
2015 |
49,167 | |||||
2016 |
6,661 | |||||
Total |
$ | 211,054 |
Note 6. |
Stock Plans and Stock Based Compensation |
Options Outstanding |
Options Exercisable |
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Options Outstanding |
Weighted Average Exercise Price |
Weighted Average Fair Value |
Weighted Average Remaining Contractual Life |
Options Exercisable |
Weighted Average Exercise Price |
Weighted Average Fair Value |
Weighted Average Remaining Contractual Life |
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At January 1, 2013 |
17,270,321 | $ | 0.08 | $ | 0.08 | 4.95 years | 16,635,237 | $ | 0.08 | $ | 0.08 | 4.85 years | ||||||||||||||||||||||
Expired |
(64,500 | ) | $ | 0.09 | $ | 0.07 | ||||||||||||||||||||||||||||
At September 30, 2013 |
17,205,821 | $ | 0.08 | $ | 0.08 | 4.21 years | 17,205,821 | $ | 0.08 | $ | 0.08 | 4.21 years |
Note 7. |
Segment Information |
2013 Three Month Segment Data |
Andrea DSP Microphone and Audio Software Products |
Andrea Anti- Noise Products |
2013 Three Month Total |
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Net revenues from external customers |
$ | 51,633 | $ | 477,769 | $ | 529,402 | ||||||||
License revenues |
229,470 | | 229,470 | |||||||||||
Loss from operations |
(47,604 | ) | (226,716 | ) | (274,320 | ) | ||||||||
Depreciation and amortization |
120,715 | 19,446 | 140,161 | |||||||||||
Purchases of patents and trademarks |
16,642 | 42 | 16,684 | |||||||||||
Assets |
1,504,987 | 1,622,851 | 3,127,838 | |||||||||||
Total long lived assets |
422,201 | 205,322 | 627,523 | |||||||||||
2012 Three Month Segment Data |
Andrea DSP Microphone and Audio Software Products |
Andrea Anti- Noise Products |
2012 Three Month Total |
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Net revenues from external customers |
$ | 88,187 | $ | 729,229 | $ | 817,416 | ||||||||
License revenues |
125,851 | | 125,851 | |||||||||||
Loss from operations |
(222,383 | ) | (123,362 | ) | (345,745 | ) | ||||||||
Depreciation and amortization |
120,689 | 23,557 | 144,246 | |||||||||||
Purchases of property and equipment |
4,121 | 1,463 | 5,584 | |||||||||||
Purchases of patents and trademarks |
1,346 | 2,909 | 4,255 | |||||||||||
December 31, 2012 Year End Segment Data |
Andrea DSP Microphone and Audio Software Products |
Andrea Anti- Noise Products |
2012 Year End Total |
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Assets |
$ | 1,946,597 | $ | 1,783,161 | $ | 3,729,758 | ||||||||
Total long lived assets |
759,273 | 259,837 | 1,019,110 |
2013 Nine Month Segment Data |
Andrea DSP Microphone and Audio Software Products |
Andrea Anti- Noise Products |
2013 Nine Month Total |
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Net revenues from external customers |
$ | 128,387 | $ | 1,272,384 | $ | 1,400,771 | ||||||||
License revenues |
1,005,302 | | 1,005,302 | |||||||||||
Income (loss) from operations |
147,816 | (759,649 | ) | (611,833 | ) | |||||||||
Depreciation and amortization |
361,416 | 58,853 | 420,269 | |||||||||||
Purchases of patents and trademarks |
28,480 | 202 | 28,682 | |||||||||||
2012 Nine Month Segment Data |
Andrea DSP Microphone and Audio Software Products |
Andrea Anti- Noise Products |
2012 Nine Month Total |
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Net revenues from external customers |
$ | 399,558 | $ | 1,643,070 | $ | 2,042,628 | ||||||||
License revenues |
550,208 | | 550,208 | |||||||||||
Loss from operations |
(397,000 | ) | (568,785 | ) | (965,785 | ) | ||||||||
Depreciation and amortization |
361,464 | 67,794 | 429,258 | |||||||||||
Purchases of property and equipment |
6,574 | 28,719 | 35,293 | |||||||||||
Purchases of patents and trademarks |
12,569 | 14,737 | 27,306 |
Geographic Data |
September 30, 2013 |
September 30, 2012 |
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Net revenues: |
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United States |
$ | 452,562 | $ | 778,503 | ||||||
Foreign(1) |
306,310 | 164,764 | ||||||||
$ | 758,872 | $ | 943,267 |
(1) |
Net revenue from the Peoples Republic of China and Singapore represented 28% of total net revenues for the three months ended September 30, 2013. Net revenues to any one foreign country did not exceed 10% of total net revenues for the three months ended September 30, 2012. |
Geographic Data |
September 30, 2013 |
September 30, 2012 |
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Net revenues: |
||||||||||
United States |
$ | 1,253,447 | $ | 2,166,970 | ||||||
Foreign(1) |
1,152,626 | 425,866 | ||||||||
$ | 2,406,073 | $ | 2,592,836 |
(1) |
Net revenue from the Peoples Republic of China and Singapore represented 37% of total net revenues for the nine months ended September 30, 2013. Net revenues to any one foreign country did not exceed 10% of total net revenues for the nine months ended September 30, 2012. |
Geographic Data |
September 30, 2013 |
December 31, 2012 |
