UNITED
STATES 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
      1934For
      the quarterly period ended March 31, 2008
  OR
  (  )
              TRANSITION
      REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934For
      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)65
      Orville Drive, Bohemia, New York
              
              11716(Address
      of principal executive offices)
              
              (Zip
      Code)Registrant’s
      telephone number (including area code):
              
              631-719-1800
  Indicate
by checkmark whether the registrant (1) has filed all reports required to by
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
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting
company.  See definition of “large accelerated filer,” “accelerated
filer” and “smaller reporting company” in Rule 12b-2 of the Exchange
Act.  (Check one)
   Large Accelerated Filer  ̈
              
              Accelerated Filer  ̈Non-Accelerated
      Filer    ̈
              
              Smaller Reporting Company x
  (Do not
check if a smaller reporting company)
  Indicate
by checkmark whether the registrant is a shell company (as defined in Rule 12b-2
of the Exchange Act). Yes ___ No _X_
  Indicate
the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date:  As of May 8, 2008, there
are 59,861,193 common shares outstanding.







PART
I.                           FINANCIAL
INFORMATION
  ITEM
1.                           FINANCIAL
STATEMENTS
  ANDREA
ELECTRONICS CORPORATION AND SUBSIDIARIES
 CONDENSED
CONSOLIDATED BALANCE SHEETS
 
 March
      31
              
              
              December
      312008
              
              
              2007(unaudited)ASSETSCurrent
      assets:Cash
      and cash equivalents
              
              $
              945,948
              
              
              $
              811,403Accounts
      receivable, net of allowance for doubtful accounts of $21,648 and $21,705,
      respectively
              
              
              568,471
              
              
              
              994,446Inventories,
      net
              
              
              868,112
              
              
              
              714,864Prepaid
      expenses and other current assets
              
              
              44,290
              
              
              
              64,005Total
      current assets
              
              
              2,426,821
              
              
              
              2,584,718Property
      and equipment, net
              
              
              57,971
              
              
              
              57,751Intangible
      assets, net
              
              
              2,870,504
              
              
              
              2,977,673Other
      assets, net
              
              
              12,864
              
              
              
              12,864Total
      assets
              
              $
              5,368,160
              
              
              $
              5,633,006LIABILITIESANDSHAREHOLDERS’
      EQUITYCurrent
      liabilities:Trade
      accounts payable
              
              $
              461,256
              
              
              $
              474,346Accrued
      Series C Preferred Stock Dividends
              
              
              151,583
              
              
              
              151,583Other
      current liabilities
              
              
              171,967
              
              
              
              121,268Total
      current liabilities
              
              
              784,806
              
              
              
              747,197Series
      B Redeemable Convertible Preferred Stock, $.01 par value; authorized:
      1,000 shares; issued and outstanding: 0 shares
              
              
              -
              
              
              
              -Commitments
      and contingenciesShareholders’
      equity: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: 90.7 shares; liquidation value:
      $907,015
              
              
              1
              
              
              
              1Series
      D Convertible Preferred Stock, net, $.01 par value; authorized: 2,500,000
      shares; issued and outstanding:  1,192,858 shares; liquidation
      value:  $1,192,858
              
              
              11,929
              
              
              
              11,929Common
      stock, $.01 par value; authorized:  200,000,000 shares; issued
      and outstanding: 59,861,193 shares
              
              
              598,612
              
              
              
              598,612Additional
      paid-in capital
              
              
              76,627,642
              
              
              
              76,568,825Accumulated
      deficit
              
              
              (72,654,830
              )
              
              
              (72,293,558
              )Total
      shareholders’ equity
              
              
              4,583,354
              
              
              
              4,885,809Total
      liabilities and shareholders’ equity
              
              $
              5,368,160
              
              
              $
              5,633,006
  See Notes to Condensed
Consolidated Financial Statements.
 2
  ANDREA
ELECTRONICS CORPORATION AND SUBSIDIARIES
 CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS
 (UNAUDITED)
 
 For
      the Three Months EndedMarch
      31, 2008
              
              
              March
      31, 2007RevenuesNet
      Product revenues
              
              $
              796,422
              
              
              $
              1,304,822License
      revenues
              
              
              130,218
              
              
              
              267,730Revenues
              
              
              926,640
              
              
              
              1,572,552Cost
      of revenues
              
              
              485,135
              
              
              
              789,169Gross
      margin
              
              
              441,505
              
              
              
              783,383Research
      and development expenses
              
              
              193,404
              
              
              
              172,759General,
      administrative and selling expenses
              
              
              610,174
              
              
              
              588,761(Loss)
      income from operations
              
              
              (362,073
              )
              
              
              21,863Interest
      income (expense), net
              
              
              2,874
              
              
              
              (1,172
              )(Loss)
      income before provision for income taxes
              
              
              (359,199
              )
              
              
              20,691Provision
      for income taxes
              
              
              2,073
              
              
              
              20,202Net
      (loss) income
              
              $
              (361,272
              )
              
              $
              489Basic
      weighted average shares
              
              
              59,861,193
              
              
              
              59,039,635Diluted
      weighted average shares
              
              
              59,861,193
              
              
              
              69,958,736Basic
      and diluted net (loss) income per share
              
              $
              (0.01
              )
              
              $
              0.00
  See Notes to Condensed
Consolidated Financial Statements.
 3
  ANDREA
ELECTRONICS CORPORATION AND SUBSIDIARIES
 CONDENSED
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
 FOR THE
THREE MONTHS ENDED MARCH 31, 2008
 (UNAUDITED)
 
 
 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’
                  EquityBalance,
      January 1, 2008
              
              
              90.701477
              
              
              $
              1
              
              
              
              1,192,858
              
              
              $
              11,929
              
              
              
              59,861,193
              
              
              $
              598,612
              
              
              $
              76,568,825
              
              
              $
              (72,293,558
              )
              
              $
              4,885,809Stock-based
      Compensation Expense related to Stock Grants to Outside
      Directors
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              5,001
              
              
              
              -
              
              
              
              5,001Stock-based
      Compensation Expense related to Stock Option Grants
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              53,816
              
              
              
              -
              
              
              
              53,816Net
      loss
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              (361,272
              )
              
              
              (361,272
              )Balance,
      March 31, 2008
              
              
              90.701477
              
              
              $
              1
              
              
              
              1,192,858
              
              
              $
              11,929
              
              
              
              59,861,193
              
              
              $
              598,612
              
              
              $
              76,627,642
              
              
              $
              (72,654,830
              )
              
              $
              4,583,354
  See Notes
to Condensed Consolidated Financial Statements.
 4
  ANDREA
ELECTRONICS CORPORATION AND SUBSIDIARIES
 CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
 (UNAUDITED)
 
 For
      the Three Months EndedMarch
      31, 2008
              
              
              March
      31, 2007Cash
      flows from operating activities:Net (loss) income
              
              $
              (361,272
              )
              
              $
              489Adjustments to reconcile net
      (loss) income to net cash provided by operating
activities:Depreciation and
      amortization
              
              
              125,024
              
              
              
              121,805Stock -based compensation
      expense
              
              
              58,817
              
              
              
              64,699Provision for bad
      debt
              
              
              (57
              )
              
              
              (78
              )Inventory reserve
              
              
              (1,858
              )
              
              
              3,199Change in:Accounts
    receivable
              
              
              426,032
              
              
              
              160,634Inventories
              
              
              (151,390
              )
              
              
              237,408Prepaid expenses and other
      current assets
              
              
              19,715
              
              
              
              190,187Trade accounts
      payable
              
              
              ( 13,090
              )
              
              
              (413,482
              )Other current
      liabilities
              
              
              50,699
              
              
              
              34,422Net cash provided by operating
      activities
              
              
              156,620
              
              
              
              399,283Cash
      flows from investing activities:Purchases of property and
      equipment
              
              
              (6,930
              )
              
              
              -Purchases of patents and
      trademarks
              
              
              (11,145
              )
              
              
              -Net cash used in investing
      activities
              
              
              (18,075
              )
              
              
              -Cash
      flows from financing activities:Payments under capital
      lease
              
              
              -
              
              
              
              (2,778
              )Net cash used in financing
      activities
              
              
              -
              
              
              
              (2,778
              )Net
      increase in cash and cash equivalents
              
              
              134,545
              
              
              
              396,505Cash
      and cash equivalents, beginning of period
              
              
              811,403
              
              
              
              303,678Cash
      and cash equivalents, end of period
              
              $
              945,948
              
              
              $
              700,183Supplemental
      disclosures of cash flow information:Cash
      paid for:Interest
              
              $
              2,874
              
              
              $
              1,189Income Taxes
              
              $
              1,520
              
              
              $
              43,509
  See Notes
to Condensed Consolidated Financial Statements.
 5
  ANDREA
ELECTRONICS CORPORATION AND SUBSIDIARIES
 NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 (UNAUDITED)
  Note
1.  Basis
of Presentation and Management’s Liquidity Plans
 
 Basis of Presentation
- The accompanying unaudited condensed consolidated interim financial statements
include the accounts of Andrea Electronics Corporation and its subsidiaries
("Andrea" or the “Company”). All intercompany balances and transactions have
been eliminated in consolidation.
 
