<PAGE>  1
                      SECURITIES AND EXCHANGE COMMISSION
                           Washington, D. C. 20549

                                  FORM 10-Q


(Mark One)

( x )   QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES
        EXCHANGE ACT OF 1934
        For the quarterly period ended September 30, 1996

                                      OR

(    )  TRANSITION REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES
        EXCHANGE ACT OF 1934 
        For the transition period from ____________ to_______________



                        Commission file number 1-4324
                                               ------

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

                  New York                             11-0482020    
           ---------------------                -------------------------
      (State or other jurisdiction of     (I.R.S. Employer Identification No.)
       incorporation or organization)

 11-40 45th Road, Long Island City, New York               11101  
 -------------------------------------------            -----------
  (Address of principal executive offices)               (Zip Code)

                                 1-800-442-7787                          
            --------------------------------------------------------------
             (Registrant's telephone number, Including area code)

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

    Indicate  the  number of  shares  outstanding  of each  of  the  issuer's
classes of common equity, as of the latest practicable date.  3,767,197.


                                    Page 1
<PAGE>   2
PART I - FINANCIAL INFORMATION

                            ANDREA ELECTRONICS CORPORATION
                             CONSOLIDATED BALANCE SHEETS


<TABLE>
<CAPTION>                               ASSETS

                                                September 30, 1996        December 31, 1995
                                                 (UNAUDITED)  
<S>                                              <C>                       <C>   
CURRENT ASSETS:
Cash and cash equivalents                        $ 1,762,452               $ 3,400,829
Investment securities                                193,324                    99,223
Accounts receivable - trade, net of allowance
 for doubtful accounts of $32,183                  1,600,516                 1,045,922
Inventories                                        4,671,266                 1,122,993
Prepaid expenses and other current assets            103,300                   189,494
                                                  ----------                ----------
Total current assets                               8,330,858                 5,858,461
                                                  ----------                ----------
PROPERTY, PLANT AND EQUIPMENT - net of
 accumulated depreciation of $968,803 and
 $849,228, respectively                              620,758                   691,498

OTHER ASSETS                                           1,151                     1,151
                                                  ----------                ----------
Total assets                                     $ 8,952,767               $ 6,551,110
                                                  ==========                ==========

LIABILITIES AND SHAREHOLDERS' EQUITY

CURRENT LIABILITIES:

Current maturities of capital lease obligations  $    11,443               $    39,243
Trade accounts payable                               117,640                   254,643
Accrued salaries and wages payable                    98,060                    50,571
Other current liabilities                             12,992                   197,485
                                                  ----------                ----------
Total current liabilities                            240,135                   541,942
                                                  ----------                ----------

CAPITAL LEASE OBLIGATIONS,
 net of current maturities                                --                     5,388

CONVERTIBLE DEBENTURES, net                        1,737,978                 2,000,000

OTHER LIABILITIES                                     35,120                    38,500
                                                  ----------                ----------
Total liabilities                                  2,013,233                 2,585,830
                                                  ----------                ----------

SHAREHOLDERS' EQUITY:

Common stock: $.50 par value;
 authorized: 10,000,000 shares;
 issued and outstanding:  3,767,197 and
 3,286,860 shares, respectively                    1,883,599                 1,643,430
Additional paid-in capital                         8,458,371                 4,542,592
Accumulated deficit                               (3,402,436)               (2,220,742)
                                                  ----------                ----------
Total shareholders' equity                         6,939,534                 3,965,280
                                                  ----------                ----------
Total liabilities and  shareholders' equity      $ 8,952,767               $ 6,551,110
                                                  ==========                ==========

</TABLE>
                                                Page 2
<PAGE>  3
                         ANDREA ELECTRONICS CORPORATION
                      CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
                                  ANDREA ELECTRONICS CORPORATION
                                CONSOLIDATED STATEMENTS OF OPERATIONS
                                             (UNAUDITED)
<CAPTION>
                                                   For the                        For the
                                              Three Months Ended             Nine Months Ended
                                                September 30,                   September 30,
                                             1996          1995             1996          1995     

