SECURITIES AND EXCHANGE COMMISSION
                            WASHINGTON, D.C. 20549

                                   FORM 10-Q

(Mark One)



(X)      QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
         EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2000

                                      OR

(  )     TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
         EXCHANGE ACT OF 1934 (NO FEE REQUIRED) For the transition period
         from ____________ to ____________


                         Commission file number 1-4324

                                   --------

                        ANDREA ELECTRONICS CORPORATION
     ---------------------------------------------------------------------
            (Exact name of registrant as specified in its charter)

             New York                                 11-0482020
--------------------------------        -------------------------------------
(State or other jurisdiction of          (I.R.S. employer identification no.)
 incorporation or organization)

45 Melville Park Road, Melville, New York                      11747
-----------------------------------------                 --------------
(Address of principal executive offices)                     (Zip Code)

Registrant's telephone number, including area code:   631-719-1800
                                                    -----------------


Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes X No ___

Indicate the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date: 13,814,572.


<PAGE>

ITEM 1.   FINANCIAL STATEMENTS

                ANDREA ELECTRONICS CORPORATION AND SUBSIDIARIES
                          CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
                                                                                  March 31, 2000   December 31, 1999
                                                                                    (unaudited)         (audited)
                                                                                  --------------   -----------------

                                  ASSETS

<S>                                                                                   <C>              <C>
CURRENT ASSETS:
     Cash and cash equivalents                                                        $  8,093,314     $  9,153,148
     Accounts receivable, net of allowance for doubtful accounts of
     $202,521                                                                            2,737,273        2,770,703
     Inventories                                                                         7,089,365        7,123,747
     Prepaid expenses and other current assets                                             293,307          267,817
                                                                                      ------------     ------------

              Total current assets                                                      18,213,259       19,315,415

PROPERTY, PLANT AND EQUIPMENT, net                                                       1,848,314        1,930,506
DEFERRED INCOME TAXES                                                                    1,806,615        1,806,615
OTHER ASSETS                                                                             2,234,931        2,254,989
GOODWILL                                                                                24,085,929       24,545,877
                                                                                      ------------     ------------

              Total assets                                                            $ 48,189,048     $ 49,853,402
                                                                                      ============     ============

                   LIABILITIES AND SHAREHOLDERS' EQUITY

CURRENT LIABILITIES:
     Trade accounts payable                                                           $  1,663,678     $  2,134,873
     Current portion of long-term debt                                                     619,425          597,247
     Convertible notes, net                                                              1,492,539        1,485,077
     Other current liabilities                                                           1,065,688        1,076,733
                                                                                      ------------     ------------

              Total current liabilities                                                  4,841,330        5,293,930

LONG-TERM DEBT                                                                             706,298          693,362
OTHER LIABILITIES                                                                           14,477           14,477
                                                                                      ------------     ------------

              Total liabilities                                                          5,562,105        6,001,769
                                                                                      ------------     ------------

SERIES B REDEEMABLE CONVERTIBLE PREFERRED STOCK, net, $.01 par value; 500
     and 750 shares issued and outstanding, respectively                                 4,801,749        7,187,077
                                                                                      ------------     ------------

SHAREHOLDERS' EQUITY:

     Preferred stock, $.01 par value; authorized: 5,000,000 shares; none
         issued and outstanding                                                                 --               --
     Common stock, $.50 par value; authorized: 25,000,000 shares; issued
         and outstanding: 13,808,072 and 13,242,538 shares, respectively                 6,904,036        6,621,269
     Additional paid-in capital                                                         46,444,510       42,990,641
     Accumulated deficit                                                               (15,523,352)     (12,947,354)
                                                                                      ------------     ------------

              Total shareholders' equity                                                37,825,194       36,664,556
              Total liabilities and shareholders' equity                              $ 48,189,048     $ 49,853,402
                                                                                      ============     ============
</TABLE>

                See Notes to Consolidated Financial Statements



<PAGE>



                ANDREA ELECTRONICS CORPORATION AND SUBSIDIARIES

                     CONSOLIDATED STATEMENTS OF OPERATIONS

                                  (UNAUDITED)

<TABLE>
<CAPTION>
                                                                     For the Three Months Ended March 31,
                                                                     ------------------------------------
                                                                     2000                           1999
                                                                     ----                           ----
<S>                                                               <C>                            <C>
NET SALES                                                         $3,201,484                     $4,664,135

COST OF SALES                                                      2,399,175                      3,299,316
                                                                 -----------                    -----------

              Gross profit                                           802,309                      1,364,819

RESEARCH AND DEVELOPMENT EXPENSES                                  1,150,478                        774,838

GENERAL, ADMINISTRATIVE AND SELLING EXPENSES                       2,141,298                      2,282,444
                                                                 -----------                    -----------

              Loss from operations                                (2,489,467)                    (1,692,463)
                                                                 -----------                    -----------

OTHER INCOME (EXPENSE):
     Interest income                                                 106,838                         23,315
     Interest expense                                                (87,172)                       (75,800)
     Other                                                           (14,820)                             -
                                                                 -----------                    -----------
                                                                       4,846                        (52,485)
                                                                 -----------                    -----------

LOSS BEFORE PROVISION FOR INCOME TAXES                            (2,484,621)                    (1,744,948)

PROVISION FOR INCOME TAXES                                            -                               -
                                                                 -----------                    -----------

              Net loss                                           $(2,484,621)                   $(1,744,948)
                                                                 ===========                    ===========

PREFERRED STOCK DIVIDENDS                                             91,377                         -
                                                                 -----------                    -----------

              Net loss applicable to common shareholders
                                                                 $(2,575,998)                   $(1,744,948)
                                                                 ===========                    ===========

PER SHARE INFORMATION:

Net Loss Per Share:
     Basic                                                            $(.19)                         $(.13)
                                                                  ==========                     ==========
     Diluted                                                          $(.19)                         $(.13)
                                                                  ==========                     ==========

Shares used in computing net loss per share:

     Basic                                                        13,363,509                     13,210,038
                                                                  ==========                     ==========
     Diluted                                                      13,363,509                     13,210,038
                                                                  ==========                     ==========
</TABLE>

                See Notes to Consolidated Financial Statements


<PAGE>



                ANDREA ELECTRONICS CORPORATION AND SUBSIDIARIES

                CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

                                  (UNAUDITED)