 These
unaudited, condensed consolidated interim financial statements have been
prepared in accordance with accounting principles generally accepted in the
United States of America for interim financial information and with the
instructions to Form 10-Q. Accordingly, they do not include all of the
information and footnotes required by accounting principles generally accepted
in the United States of America (“GAAP”) for complete financial
statements.  In addition, the December 31, 2007 balance sheet data was
derived from the audited consolidated financial statements, but does not include
all disclosures required by GAAP.  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 of any interim
period are not necessarily indicative of the results of operations to be
expected for any other interim period or for the fiscal year.
 
 These
unaudited condensed consolidated interim financial statements should be read in
conjunction with the audited consolidated financial statements and notes thereto
for the fiscal year ended December 31, 2007 included in the Company's Form
10-KSB for the fiscal year ended December 31, 2007, filed on March 31,
2008.  The accounting policies used in preparing these unaudited
condensed consolidated interim financial statements are consistent with those
described in the December 31, 2007 audited consolidated financial
statements.
 
 Management's Liquidity
Plans - As of March 31, 2008, Andrea had working capital of $1,642,015
and cash on hand of $945,948.  Andrea’s loss from operations was
$362,073 for the three months ended March 31, 2008.  Andrea plans to
continue to improve its cash flows during 2008 by aggressively pursuing
additional licensing opportunities related to Andrea DSP Audio Software and
increasing its Andrea Anti-Noise Headset Products sales through the introduction
of refreshed product line scheduled to be introduced in the early part of 2008
as well as the increased efforts the Company is dedicating to its sales and
marketing efforts.  However, there can be no assurance that Andrea
will be able to successfully execute the aforementioned plans.
 
 As of May
8, 2008, Andrea has approximately $620,000 of cash. Management projects that
Andrea has sufficient liquidity available to operate through at least March
2009.While Andrea explores opportunities to increase revenues in new business
areas, the Company also continues to examine additional opportunities for cost
reduction and further diversification of its business.  Andrea was
cash flow positive in 2007 and 2006.  Although these steps are
encouraging, if Andrea fails to develop additional revenues from sales of its
products and licensing of its technology or to generate adequate funding from
operations, or if Andrea fails to obtain additional financing through a capital
transaction or other type of financing, Andrea will be required to continue to
significantly reduce its operating expenses and/or operations or Andrea may have
to relinquish its products, technologies or markets which could have a
materially adverse effect on revenue and operations. Andrea has no commitment
for additional financing and may experience difficulty in obtaining additional
financing on favorable terms, if at all.
 
 Note
2.  Summary
of Significant Accounting Policies
 
 (Loss) Earnings Per
Share - Basic (loss) earnings per share is computed by dividing the net
(loss) income by the weighted average number of common shares outstanding during
the period.  Diluted (loss) earnings per share adjusts basic (loss)
earnings per share for the effects of convertible securities, stock options and
other potentially dilutive financial instruments, only in the periods in which
such effect is dilutive.  Securities that could potentially dilute
basic (loss) earnings per share (“EPS”) in the future that were not included in
the computation of the diluted EPS because to do so would have been
anti-dilutive for the periods presented, consist of the following:
 
 For
      the Three Months EndedMarch
      31, 2008
              
              
              March
      31, 2007Total
      potential common shares as of:Options
      to purchase common stock (Note 7)
              
              
              9,626,820
              
              
              
              4,980,001Series
      C Convertible Preferred Stock and related accrued dividends (Note
      3)
              
              
              4,149,736
              
              
              
              -Series
      D Convertible Preferred Stock and related warrants (Note
4)
              
              
              9,929,776
              
              
              
              5,158,344Total
      potential common shares
              
              
              23,706,332
              
              
              
              10,138,345
  6
 ANDREA
ELECTRONICS CORPORATION AND SUBSIDIARIES
 NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 (UNAUDITED)
  The
following table sets forth the components used in the computation of basic and
diluted earnings per share for the three months ended March 31,
2007:
 For
      the Three
                Months
      EndedMarch
      31, 2007Numerator:Net
      income
              
              $
              489Denominator:Weighted
      average shares
              
              
              59,039,635Effect
      of dilutive securities:Series
      C Convertible Preferred Stock
              
              
              4,607,252Series
      D Convertible Preferred Stock
              
              
              4,871,432Employee
      stock options
              
              
              1,440,417Denominator
      for diluted earnings per share-adjusted weighted average shares after
      assumed conversions
              
              
              69,958,736
 
 The above
computation was not necessary for the three months ended March 31, 2008 as the
period had a net loss.
 
 Cash and Cash
Equivalents - Cash and cash equivalents include cash and highly liquid
investments with original maturities of three months or less.  The
Company has cash deposits in excess of the maximum amounts insured by the
Federal Deposit Insurance Corporation at March 31, 2008 and December 31,
2007.  The Company mitigates its risk by investing in or through major
financial institutions.
 
 Concentration of Credit
Risk - Andrea is a manufacturer of audio communications equipment for
several industries.  Revenues of Superbeam array microphone products
were significant to one customer and its affiliates, accounting for
approximately 11% and 13% of the total net revenues for the three months ended
March 31, 2008 and 2007, respectively.  This customer accounted for
17% and 20% of total accounts receivable at March 31, 2008 and December 31,
2007, respectively.  Licensing revenues and other revenues of noise
canceling and active noise canceling products were significant to one customer
and its affiliates, accounting for approximately 2% and 23% of the total net
revenues for the three months ended March 31, 2008 and 2007,
respectively.  Licensing revenues and other service related revenues
to one customer were approximately 19% and 9% of the total net revenues for the
three months ended March 31, 2008 and 2007, respectively.
 
 During the
three months ended March 31, 2008 and 2007, Andrea purchased a substantial
portion of its finished goods from two suppliers. Purchases from these two
suppliers amounted to 60% and 27% in 2008 and 86% and 0% in 2007, of total
purchases.  At March 31, 2008, the amounts due to these suppliers in
accounts payable were $152,824 and $55,920 respectively.  At December
31, 2007, the amounts due to these suppliers in accounts payable were $191,411
and $104,760 respectively.
 
 Allowance for Doubtful
Accounts - The Company performs on-going credit evaluations of its
customers and adjusts credit limits based upon payment history and the
customer’s current credit worthiness, as determined by the review of their
current credit information.  Collections and payments from customers
are continuously monitored.  The Company maintains an allowance for
doubtful accounts, which is based upon historical experience as well as specific
customer collection issues that have been identified.  While such bad
debt expenses have historically been within expectations and allowances
established, the Company cannot guarantee that it will continue to experience
the same credit loss rates that it has in the past.  If the financial
condition of customers were to deteriorate, resulting in an impairment of their
ability to make payments, additional allowances may be required.
 
 Inventories -
Inventories are stated at the lower of cost (on a first-in, first-out) or market
basis.  The cost elements of inventories include materials, labor and
overhead.  Andrea reviews its inventory reserve for obsolescence on a
quarterly basis and establishes reserves on inventories when the cost of the
inventory is not expected to be recovered.  Andrea’s policy is to
reserve for inventory that shows slow movement over the preceding six
consecutive quarters.  Andrea records charges in inventory reserves as
part of cost  of revenues.
  March
      31, 2008
              
              
              December
      31, 2007Raw
      materials
              
              $
              70,206
              
              
              $
              62,834Finished
      goods
              
              
              1,362,989
              
              
              
              1,218,9711,433,195
              
              
              
              1,281,805Less:
      reserve for obsolescence
              
              
              (565,083
              )
              
              
              (566,941
              )$
              868,112
              
              
              $
              714,864
  7
 ANDREA
ELECTRONICS CORPORATION AND SUBSIDIARIES
 NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 (UNAUDITED)
 Intangible and Long-Lived
Assets - Andrea accounts for its long-lived assets in accordance with
Statement of Financial Accounting Standards (“SFAS”) No. 144, “Accounting for
the Impairment or Disposal of Long-Lived Assets” for purposes of determining and
measuring impairment of its long-lived assets (primarily intangible assets)
other than goodwill. Andrea’s policy is to periodically review the value
assigned to its long-lived assets to determine if they have been permanently
impaired by adverse conditions which may affect Andrea. If Andrea identifies a
permanent impairment such that the carrying amount of Andrea’s long lived assets
are not recoverable using the sum of an undiscounted cash flow projection (gross
margin dollars from product revenues), a new cost basis for the impaired asset
will be established. If required, an impairment charge is recorded based on an
estimate of future discounted cash flows.  This new cost basis will be
net of any recorded impairment.
 