<S>                                          <C>           <C>              <C>           <C>
Sales                                        $ 2,745,095   $ 1,403,091      $ 5,489,504   $ 4,064,042
Cost of sales                                  1,585,646       799,993        3,767,308     2,217,786
                                              ----------    ----------       ----------    ----------
Gross profit                                   1,159,449       603,098        1,722,196     1,846,256
                                              ----------    ----------       ----------    ----------
Research and development                         177,843       355,769          700,676     1,218,231
General, administrative and selling expenses     713,281       786,338        2,112,288     1,580,662
                                              ----------    ----------       ----------    ----------
Operating income (loss)                          268,325      (539,009)      (1,090,768)     (952,637)
                                              ----------    ----------       ----------    ----------
Other income (expense)
 interest income                                   9,731        33,360           38,432       140,294
 interest (expense)                              (50,553)         (841)        (305,016)       (2,845)
 rent & miscellaneous                             58,858         9,133          175,658       180,404
                                              ----------    ----------       ----------    ----------
                                                  18,036        41,652          (90,926)      317,853
                                              ----------    ----------       ----------    ----------
Earnings (loss) before provision (credit)
 for corporate income tax                        286,361      (497,357)      (1,181,694)     (634,784)
Income tax provision                                  --            --               --            --
                                              ----------    ----------       ----------    ----------
Net earnings (loss)                          $   286,361   $  (497,357)     $(1,181,694)  $  (634,784)
                                              ==========    ==========       ==========    ==========
Net earnings (loss) per common
 and common equivalent share                 $       .08   $      (.16)     $      (.34)  $     ( .21)

Weighted average number of
 shares outstanding                            3,669,526     3,201,461        3,490,238     3,078,738

</TABLE>
                                            Page 3

<PAGE>  4

<TABLE>
                                    ANDREA ELECTRONICS CORPORATION
                                 CONSOLIDATED STATEMENTS OF CASH FLOWS
                                             (UNAUDITED)

<CAPTION>
                                                                        For the Nine Months Ended  
                                                                                September 30,
                                                                            1996             1995     

<S>                                                                      <C>             <C>         
CASH FLOWS FROM OPERATING ACTIVITIES:
         Net loss                                                        $(1,181,694)    $ (634,784)
Adjustments to reconcile net loss to net cash
 provided by (used in) operating activities:

         Depreciation and amortization                                       425,154         85,830
         (Increase) decrease in:
              Investment Securities                                          (94,101)            --
              Accounts receivable                                           (554,594)      (660,514)
              Inventories                                                 (3,548,274)      (299,233)
              Prepaid expenses and other current assets                       86,194          7,008
         Increase (decrease) in:
              Trade accounts payable                                        (137,003)        68,085
              Accrued salaries and wages payable                              47,489             --
              Other current liabilities                                     (184,493)        (3,514)
                                                                          ----------      ----------
Net cash used in operating activities                                     (5,141,322)     (1,437,122)
                                                                          ----------      ----------

CASH FLOWS FROM INVESTING ACTIVITIES:
         Purchases of property, plant and equipment                         (164,273)        (60,565)
                                                                          ----------      ----------
         Net cash used in investing activities                              (164,273)        (60,565)
                                                                          ----------      ----------

CASH FLOWS FROM FINANCING ACTIVITIES
         Payments of capital lease obligations                               (33,188)         (8,623)
         Net Proceeds from Convertible Debentures                          3,455,000              --
         Exercise of stock options                                           245,406         448,218
                                                                          ----------      ----------
         Net cash provided by financing activities                         3,667,218         439,595
                                                                          ----------      ----------
         Net decrease in cash and cash equivalents                        (1,638,377)     (1,058,092)
         Cash and cash equivalents - beginning                             3,400,829       3,313,043
                                                                          ----------      ----------
         Cash and cash equivalents - end                                 $ 1,762,452     $ 2,254,951
                                                                          ==========      ==========
Supplemental disclosures
         Cash paid:
                   Interest                                              $       162     $     2,845
                   Income Taxes                                          $        --     $        --
         Interest expense paid in common stock                           $   304,853     $        --