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Accounts receivable: |
||||||||||
United States |
$ | 271,075 | $ | 206,575 | ||||||
Foreign |
327,134 | 22,450 | ||||||||
$ | 598,209 | $ | 229,025 |
|
the volume of sales of our products under our collaborative marketing arrangements; |
|
the cost of development of our products; |
|
the mix of products we sell; |
|
the mix of distribution channels we use; |
|
the timing of our new product releases and those of our competitors; |
|
fluctuations in the computer and communications hardware and software marketplace; and |
|
general economic conditions. |
For the Three Months Ended September 30, |
% | For the Nine Months Ended September 30, |
% | |||||||||||||||||||||||||||
2013 |
2012 |
Change |
2013 |
2012 |
Change |
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Andrea Anti-Noise Products net Product revenues |
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Sales of products to OEM customers for use with educational software |
$ | 112,755 | $ | 325,781 | (65 | ) | $ | 146,258 | $ | 413,369 | (65 | ) | (a) | |||||||||||||||||
All other Andrea Anti-Noise net product revenues |
365,014 | 403,448 | (10 | ) | 1,126,127 | 1,229,701 | (8 | ) | (b) | |||||||||||||||||||||
Total Andrea Anti-Noise Products net Product revenues |
$ | 477,769 | $ | 729,229 | (34 | ) | $ | 1,272,385 | $ | 1,643,070 | (23 | ) | ||||||||||||||||||
Andrea DSP Microphone and Audio Software Products revenues |
||||||||||||||||||||||||||||||
Sales of automotive array microphone products |
12,900 | 13,525 | (5 | ) | 44,412 | 121,485 | (63 | ) | (c) | |||||||||||||||||||||
All other Andrea DSP Microphone and Audio product revenues |
38,733 | 74,662 | (48 | ) | 83,974 | 278,073 | (70 | ) | (d) | |||||||||||||||||||||
License revenues |
229,470 | 125,851 | 82 | 1,005,302 | 550,208 | 83 | (e) | |||||||||||||||||||||||
Total Andrea DSP Microphone and Audio Software Products revenues |
281,103 | 214,038 | 31 | 1,133,688 | 949,766 | 19 | ||||||||||||||||||||||||
Total Revenues |
$ | 758,872 | $ | 943,267 | (20 | ) | $ | 2,406,073 | $ | 2,592,836 | (7 | ) |
(a) |
The decreases of approximately $213,000 and $267,000 for the three and nine months ended September 30, 2013, respectively, as compared to the three and nine months ended September 30, 2012, represent decreased product sales to our educational customers for use with their distance learning products. We believe that these changes in product sales relate to the timing of the customers demand for our products. |
(b) |
The decreases of approximately $38,000 and $104,000 for the three and nine months ended September 30, 2013, respectively, as compared to the three and nine months ended September 30, 2012, in all other Andrea Anti-noise product revenues is primarily related to decreased demand from our distance learning customers as well as distributor and reseller customers. |
(c) |
The decrease of approximately $77,000 for the nine months ended September 30, 2013 as compared to the nine months ended September 30, 2012, in sales of automotive array microphone products is primarily the result of decreased product sales to integrators of public safety vehicle solutions. |
(d) |
The decreases of approximately $36,000 and $194,000 for the three and nine months ended September 30, 2013, respectively, as compared to the three and nine months ended September 30, 2012, in all other Andrea DSP Microphone and Audio Software product revenues is related to decreased demand from our OEM customers. |
(e) |
The increase of approximately $104,000 for the three months ended September 30, 2013, as compared to the three months ended September 30, 2012, is the result of an increase in sales of PC models which feature our technology. The increase of approximately $455,000 for the nine months ended September 30, 2013, as compared to the nine months ended September 30, 2012, is the result of an increase in sales of PC models which feature our technology and the Companys determination that certain royalties of approximately $295,000 related to a customers licensing agreement were not reported for 2012. |
(1) |
Incorporated herein by reference to Exhibit 10.1 to the Companys current report on Form 8-K filed with the SEC on August 1, 2013. |
ANDREA ELECTRONICS CORPORATION |
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By: /s/ DOUGLAS J. ANDREA |
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Name: Douglas J. Andrea |
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Title: Chairman of the Board, President, Chief Executive Officer and Corporate Secretary |
/s/ DOUGLAS J. ANDREA Douglas J. Andrea |
Chairman of the Board, President, Chief Executive Officer and Corporate Secretary |
November 14, 2013 |
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/s/ CORISA L. GUIFFRE Corisa L. Guiffre |
Vice President, Chief Financial Officer and Assistant Corporate Secretary |
November 14, 2013 |