 At March
31, 2008, because the revenues from the Andrea DSP Microphone and Audio Software
Products business segment were lower than expected and this business segment was
still operating at a loss, management compared the sum of Andrea’s undiscounted
cash flow projections (gross margin dollars from product sales) of the Andrea
DSP Microphone and Audio Software core technology to the carrying value of that
technology.  The results of this test indicated that there was not an
impairment.  This process utilized probability weighted undiscounted
cash flow projections which include a significant amount of management’s
judgment and estimates as to future revenue.  If these probability
weighted projections do not come to fruition, the Company could be required to
record an impairment charge in the near term and such impairment could be
material.
 
 Andrea
amortizes its core technology, patents and trademarks on a straight-line basis
over the estimated useful lives of its intangible assets that range from 15 to
17 years.  Amortization expense was $118,314 and $117,954 for the
three months ended March 31, 2008 and 2007, respectively.
 
 Revenue Recognition –
Non-software related revenue, which is generally comprised of microphones and
microphone connectivity product revenues, is recognized when title and risk of
loss pass to the customer, which is generally upon shipment.  With
respect to licensing revenues, Andrea recognizes revenue in accordance with
Statement of Position (“SOP”) 97-2, “Software Revenue Recognition,” as amended,
and Staff Accounting Bulletin Topic 13 “Revenue Recognition in Financial
Statements.”  License revenue is recognized based on the terms and
conditions of individual contracts (see Note 5).  In addition, fee
based services, which are short-term in nature, are generally performed on a
time-and-material basis under separate service arrangements and the
corresponding revenue is generally recognized as the services are
performed.
 
 Income Taxes - The
provision for income taxes is a result of certain licensing revenues that are
subject to withholding of income tax as mandated by the foreign jurisdiction in
which the revenues are earned.  For all other income taxes, Andrea
accounts for income taxes in accordance with SFAS No. 109, “Accounting for
Income Taxes” and Financial Accounting Standards Board (“FASB”) Interpretation
No. 48, “Accounting for Uncertainty in Income Taxes – an interpretation of FASB
Statement No. 109” (“FIN 48”).  SFAS No. 109 requires an asset and
liability approach for financial accounting and reporting for income
taxes.  FIN 48 establishes for all entities a minimum threshold for
financial statement recognition of the benefit of tax positions, and requires
certain expanded disclosures.  Using both of the guidelines set forth
in these statements, the provision for income taxes is based upon income or loss
after adjustment for those permanent items that are not considered in the
determination of taxable income. Deferred income taxes represent the tax effects
of differences between the financial reporting and tax bases of the Company’s
assets and liabilities at the enacted tax rates in effect for the years in which
the differences are expected to reverse.  The Company evaluates the
recoverability of deferred tax assets and establishes a valuation allowance when
it is more likely than not that some portion or all of the deferred tax assets
will not be realized.  Since cumulative losses weigh heavily in the
overall assessment, Andrea provides a full valuation allowance on future tax
benefits until it can sustain a level of profitability that demonstrates its
ability to utilize the assets, or other significant positive evidence arises
that suggests Andrea’s ability to utilize such assets.  If it becomes
more likely than not that a tax asset will be used, the related valuation
allowance on such assets would be reversed.  Management makes
judgments as to the interpretation of the tax laws that might be challenged upon
an audit and cause changes to previous estimates of tax liability.  In
management’s opinion, adequate provisions for income taxes have been made for
all years.  If actual taxable income by tax jurisdiction varies from
estimates, additional allowances or reversals of reserves may be
necessary.  Income tax expense consists of the tax payable for the
period and the change during the period in deferred tax assets and
liabilities.  The Company has identified its federal tax return and
its state tax return in New York as "major" tax jurisdictions, as defined in FIN
48.  Based on the Company's evaluation, it has been concluded that
there are no significant uncertain tax positions requiring recognition in the
Company's financial statements.  The Company's evaluation was
performed for tax years ended 2003 through 2007.  The Company believes
that its income tax positions and deductions will be sustained on audit and does
not anticipate any adjustments that will result in a material change to its
financial position.
 
 Stock-Based
Compensation - At December 31, 2007, Andrea had three stock-based
employee compensation plans, which are described more fully in Note
7.  Andrea accounts for stock based compensation in accordance with
SFAS No. 123R, “Share-Based Payment.”  SFAS No. 123R establishes
accounting for stock-based awards exchanged for employee
services.  Under the provisions of SFAS No. 123R, share-based
compensation cost is measured at the grant date, based on the fair value of the
award, and is recognized
  8
 ANDREA
ELECTRONICS CORPORATION AND SUBSIDIARIES
 NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 (UNAUDITED)
  as expense
over the employee’s requisite service period (generally the vesting period of
the equity grant).  The fair value of the Company’s common stock
options are estimated using the Black Scholes option-pricing model with the
following assumptions:  expected volatility, dividend rate, risk free
interest rate and the expected life.  The Company expenses stock-based
compensation by using the straight-line method.  In accordance with
SFAS No. 123R, excess tax benefits realized from the exercise of stock-based
awards are classified in cash flows from financing activities.  The
future realization of the reserved deferred tax assets related to these tax
benefits associated with the exercise of stock option will result in a credit to
additional paid in capital if the related tax deduction reduces taxes
payable.  The Company has elected the “with and without approach”
regarding ordering of windfall tax benefits to determine whether the windfall
tax benefit did reduce taxes payable in the current year.   Under
this approach the windfall tax benefit would be recognized in additional
paid-in-capital only if an incremental tax benefit is realized after considering
all other benefits presently available.
 
 Recently Issued
      Accounting Pronouncements
 
 In
December 2007, the FASB issued SFAS No. 141R, “Business Combinations” (“SFAS
141R”), which replaces SFAS No. 141, “Business Combinations.” SFAS 141R
establishes principles and requirements for determining how an enterprise
recognizes and measures the fair value of certain assets and liabilities
acquired in a business combination, including noncontrolling interests,
contingent consideration, and certain acquired contingencies. SFAS 141R also
requires acquisition-related transaction expenses and restructuring costs be
expensed as incurred rather than capitalized as a component of the business
combination. SFAS 141R will be applicable prospectively to business combinations
for which the acquisition date is on or after the beginning of the first annual
reporting period beginning on or after December 15, 2008. SFAS 141R would have
an impact on accounting for any businesses acquired after the effective date of
this pronouncement.
 
 In
September 2006, the FASB issued Statement of Financial Accounting Standards No.
157, "Fair Value Measurements" (“SFAS 157”). SFAS 157 clarifies the principle
that fair value should be based on the assumptions market participants would use
when pricing an asset or liability and establishes a fair value hierarchy that
prioritizes the information used to develop those assumptions. SFAS 157 requires
fair value measurements to be separately disclosed by level within the fair
value hierarchy. SFAS 157 is effective for financial statements issued for
fiscal years beginning after November 15, 2007, and interim periods within those
fiscal years.  The adoption of SFAS 157 did not have a material effect on
the Company’s condensed consolidated financial position or results of operations
or cash flows.
 
 In
February 2007, the FASB issued SFAS No. 159 “The Fair Value Option for Financial
Assets and Financial Liabilities – Including an amendment of FASB Statement No.
115” (“SFAS No. 159”), which permits entities to choose to measure many
financial instruments and certain other items at fair value.  The fair
value option established by this Statement permits all entities to choose to
measure eligible items at fair value at specified election dates. A business
entity shall report unrealized gains and losses on items for which the fair
value option has been elected in earnings at each subsequent reporting
date.  Adoption is required for fiscal years beginning after November
15, 2007.  The adoption of SFAS 159 did not have a material effect on
the Company’s condensed consolidated financial position or results of operations
or cash flows.
 
 In
December 2007, the Securities and Exchange Commission issued Staff Accounting
Bulletin No. 110 (“SAB 110”).  SAB 110 amends and replaces Question 6
of Section D.2 of Topic 14, Share-Based Payment of the Staff Accounting Bulletin
series. Question 6 of Section D.2 of Topic 14 expresses the views of the staff
regarding the use of the “simplified” method in developing an estimate of the
expected term of “plain vanilla” share options and allows usage of that method
for option grants prior to December 31, 2007.  SAB 110 allows public
companies which do not have sufficient historical experience to provide a
reasonable estimate to continue the use of this method for estimating the
expected term of “plain vanilla” share option grants after December 31,
2007.  SAB 110 did not have a material effect on the Company’s
condensed consolidated financial position or results of operations or cash
flows.
 