</TABLE>

                                                Page 4

<PAGE>   5

<TABLE>
                                   ANDREA ELECTRONICS CORPORATION
                            CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
                                              (UNAUDITED)
<CAPTION>
                                                      Additional                          Total
                       Shares           Common         Paid-In        Accumulated      Shareholders'
                     Outstanding        Stock          Capital         (Deficit)          Equity


<S>                      <C>            <C>             <C>            <C>                <C>         
Balance at
December 31, 1995         3,286,860     $1,643,430      $4,542,592     $(2,220,742)       $ 3,965,280

Exercise of Stock
 Options                    162,500         81,250         164,156               -            245,406

Issuance of Common Stock
 due to conversion of
 debentures and accrued
 interest thereon           317,837        158,919       3,751,623               -          3,910,542

Net loss                          -              -               -       (1,181,694)       (1,181,694)

Balance at
September  30, 1996
(Unaudited)               3,767,197     $1,883,599       $8,458,371    $(3,402,436)       $ 6,939,534

</TABLE>

                                               Page 5

<PAGE>  6

Notes to Financial Statements

1. In the opinion of the management of Andrea Electronics Corporation ("Andrea
Electronics" or the "Company"), the accompanying unaudited financial statements
contain all adjustments necessary to present fairly the Company's financial
position as of September 30, 1996 and the results of operations and cash flows
for the three months and nine months ended September 30, 1996 and 1995.  The
results of operations for the three and nine months ended September 30, 1996
are not necessarily indicative of the results to be expected for the full year
ending December 31, 1996.  Additionally, it should be noted that the
accompanying financial statements do not purport to be a complete disclosure in
conformity with generally accepted accounting principles.  These statements
should be read in conjunction with the Company's audited financial statements
for the fiscal year ended December 31, 1995 and included in the annual report
on Form 10K.
     
 
2. In December, 1994, a subpoena duces tecum was issued to the Company by the
United States Department of Defense, Office of the Inspector General, seeking
certain documents pertaining to contracts relating to audio frequency
amplifiers.  Documents responding to the subpoena were delivered by the Company
in the first quarter of 1995 and to date no claim has been made or threatened
against the Company in connection with this matter.  The Company is unable to
determine at this point if any such claim will be made or to what extent, if
any, such claim could have on the financial position of the Company.

                                             Page 6
<PAGE>  7

Item 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS AND FINANCIAL CONDITION

OVERVIEW

     Andrea Electronics' mission is to provide state-of-the-art communications
products for the "voice interface" markets that are rapidly emerging from the
convergence of the telecommunications and computer industries and for the
defense electronics markets that are requiring increasingly higher quality
voice communications products.  The Company's strategy for serving these
markets is to leverage its expertise in audio communications technology,
including its patented Active Noise Cancellation (ANC) and Active Noise
Reduction (ANR) technology (together referred to as "Andrea
Anti-Noise(Registered Trademark) technology") and to develop, manufacture, and
market, either directly or through licensees, a line of Andrea
Anti-Noise(Registered Trademark) headsets, handsets and other communication
devices to cost-effectively enhance voice communications for end users of the
growing number of new, voice-based computer and computer telephony applications
and interfaces. 

     Examples of these applications and interfaces include:  Internet and other
computer-based speech, telephony and communications; multi-point conferencing;
multi-player Internet and CD ROM interactive games;  speech recognition; ;
multimedia; military and industrial communications; and other applications and
interfaces that incorporate natural language processing.  The Company believes
that end users of these applications and interfaces will require high quality
microphone and earphone products that enhance voice  transmission, particularly
to and from noisy environments, for use with personal computers, business and
residential telephones, military headsets, cellular and other wireless
telephones, personal communication systems, and avionics communications
systems.