<TABLE>
<CAPTION>
                                                                                  Additional                            Total
                                              Shares            Common             Paid-In         Accumulated      Shareholders'
                                           Outstanding           Stock             Capital           Deficit            Equity
                                           -----------          ------            ----------       -----------      -------------
<S>                                          <C>               <C>              <C>             <C>                  <C>
BALANCE, December 31, 1999                   13,242,538        $  6,621,269     $  42,990,641   $  (12,947,354)      $36,664,556
   Conversion of Series B Redeemable
     Convertible Preferred Stock, net
     of related costs                           371,909             185,955         2,231,447           -              2,417,402
   Exercise of stock options, net of
     related costs                              193,625              96,812         1,222,422           -              1,319,234
   Preferred stock dividends                    -                  -                  -               (91,377)           (91,377)
   Net (loss)                                   -                  -                  -            (2,484,621)        (2,484,621)
                                             ----------        ------------     -------------   --------------       -----------
BALANCE, March 31, 2000                      13,808,072           6,904,036        46,444,510     (15,523,352)        37,825,194
                                             ==========        ============     =============   ==============       ===========
</TABLE>


                See Notes to Consolidated Financial Statements


<PAGE>



                ANDREA ELECTRONICS CORPORATION AND SUBSIDIARIES
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                                  (UNAUDITED)

<TABLE>
<CAPTION>
                                                                                         For the Three Months Ended March 31,
                                                                                         ------------------------------------
                                                                                          2000                          1999
                                                                                          ----                          ----

<S>                                                                                 <C>                            <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
   Net loss                                                                         $(2,484,621)                   $(1,744,948)
     Adjustments to reconcile net loss to net cash used in operating
         activities:
             Non-cash interest expense                                                   23,259                         69,293
             Depreciation and amortization                                              909,206                        751,416
             (Increase) Decrease in:
               Accounts receivable, net                                                  33,430                        966,293
               Inventories                                                               34,382                        305,548
               Prepaid expenses and other current assets                               (197,462)                        46,259
               Other assets                                                               1,207                       (204,113)
             Increase (Decrease) in:
               Trade accounts payable                                                  (471,195)                        39,353
               Other current and long term liabilities                                  (99,548)                      (511,820)
                                                                                    -----------                    -----------
                  Net cash used in operating activities                              (2,251,342)                      (282,719)
                                                                                    -----------                    -----------

CASH FLOWS FROM INVESTING ACTIVITIES:
   Purchases of property, plant and equipment                                          (127,726)                      (450,803)
                                                                                    -----------                    -----------
                  Net cash used in investing activities                                (127,726)                      (450,803)
                                                                                    -----------                    -----------

CASH FLOWS FROM FINANCING ACTIVITIES:
   Proceeds from issuance of common stock upon exercise of stock
       options, net of related costs                                                  1,319,234                             --
                                                                                    -----------                    -----------

                  Net cash provided by financing activities                           1,319,234                             --
                                                                                    -----------                    -----------

NET DECREASE IN CASH AND CASH EQUIVALENTS                                            (1,059,834)                      (733,522)
CASH AND CASH EQUIVALENTS, beginning of period                                        9,153,148                      5,437,423
                                                                                    -----------                    -----------
CASH AND CASH EQUIVALENTS, end of period                                             $8,093,314                     $4,703,901
                                                                                     ==========                     ==========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Non-cash investing and financing activities:
     Conversion of Series B Redeemable Convertible Preferred Stock and related
         accrued dividends into common stock                                         $2,417,402                   $       --
                                                                                     ==========                     ==========
</TABLE>


                See Notes to Consolidated Financial Statements


<PAGE>




                ANDREA ELECTRONICS CORPORATION AND SUBSIDIARIES

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.   Basis of Presentation - The accompanying consolidated financial
     statements include the accounts of Andrea Electronics Corporation and its
     subsidiaries (collectively, the "Company"). All intercompany balances and
     transactions have been eliminated in consolidation.

     The consolidated financial statements have been prepared in accordance
     with generally accepted accounting principles for interim financial
     reporting. Accordingly, they do not include all of the information and
     footnotes required by generally accepted accounting principles for
     complete financial statements. In the opinion of management, all
     adjustments (consisting of normal recurring accruals) considered
     necessary for a fair presentation have been included. The results of
     operations for any interim period are not necessarily indicative of the
     results to be expected for the fiscal year. For further information,
     refer to the consolidated financial statements and accompanying footnotes
     included in the Company's annual report on Form 10-K for the year ended
     December 31, 1999.

2.   Earnings Per Common Share - Basic net income (loss) per common share is
     computed by dividing net income (loss) by the weighted-average number of
     common shares outstanding. Diluted net income (loss) per common share is
     computed by dividing net income (loss) by the weighted-average number of
     common shares and dilutive common share equivalents and convertible
     securities then outstanding.

     The following chart provides a reconciliation of information used in
     calculating the per share amounts:

<TABLE>
<CAPTION>
                                                            For the Three Months Ended March 31,
                                                            ------------------------------------
                                                              2000                        1999
                                                              ----                        ----
<S>                                                      <C>                         <C>
     Numerator:
          Net loss                                       $(2,484,621)                $(1,744,948)
                                                         -----------                 -----------
          Preferred stock dividends                           91,377                          --
                                                         -----------                 -----------
            Net loss applicable to common
              shareholders                               $(2,575,998)                $(1,744,948)
                                                         ===========                 ===========
     Denominator:
          Weighted-average common shares outstanding      13,363,509                  13,210,038
          -- Basic
          Effect of dilutive employee stock options               --                          --
                                                         -----------                 -----------
          Weighted-average common shares outstanding
         -- Diluted                                       13,363,509                  13,210,038
                                                         ===========                 ===========
     Net loss per share:
          Basic                                                $(.19)                      $(.13)
                                                         ===========                 ===========
          Diluted                                              $(.19)                      $(.13)
                                                         ===========                 ===========
</TABLE>


3.   Comprehensive Income - The Company follows the provisions of SFAS No.
     130, "Reporting Comprehensive Income", which requires companies to report
     all changes in equity during a period, except those resulting from
     investment by owners and distribution to owners, in a financial statement
     for the period in which they are recognized. Comprehensive income is the
     total of net income (loss) and all other non-owner changes in equity (or
     other comprehensive income) such as unrealized gains/losses on securities
     available-for-sale, foreign currency translation adjustments and minimum
     pension liability adjustments. Comprehensive and other comprehensive
     income must be reported on the face of the annual financial statements
     or, in the case of interim reporting, in the footnotes to the financial
     statements. For the three months ended March 31, 2000 and 1999, the
     Company's operations did not give rise to items includible in
     comprehensive income (loss), which were not already included in net
     income (loss). Accordingly, the Company's comprehensive income (loss) is
     the same as its net income (loss) for all periods presented.