 In
December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in
Consolidated Financial Statements – An Amendment of ARB No. 51” (“SFAS 160”).
SFAS 160 establishes accounting and reporting standards for the noncontrolling
interest in a subsidiary (previously referred to as minority interests). SFAS
160 also requires that a retained noncontrolling interest upon the
deconsolidation of a subsidiary be initially measured at its fair value. Upon
adoption of SFAS 160, the Company would be required to report any noncontrolling
interests as a separate component of stockholders’ equity.  The
Company would also be required to present any net income allocable to
noncontrolling interests and net income attributable to the stockholders of the
Company separately in its consolidated statements of operations. SFAS 160 is
effective for fiscal years, and interim periods within those fiscal years,
beginning on or after December 15, 2008. SFAS 160 requires retroactive adoption
of the presentation and disclosure requirements for existing minority interests.
All other requirements of SFAS 160 shall be applied prospectively. SFAS 160
would have an impact on the presentation and disclosure of the noncontrolling
interests of any non wholly-owned businesses acquired in the
future.
 
 9
 ANDREA
ELECTRONICS CORPORATION AND SUBSIDIARIES
 NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 (UNAUDITED)
 On
February 12, 2008, the FASB issued FASB Staff Position (FSP) No. SFAS 157-2,
“Effective Date of FASB Statement No. 157” (FSP SFAS 157-2). FSP SFAS 157-2
amends SFAS No. 157, to delay the effective date of SFAS 157 for nonfinancial
assets and nonfinancial liabilities, except for the items that are recognized or
disclosed at fair value in the financial statements on a recurring basis. For
items within its scope, FSP SFAS 157-2 defers the effective date of SFAS 157 to
fiscal years beginning after November 15, 2008, and interim periods within those
fiscal years. The Company is currently evaluating the impact of adopting SFAS
157 and FSP SFAS 157-2 on its consolidated financial statements.
 
 In March
2008, the FASB issued SFAS 161, “Disclosures about Derivative Instruments and
Hedging Activities an amendment of FASB Statement No. 133”, which amends and
expands the disclosure requirements of SFAS 133 to require qualitative
disclosure about objectives and strategies for using derivatives, quantitative
disclosures about fair value amounts of and gains and losses on derivative
instruments, and disclosures about credit-risk-related contingent features in
derivative agreements. This statement will be effective for the Company
beginning on January 1, 2009. The adoption of this statement will change the
disclosures related to derivative instruments held by the Company.
 
 Reclassifications -
Certain prior year amounts have been reclassified to conform to the current year
presentation.
 
 Use of Estimates -
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America, requires management to make
estimates and assumptions that affect the reported amounts of assets,
liabilities and disclosures of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period.
 
 Management
bases its estimates on historical experience and on various assumptions that are
believed to be reasonable under the circumstances, the results of which form the
basis for making judgments about the carrying value of assets and liabilities
that are not readily apparent from other sources.  The most
significant estimates, among other things, are used in accounting for allowances
for bad debts, inventory valuation and obsolescence, product warranty,
depreciation, deferred income taxes, expected realizable values for assets
(primarily intangible assets), contingencies, revenue recognition as well as the
recording and presentation of the Company’s convertible preferred stock.
Estimates and assumptions are periodically reviewed and the effects of any
material revisions are reflected in the condensed consolidated financial
statements in the period that they are determined to be necessary. Actual
results could differ from those estimates and assumptions.
 
 Note
3.  Series
C Redeemable Convertible Preferred Stock
 
 On October
10, 2000, Andrea issued and sold in a private placement $7,500,000 of Series C
Redeemable Convertible Preferred Stock (the “Series C Preferred
Stock”).  Each of these shares of Series C Preferred Stock had a
stated value of $10,000 plus $671.23 increase in the stated value, which sum is
convertible into Common Stock at a conversion price of $0.2551.  On
February 17, 2004, Andrea announced that it had entered into an Exchange and
Termination Agreement and an Acknowledgment and Waiver Agreement, which
eliminated the dividend of 5% per annum on the stated value.  The
additional amount of $671.23 represents the 5% per annum from October 10, 2000
through February 17, 2004.
 
 On April
11, 2007, 10 shares of Series C Preferred Stock, together with related accrued
dividends of $16,712, were converted into 457,516 shares of Common Stock at a
conversion price of $0.2551.
 
 As of
March 31, 2008, there were 90.701477 shares of Series C Preferred Stock
outstanding, which were convertible into 4,149,736 shares of Common Stock and
remaining accrued dividends of $151,583.
 
 Note
4.  Series
D Redeemable Convertible Preferred Stock
 
 On
February 17, 2004, Andrea entered into a Securities Purchase Agreement
(including a Registration Rights Agreement) with certain holders of the Series C
Preferred Stock and other investors (collectively, the “Buyers”) pursuant to
which the Buyers agreed to invest a total of $2,500,000.  In
connection with this agreement, on February 23, 2004, the Buyers purchased, for
a purchase price of $1,250,000, an aggregate of 1,250,000 shares of a new class
of preferred stock, the Series D Preferred Stock, convertible into 5,000,000
shares of Common Stock (an effective conversion price of $0.25 per share) and
Common Stock warrants exercisable for an aggregate of 2,500,000 shares of Common
Stock.  The warrants are exercisable at any time after August 17, 2004
and before February 23, 2009 at an exercise price of $0.38 per
share.
 
 In
addition, on June 4, 2004, the Buyers purchased for an additional $1,250,000, an
additional 1,250,000 shares of Series D Preferred Stock convertible into
5,000,000 shares of Common Stock (an effective conversion price of $0.25 per
share) and Common Stock warrants exercisable for an aggregate of 2,500,000
shares of Common Stock.  The warrants are exercisable at any time
after December 4, 2004 and before June 4, 2009 at an exercise price of $0.17 per
share.
 
 10
 ANDREA
ELECTRONICS CORPORATION AND SUBSIDIARIES
 NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 (UNAUDITED)
  Knightsbridge
Capital served as a financial advisor to Andrea in connection with the
aforementioned transactions and the initial issuance of the Series D Preferred
Stock and related warrants.  In connection with these transactions,
Andrea agreed to pay Knightsbridge Capital $350,000 in cash and to issue
warrants exercisable for an aggregate of 439,594 shares of Common Stock. 377,094
of the warrants are exercisable at any time after August 17, 2004 and before
February 23, 2009 at an exercise price of $0.38 per share and 62,500 of the
warrants at any time after December 4, 2004 and before June 4, 2009 at an
exercise price of $0.17 per share.  Through March 31, 2008, 281,250
shares of common stock have been issued as a result of exercises of the Series D
Preferred Stock Warrants.
 
 The
Company is required to maintain an effective registration statement from the
time of issuance through June 4, 2010.  In the event that the holder
of the Series D Preferred Stock and related warrants is unable to convert these
securities into Andrea Common stock the Company shall pay to each such holder of
such registrable securities a Registration Delay Payment.  This
payment is to be paid in cash and is equal to the product of (i) the stated
value of such Preferred Shares multiplied by (ii) the product of (1) .0005
multiplied by (2) the number of days that sales cannot be made pursuant to the
Registration Statement (excluding any days during that may be considered grace
periods as defined by the Registration Rights Agreement).
 
 During
2007, 50,000 shares of Series D Preferred Stock were converted into 200,000
shares of Common Stock at a conversion price of $0.25. There were no Series D
Preferred Stock Warrant exercises during the three months ended March 31, 2008
or the year ended December 31, 2007.
 
 As of
March 31, 2008, there are 1,192,858 shares of Series D Preferred Stock and
5,158,344 related warrants outstanding, which are convertible and exercisable
into 9,929,776 shares of Common Stock.
 
 Note
5.  Licensing
Agreements
 
 The
Company has entered into various licensing, production and distribution
agreements with manufacturers of PC and related components.  These
agreements provide for revenues based on the terms of each individual
agreement.  The Company's three largest licensing customers accounted
for $102,376, $20,727 and $4,200 of revenues for the three months ended March
31, 2008 and $68,454, $179,308 and $6,080 of revenues for the three months ended
March 31, 2007.
 
 Note
6.  Commitments
And Contingencies
 
 Leases
 
 In March
2005, Andrea entered into a lease for its corporate headquarters located in
Bohemia, New York, where Andrea leases space for warehousing, sales and
executive offices from an unrelated party.  The lease is for
approximately 11,000 square feet and expires in April 2010.  Rent
expense under this operating lease was $20,469 and $19,873, respectively for the
three-month periods ended March 31, 2008 and March 31, 2007,
respectively.
 