     An important element of the Company's strategy for expanding the channels
of distribution and broadening the base of users for its ANC and ANR products
is its set of collaborative arrangements with several hardware OEMs, software
publishers, distributors, and retailers actively engaged in the various markets
in which the Company's ANC and ANR products have application.  Under some of
these arrangements, the Company supplies its products for sale by the
collaborative partners.  Under others, the collaborative partners supply the
Company with software that the Company sells with its ANC and ANR products.  In
addition to these collaborative marketing arrangements, the Company is also
seeking to increase its own direct marketing efforts.

     In 1995, the Company entered into a Procurement Agreement with
International Business Machines ("IBM") covering the supply of Andrea
Anti-Noise(Registered Trademark) computer headsets to IBM for sale with certain
IBM products.  During the nine months ended September 30, 1996 (the "1996 First
Nine Months"), IBM purchased Andrea Anti-Noise(Registered Trademark) computer
headsets for inclusion with its VoiceType(Registered Trademark) speech
recognition products, and during the three months ended September 30, 1996 (the
"1996 Third Quarter"), the Company began shipping Andrea Anti-Noise(Registered
Trademark) computer headsets for inclusion with all shrink-wrapped copies of
IBM's OS/2 "Merlin" software product.

     During the 1996 Third Quarter, the Company  entered into additional OEM
relationships with, and began shipping Andrea Anti-Noise(Registered Trademark)
computer headsets to, Packard Bell NEC, Inc., Kurzweil Applied Intelligence,
Inc. ("Kurzweil"), Lucent Technologies Inc. and FICOMP, Inc.

     Following the 1996 Third Quarter, the Company has entered into several
additional collaborative arrangements.  These include the following:

                                  Page 7
<PAGE>  8

     *  a licensing agreement with the Microsoft Corporation ("Microsoft")
covering the distribution by the Company of Microsoft NetMeeting(Registered
Trademark) Internet and Intranet conferencing software with the Company's
Andrea Anti-Noise(Registered Trademark) retail line of ANC PC Headsets and
Handsets (this agreement replaced the Company's prior licensing agreement with
Microsoft for Microsoft's MSPhone and MSVoice computer telephony and speech
recognition software); and

     *  expansion of the Company's agreement with Kurzweil  to cover the
distribution by the Company of a special version of Kurzweil
VoicePad(Registered Trademark) for Windows(Registered Trademark) with the
Company's Andrea Anti-Noise(Registered Trademark) retail line of ANC PC
Headsets and Handsets.

       Under the Company's License and Technical Support Agreement with
BellSouth Products, Inc. ("BellSouth"), a subsidiary of Bell South
Telecommunications Inc., the Company had granted BellSouth certain exclusive
license rights for a period of three years covering the incorporation of the
Company's Andrea Anti-Noise(Registered Trademark) ANC technology into
BellSouth's residential and small business telephones and an exclusive right to
distribute these telephones in the United States, Canada, Mexico, South America
and Israel.  BellSouth has informed the Company that to date it has not
incorporated the Anti-Noise(Registered Trademark) technology into any of these
products and, accordingly, will not retain exclusive rights under the terms of
the Agreement.  The Company has, therefore,  begun to explore collaborative
arrangements covering the licensing of its Andrea Anti-Noise(Registered
Trademark) technology to certain other major telecommunications equipment
manufacturers.  No assurance can be given that the Agreement with BellSouth
will result in any revenues to the Company or that the Company will succeed in
entering into any arrangements with other telecommunications equipment
manufacturers.

    Consistent with the Company's results of operations for the 1996 First Nine
Months, the Company expects that, as a result of its collaborative arrangements
and its own direct marketing efforts, sales of its Anti-Noise(Registered
Trademark) products for the year ending December 31, 1996 will evidence
substantial growth over the year ended December 31, 1995.  

