Commitments and Contingencies

12 Months Ended

Dec. 31, 2015

Commitments and Contingencies [Abstract]

COMMITMENTS AND CONTINGENCIES

11. COMMITMENTS AND CONTINGENCIES

Leases

In May 2015, Andrea entered into a new lease for its new corporate headquarters located in Bohemia, New York, where Andrea leases space for research and development, sales and executive offices from an unrelated party. The lease is for approximately 3,000 square feet and expires in October 2020. The rent expense under this operating lease was $13,125 for the year ended December 31, 2015. The monthly rent under this lease is $2,625 with annual escalations of 3.5%.

Andrea’s previous corporate headquarters were located in Bohemia, New York. The lease from an unrelated party, which expired in May 2015, was for approximately 11,000 square feet and housed Andrea’s warehousing, sales and executive offices. Rent expense under Andrea’s previous operating lease was $37,676 and $99,718 for the years ended December 31, 2015 and 2014, respectively.As of December 31, 2015, the minimum annual future lease payments, under this lease and all other noncancellable operating leases, are as follows:

2016		54,365
2017		44,124
2018		38,700
2019		39,912
2020		30,856
Total	$	207,95

Employment Agreements

In August 2014, the Company entered into an employment agreement with Mr. Andrea. The effective date of the employment agreement is August 1, 2014 and expires July 31, 2016 and is subject to renewal as approved by the Compensation Committee of the Board of Directors. Pursuant to his employment agreement, Mr. Andrea will receive an annual base salary of $300,000. The employment agreement provides for quarterly bonuses equal to 5% of the Company’s pre-bonus net after tax quarterly earnings for a total quarterly bonus amount not to exceed $12,500; and annual bonuses equal to 9% of the Company’s annual pre-bonus net after tax earnings in excess of $300,000 up to $3,000,000, and 3% of the Company’s annual pre-bonus adjusted net after tax earnings in excess of $3,000,000. Adjustments to net after tax earnings shall be made to remove the impact of change in recognition of accumulated deferred tax asset value. All bonuses shall be payable as soon as the Company’s cash flow permits. All bonus determinations or any additional bonus in excess of the above will be made in the sole discretion of the Compensation Committee. Mr. Andrea is also entitled to a change in control payment equal to three times the three year average of the cash incentive compensation paid or accrued as of the date of termination, continuation of health and medical benefits for three years and immediate vesting of all stock options in the event of a change in control during the term of his agreement and subsequent termination of his employment within two years following the change of control. In the event of his termination without cause or resignation with the Company’s consent, Mr. Andrea is entitled to a severance payment equal to six months of his base salary, plus the six months prorated portion of his most recent annual and quarterly bonuses, and a continuation of health insurance coverage for Mr. Andrea, his spouse and his dependents for 12 months. At December 31, 2015, the future minimum cash commitments under this agreement aggregate $398,863.

In November 1999, as amended August 2008, the Company entered into a change in control agreement with the Chief Financial Officer, Corisa L. Guiffre. This agreement provides for a change in control payment equal to three times her average annual compensation for the five preceding taxable years, with continuation of health and medical benefits for three years in the event of a change in control of the Company, as defined in the agreement, and subsequent termination of employment other than for cause.

Legal Proceedings

In December 2010, Audrey Edwards, Executrix of the Estate of Leon Leroy Edwards, filed a law suit in the Superior Court of Providence County, Rhode Island, against 3M Company and over 90 other defendants, including the Company, alleging that the Company processed, manufactured, designed, tested, packaged, distributed, marketed or sold asbestos containing products that contributed to the death of Leon Leroy Edwards. The Company received service of process in April 2011. The Company has retained legal counsel and has filed a response to the compliant. The Company believes the lawsuit is without merit and intends to file a Motion for Summary Judgment to that affect. Accordingly, the Company does not believe the lawsuit will have a material adverse effect on the Company’s financial position or results of operations.

In July 2014, Andrea filed three complaints with the United States District Court for the Eastern District of New York, alleging patent infringement against Acer Inc. and related entities ("Acer"), Lenovo Group Ltd. and related entities ("Lenovo"), and Toshiba Corp. and related entities ("Toshiba"), and requesting monetary and injunctive relief. Acer, Lenovo, and Toshiba answered Andrea's complaints on October 20, 2014. Lenovo also asserted counterclaims which Andrea answered on November 10, 2014. Andrea also filed First Amended Complaints in these actions on November 10, 2014 which Acer, Lenovo, and Toshiba answered on November 24, 2014. Lenovo also asserted counterclaims which Andrea answered on December 15, 2014. All of these cases were stayed on March 23, 2015 due to Andrea’s complaint with the International Trade Commission (“ITC”) against these parties. Andrea and Acer settled their disputes and filed a stipulation of dismissal which was granted on January 19, 2016.