 As of
March 31, 2008, the future minimum annual lease payments under this lease and
all non-cancelable operating leases are as follows:
 
 2008
      (April to December 31)
              
              $
              77,2052009
              
              
              93,5412010
              
              
              29,171Total
              
              $
              199,917
 
 Employment
Agreements
 
 In
November 2006, the Company entered into a new employment agreement with the
Chairman of the Board, Douglas J Andrea.  The employment agreement
expires July 31, 2008 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 per
annum.  In addition, upon execution of the employment agreement, Mr.
Andrea was entitled to a salary adjustment from August 1, 2006 through the date
of the employment agreement.   The employment agreement provides
for quarterly bonuses equal to 25% of the Company’s pre-bonus net after tax
quarterly earnings in excess of $25,000 for a total quarterly bonus amount not
to exceed $12,500; and annual bonuses equal to 10% of the Company’s annual
pre-bonus net after tax earnings in excess of $300,000.  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.  On November 2,
2006, in accordance with his employment agreement, Mr. Andrea was granted
1,000,000 stock options with a fair value of $100,000. This grant provides for a
three year vesting period, an exercise price of $0.12 per share, which was fair
market value at the date of grant, and a term of 10 years.  On
November 16, 2006, in accordance with his employment agreement, Mr. Andrea was
granted an additional 1,000,000 stock options with a fair value of $100,000.
This grant provides for a three year vesting period, an exercise price of $0.12
per share, which was fair market value at the date of grant, and a term of 10
years.  Mr. Andrea is also entitled to a change in control payment
equal to two times his salary with continuation of health and medical benefits
for two years in the event of a change in control.  At March 31, 2008,
the future minimum cash commitments under this agreement aggregate
$100,000.
 
 11
 ANDREA
ELECTRONICS CORPORATION AND SUBSIDIARIES
 NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 (UNAUDITED)
  Legal
Proceedings
 
 Andrea is
involved in routine litigation incidental to the normal course of business.
While it is not feasible to predict or determine the final outcome of claims,
Andrea believes the resolution of these matters will not have a material adverse
effect on Andrea’s financial position, results of operations or
liquidity.
 
 Note
7.  Stock
Plans and Stock Based Compensation
 
 In 1991,
the Board of Directors of Andrea (the “Board”) adopted the 1991 Performance
Equity Plan (“1991 Plan”), which was approved by the shareholders. The 1991
Plan, as amended, authorizes the granting of awards, the exercise of which would
allow up to an aggregate of 4,000,000 shares of Andrea’s Common Stock to be
acquired by the holders of those awards.  Stock options granted to
employees and directors under the 1991 Plan were granted for terms of up to 10
years at an exercise price equal to the market value at the date of
grant.  No further awards will be granted under the 1991
Plan.
 
 In 1998,
the Board adopted the 1998 Stock Option Plan (“1998 Plan”), which was
subsequently approved by the shareholders. The 1998 Plan, as amended, authorizes
the granting of awards, the exercise of which would allow up to an aggregate of
6,375,000 shares of Andrea’s Common Stock to be acquired by the holders of those
awards.  The awards can take the form of stock options, stock
appreciation rights, restricted stock, deferred stock, stock reload options or
other stock-based awards. Awards may be granted to key employees, officers,
directors and consultants.  At March 31, 2008, there were 14,984
shares available for further issuance under the 1998 Plan.
 
 In October
2006, the Board adopted the Andrea Electronics Corporation 2006 Equity
Compensation Plan (“2006 Plan”), which was subsequently approved by the
shareholders.  The 2006 Plan authorizes the granting of awards, the
exercise of which would allow up to an aggregate of 10,000,000 shares of
Andrea’s Common Stock to be acquired by the holders of those
awards.  The awards can take the form of stock options, stock
appreciation rights, restricted stock or other stock-based awards. Awards may be
granted to key employees, officers, directors and consultants.  At
March 31, 2008, there were 5,636,361 shares available for further issuance under
the 2006 Plan.
 
 During
2006, the Board granted 400,000 stock options to the Vice President and Chief
Financial Officer and 755,000 stock options to employees of the
Company.  Each option grant provides for vesting periods of up to
three years, a weighted average exercise price of $0.12 per share, which was the
fair market value of the Company’s common stock at the date of grant, and a term
of 10 years.  The compensation expense related to these awards was
$7,641 and $20,302 for the three months ended March 31, 2008 and 2007,
respectively.
 
 On
November 16, 2006, the Board granted 16,667 stock options to each chairperson on
the Nominating and Compensation Committees and 41,667 stock options to the
chairperson on the Audit Committee.  The grants provide for an
eighteen-month vesting period, an exercise price of $0.12 per share, which was
the fair market value of the Company’s common stock at the date of grant, and a
term of 10 years.  The compensation expense related to these awards
was $417 and $2,749 for the three months ended March 31, 2008 and 2007,
respectively.
 
 On
September 12, 2007, the Board granted 1,000,000 stock options to the President
and Chief Executive Officer, 350,000 stock options to the Vice President and
Chief Financial Officer, 60,000 stock options to the Board of Directors and
760,000 stock options to employees and consultants of the
Company.  Each option grant provides for vesting periods of up to
three years, an exercise price of $0.11 per share, which was the fair market
value of the Company’s common stock at the date of grant, and a term of 10
years.  Compensation expense related to these awards was $29,823 for
the three months ended March 31, 2008.
 
 On
September 12, 2007, the Board granted 18,182 stock options to each chairperson
on the Nominating and Compensation Committees and 45,455 stock options to the
chairperson on the Audit Committee.  The grants provide for an
eighteen-month vesting period, an exercise price of $0.11 per share, which was
the fair market value of the Company’s common stock at the date of grant, and a
term of 10 years.  Compensation expense related to these awards was
$2,045 for the three months ended March 31, 2008.
 
 12
 ANDREA
ELECTRONICS CORPORATION AND SUBSIDIARIES
 NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 (UNAUDITED)
  Total
compensation expense recognized related to all stock option awards was $53,816
and $59,699 for the three months ended March 31, 2008 and 2007,
respectively.  In the accompanying consolidated statement of
operations $41,885 of the first quarter 2008 expense is included in general,
administrative and selling expenses, $11,550 is included in research and
development expenses and $381 is included in cost of revenues.  In the
accompanying consolidated statement of operations $49,148 of the first quarter
2007 expense is included in general, administrative and selling expenses,
$10,077 is included in research and development expenses and $474 is included in
cost of revenues.
 
 There were
no options granted during the three-month period ending March 31, 2008 and
2007.
 
 Option
activity during 2008 and 2007 is summarized as follows:
 Options
      Outstanding
              
              Options
      ExercisableOptions
                Outstanding
              
              
              Weighted
                Average
                Exercise
                Price
              
              Weighted
                Average
                Remaining
                Contractual Life
              
              Options
                Exercisable
              
              
              Weighted
                Average
                Exercise
                Price
              
              Weighted
                Average
                Remaining
                Contractual LifeAt
      January 1, 2007
              
              
              7,590,001
              
              
              $
              1.05
              
              8.01 years
              
              
              4,397,500
              
              
              $
              1.72
              
              6.26 yearsGranted
              
              
              2,251,819
              
              
              $
              0.11Cancelled
              
              
              (155,000
              )
              
              $
              5.20At
      December 31, 2007
              
              
              9,686,820
              
              
              $
              0.76
              
              7.79 years
              
              
              5,355,590
              
              
              $
              1.29
              
              6.57 yearsCancelled
              
              
              (60,000
              )
              
              $
              14.63At
      March 31, 2008
              
              
              9,626,820
              
              
              $
              0.68
              
              7.59 years
              
              
              5,322,837
              
              
              $
              1.13
              
              6.41
  years
 
 During the
three months ended March 31, 2008, 27,247 options vested with a weighted average
exercise price of $0.11 and a weighted average fair value of $0.09 per
option.
 
 Based on
the March 31, 2008, fair market value of the company’s common stock of $0.09,
the aggregate intrinsic value of the 9,626,820 options outstanding and 5,355,590
shares exercisable is $866,164 and $478,805, respectively.
 
 As of
March 31, 2008, there was $204,392 of total unrecognized compensation cost
related to nonvested share-based compensation arrangements granted under the
1998 and 2006 Plans.  This unrecognized compensation cost is expected
to be recognized over the next 3 years ($120,663 in 2008, $68,319 in 2009 and
$15,410 in 2010).
 
 Pursuant
to Andrea’s compensation policy for outside directors, Andrea granted 181,820
shares of Common Stock with a fair market value of $0.11, 166,668 shares of
Common Stock with a fair market value of $0.12 and 400,000 shares of Common
Stock with a fair market value of $0.05, respectively.  These stock
grants were fully vested on the date of grant.  Compensation expense
related to these awards was $5,001 and $5,000 for the three months ended March
31, 2008 and 2007, respectively.
 