                                 Page 8
<PAGE>  9

       The Company outsources the manufacture of its ANC and ANR products for
its OEM, consumer and commercial customers.  The Company also manufactures and
distributes intercom systems and related components for military applications
("Traditional Military Products") and industrial applications ("Traditional
Industrial Products"; together with Traditional Military Products, "Traditional
Products").  In contrast to the outsourced manufacture of its ANC and ANR
products for the non-military market, the Company has historically manufactured
its Traditional Products in its own facility.  The Company is engaged in
developing a new line of products for military use that incorporate ANC and ANR
technology and anticipates that it will  manufacture these new military
products through both outsourcing and self-manufacturing.
      
     The interim results of operations of the Company presented in this report
are not necessarily indicative of the actual sales or results of operations
realized for the full year.

     VoiceType(Registered Trademark) is a registered trademark of IBM;
Windows(Registered Trademark)and NetMeeting(Registered Trademark) are
registered trademarks of Microsoft; and VoicePad(Registered Trademark) is a
registered trademark of Kurzweil.

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

     Certain information contained in this Management's Discussion and Analysis
of Financial Condition and Results of Operations for the 1996 Third Quarter and
the 1996 First Nine Months are forward-looking statements within the meaning of
the Private Securities Litigation Reform Act of 1995 (the "Act"), which became
law in December 1995.  In order to obtain the benefits of the "safe harbor"
provisions of the Act for any such forward-looking statements, the Company
wishes to caution investors and prospective investors about the following
significant factors, which, among others, have in some cases affected the
Company's actual results and are in the future likely to affect the Company's
actual results and cause them to differ materially from those expressed in any
such forward-looking statements.  These factors include:

     *  the rate at which the Company's Anti-Noise(Registered Trademark)
technology is accepted by the diverse range of users and applications within
the global communications and informatics marketplace;
 
     *  the ability of the Company to maintain a competitive position for its
Anti-Noise(Registered Trademark) products in terms of technical specifications,
quality, price, reliability and service;
 
     *  the on-going ability of the Company to enter into and maintain
collaborative relationships with larger companies in the fields of
telecommunications, computer manufacturing, software design and publishing,
Internet and online services, defense-related manufacturers and system
providers, and retail and direct marketing distributors; and


                                 Page 9
<PAGE>  10
 
     *  in the event that the Company does experience continued significant
growth in demand for its Anti-Noise(Registered Trademark) technology, the
ability of the Company to raise sufficient external capital to fund the working
capital requirements for meeting such demand.

     The failure of the Company to surmount the challenges posed by any one or
more of these factors could have a material adverse effect on the Company's
results of operations and growth.


RESULTS OF OPERATIONS

     Sales

     Sales for the 1996 Third Quarter were $2,745,095, an increase of 96% over
the three months ended September 30, 1995 (the "1995 Third Quarter").  Sales
for the 1996 First Nine Months were $5,489,504, an increase of 35% over the
nine months ended September 30, 1995 (the "1995 First Nine Months").  The
increase in sales during the 1996 Third Quarter reflected an approximate 6%
decrease in sales of Traditional Military Products from the 1995 Third Quarter
to $1,317,646, or 48% of total sales for the 1996 Third Quarter, offset by an
increase in sales of industrial and commercial products from an insignificant
amount for the 1995 Third Quarter to $1,427,449, or 52% of sales for the 1996
Third Quarter.  Most of this increase in industrial and commercial products was
attributed to an increase in sales of the Company's Andrea
Anti-Noise(Registered Trademark) products.  The increase in total sales during
the 1996 First Nine Months reflects the growth of sales of the Company's Andrea
Anti-Noise(Registered Trademark) products, offset by the 29% decrease in sales
of the Company's Traditional Products during the 1996 First Nine Months.  Sales
of Andrea Anti-Noise(Registered Trademark) products were immaterial during the
comparable 1995 periods.

