ANDREA ELECTRONICS CORP (Form: 10-Q, Received: 11/14/2008 13:02:06)

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

(X)	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2008

( )	TRANSITION REPORT PURSUANT TO 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 incorporation or organization)	(I.R.S. employer identification no.)

	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 November 10, 2008, there are 60,406,945 common shares outstanding.

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

ANDREA ELECTRONICS CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

	September 30,			December 31,
	2008			2007
	(unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	1,156,518		$	811,403
Accounts receivable, net of allowance for doubtful accounts of $7,815 and $21,705, respectively		727,067			994,446
Inventories, net		1,008,445			714,864
Prepaid expenses and other current assets		77,737			64,005
Total current assets		2,969,767			2,584,718

Property and equipment, net		70,016			57,751
Intangible assets, net		2,655,947			2,977,673
Other assets		12,864			12,864
Total assets	$	5,708,594		$	5,633,006

LIABILITIES AND SHAREHOLDERS’ EQUITY

Current liabilities:
Trade accounts payable	$	639,728		$	474,346
Accrued Series C Preferred Stock Dividends		151,583			151,583
Other current liabilities		185,340			121,268
Total current liabilities		976,651			747,197

Series B Redeemable Convertible Preferred Stock, $.01 par value; authorized: 1,000 shares; issued and outstanding: 0 shares		-			-

Commitments and contingencies

Shareholders’ 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			1
Series 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			11,929
Common stock, $.01 par value; authorized: 200,000,000 shares; issued and outstanding: 60,361,193 and 59,861,193 shares on September 30, 2008 and December 31, 2007, respectively		603,612			598,612
Additional paid-in capital		76,754,833			76,568,825
Accumulated deficit		(72,638,432	)		(72,293,558	)

Total shareholders’ equity		4,731,943			4,885,809

Total liabilities and shareholders’ equity	$	5,708,594		$	5,633,006

See Notes to Condensed Consolidated Financial Statements.

ANDREA ELECTRONICS CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)

	For the Three Months Ended					For the Nine Months Ended
	September 30, 2008		September 30, 2007			September 30, 2008			September 30, 2007
Revenues
Net product revenues	$	946,575	$	959,963		$	2,560,133		$	3,127,078
License revenues		337,382		89,952			857,715			497,853
Revenues		1,283,957		1,049,915			3,417,848			3,624,931

Cost of revenues		526,311		565,167			1,486,028			1,822,086

Gross margin		757,646		484,748			1,931,820			1,802,845

Research and development expenses		179,062		173,895			557,807			502,755

General, administrative and selling expenses		555,326		507,503			1,721,773			1,587,335

Income (loss) from operations		23,258		(196,650	)		(347,760	)		(287,245	)

Interest income, net		2,031		3,967			6,602			4,371

Income (loss) before provision for income taxes		25,289		(192,683	)		(341,158	)		(282,874	)

Provision for income taxes		-		1,886			3,716			30,340

Net income (loss)	$	25,289	$	(194,569	)	$	(344,874	)	$	(313,214	)

Basic weighted average shares		60,149,236		59,714,946			59,957,908			59,457,994

Diluted weighted average shares		69,426,298		59,714,946			59,957,908			59,457,994

Basic and diluted net income (loss) per share	$	.00	$	(.00	)	$	(.01	)	$	(.01	)

See Notes to Condensed Consolidated Financial Statements.

ANDREA ELECTRONICS CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 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’ Equity

Balance, January 1, 2008		90.701477	$	1		1,192,858	$	11,929		59,861,193	$	598,612	$	76,568,825	$	(72,293,558	)	$	4,885,809

Stock-based Compensation Expense related to Stock Grants to Outside Directors		-		-		-		-		500,000		5,000		12,500		-			17,500

Stock-based Compensation Expense related to Stock Option Grants		-		-		-		-		-		-		173,508		-			173,508

Net loss		-		-		-		-		-		-		-		(344,874	)		(344,874	)

Balance, September 30, 2008		90.701477	$	1		1,192,858	$	11,929		60,361,193	$	603,612	$	76,754,833	$	(72,638,432	)	$	4,731,943

See Notes to Condensed Consolidated Financial Statements.

ANDREA ELECTRONICS CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

	For the Nine Months Ended
	September 30, 2008			September 30, 2007
Cash flows from operating activities:
Net loss	$	(344,874	)	$	(313,214	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization		380,225			365,500
Stock -based compensation expense		191,008			143,653
Inventory reserve		26,522			222

Change in:
Accounts receivable		267,379			157,924
Inventories		(320,103	)		352,671
Prepaid expenses and other current assets		(13,732	)		266,460
Trade accounts payable		165,382			(286,317	)
Other current liabilities		64,072			(124,527	)
Net cash provided by operating activities		415,879			562,372

Cash flows from investing activities:
Purchases of property and equipment		(35,512	)		-
Purchases of patents and trademarks		(35,252	)		(7,730	)
Net cash used in investing activities		(70,764	)		(7,730	)

Cash flows from financing activities:
Payments under capital lease		-			(4,305	)
Net cash used in financing activities		-			(4,305	)

Net increase in cash and cash equivalents		345,115			550,337

Cash and cash equivalents, beginning of period		811,403			303,678
Cash and cash equivalents, end of period	$	1,156,518		$	854,015

Non-cash investing and financing activities:
Conversion of Series C Convertible Preferred Stock into common stock	$	-		$	16,712

Supplemental disclosures of cash flow information:

Cash paid for:
Interest	$	-		$	2,038
Income Taxes	$	14,211		$	76,420

See Notes to Condensed Consolidated Financial Statements.