 Note
8.  Segment
Information
 
 Andrea
follows the provisions of SFAS No. 131, “Disclosures about Segments of an
Enterprise and Related Information.” Reportable operating segments are
determined based on Andrea’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 Andrea’s results of operations are
primarily reviewed on a consolidated basis, the chief operating decision-maker
also manages the enterprise in two segments: (i) Andrea DSP Microphone and Audio
Software Products and (ii) Andrea Anti-Noise Products.  Andrea DSP
Microphone and Audio Software Products primarily include products based on the
use of some, or all, of the following technologies: Andrea Digital Super
Directional Array microphone technology (DSDA), Andrea Direction Finding and
Tracking Array microphone technology (DFTA), Andrea PureAudio noise filtering
technology, and Andrea EchoStop, an advanced acoustic echo cancellation
technology.  Andrea Anti-Noise Products include noise cancellation and
active noise cancellation computer headset products and related computer
peripheral products.
  13
 ANDREA
ELECTRONICS CORPORATION AND SUBSIDIARIES NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 (UNAUDITED)
  The
following represents selected condensed consolidated financial information for
Andrea’s segments for the three-month periods ended March 31, 2008 and
2007.
 2008
      Three Month Segment Data
              
              Andrea
      DSP
                  Microphone
      and
                  Audio
      Software
                  Products
              
              
              Andrea
      Anti-
                  Noise
      Products
              
              
              Total
      2008Net
      revenues from external customers
              
              $
              265,543
              
              
              $
              530,879
              
              
              $
              796,422License
      Revenues
              
              
              130,218
              
              
              
              -
              
              
              
              130,218(Loss)
      income from operations
              
              
              (237,503
              )
              
              
              (124,570
              )
              
              
              (362,073
              )Depreciation
      and amortization
              
              
              117,342
              
              
              
              7,682
              
              
              
              125,024Capital
      expenditures
              
              
              3,465
              
              
              
              3,465
              
              
              
              6,930Purchases
      of patents and trademarks
              
              
              6,155
              
              
              
              4,990
              
              
              
              11,145Assets
              
              
              3,785,698
              
              
              
              1,582,462
              
              
              
              5,368,160Total
      long lived assets
              
              
              2,750,264
              
              
              
              191,075
              
              
              
              2,941,3392007
      Three Month Segment Data
              
              Andrea
      DSP
                  Microphone
      and
                  Audio
      Software
                  Products
              
              
              Andrea
      Anti-
                  Noise
      Products
              
              
              Total
      2007Net
      revenues from external customers
              
              $
              467,484
              
              
              $
              837,338
              
              
              $
              1,304,822License
      Revenues
              
              
              267,730
              
              
              
              -
              
              
              
              267,730(Loss)
      income from operations
              
              
              (2,256
              )
              
              
              24,119
              
              
              
              21,863Depreciation
      and amortization
              
              
              117,159
              
              
              
              4,646
              
              
              
              121,805Capital
      expenditures
              
              
              -
              
              
              
              -
              
              
              
              -Purchases
      of patents and trademarks
              
              
              -
              
              
              
              -
              
              
              
              -
 
 The
following represents selected condensed consolidated financial information for
Andrea’s segments as of December 31, 2007.
 
 2007
      Year End Segment Data
              
              Andrea
      DSP
                  Microphone
      and
                  Audio
      Software
                  Products
              
              
              Andrea
      Anti-
                  Noise
      Products
              
              
              Total
      2007Assets
              
              
              4,021,688
              
              
              
              1,611,318
              
              
              
              5,633,006Total
      long lived assets
              
              
              2,858,713
              
              
              
              189,575
              
              
              
              3,048,288
 
 Management
assesses non-operating income statement data on a consolidated basis
only.  International revenues are based on the country in which the
end-user is located.  For the three-month periods ended March 31, 2008
and 2007, and as of each respective period-end, net revenues and accounts
receivable by geographic area are as follows:
 
 Geographic
      Data
              
              March
      31, 2008
              
              
              March
      31, 2007Net
      revenues:United States
              
              $
              722,648
              
              
              $
              1,113,179Foreign(1)
              
              
              203,992
              
              
              
              459,373$
              926,640
              
              
              $
              1,572,552
  (1)
              Net
      revenue from the People’s Republic of China and Singapore represented 11%
      and 2%, respectively of total net revenues for three months ended March
      31, 2008.  Net revenue from the People’s Republic of China and
      Singapore represented 13% and 12%, respectively of total net revenues for
      three months ended March 31, 2007.
 
 As of
March 31, 2008 and December 31, 2007, account receivable by geographic area is
as follows:
 
 Geographic
      Data
              
              March
      31, 2008
              
              
              December
      31, 2007Accounts
      receivable:United States
              
              $
              413,047
              
              
              $
              736,122Foreign
              
              
              155,424
              
              
              
              258,324$
              568,471
              
              
              $
              994,446
  14
 
 ITEM
      2.
              MANAGEMENT’S
      DISCUSSION AND ANALYSIS OF FINANCIAL CONDIDTION 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 DSP Microphone and Audio
Software Products and Andrea Anti-Noise Products provide benefit include:
Internet and other computer-based speech; telephony communications; multi-point
conferencing; speech recognition; multimedia; multi-player Internet and CD ROM
interactive games; 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 devises, cellular and other
wireless communication devices and automotive communication systems. Our Andrea
DSP Microphone and Audio Software Products use “far-field” digital signal
processing technology to provide high quality transmission of voice where the
user is at a distance from the microphone. High quality audio communication
technologies will be required for emerging far-field voice applications, ranging
from continuous speech dictation, to Internet telephony and 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.
 
 We
outsource to Asia high volume assembly for most of our products from purchased
components.  We assemble some low volume Andrea DSP Microphone and
Audio Software Products from purchased components. As sales of any particular
Andrea DSP Microphone and Audio Software Product increases, assembly operations
are transferred to a subcontractor in Asia.
 
 Our
Critical Accounting Policies
 
 Our
unaudited condensed consolidated financial statements and the notes to our
unaudited condensed consolidated financial statements contain information that
is pertinent to management's discussion and analysis.  The preparation
of financial statements in conformity with accounting principles generally
accepted in the United States requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosures of contingent assets and liabilities.  Management bases
its estimates on historical experience and on various other assumptions that are
believed to be reasonable under the circumstances, the results of which form the
basis for making judgments about the carrying values of assets and liabilities
that are not readily apparent from other sources.  On a continual
basis, management reviews its estimates utilizing currently available
information, changes in facts and circumstances, historical experience and
reasonable assumptions.  After such reviews, and if deemed
appropriate, those estimates are adjusted accordingly.  Actual results
may vary from these estimates and assumptions under different and/or future
circumstances.  Our significant accounting policies are described in
Note 2 of the Notes to Consolidated Financial Statements included in our Annual
Report on Form 10-KSB for the year ended December 31, 2007.  A
discussion of our critical accounting policies and estimates are included in
Management’s Discussion and Analysis or Plan of Operation in our Annual Report
on Form 10-KSB for the year ended December 31, 2007. Management has discussed
the development and selection of these policies with the Audit Committee of the
Company’s Board of Directors, and the Audit Committee of the Board of Directors
has reviewed the Company’s disclosures of these policies.  There have
been no material changes to the critical accounting policies or estimates
reported in the Management’s Discussion and Analysis section of the 10KSB for
the year ended December 31, 2007 as filed with the Securities and Exchange
Commission.
 
 Cautionary
Statement Regarding Forward-Looking Statements
 
 This
report contains forward-looking statements that are based on assumptions and may
describe future plans, strategies and expectations of the
Company.  These forward-looking statements are generally identified by
use of the words “believe”, “expect”, “intend”, “anticipate”, “estimate”,
“project” or similar expressions.  The Company’s ability to predict
results or the actual effect of future plans or strategies is inherently
uncertain. Factors which could have a material adverse effect on the operations
of the Company and its subsidiaries include, but are not limited to, changes in
economic, competitive, governmental, technological and other factors that may
affect our business and prospects.  Additional factors are discussed
below under “Risk Factors” and in Part II, “Item 6. Management’s Discussion and
Analysis or Plan of Operation—Risk Factors” in the Company’s Annual
Report on Form 10-KSB for the year ended December 31, 2007.  These
risks and uncertainties should be considered in evaluating forward-looking
statements and undue reliance should not be placed on such
statements.  Except as required by applicable law or regulation, the
Company does not undertake, and specifically disclaims any obligation, to
release publicly the result of any revisions that may be made to any
forward-looking statements to reflect events or circumstances after the date of
the statements or to reflect the occurrence of anticipated or unanticipated
events.
 
 15
  Risk
Factors
 
 Our
operating results are subject to significant fluctuation, period-to-period
comparisons of our operating results may not necessarily be meaningful and you
should not rely on them as indications of our future performance.
 
 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;
  –
              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;
  –
              general
      economic conditions.
 
 We cannot
assure that the level of revenues and gross profit, if any, that we achieve in
any particular fiscal period will not be significantly lower than in other
fiscal periods.  Our net revenues for the three months ended March 31,
2008 were $926,640 versus $1,572,552 for the three months ended March 31,
2007.  Net loss for the three months ended March 31, 2008 was
$362,272, or $0.01 loss per share on a basic and diluted basis, versus net
income of $489, or $0.00 per share on a basic and diluted basis for the three
months ended March 31, 2007. We continue to explore opportunities to grow sales
in other business areas; we are also examining additional opportunities for cost
reduction, production efficiencies and further diversification of our
business.  Although we have improved cash flows by reducing overall
expenses, if our revenues continue to decline we may not continue to generate
positive cash flows and our net income or loss may be affected.
 