     Cost of Sales
     
     Cost of sales as a percentage of sales for the 1996 Third Quarter
increased to approximately 58% from 57% for the 1995 Third Quarter.  Cost of
sales as a percentage of sales for the 1996 First Nine Months increased to
approximately 69% from approximately 55% for the 1995 First Nine Months.  The
increase in the cost of sales as a percentage of sales for the 1996 First Nine
Months was due to a decrease in production capacity utilization for the
Company's Traditional Products arising from lower sales and the costs
associated with the initial production runs of new Andrea Anti-Noise(Registered
Trademark) computer products in the first six months of 1996.  The comparison
of the 1996 Third Quarter with the 1995 Third Quarter reflects the increase in
sales volume of the Company's Andrea Anti-Noise(Registered Trademark) products
offset by a slight decrease in sales volume of the Company's Traditional
Products.

     Research and Development

     Research and development expenses decreased 50% to $177,843 in the 1996
Third Quarter from $355,769 in the 1995 Third Quarter, and decreased
approximately 43% to $700,676 in the 1996 First Nine Months from $1,218,231 in
the 1995 First Nine Months.  These decreases in research and development
expenses for the 1996 Third Quarter and 1996 First Nine Months are attributable
to increased allocation of engineering and technician time associated with the
natural migration from design and development to production in connection with
the commercialization of the Company's Andrea Anti-Noise(Registered Trademark)
products.  


                                 Page 10
<PAGE> 11


     General, Administrative and Selling Expenses
     
     General, administrative and selling expenses decreased 9% to $713,281 for
the 1996 Third Quarter from $786,338 for the 1995 Third Quarter, but increased
nearly 34% to $2,112,288 for the 1996 First Nine Months from $1,580,662 for the
1995 First Nine Months.  The increase for the 1996 First Nine Months reflects
increased business development, promotional, marketing and sales expenses, as
well as costs associated with the addition of sales representative expenses to
market, promote and support Andrea Anti-Noise(Registered Trademark) products in
personal computer magazines, on the Internet, at major trade shows, to major
retail superstores, and to potential customers for personal computer,
telecommunications and military electronics applications.

     Operating Income/Loss
     
     Operating income for the 1996 Third Quarter was $268,325 compared to an
operating loss of $539,009 for the 1995 Third Quarter.  The Company's operating
loss for the 1996 First Nine Months was $1,090,768 compared to $952,637 for the
1995 First Nine Months.  These changes in operating loss reflect the factors 
discussed above.

      Other Income(Expense)

      Other income for the 1996 Third Quarter was $18,036 compared to other
income of $41,652 for the 1995 Third Quarter.  Other expense for the 1996 First
Nine Months was $90,926 compared to other income of $317,853 for the 1995 First
Nine Months.  The decrease in other income for the 1996 Third Quarter and
reversal for the 1996 First Nine Months from that for the 1995 First Nine
Months were due to an increase in interest expense to $50,553 for the 1996
Third Quarter from $841 for the 1995 Third Quarter and an increase in interest
expense to $305,016 for the 1996 First Nine Months from $2,845 for the 1995
First Nine Months.  These increases reflect accrued interest on the Company's
convertible subordinated debentures and  amortization of the placement fee
associated with the issuance of the Company's convertible subordinated
debentures in April 1996 and August 1996.  During the 1996 Third Quarter,
$1,050,000 in face value of the Company's convertible subordinated debentures
were converted and the related accrued interest was paid in common stock of the
Company.  Interest income for the 1996 Third Quarter and the 1996 First Nine
Months decreased due to a decrease in the Company's average cash position
during those periods in order to fund the increased working capital and
production requirements associated with filling orders for the Company's
Anti-Noise(Registered Trademark) products from IBM and other OEMs and computer
retailers.

     Net earnings/(loss)

     Net earnings for the 1996 Third Quarter was $286,361, compared to a net
loss of $497,357 for the 1995 Third Quarter.  Net loss for  the 1996 First Nine
Months was $1,181,694, compared to a net loss of $634,784 for the 1995 First
Nine Months.  The levels of net earnings in the 1996 Third Quarter and net loss
for the 1996 First Nine Months reflect principally the factors described above.