4.   Derivative Instruments - In June 1998, the Financial Accounting Standards
     Board issued SFAS No. 133, "Accounting for Derivative Instruments and
     Hedging Activities". This statement establishes accounting and reporting
     standards for derivative instruments, including certain derivative
     instruments embedded in other contracts, and for hedging activities. SFAS
     No. 133 is effective for all fiscal years beginning after June 15, 1999
     (subsequently amended by SFAS No. 137, to be effective for all fiscal
     years beginning after June 15, 2000) and will not require retroactive
     restatement of prior period financial statements. This statement requires
     the recognition of all derivative instruments as either assets or
     liabilities in the balance sheet measured at fair value. Derivative
     instruments will be recognized as gains or losses in the period of
     change. If certain conditions are met where the derivative instrument has
     been designated as a fair value hedge, the hedge items may also be marked
     to market through earnings, thus creating an offset. If the derivative is
     designed and qualifies as a cash flow hedge, the changes in fair value of
     the derivative instrument may be recorded in comprehensive income. While
     the Company operates in international markets, it does so presently
     without the use of derivative instruments.

5.   Procurement Agreement - The Company has an agreement with International
     Business Machines and its subsidiaries ("IBM") to produce and procure
     certain products, as defined. The agreement continues in full force and
     effect unless terminated earlier for material breach by either party, as
     defined. For the three month period ending March 31, 2000, sales of the
     Company's products to IBM and certain of IBM's affiliates, distributors,
     licensees and integrators accounted for approximately 41% of the
     Company's total net sales.

6.   Convertible Notes - On June 10, 1998, the Company issued and sold in a
     private placement, $10,753,000 aggregate principal amount of 6%
     Convertible Notes (the "Notes") due June 10, 2000. The Notes are
     convertible into shares of the Company's common stock at a conversion
     price equal to the average of the two lowest closing prices of the common
     stock during the thirty trading days preceding any date of conversion,
     subject to a maximum conversion price of $16.125 per share. At the option
     of the Company, interest is payable in the form of cash or shares of
     common stock at the conversion price then in effect. The maximum number
     of shares issuable upon conversion is 2,100,000 shares, and if this
     maximum number of shares is issued, any remaining unconverted principal
     amount of the Notes will bear interest at 17% per annum. During 1998,
     $9,253,000 of the Notes, together with related accrued interest, was
     converted into 2,097,000 shares of the Company's common stock. At March
     31, 2000, the remaining obligation from the Notes is recorded net of an
     unaccreted discount of $7,462.

7.   Series B Redeemable Convertible Preferred Stock - On June 22, 1999, the
     Company issued and sold in a private placement $7,500,000 of Series B
     Redeemable Convertible Preferred Stock (the "Preferred Stock"), and a
     warrant covering 75,000 shares of the Company's common stock. Each of the
     750 shares of Preferred Stock has a stated value of $10,000 plus
     dividends of 4% per annum, which sum is convertible into common stock at
     a conversion price equal to the lower of $8.775 (the "Maximum Conversion
     Price") and the average of the two lowest closing bid prices of the
     common stock during the 15 consecutive trading days immediately preceding
     a conversion date (the "Market Price"), subject to certain adjustments,
     including anti-dilution. The 4% dividends may, at the option of the
     Company, be paid in cash. The warrant has an exercise price of $8.775 per
     share and expires on June 18, 2004.

     The Preferred Stock becomes convertible into the Company's common stock
     according to a vesting schedule, with 12.5% of the shares becoming
     convertible at the end of each of the eight succeeding 30-day periods
     beginning on October 17, 1999. The vesting schedule will lapse for
     conversions occurring at the Maximum Conversion Price and upon the
     occurrence of certain extraordinary events, as defined. Any unconverted
     Preferred Stock that remains outstanding on June 18, 2004, will
     automatically convert into the Company's common stock. The Company has
     reserved 1,744,235 of common stock for issuance upon conversion of the
     shares of the Preferred Stock.

     Prior to June 22, 2000, the Company has the option to redeem any
     Preferred Stock presented for conversion if the conversion price is less
     than or equal to $4.725 per share, at a redemption price equal to 110% of
     the stated value plus any accrued dividends. Upon the announcement of a
     major transaction, as defined, the investor shall have the right to
     require the Company to redeem all or a portion of the investor's
     Preferred Shares at a redemption price equal to the greater of 120% of
     the stated value plus any accrued dividends and the Market Price on the
     day of announcement. In addition, upon the occurrence of certain
     triggering events, as defined, and depending on the Company's control
     over such events, the investor may have the right to require the Company
     to a) redeem all or a portion of the Preferred Shares at a redemption
     price equal to the greater of 120% of the stated value plus any accrued
     dividends and the Market Price on the day of announcement, or b) pay a
     penalty equal to 1% of the remaining principal amount outstanding for a
     period not to exceed 20 days in any 365 day period, and adjust the
     Maximum Conversion Price, as defined.

     During the six month period beginning March 14, 2000, the Company,
     subject to certain conditions, may exercise an option to sell to the
     investor up to an additional $7.5 million of its Preferred Stock, and
     warrants for up to an additional 75,000 shares of common stock.

     On February 25, 2000, 250 shares of the Preferred Stock, together with
     related accrued dividends, were converted into 371,909 shares of common
     stock. As of March 31, 2000, the Preferred Stock is recorded net of the
     unaccreted present value of the warrants of $198,252. Due to the
     redemption features discussed above, the Preferred Stock is presented
     outside of stockholders' equity in the accompanying consolidated balance
     sheet.

8.   Acquisition Of Business -On May 5, 1998, the Company acquired all of the
     outstanding shares of capital stock of Lamar (the "Acquisition"). The
     consideration paid by the Company for the Acquisition was approximately
     1,800,000 shares of restricted common stock and $3,000,000 in cash and
     notes payable. Of the approximately 1,800,000 shares issued to the
     sellers, one-third became freely transferable on the first anniversary of
     the closing, an additional one-third became transferable on the second
     anniversary and the last one-third becomes transferable on the third
     anniversary. Of the aggregate cash consideration to be paid by the
     Company, $2,000,000 was paid through 1999, $500,000 was paid on May 5,
     2000, and the remaining $500,000 is payable on May 5, 2001. The
     Acquisition was accounted for under the purchase method of accounting
     and, accordingly, the operating results of Lamar have been included in
     the consolidating operating results since the date of acquisition. The
     Acquisition was valued using an independent appraisal of the fair value
     of the consideration paid and the assets purchased, and resulted in
     goodwill of approximately $27.6 million, which is being amortized over 15
     years. Goodwill at March 31, 2000 is approximately $24.1 million, which
     is net of approximately $3.5 million in accumulated amortization.