 If
we fail to obtain additional capital or maintain access to funds sufficient to
meet our operating needs, we may be required to significantly reduce, sell, or
refocus our operations and our business, results of operations and financial
condition could be materially and adversely effected.
 
 In order
to be a viable entity we need to maintain and increase profitable
operations.  To achieve profitable operations we need to
maintain/increase current net revenues and continue to look for ways to control
expenses.  We might also need to sell additional assets or raise
capital as a means of funding continued operations.  We may have to
raise capital from external sources.  These sources may include
private or public financings through the issuance of debt, convertible debt or
equity, or collaborative arrangements.  Such additional capital and
funding may not be available on favorable terms, if at
all.  Additionally, we may only be able to obtain additional capital
or funds through arrangements that require us to relinquish rights to our
products, technologies or potential markets, in whole or in part, or result in
our sale.  As a result of past few years of performance, we believe
that we have sufficient liquidity to continue our operations at least through
March 2009, provided our net revenues do not continue to decline and our
operating expenses do not continue to increase.  Although we have
revised our business strategies to reduce our expenses and capital expenditures,
we cannot assure you that we will be successful in generating positive cash
flows or obtaining access to additional sources of funding in amounts necessary
to continue our operations.  Failure to maintain sufficient access to
funding may also result in our inability to continue operations.
 
 Shares
Eligible For Future Sale May Have An Adverse Effect On Market Price and Andrea
Shareholders May Experience Substantial Dilution.
 
 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 200,000,000 shares of common stock presently
authorized, 59,861,193 were outstanding as of May 8, 2008. The number of shares
outstanding does not include an aggregate of 29,357,677 shares of common stock
that are issuable.  This number of issuable common shares is equal to
approximately 49% of the 59, 861,193 outstanding shares.  These
issuable common shares are comprised of:  a) 9,626,820 shares of our
common stock reserved for issuance upon exercise of outstanding awards granted
under our 1991 Performance Equity Plan, 1998 Stock Plan and 2006 Stock Plan; b)
14,984 shares reserved for future grants under our 1998 Stock Plan; c) 5,636,361
shares reserved for future grants under our 2006 Stock Plan; d) 4,149,736 shares
of common stock that are issuable upon conversion of the Series C Preferred
Stock; e) 4,771,432 shares of common stock issuable upon conversion of the
Series D Preferred Stock; and f) 5,158,344 of common stock issuable upon
exercise of warrants relating to the Series D Preferred stock.
 
 16
  Changes
in economic and political conditions outside the United States could adversely
affect our business, results of operations and financial condition.
 
 We
generate revenues to regions outside the United States, particularly in Asia.
For the three months ended March 31, 2008 and 2007, net revenues to customers
outside the United States accounted for approximately 22% and 29%, respectively,
of our net sales. International sales and operations are subject to a number of
risks, including:
  •           trade
restrictions in the form of license requirements;
  •           restrictions
on exports and imports and other government controls;
  •           changes
in tariffs and taxes;
  •           difficulties
in staffing and managing international operations;
  •           problems
in establishing and managing distributor relationships;
  •           general
economic conditions; and
  •          
political and economic instability or conflict.
  To date,
we have invoiced our international revenues in U.S. dollars, and have not
engaged in any foreign exchange or hedging transactions. We may not be able to
continue to invoice all of our revenues in U.S. dollars in order to avoid
engaging in foreign exchange or hedging transactions. If we are required to
invoice any material amount of international revenues in non-U.S. currencies,
fluctuations in the value of non-U.S. currencies relative to the U.S. dollar may
adversely affect our business, results of operations and financial condition or
require us to incur hedging costs to counter such fluctuations.
  In
addition to the risk factors set forth above and the other information set forth
in this report, you should carefully consider the factors discussed in Part II,
“Item 6. Management’s
Discussion and Analysis or Plan of Operation—Risk Factors” in the
Company’s Annual Report on Form 10-KSB for the year ended December 31, 2007,
which could materially affect our business, financial condition or future
results. The risks described in this report and in our Annual Report on Form
10-KSB are not the only risks that we face. Additional risks and uncertainties
not currently known to us or that we currently deem to be immaterial also may
materially adversely affect our business, financial condition and/or operating
results.
 
 Results
Of Operations
 
 Quarter
ended March 31, 2008 compared to Quarter ended March 31, 2007
 
 Net
Revenues
 
 For
      the Three Months Ended March 312008
              
              
              2007
              
              
              %
      ChangeAndrea
      Anti-Noise Products net Product revenuesSales
      of products to an OEM customer for use with speech recognition
      software
              
              $
              24,790
              
              $
              131,361
              
              
              (81)
              (a)Sales
      of gaming headset products to an OEM customer
              
              
              -
              
              
              183,261
              
              
              (100)
              (b)All
      other Andrea Anti-Noise net product revenues
              
              
              506,089
              
              
              522,716
              
              
              (3)Total
      Andrea Anti-Noise Products net Product revenues
              
              $
              530,879
              
              $
              837,338
              
              
              (37)Andrea
      DSP Microphone and Audio Software Products revenuesSales
      of array microphone products to an OEM customer
              
              
              98,000
              
              
              200,970
              
              
              (51)
              (c)All
      other Andrea DSP Microphone and Audio product revenues
              
              
              167,543
              
              
              266,514
              
              
              (37)
              (d)License
      revenues
              
              
              130,218
              
              
              267,730
              
              
              (51)
              (e)Total
      Andrea DSP Microphone and Audio Software Products revenues
              
              
              395,761
              
              
              735,214
              
              
              (46)Total
      Revenues
              
              $
              926,640
              
              $
              1,572,552
              
              
              (41)
  17
  (a)
              The
      significant decrease of sales of Andrea Anti-Noise Products is directly
      related to an OEM customer for use with speech recognition software and
      was a result of the OEM’s decreased demand for our products during the
      three month ended March 31, 2008 as compared to the same period in
      2007.  We believe that this decreased demand is related to the
      OEM’s 2006 product revision and related orders that did not ship until
      early 2007.  We believe that our annual revenues for 2008
      associated with this customer will be approximately
    $250,000.
  (b)
              The
      difference of approximately $183,000 relates to the sale of product to one
      of our OEM customers for a one-time design and build of a particular
      product.  These revenues represented one-time revenues that were
      only anticipated to be repeated if the OEM’s product was successful in the
      marketplace, which it was not.
  (c)
              The
      significant 51% decrease in sales of microphone array products to an OEM
      customer relates to the decreased demand from the OEM
      customer.  We believe that the significantly higher sales in the
      three months ended March 31, 2007 was due to the introduction of the OEM’s
      product and the OEM customer’s need to supply all of its customers for the
      initial launch as opposed to regular fulfillment of a regularly stocked
      product that occurred during the three months ended March 31,
      2008.  We believe that our sales from April 2008 to March 2009
      will be consistent with our sales from April 2007 to March
      2008
  (d)
              The
      37% decrease in all other Andrea DSP Microphone and Audio product revenues
      is comprised of an approximate $62,000 decrease in sales of our Andrea
      AutoArray Microphone and an approximate $32,000 decrease in sales of a
      custom product to one of our OEM customers.  The decrease in our
      Andrea AutoArray Microphone sales is due to a decrease in demand from the
      agencies that install voice activated programs into the emergency vehicle
      market.  We further believe this demand is due to a decrease in
      agency funding coupled with the time frame needed to obtain
      funding/approval of this type of product
  installation.
  (e)
              The
      majority of the decrease in licensing revenues for the year ended December
      31, 2007 is a result of one of our OEM licensing partners not including
      one of our licensed products in their new Vista bundle.  This
      decrease was partially offset by increases in other licensing
      revenues.  We expect that our 2008 licensing revenues will be in
      line with our 2007 licensing
revenues.
  Cost of
Revenues
 
 Cost of
revenues as a percentage of net revenues for the three months ended March 31,
2008 increased to 52% from 50% for the three months ended March 31,
2007.  The cost of revenues as a percentage of net revenues for the
three months ended March 31, 2008 for Andrea Anti-Noise Products is 63% compared
to 61% for the three months ended March 31, 2007.  The cost of
revenues as a percentage of net revenues for the three months ended March 31,
2008 for Andrea DSP Microphone and Audio Software Products is 38% compared to
37% for the three months ended March 31, 2007.  The changes are
primarily the result of the changes in revenue as described under “Net Revenues”
above.
 