LIQUIDITY AND CAPITAL RESOURCES

     Working capital (total current assets less total current liabilities) at
September 30,1996 was $8,090,723 compared to $5,316,519 at December 31,1995. 
The increase in working capital reflects an increase in total current assets of
$2,472,397 and a decrease in total current liabilities of $301,807.  The
increase in total current assets reflects a decrease in cash of $1,638,377, an
increase in investment securities of $94,101, an increase in accounts
receivable of $554,594, an increase in inventory of $3,548,274, and a decrease
of $86,194 in prepaid expenses and other current assets.



                                Page 11
<PAGE> 12

     The decrease in cash of $1,638,377 reflects $5,141,322 of net cash used in
operating activities and $164,273 of cash used in investing activities,
partially offset by an increase in cash from financing activities of
$3,667,218.  The principal operating activity for which cash was used was the
increase in inventory of Andrea Anti-Noise(Registered Trademark) computer
headsets.  The increase in inventory of $3,548,274 primarily resulted from the
acquisition of $2,140,412 of long lead components and parts for Andrea
Anti-Noise(Registered Trademark) products and an increase in work-in-process
and finished goods inventory of $1,361,373 for the Andrea Anti-Noise(Registered
Trademark) products.  Management anticipates that this inventory will cover
anticipated sales during the last quarter of 1996 and a significant portion of
anticipated sales during the first quarter of 1996.  The cash used in investing
activities was for the acquisition of equipment, primarily tooling and molds
for Andrea Anti-Noise(Registered Trademark) products.

     The decrease in prepaid expenses and other current assets includes the
expensing of prepaid advertising, property taxes and prepaid insurance
premiums.

     The decrease in current liabilities primarily reflects a $137,003 decrease
in trade accounts payable and a decrease of $184,493 in other current
liabilities.  The decrease in trade accounts payable is associated with
payments for acquisition of raw materials for the Andrea Anti-Noise(Registered
Trademark) products.  The decrease in other current liabilities includes
$167,500 for the settlement of a previously disclosed complaint by a former
employee of the Company.

     Demand for Andrea Anti-Noise(Registered Trademark) products has required
the Company to raise additional working capital to support its production
operations.  Since December 1995, the Company has raised additional working
capital through the issuance of convertible subordinated debentures.  In
addition, the Company has been exploring various forms of bank and other debt
and equity financing.  The Company believes that its ability to remedy its
existing accumulated deficit will depend on profitable growth from the sale of
its Andrea Anti-Noise(Registered Trademark) products.  Notwithstanding growth
in sales of Andrea Anti-Noise(Registered Trademark) products during the 1996
First Nine Months, no assurance can be given that demand will continue to
increase for these products or any of the Company's other products or, that if
such demand does increase, that the Company will be able to obtain the
necessary working capital to increase production and marketing resources to
meet such demand on favorable terms or at all.


                                    Page 12
<PAGE> 13



PART II - OTHER INFORMATION

ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K.

(a)  Exhibits.

Exhibit
Number                              Description

4.1     Securities Purchase Agreement, dated as of August 7, 1996, relating to
the sale of the Registrant's 10% Convertible Subordinated Debentures due
February 9, 1998 (with forms of Debenture and Registration Rights Agreement
attached)

11      Computation of Fully Diluted Earnings Per Common Share

27      Financial Data Schedule


(b)  Reports on Form 8-K.

     On August 14, 1996, the Registrant filed a report on Form 8-K to report
that, on August 7, 1996, the Registrant issued and sold in an offshore
transaction $1,687,500 aggregate principal amount of its 15% Convertible
Subordinated Debentures due February 9, 1998.


                                   Page 13
<PAGE> 14

                                  SIGNATURES

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



ANDREA  ELECTRONICS CORPORATION


/s/ John N. Andrea             Co-President                   November 13, 1996
   ------------------------    
    John N. Andrea


/s/ Patrick D. Pilch           Executive Vice President,      November 13, 1996
    --------------------       and Chief Financial Officer
    Patrick D. Pilch 

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