9.   Segment Information - The Company follows the provisions of SFAS No. 131,
     "Disclosures about Segments of an Enterprise and Related Information."
     Reportable operating segments are determined based on the Company's
     management approach. The management approach, as defined by SFAS No. 131,
     is based on the way that the chief operating decision-maker organizes the
     segments within an enterprise for making operating decisions and
     assessing performance. While the Company's results of operations are
     primarily reviewed on a consolidated basis, the chief operating
     decision-maker also manages the enterprise in three segments: (i) Andrea
     Anti-Noise Products, (ii) Aircraft Communications Products, and (iii)
     Far-field Digital Audio Technology Products. The following represents
     selected consolidated financial information for the Company's segments
     for the three months ended March 31, 2000, and 1999:

<TABLE>
<CAPTION>
                                                                             Far-field
                                         Andrea            Aircraft        Digital Audio
                                        Anti-Noise      Communications       Technology
               Segment Data              Products          Products           Products      March 31, 2000
               ------------             ----------      --------------     -------------    --------------
<S>                                    <C>              <C>                <C>               <C>
     Net sales                         $2,415,737       $  604,700         $   181,047       $ 3,201,484
     Income (loss) from operations        119,205         (152,823)         (2,455,849)       (2,489,467)
     Depreciation                         100,015           47,464              70,587           218,066
</TABLE>



<TABLE>
<CAPTION>
                                                                             Far-field
                                         Andrea            Aircraft        Digital Audio
                                        Anti-Noise      Communications       Technology
               Segment Data              Products          Products           Products      March 31, 1999
               ------------             ----------      --------------     -------------    --------------
<S>                                    <C>              <C>                <C>               <C>
     Net sales                         $ 3,701,390      $  962,745         $      -          $ 4,664,135
     Income (loss) from operations      (1,817,620)        125,157                -           (1,692,463)
     Depreciation                          160,354          23,290                -              183,644
</TABLE>

     For the three months ended March 31, 2000 and 1999, sales and accounts
     receivable by geographic area are as follows:

        Geographic Data                 March 31, 2000         March 31, 1999
        ---------------                 --------------         --------------

     Sales:
          United States                   $ 2,336,711            $  2,753,100
          Europe                              390,686               1,105,973
          Other foreign                       474,087                 805,062
                                          -----------            ------------
                                          $ 3,201,484            $  4,664,135
                                          ===========            ============
     Accounts receivable:
          United States                   $ 1,837,008            $  1,814,873
          Europe                              560,163                 834,090
          Other foreign                       340,102               1,252,526
                                          -----------            ------------
                                          $ 2,737,273            $  3,901,489
                                          ===========            ============

10.  Legal Proceedings - As previously reported in "Item 3. Legal Proceedings"
     in the Company's Annual Report on Form 10-K for the year ended December
     31, 1999, on November 17, 1998 a complaint was filed against us in the
     U.S. District Court for the Eastern District of New York by NCT Group,
     Inc. ("NCT"; formerly Noise Cancellation Technologies, Inc.) and NCT
     Hearing Products, Inc., one of NCT's subsidiaries. The complaint involves
     two of Andrea's patents, U.S. Patent No. 5,732,143 and U.S. Patent No.
     5,825,897. These patents relate to certain active noise reduction
     technology that is particularly applicable to aircraft passenger
     headphones. Andrea does not currently derive any sales or licensing
     revenue from aircraft passenger headphones. The complaint requests a
     declaration that these two patents are invalid and unenforceable and that
     NCT's products do not infringe upon these two patents. The complaint
     alleges that Andrea has engaged in unfair competition by misrepresenting
     the scope of the two patents, tortiously interfering with prospective
     contractual rights between NCT and its existing and potential customers,
     making false and disparaging statements about NCT and its products, and
     falsely advertising Andrea's ANR products. The complaint seeks to enjoin
     Andrea from engaging in these alleged activities and seeks compensatory
     damages of not less than $5 million, punitive damages of not less than
     $50 million and plaintiffs' costs and attorneys' fees. On December 30,
     1998, we filed and served an answer to the NCT complaint, denying the
     allegations and asserting affirmative defenses and counterclaims. Our
     counterclaims allege that NCT has infringed U.S. Patents Nos. 5,732,143
     and 5,825,897, and that NCT has engaged in trademark infringement, false
     designation of origin, and unfair competition. The counterclaims also
     allege that NCT's patent infringement has been and is willful. The
     counterclaims seek injunctive relief with respect to the allegations of
     patent infringement, trademark infringement, false designation of origin
     and unfair competition. We are also seeking exemplary and punitive
     damages, prejudgment interest on all damages, costs, reasonable
     attorneys' fees and expenses. During the second half of 1999, both NCT
     and Andrea submitted briefs to the Court on whether to have an early
     hearing on the meaning of the claims in the two Andrea patents. This type
     of hearing is called a "Markman Hearing." We anticipate that the Court
     will issue a decision on this question by the middle of 2000, but we
     cannot assure this. We and NCT are proceeding with discovery, including
     document production and depositions. If this suit is ultimately resolved
     in favor of NCT, we could be materially adversely effected. We believe,
     however, that NCT's allegations are without merit and we intend to
     vigorously defend Andrea and to assert against NCT the claims described
     above.

     On March 11, 1999, we were notified about a claim filed with the New York
     State Environmental Protection and Spill Compensation Fund (the "Fund")
     by the owners (Mark J. Mergler and Ann Mergler, the "Claimants") of
     property adjoining our former Long Island City facility. This claim
     alleges property damages arising from petroleum migrating from our former
     facility and was purportedly detected in the basement of the Claimants'
     property. In their claim to the Fund, the Claimants alleged that their
     property has been damaged and that they have incurred remedial costs. In
     the event the Fund honors this claim in whole or in part, we may be
     liable to reimburse the Fund. The New York State Department of
     Environmental Conservation has asserted a demand that we investigate and
     remediate the discharge of petroleum from a fuel oil storage tank at our
     former Long Island City facility, and determine whether the petroleum
     discharge has migrated to the Claimants' adjoining property. We engaged
     environmental consultants to investigate the discharge from the fuel oil
     storage tank and we are currently funding remediation work. We denied,
     however, the allegations that any petroleum discharge has migrated to the
     Claimant's property and objected to the claim made by the Claimant to the
     Fund. On September 2, 1999, a civil action related to this matter was
     commenced in the Nassau County Supreme Court by Mark J. Mergler and Ann
     Mergler. The plaintiffs allege that the fuel oil released from the
     heating system of our former facility has migrated beneath and onto the
     neighboring property causing an excess of $1,000,000 in direct and
     consequential damages. The plaintiffs' allegations against us include,
     negligence, nuisance and strict liability under the New York State
     Navigation Law. We have submitted an answer denying the allegations and
     all liability relating to the alleged property damage. This lawsuit is at
     an early stage and we are unable to evaluate the likelihood of an
     unfavorable outcome or estimate the amount or range of potential loss, if
     any.