In January 2015, Andrea filed seven complaints with the United States District Court for the Eastern District of New York, alleging patent infringement against Acer, ASUSTeK Computer Inc. and related entities ("Asus"), Dell Inc. ("Dell"), Hewlett-Packard Co. ("HP"), Lenovo, Realtek Semiconductor Corp. ("Realtek"), and Toshiba, and requesting monetary and injunctive relief. Lenovo answered Andrea's complaint on February 10, 2015. Lenovo also asserted counterclaims which Andrea answered on March 3, 2015. The other defendants have not yet answered Andrea's complaint. All of these cases except for the case against Realtek were also stayed on March 23, 2015 due to Andrea’s complaint with the ITC against these parties. In October 2015, Andrea and Realtek reached a settlement agreement, resolving all disputes between the parties, and as a part of that agreement, Andrea and Realtek agreed to move for dismissal of Andrea’s action against Realtek in the Eastern District of New York. Andrea and Realtek’s stipulation of dismissal was granted on December 22, 2015. Andrea and Acer settled their disputes and filed a stipulation of dismissal which was granted on January 27, 2016. Andrea and HP settled their disputes and filed a stipulation of dismissal which was granted on February 5, 2016. Andrea and Asus settled their disputes and filed a stipulation of dismissal which was granted on February 23, 2016.

In February 2015, Andrea filed a complaint with the ITC, alleging patent infringement and unfair competition against Acer, Asus, Dell, HP, Lenovo, Realtek, and Toshiba (the “ITC Respondents”), and requesting injunctive relief. The ITC instituted an investigation on March 12, 2015. The ITC Respondents answered Andrea's complaint on April 6, 2015. On July 2, 2015, Conexant Systems, Inc. (“Conexant”) filed a motion to intervene in the Investigation. On July 14, 2015, Waves Audio, Ltd. (“Waves”) filed a motion to intervene in the investigation. The Administrative Law Judge (“ALJ”) granted Conexant and Waves’ motions to intervene on August 7, 2015. In October 2015, Andrea and Realtek reached a settlement agreement, resolving all disputes between the parties, and as a part of that agreement, Andrea and Realtek moved to partially terminate the ITC Investigation with respect to certain of Andrea’s claims pertaining to Realtek and its products. That motion was granted by the ALJ on November 6, 2015. The ITC chose not to review the ALJ’s initial determination granting that motion. Andrea and Acer settled their disputes and filed a motion to terminate Acer from the investigation, which was granted by the ALJ on November 25, 2015. The ITC chose not to review the ALJ’s initial determination granting that motion. Andrea and HP settled their disputes and filed a motion to terminate HP from the investigation, which was granted by the ALJ on January 12, 2016. The ITC chose not to review the ALJ’s initial determination granting that motion. Andrea and Asus settled their disputes and filed a motion to terminate Asus from the investigation, which was granted by the ALJ on February 4, 2016. The ITC chose not to review the ALJ’s initial determination granting that motion. Andrea and Lenovo settled their disputes and filed a motion to terminate Lenovo from the investigation, which was granted by the ALJ on February 23, 2016. The ITC has not yet decided whether to review the ALJ’s initial determination granting that motion. Andrea and Conexant settled their disputes and filed a motion to terminate Conexant from the investigation, which was granted by the ALJ on March 7, 2016. The ITC has not yet decided whether to review the ALJ’s initial determination granting that motion. Andrea and Waves settled their disputes and filed a motion to terminate Waves and Dell from the investigation, which was granted by the ALJ as to Waves only on March 18, 2016. The ITC has not yet decided whether to review the ALJ’s initial determination partially granting that motion. Andrea and Toshiba settled their disputes and filed a motion to terminate Toshiba from the investigation, which was granted by the ALJ on March 18, 2016. The ITC has not yet decided whether to review the ALJ’s initial determination granting that motion. Andrea filed a motion to terminate Dell from the investigation on March 25, 2016, which has not yet been ruled upon by the ALJ.

In July 2015, Realtek filed six (6) petitions for inter partes review of the Andrea patents asserted in the District Court and ITC litigation proceedings with the United States Patent and Trademark Office (“PTO”). Also in July 2015, Realtek filed a Complaint with the United States District Court for the Northern District of California, alleging breach of contract and seeking declaratory judgment against Andrea. In October 2015, Andrea and Realtek reached a settlement agreement, resolving all disputes between the parties, and as a part of that agreement, Andrea and Realtek agreed to move for termination of those proceedings. Andrea and Realtek have since filed motions to terminate all six (6) inter partes review proceedings, and on November 3, 2015, the PTO granted all six (6) of those motions and terminated all six (6) of the inter partes reviews of Andrea’s patents.

In January 2016, Waves filed three (3) petitions for inter partes review of certain Andrea patents asserted in the District Court and ITC litigation proceedings with the PTO. Andrea and Waves have since filed motions to terminate all three (3) inter partes review proceedings. The PTO has not yet ruled on those motions.