 Research and
Development
 
 Research
and development expenses for the three months ended March 31, 2008 increased 12%
to $193,404 from $172,759 for the three months ended March 31,
2007.  This increase primarily relates to increases in employee
compensation and related benefit costs.  For the three months ended
March 31, 2008, the increase in research and development expenses reflects
an 8% increase in our Andrea DSP Microphone and Audio Software Technology
efforts to $132,971, or 69% of total research and development expenses and a 21%
increase in our Andrea Anti-Noise Headset Product efforts to $60,433, or 31% of
total research and development expenses.  With respect to DSP
Microphone and Audio Software 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 Andrea’s digital super
directional array microphone technology, and certain other related technologies
such as noise suppression and stereo acoustic echo cancellation.  We
believe that continued research and development spending should provide Andrea
with a competitive advantage.
 
 General, Administrative and
Selling Expenses
 
 General,
administrative and selling expenses increased approximately 4% to $610,174 for
the three months ended March 31, 2008 from $588,761 for the three months
ended March 31, 2007.  This increase is principally related to
expenses associated with the implementation and compliance with Section 404 of
the Sarbanes-Oxley Act of 2002.  For the three months ended March 31,
2008, the increase reflects a 3% increase in our Andrea DSP Microphone and Audio
Software Technology efforts to $350,558, or 58% of total general, administrative
and selling expenses and a 4% increase in our Andrea Anti-Noise Headset Product
efforts to $259,616, or 42% of total general, administrative and selling
expenses.
 
 Interest Income (Expense),
net
 
 Other
income, net for the three months ended March 31, 2008 was $2,874 compared to an
interest expense of $1,172 for the three months ended March 31,
2007.  The year to date increase in other income is the result of
interest earned on higher cash balances in 2007.
 
 18
  Provision for Income
Taxes
 
 The
provision for income taxes is a result of certain licensing revenues that are
subject to withholding of income tax as mandated by the foreign jurisdiction in
which the revenues are earned.  Amounts are based on net revenues and
are therefore subject to change.
 
 Net Loss
 
 Net loss
for the three months ended March 31, 2008 was $361,272 compared to a net income
of $489 for the three months ended March 31, 2007.  The net loss for
the three months ended March 31, 2008 principally reflects the factors described
above.
 
 Off-Balance Sheet
Arrangements
 
 The
Company has no off-balance sheet arrangements that have or are reasonably likely
to have a current or future effect on its financial condition, changes in
financial condition, revenues or expenses, results of operations, liquidity,
capital expenditures or capital resources that are material to
investors.
 
 Liquidity
And Capital Resources
 
 Andrea’s
principal sources of funds are and are expected to continue to be gross cash
flows from operations.  At March 31, 2008, we had cash and cash
equivalents of $945,948 compared with $811,403 at December 31,
2007.  The balance of cash and cash equivalents at March 31, 2008 is
primarily a result of our cash provided from operations during the three months
ended March 31, 2008.
 
 Working
capital balance at March 31, 2008 was $1,642,015 compared to a working capital
balance of $1,837,521 at December 31, 2007.  The decrease in working
capital reflects a decrease in total current assets of $157,897 coupled with an
increase in total current liabilities of $37,609. The decrease in total current
assets reflects an increase in cash and cash equivalents of $134,545, a decrease
in accounts receivable of $425,975, an increase in inventory of $153,248, and a
decrease in prepaid expenses and other current assets of $19,715.  The
increase in total current liabilities reflects a decrease in trade accounts
payable of $13,090, and an increase of $50,699 in other current liabilities. The
increase in cash and cash equivalents of $134,545 reflects $152,620 of net cash
provided by operating activities, and $18,075 of net cash used in investing
activities.
 
 The cash
provided by operating activities of $152,620, excluding non-cash charges for the
quarter ended March 31, 2008, is attributable to a $426,032 decrease in accounts
receivable, a $151,390 increase in inventory, a $19,715 decrease in prepaid
expenses and other current assets, a $13,090 decrease in accounts payable, and a
$50,699 increase in other current and long-term liabilities.  The
changes in receivables, inventory, prepaid expenses and accounts payable
primarily reflect differences in the timing related to both the payments for and
the acquisition of inventory as well as for other services in connection with
ongoing efforts related to Andrea’s various product lines.
 
 The cash
used by investing activities of $18,075 reflects an increase in property and
equipment of $6,930 and an increase in patents and trademarks of
$11,145.  The increase in property and equipment reflects capital
expenditures associated with computer purchases.  The increase in
patents and trademarks reflects capital expenditures associated with our
intellectual property.
 
 We plan to
continue to improve our cash flows during 2008 by aggressively pursuing
additional licensing opportunities related to our Andrea DSP Audio Software and
increasing our Andrea Anti-Noise Headset Products through the introduction of
refreshed product line set to introduced in the early part of 2008 as well as
the increased efforts we are putting into our sales and marketing
efforts.  However, there can be no assurance that we will be able to
successfully execute the aforementioned plans.  As of May 8, 2008,
Andrea has approximately $620,000 of cash and cash equivalents.  We
believe that we have sufficient liquidity available to continue in operation
through at least September 2009.  To the extent that we do not
generate sufficient cash flows from our operations in the next twelve months,
additional financing might be required.  Although we have improved
cash flows by reducing overall expenses, if our revenues decline, these
reductions may impede our ability to be cash flow positive and our net income or
loss may be disproportionately affected.  We have no commitment for
additional financing and may experience difficulty in obtaining additional
financing on favorable terms, if at all.  Any financing we obtain may
contain covenants that restrict our freedom to operate our business or may have
rights, preferences or privileges senior to our common stock and may dilute our
current shareholders’ ownership interest in Andrea. We cannot assure that demand
will continue for any of our products, including future products related to our
Andrea DSP Microphone and Audio Software technologies, or, that if such demand
does exist, that we will be able to obtain the necessary working capital to
increase production and provide marketing resources to meet such demand on
favorable terms, or at all.
 
 Recently Issued
      Accounting Pronouncements
 
 For a
discussion of the impact of recent accounting pronouncements, see Note 2 of the
accompanying condensed consolidated financial statements.
 
 19
  ITEM
3.                      QUANTITATIVE
AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
  Not
Applicable.
 
 ITEM
4.                      CONTROLS
AND PROCEDURES
  Andrea’s
management, including its principal executive officer and principal financial
officer, have evaluated the effectiveness of the Company’s “disclosure controls
and procedures,” as such term is defined in Rule 13a-15(e) promulgated under the
Securities Exchange Act of 1934, as amended, (the “Exchange Act”). Based upon
their evaluation, the principal executive officer and principal financial
officer concluded that, as of the end of the period covered by this report,
Andrea’s disclosure controls and procedures were effective for the purpose of
ensuring that the information required to be disclosed in the reports that it
files or submits under the Exchange Act with the Securities and Exchange
Commission (the “SEC”) (1) is recorded, processed, summarized and reported
within the time periods specified in the SEC’s rules and forms, and (2) is
accumulated and communicated to the Andrea’s management, including its principal
executive and principal financial officers, as appropriate to allow timely
decisions regarding required disclosure.
  Limitations on the
Effectiveness of Controls
  A control
system, no matter how well conceived and operated, can provide only reasonable,
not absolute, assurance that all control issues and instance of fraud, if any,
within a company have been detected.  Andrea’s disclosure controls and
procedures are designed to provide reasonable assurance of achieving its
objectives.
  There have
been no changes in the Company’s internal controls over financial reporting that
have materially affected, or is reasonable likely to materially affect the
Company’s internal controls over financial reporting during the period covered
by this Quarterly Report.
  PART
II                      OTHER
INFORMATION
  ITEM
1.                      LEGAL
PROCEEDINGS
  None.
  ITEM
      1A.
              RISK
      FACTORS
  Not
Applicable.
 
 ITEM
2.                      UNREGISTERED
SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
  None.
  ITEM
3.                      DEFAULTS
UPON SENIOR SECURITIES
  None.
  ITEM
4.                      SUBMISSION
OF MATTERS TO A VOTE OF SECURITIES HOLDERS
  None.
  ITEM
5.                      OTHER
INFORMATION
  None.
  ITEM
6.                      EXHIBITS
  a)
              Exhibits
  Exhibit 31
– Rule 13a-14(a)/15d-14(a) Certifications*
  Exhibit 32
– Section 1350 Certifications*
 
 * Filed
herewith
 
 20
  SIGNATURES
  Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant has
duly caused this report to be signed on its behalf by the undersigned thereunto
duly authorized.
  ANDREA
      ELECTRONICS CORPORATIONBy:
              /s/    DOUGLAS J.
      ANDREAName:Douglas J.
      AndreaTitle:Chairman of the Board,
      President, Chief
                Executive Officer and Corporate
      Secretary
 
  Date:
      May 12, 2008
 /s/    DOUGLAS J.
      ANDREA
              Chairman
      of the Board, President, Chief
              May
      12, 2008Douglas
      J. Andrea
              Executive
      Officer and Corporate Secretary/s/    CORISA L.
      GUIFFRE
              Vice
      President, Chief Financial Officer and
              May
      12, 2008Corisa
      L. Guiffre
              Assistant
      Corporate Secretary
   21