     In addition to the litigation described above, we are from time to time
     subject to routine litigation incidental to our business.

11.  Reclassifications - Certain prior year amounts have been reclassified to
     conform to the current year presentation.


ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
         RESULTS OF OPERATIONS

Overview

Our mission is to provide the emerging "voice interface" markets with
state-of-the-art communications products that facilitate natural language,
human/machine interfaces.

Examples of the applications and interfaces for which Andrea Anti-Noise
Products and Andrea digital signal processing ("DSP") Microphone and Software
Products provide benefits include: Internet and other computer-based speech;
telephony communications; telematics; multi-point conferencing; speech
recognition; multimedia; multi-player Internet and CD ROM interactive games;
military and commercial aircraft communications; and other applications and
interfaces that incorporate natural language processing. We believe that end
users of these applications and interfaces will require high quality
microphone and earphone products that enhance voice transmission, particularly
in noisy environments, for use with personal computers, mobile personal
computing devices, military and commercial aircraft systems, cellular and
other wireless communication devices and automotive communication systems.
High quality audio communication technologies will also be required for
emerging "far-field" voice applications, ranging from continuous speech
dictation, to multiparty video teleconferencing and collaboration, to natural
language-driven interfaces for automobiles, home and office automation and
other machines and devices into which voice-controlled microprocessors are
expected to be introduced during the next several years.

Our strategy is to maintain and extend our market position with our Andrea
Anti-Noise Products; broaden our Andrea Anti-Noise Product lines and Andrea
DSP Microphone and Software Product lines through internal research and
development and, from time to time, strategic acquisitions; design our
products to satisfy specific end-user requirements identified by our
collaborative partners; and outsource manufacturing of certain products in
order to achieve economies of scale. An important element of our strategy for
expanding the channels of distribution and broadening the base of users for
our products is our collaborative arrangements with OEMs, software publishers,
and distributors and retailers actively engaged in the various markets in
which our products have application. Under some of these arrangements, we
supply our products for sale by our collaborative partners. Under others, the
collaborative partners supply us with software that we include with our
products. In addition, we have been increasing our own direct marketing
efforts.

The success of our strategy will depend on our ability to, among other things,
increase sales of our line of Andrea Anti-Noise Products and Andrea DSP
Microphone and Software Products, contain costs, manage growth, introduce
additional Andrea Anti-Noise Products and Andrea DSP Microphone and Software
Products, maintain the competitiveness of our technologies through successful
research and development, and achieve widespread adoption of our products and
technologies.

In order to complement our internal efforts to develop DSP technology, in May
1998, we acquired Lamar Signal Processing, Ltd. ("Lamar"), an Israeli
corporation engaged in the development of DSP noise cancellation microphone
solutions for voice-driven interfaces covering a wide range of audio and
acoustic applications. This acquisition resulted in a substantial amount of
goodwill. The amortization of this goodwill had, and will continue to have, a
negative, non-cash impact on our results of operations.

We outsource the assembly of most of our Andrea Anti-Noise Products from
purchased components, and we are currently assembling our Andrea DSP
Microphone and Software Products from purchased components at our New York and
Israeli facilities. We manufacture our Aircraft Communications Products at our
New York facility.

The interim results of operations of the Company presented in this report are
not necessarily indicative of the actual sales or results of operations to be
realized for the full year.

Cautionary Statement Regarding Forward-Looking Statements

Certain information contained in this Management's Discussion and Analysis of
Financial Condition and Results of Operations for the three months ended March
31, 2000 (the "2000 First Quarter") compared to the three months ended March
31, 1999 (the "1999 First Quarter") are forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933, as amended, and Section
21E of the Securities Exchange Act of 1934, as amended. The words
"anticipates," "believes," "estimates," "expects," "intends," "plans,"
"seeks," variations of such words, and similar expressions are intended to
identify forward-looking statements. We have based these forward-looking
statements on our current expectations, estimates and projections about our
business and industry, our beliefs and certain assumptions made by our
management. Investors are cautioned that matters subject to forward-looking
statements involve risks and uncertainties including economic, competitive,
governmental, technological and other factors that may affect our business and
prospects. These statements are not guarantees of future performance and are
subject to certain risks, uncertainties and assumptions that are difficult to
predict. In order to obtain the benefits of these "safe harbor" provisions for
any such forward-looking statements, we wish to caution investors and
prospective investors about the following significant factors, which, among
others, have in some cases affected our actual results and are in the future
likely to affect our actual results and could cause them to differ materially
from those expressed in any such forward-looking statements. These factors
include:

o    Our results of operations have historically been and are subject to
     continued substantial annual and quarterly fluctuations. The causes of
     these fluctuations include, among other things:

     -    the volume of sales of our products under our collaborative
          marketing arrangements;
     -    the cost of development of our products under our collaborative
          development arrangements;
     -    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.

o    We cannot assure that the level of sales and gross profit, if any, that
     we achieve in any particular fiscal period will not be significantly
     lower than in other fiscal periods. Our revenues for the 2000 First
     Quarter were approximately $3.2 million compared to approximately $4.7
     million in the 1999 First Quarter. For the 2000 First Quarter, we had a
     net loss of approximately $2.5 million versus a net loss of $1.7 million
     for the 1999 First Quarter.

o    While we are examining opportunities for further cost-reduction, production
     efficiencies and diversification of our business, we may continue
     to accumulate losses and the market price of our common stock could
     decline. In order to remain competitive, we intend to continue to incur
     substantial research and development, marketing and general and
     administrative expenses. These expenses may not be necessarily or easily
     reduced if sales revenue is below expectations and, therefore, net income
     or loss may be disproportionately affected by any reduction in sales
     revenue. Accordingly, we believe that period-to-period comparisons of our
     results of operations may not necessarily be meaningful and should not be
     relied upon as indications of future performance.

o    Sales of a substantial number of shares of our common stock in the public
     market could have the effect of depressing the prevailing market price of
     our common stock. Of the 25,000,000 shares of common stock presently
     authorized, 13,814,572 were outstanding as of May 10, 2000. This does not
     include (i) 4,651,125 shares of our common stock reserved for issuance
     upon exercise of outstanding options granted under our 1991 Performance
     Equity Plan and 1998 Stock Plan and shares of our common stock reserved
     for further option grants under the 1991 Performance Equity Plan and 1998
     Stock Plan and (ii) 1,744,235 shares of common stock reserved for
     issuance upon conversion of the Series B Convertible Preferred Stock and
     exercise of the related warrant. To the extent that Series B Convertible
     Preferred Stock is converted, the related warrant is exercised, such
     options are exercised or we issue additional shares of capital stock, the
     ownership interests of holders of common stock would be diluted.