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 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 September 30, 2008, Andrea had working capital of $1,993,116 and cash on hand of $1,156,518. Andrea’s income from operations was $23,258 for the three months ended September 30, 2008. Andrea incurred a loss from operations of $347,760 for the nine months ended September 30, 2008. Andrea plans to continue to improve its cash flows during the remainder of 2008 and in 2009 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 which was introduced in September 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 November 10, 2008, Andrea has approximately $1,200,000 of cash. Management projects that Andrea has sufficient liquidity available to operate through at least September 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. Since the third quarter of 2006, Andrea has had generated cash from operations. 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

Earnings (loss) Per Share - Basic earnings (loss) per share is computed by dividing the net income (loss) by the weighted average number of common shares outstanding during the period. Diluted earnings (loss) per share adjusts basic earnings (loss) 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 earnings (loss) 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 Ended				For the Nine Months Ended
	September 30, 2008		September 30, 2007		September 30, 2008		September 30, 2007
Total potential common shares as of:
Options to purchase common stock (Note 7)		12,336,820		9,686,820		14,676,820		9,686,820
Series C Convertible Preferred Stock and related accrued dividends (Note 3)		-		4,149,736		4,149,736		4,149,736
Series D Convertible Preferred Stock and related warrants (Note 4)		5,158,344		9,929,776		9,929,776		9,929,776

Total potential common shares		17,495,164		23,766,332		28,756,332		23,766,332

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 (loss) per share:

	For the Three Months Ended					For the Nine Months Ended
	September 30, 2008		September 30, 2007			September 30, 2008			September 30, 2007
Numerator:
Net income (loss)	$	25,289	$	(194,569	)	$	(344,874	)	$	(313,214	)
Denominator:
Weighted average shares		60,149,236		59,714,946			59,957,908			59,457,994
Effect of dilutive securities:
Series C Convertible Preferred Stock		4,149,736		-			-			-
Series D Convertible Preferred Stock		4,771,432		-			-			-
Employee stock options		355,894		-			-			-
Denominator for diluted income (loss) per share-adjusted weighted average shares after assumed conversions		69,426,298		59,714,946			59,957,908			59,457,994

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 September 30, 2008 and December 31, 2007. The Company mitigates its risk by investing in or through major financial institutions.

Concentration of Credit Risk - The following customers accounted for 10% or more of Andrea’s consolidated net revenues during at least one of the periods presented below:

	For the Three Months Ended						For the Nine Months Ended
	September 30, 2008			September 30, 2007			September 30, 2008			September 30, 2007

Customer A		16	%		13	%		16	%		12	%
Customer B		15	%		*			*			*
Customer C		*			34	%		*			20	%
Customer D		15	%		*			14	%		*

_________________

* Amounts are less than 10%

As of September 30, 2008, two customers accounted for approximately 10% and 13% of accounts receivable and as of December 31, 2007, two customers account for approximately 20% and 15% of accounts receivable.

The following suppliers accounted for 10% or more of Andrea’s purchases during at least one of the periods presented below:

	For the Three Months Ended						For the Nine Months Ended
	September 30, 2008			September 30, 2007			September 30, 2008			September 30, 2007

Supplier A		*			43	%		43	%		66	%
Supplier B		82	%		48	%		41	%		22	%

_________________

* Amounts are less than 10%

At September 30, 2008 and December 31, 2007, one supplier accounted for approximately 73% and 22%, respectively of accounts payable. The significant amount of purchases from one supplier during the three months ended September 30, 2008 relates to purchases of inventory relating to our refreshed product line. Although these products were primarily purchased from one vendor, this source is a replaceable source.

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.

ANDREA ELECTRONICS CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

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.

	September 30, 2008			December 31, 2007

Raw materials	$	31,441		$	62,834
Work in Progress		50,687			-
Finished goods		1,519,780			1,218,971

		1,601,908			1,281,805
Less: reserve for slow moving and obsolescence		(593,463	)		(566,941	)
	$	1,008,445		$	714,864

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.

Because the Andrea DSP Microphone and Audio Software Products business segment was operating at a loss for the nine months ended September 30, 2008 and because the revenues from the Andrea DSP Microphone and Audio Software Products business segment were lower than expected and this business segment was operating at a loss for the nine months ended September 30, 2007, 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. For the three-month periods ended September 30, 2008 and 2007, amortization expense was $119,487 and $118,130, respectively. For the nine-month periods ended September 30, 2008 and 2007, amortization expense was $356,978 and $354,127, 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.