     We have 500 shares of Series B Convertible Preferred Stock and a warrant
     for 75,000 shares of common stock outstanding and, subject to certain
     conditions and limitations, we have the right during the six month period
     beginning March 14, 2000 to sell to the current holder of Series B
     Convertible Preferred Stock up to an additional 750 shares of Series B
     Convertible Preferred Stock and a warrant for up to an additional 75,000
     shares of common stock. The number of shares of common stock issuable
     upon the conversion of the Series B Convertible Preferred Stock depends
     on the prices of the common stock as quoted on the American Stock
     Exchange shortly before the date of conversion. We cannot predict the
     price of the common stock in the future. If the price of our common stock
     decreases over time, the number of shares of common stock issuable upon
     conversion of the Series B Convertible Preferred Stock will increase and
     the holders of common stock would experience substantial dilution of
     their investment. On February 25, 2000, 250 shares of the Series B
     Convertible Preferred Stock were converted into 371,909 shares of common
     stock.

     In addition, in May 1998, we issued 1,800,000 shares of common stock as
     part of the consideration for our acquisition of Lamar Signal Processing,
     Ltd., of which 1,200,000 shares of common stock are subject to trading
     restrictions that expire with respect to 600,000 shares in May 2000 and
     600,000 in May 2001. As the restrictions expire, the shares are subject
     to demand and piggyback registration rights.

o    Most of our current and potential competitors have significantly greater
     financial, technology development, marketing, technical support and other
     resources than we do. Consequently, these competitors may be able to
     respond more quickly to new or emerging technologies and changes in
     customer requirements, or devote greater resources to the development,
     marketing, and sale of their products than we can. We cannot assure that
     one or more of these competitors will not independently develop
     technologies that are substantially equivalent or superior to our
     technology.

o    We have entered into several collaborative and distribution arrangements
     with software publishers and computer hardware manufacturers relating to
     the marketing and sale of Andrea Anti-Noise Products and Andrea DSP
     Microphone and Software Products. Under these collaborative arrangements,
     our products are or will be sold to end users through inclusion of the
     products of our collaborators. The revenue derived by us from these
     arrangements will be based in large part upon the sale of our
     collaborator's products. Our success will therefore be dependent to a
     substantial degree on the efforts of these collaborators in marketing
     existing products and new products under development with which to
     include our products and technologies. We cannot assure that any product
     of any of our collaborators incorporating our products and technologies
     will be marketed successfully. Our collaborators generally are not
     contractually obligated to any minimum level of sales of our products or
     technologies. Furthermore, our collaborators may develop their own
     microphone or earphone products or technologies that compete with our
     products and technologies. We cannot assure that these collaborators will
     not replace our products or technologies with, or give higher priority
     to, the sales of these competitive products or technologies. We have also
     established direct arrangements with large electronic and computer retail
     chains in the United States, as well as with certain distributors in
     Europe and the Americas. We cannot assure that any of these channels will
     devote sufficient resources to support the sale of our products. We are
     also currently discussing additional arrangements with other software
     companies, several major automotive companies, several major personal
     computer companies, consumer electronic manufacturers, and electronic and
     computer retailers. We cannot assure that any of these discussions will
     result in any definitive agreements. We are substantially dependent on
     our product procurement relationship with IBM. During the 2000 First
     Quarter, IBM and certain of IBM's affiliates, distributors, licensees and
     integrators accounted for 41% of our net sales. While we are a party to a
     procurement agreement with IBM covering the purchase by IBM of certain of
     our Andrea Anti-Noise microphone and earphone products for inclusion with
     certain of IBM's personal computer products, IBM is not obligated to
     purchase these products and is free to purchase microphone and earphone
     products and technologies from our competitors. Our failure to maintain
     sales of Andrea Anti-Noise Products and Andrea DSP Microphone and
     Software Products to IBM would have a material adverse effect on our
     business, results of operations and financial condition.

o    We conduct assembly operations at our facilities in New York and Israel
     and through subcontractors. During initial production runs of Andrea
     Anti-Noise Products, we perform assembly operations at our New York
     facility from purchased components. As sales of any particular Andrea
     Anti-Noise Product increase, assembly operations are primarily transferred
     to a subcontractor in Asia. Any failure on the part of this subcontractor
     to meet our production and shipment schedules could have a material adverse
     effect on our business, results of operations and financial condition.

     Most of the components for the Andrea Anti-Noise Products and Andrea DSP
     Microphone and Software Products are available from several sources and
     are not characteristically in short supply. However, certain specialized
     components, such as microphones and DSP boards, are available from a
     limited number of suppliers and subject to long lead times. To date we
     have been able to obtain sufficient supplies of these more specialized
     components, but we cannot assure that we will continue to be able to do
     so. Shortages of, or interruptions in, the supply of these more
     specialized components could have a material adverse effect on our sales
     of Andrea Anti-Noise Products and Andrea DSP Microphone and Software
     Products.

     We assemble our Aircraft Communications Products at our New York facility
     from purchased components. Certain highly specialized components for our
     Aircraft Communications Products sold for military and industrial use
     have limited sources of supply, the availability of which can affect
     particular products. We do not believe, however, that our earnings have
     been, or will be, materially affected due to unavailability of these
     components.

o    We rely on a combination of patents, patent applications, trade secrets,
     copyrights, trademarks, nondisclosure agreements with our employees,
     licensees and potential licensees, limited access to and dissemination of
     our proprietary information, and other measures to protect our
     intellectual property and proprietary rights. We cannot assure, however,
     that the steps we have taken to protect our intellectual property will
     prevent its misappropriation or circumvention.

o    We have been granted 18 patents in the United States covering our Andrea
     Anti-Noise and Andrea DSP Microphone and Software Products, and we have
     other U.S. and non-U.S. patent applications currently pending. We cannot
     assure that patents will be issued with respect to these applications or
     any patent applications filed by us in the future.

o    Our performance is substantially dependent on the performance of our
     executive officers and key employees. We are dependent on our ability to
     retain and motivate high quality personnel, especially management and
     product and technology development teams. The loss of the services of any
     of our executive officers or other key employees could have a material
     adverse effect on our business, results of operations and financial
     condition. Our future success also depends on our continuing ability to
     attract and retain additional highly qualified technical personnel.
     Competition for qualified personnel is intense and we cannot assure that
     we will be able to attract, assimilate or retain qualified personnel in
     the future. Our inability to attract and retain the necessary technical
     and other personnel could have a material adverse effect on our business,
     results of operations and financial condition.



<PAGE>



Results Of Operations

   Quarter Ended March 31, 2000 Compared to the Quarter Ended March 31, 1999

Sales
-----

Sales for the 2000 First Quarter were $3,201,484, a decrease of 31% from sales
of $4,664,135 for the 1999 First Quarter. The decrease in sales for the 2000
First Quarter reflects an approximate 35% decrease in sales of Andrea Anti-
Noise Products to $2,415,737, or 75% of total sales, and an approximate 37%
decrease in sales of our Aircraft Communications Products, to $604,700, or 19%
of total sales, these decreases being offset by initial sales of Far-field
Digital Audio Technology Products of $181,047, or 6% of total sales. The
decreases in sales are due to 1) lower volumes and lower price/lower margin
sales of PC headsets to the Company's original equipment manufacturer (OEM)
customers, and 2) a decrease in unit sales of higher-margin Aircraft
Communications Products during the 2000 First Quarter. For the 2000 First
Quarter, sales of our computer headsets IBM and certain of its affiliates,
distributors, licensees and integrators accounted for approximately 41% of
our total sales; and sales of computer headsets to Radio Shack and certain
of its affiliates and distributors accounted for approximately 15% of our total
sales.

Cost of Sales
-------------

Cost of sales as a percentage of sales for the 2000 First Quarter increased to
75% from 71% for the 1999 First Quarter. This increase in cost of sales
percentage is primarily a result of the decreases in unit production and sales,
as described above, over which to spread the Company's pool of fixed overhead
costs.

Research and Development
------------------------

Research and development expenses for the 2000 First Quarter increased 48% to
$1,150,478 from $774,838 for the 1999 First Quarter. This increase is due to
the Company's continuing efforts to develop its Far-field Digital Audio
Technologies, coupled with, to a lesser extent, efforts in Aircraft
Communication product technologies and Andrea Anti-Noise Product technologies.
Specifically, Far-field Digital Audio Technology efforts were $916,509, or 80%
of total research and development expenses, Aircraft Communications technology
efforts were $152,914, or 13% of total research and development expenses and
Andrea Anti-Noise Product efforts were $81,055, or 7% of total research and
development expenses. With respect to Far-field Digital Audio Technologies,
research efforts are primarily focused on the pursuit of commercializing a
natural language-driven human/machine interface by developing optimal
far-field microphone solutions for various voice-driven interfaces,
incorporating the Company's digital super directional array microphone
technology ("DSDA") and certain other related technologies obtained through
the acquisition of Lamar in May 1998. Correspondingly, the activities of Lamar
accounted for approximately 18% of the total research and development expenses
during the 2000 First Quarter. The Company believes that the acquisition of
Lamar significantly reinforces its position in digital signal processing by
extending the Company's marketing programs to other industries, including the
consumer electronics and professional audio markets, among others. With
respect to Aircraft Communication technologies, research efforts are primarily
focused on developing intercom systems that are capable of accepting the
Company's digital audio software technologies. The Company anticipates
continued significant increases in research and development expenses as the
year progresses, with particular emphasis on Far-field Digital Audio
Technologies.

General, Administrative and Selling Expenses
--------------------------------------------

General, administrative and selling expenses decreased approximately 6% to
$2,141,298 for the 2000 First Quarter from $2,282,444 for the 1999 First
Quarter. The high level of general, administrative and selling expenses,
primarily attributable to the Far-field Digital Audio Technology product line,
reflects significant business development expenses relating to existing and
prospective collaborative arrangements with OEMs, software publishers and
developers. The Company also incurs significant promotional, marketing and
sales expenses to promote product awareness and acceptance of the Far-field
Digital Audio Technology product line. In addition, included in general,
administrative and selling expenses in the 2000 First Quarter and 1999 First
Quarter is goodwill amortization expense of $459,948.

Other Income (Expense)
----------------------

Other income for the 2000 First Quarter was $4,846 compared to other expense
of $52,485 for the 1999 First Quarter. This change was due to interest earned
on higher cash balances resulting from the sale of the Company's Series B
Redeemable Convertible Preferred Stock.

Provision for Income Taxes
--------------------------

The Company did not record income tax expense for the 2000 First Quarter in
light of the net loss recorded for the period. Furthermore, the realization of
a portion of the Company's reserved deferred tax assets, if and when realized,
will not result in a tax benefit in the consolidated statement of operations,
but will result in an increase in additional paid in capital as they are
related to tax benefits associated with the exercise of stock options. The
Company will be continually re-assessing its reserves on deferred income tax
assets in future periods on a quarterly basis.

Net Income (Loss)
-----------------

Net loss for the 2000 First Quarter was $2,484,621 compared to a net loss of
$1,744,948 for the 1999 First Quarter. The net loss for the 2000 First Quarter
principally reflects the factors described above.

Liquidity And Capital Resources

The Company's principal sources of funds have historically been, and are
expected to continue to be, cash flow from operations and proceeds from the
sale of convertible notes, preferred stock or other securities to certain
financial institutions. At March 31, 2000, we had cash and cash equivalents of
$8,093,314 compared with $4,703,901 at March 31, 1999. The balance of cash and
cash equivalents at March 31, 2000 is primarily a result of the Company's
issuance and sale in a private placement of $7,500,000 of its Series B
Redeemable Convertible Preferred Stock (the "Preferred Stock"), and from the
Company's June 1998 private placement of $10.75 million aggregate principal
amount of 6% Convertible Notes ("Notes"). All but $1.5 million of the Notes
have been converted to common stock, with the remaining outstanding principal
amount convertible into 3,000 shares of common stock, which amount is recorded
as a current liability, net of an unaccreted discount of $7,461 in the
accompanying consolidated balance sheet as of March 31, 2000. Furthermore, on
February 25, 2000, 250 shares of the Preferred Stock were converted into
371,909 shares of common stock at a conversion price of $6.91 per share. The
Company is using the net proceeds from the issuance of the Preferred Stock and
Notes for costs associated with technology development, tooling costs,
creating and maintaining strategic alliances, payment of certain debt
obligations and general working capital requirements.

In connection with the acquisition of Lamar, of the aggregate cash
consideration to be paid by the Company, $1,000,000 was paid on May 5, 1998,
the closing date, and $500,000 was paid on each of the six, twelve and
twenty-four month anniversaries of the closing date, with the remainder
payable on the thirty-six month anniversary of the closing. The $500,000 in
additional cash consideration remaining, due on the thirty-six month
anniversary of the closing, is recorded as long-term debt on the accompanying
consolidated balance sheet.

Working capital at March 31, 2000, was $13,371,929 compared to $14,021,485 at
December 31, 1999. The decrease in working capital reflects decreases in total
current assets and total current liabilities of $1,102,156 and $452,600,
respectively.  The decrease in total current assets reflects a decrease in cash
of $1,059,834, a decrease in accounts receivable of $33,430, and
a decrease in inventory of $34,382, partially offset by an increase
in prepaid expenses and other current assets of $25,490. The decrease in current
liabilities reflects a decrease in trade accounts payable of $471,495, and a
decrease in other current liabilities of $11,045, partially offset by increases
in the current portion of long term debt and convertible debentures of $22,178
and $7,462, respectively.

The decrease in cash from December 31, 1999 to the period ending March 31,
2000 of $1,059,834 reflects $2,251,342 of net cash used in operating
activities, $127,726 of net cash used in investing activities and $1,319,234
of net cash provided by financing activities.

The cash used in operating activities, excluding non-cash charges, is
primarily attributable to the $2,484,621 net loss for the 2000 First Quarter,
a $197,462 increase in prepaid and other current assets, a $471,195 decrease
in accounts payable and a $99,548 decrease in other current and long term
liabilities, partially offset by a $33,430 decrease in accounts receivable, a
$34,382 decrease in inventory and a $1,207 decrease in other assets. The
increase in prepaid expenses and other current assets primarily includes the
recognition of increased premiums for prepaid property taxes and insurance, as
well as increases in other service costs related to the remainder of 2000. The
decrease in accounts payable and other current and long term liabilities as
well as the decrease in inventory primarily reflect differences in the timing
related to both the payments for and the acquisition of raw materials as well
as for other services in connection with ongoing efforts related to the
Company's various product lines. The decrease in other current and long term
liabilities is also partially attributable to a decrease in accrued interest
expense associated with the partial conversion of the Series B Redeemable
Convertible Preferred stock on February 25, 2000.

The cash used in investing activities is primarily attributable to investments
in the Company's existing information systems, as well as, to a lesser extent,
capital expenditures consisting of the ongoing upgrade of manufacturing dies
and molds for Andrea Anti-Noise Products.

The net cash provided by financing activities reflects exercises of employee
stock options.

Demand for the Company's products and technologies has required the Company to
raise additional working capital to support operations. In addition, the
acquisition of Lamar will require the Company to continue to provide working
capital to support Lamar's operations and to repay notes to the sellers of
Lamar. In June 1998, the Company raised $10 million through the issuance and
sale of the Notes. In June 1999, the Company raised $7.5 million through the
issuance and sale of Preferred Stock. In addition, the Company entered into a
revolving credit agreement in September 1997 that provides maximum borrowings
of up to $8 million based on eligible accounts receivable and inventory, as
defined. At March 31, 2000, there were no outstanding amounts under the
revolving credit agreement. We believe that our current levels of cash, as
well as our access to financing sources, provide sufficient liquidity and
capital resources to fund working capital requirements for at least twelve to
eighteen months. Notwithstanding the significance of sales of Andrea
Anti-Noise Products as a percentage of our total sales during the 2000 First
Quarter, we cannot assure that demand will continue for these products or any
of our other products, including future products related to our Andrea
Microphone Array Products and Software Technologies, or, that if such demand
does exist, that we will be able to obtain the necessary working capital to
increase production and marketing resources to meet such demand on favorable
terms, or at all.

ITEM 3.   QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Our principal source of financing activities includes debt under a revolving
credit facility that provides for interest at a spread above the prime rate,
as well as the issuance of convertible debt and convertible preferred stock
with financial institutions. We are affected by market risk exposure primarily
through the effect of changes in interest rates on amounts payable in cash by
us under the revolving credit facility, as well as the amount payable in stock
by us under convertible debt and convertible preferred stock. A significant
rise in interest rates could materially adversely affect our financial
condition and results of operations. At March 31, 2000, there were no
outstanding borrowings under our credit facility, and approximately $1.5
million of remaining unconverted debt and $5 million of unconverted redeemable
preferred stock. We do not utilize derivative financial instruments to hedge
against changes in interest rates or for any other purpose. In addition,
substantially all transactions by us are denominated in U.S. dollars. As such,
we have shifted foreign currency exposure onto its foreign customers. As a
result, if exchange rates move against foreign customers, we could experience
difficulty collecting unsecured accounts receivable, the cancellation of
existing orders or the loss of future orders. The foregoing could materially
adversely affect our business, financial condition and results of operations.

ITEM 6.   EXHIBITS AND REPORTS ON FORM 8-K

(a)  Exhibits

     Exhibit Number               Description
     --------------               -----------

          10.1              Employment Agreement, between the Company and
                            John N. Andrea, dated as of April 12, 2000.

          10.2              Employment Agreement, between the Company and
                            Doug J. Andrea, dated as of April 12, 2000.

          10.3              Employment Agreement, between the Company and
                            Richard A. Maue, dated as of April 12, 2000.

          27                Financial Data Schedule

(b)  Reports on Form 8-K

The registrant did not file any reports on Form 8-K during the three-month
period ended March 31, 2000.

                                  SIGNATURES

Pursuant to the requirements of Section 13 and 15(d) of the Exchange Act, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.

ANDREA ELECTRONICS CORPORATION

<TABLE>
<CAPTION>
<S>                                 <C>                                            <C>

/s/ Christopher P. Sauvigne         President and Chief Operating Officer          May 15, 2000
-------------------------------
  Christopher P. Sauvigne

/s/ Richard A. Maue                 Senior Vice President, Chief                   May 15, 2000
-------------------------------
  Richard A. Maue                   Financial Officer, and Secretary

</TABLE>