ANDREA ELECTRONICS CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

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 the guidelines set forth in both of 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 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 September 30, 2008, 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 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 to the Company for fiscal 2009. SFAS 141R would have an impact on accounting for any businesses acquired after the effective date of this pronouncement.

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.

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 that might be 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 September 30, 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.

On November 10, 2008, 1 share of Series C Preferred Stock, together with related accrued dividends, was converted into 45,752 shares of Common Stock at a conversion price of $0.2551.

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.

ANDREA ELECTRONICS CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

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.

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 September 30, 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 nine months ended September 30, 2008 or the year ended December 31, 2007.

As of September 30, 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 personal computers (“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 $186,459, $128,664 and $22,040 of revenues for the three months ended September 30, 2008 and $64,436, $13,327 and $6,712 of revenues for the three months ended September 30, 2007. The Company's three largest licensing customers accounted for $472,133, $322,661 and $34,833 of revenues for the nine months ended September 30, 2008 and $251,956, $196,379 and $34,203 of revenues for the nine months ended September 30, 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 $21,083 and $62,634 for the three and nine-month periods ended September 30, 2008, respectively. Rent expense under this operating lease was $22,958 and $63,473 for the three and nine-month periods ended September 30, 2007, respectively.

As of September 30, 2008, the future minimum annual lease payments under this lease and all non-cancelable operating leases are as follows:

2008 (October 1 to December 31)	$	25,735
2009		93,541
2010		29,171
Total	$	148,447

Employment Agreements

In November 2008, the Company entered into an employment agreement with the Chairman of the Board, Douglas J Andrea. The effective date of the employment agreement is August 1, 2008 and expires July 31, 2010 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 $312,500 through July 31, 2009 and for the period of August 1, 2009 through July 31, 2010 Mr. Andrea’s will receive an annual base salary of $325,000. 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 August 8, 2008, the Board granted Mr. Andrea 2,000,000 stock options and 1,000,000 stock options with an aggregate fair value of $120,000 (fair value was estimated using the Black-Scholes option-pricing model). The 2,000,000 grant vests in three equal annual installments over a three year period commencing August 1, 2009. The 1,000,000 grant vests in three equal annual installments over a three year period commencing August 1, 2010. All stock options granted have an exercise price of $0.04 per share, which was fair market value at the date of grant, and a term of 10 years. Pursuant to the employment agreement and subject to the approval of the Board, the Compensation Committee will recommend a second grant of 1,000,000 stock options as soon as practical after August 1, 2009, with an exercise price equal to the per share fair market value of the Company’s common stock on the date of grant. 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 September 30, 2008, the future minimum cash commitments under this agreement aggregate $585,417.

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. No further awards will be granted 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 September 30, 2008, there were 101,345 shares available for further issuance under the 2006 Plan.

The stock option awards granted under these plans have been granted with an exercise price equal to the market price of the Company’s stock at the date of grant; with vesting periods of up to four years and 10-year contractual terms.

The fair values of each stock option grant is estimated on the date of grant using the Black-Scholes option-pricing model that uses the weighted-average assumptions noted in the following table. Expected volatilities are based on implied volatilities from historical volatility of the Company’s stock. The expected term of options granted represents the period of time that options granted are expected to be outstanding. The risk-free rate for periods within the contractual life of the option is based on the U.S. Treasury yield curve in effect at the time of grant.

The fair values of the stock options granted for the three and nine-month periods ended September 30, 2008 were estimated on the date of grant using the Black-Scholes option-pricing model using the following weighted-average assumptions:

	Three months ended September 30, 2008			Nine months ended September 30, 2008

Expected life in years		6			6
Risk-free interest rates		3.35	%		3.38	%
Volatility		146.91	%		146.59	%
Dividend yield		0	%		0	%

ANDREA ELECTRONICS CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

The fair values of the stock options granted for the three and nine-month periods ended September 30, 2007 were estimated on the date of grant using the Black-Scholes option-pricing model using the following weighted-average assumptions:

	Three months ended September 30, 2007			Nine months ended September 30, 2007

Expected life in years		6			6
Risk-free interest rates		4.17	%		4.17	%
Volatility		100.63	%		100.63	%
Dividend yield		0	%		0	%

Option activity during 2008 and 2007 is summarized as follows:

	Options Outstanding								Options Exercisable
	Options Outstanding			Weighted Average Exercise Price		Weighted Average Fair Value		Weighted Average Remaining Contractual Life	Options Exercisable		Weighted Average Exercise Price		Weighted Average Fair Value		Weighted Average Remaining Contractual Life

At January 1, 2007		7,590,001		$	1.05	$	0.81	8.01 years		4,397,500	$	1.72	$	1.33	6.26 years
Granted		2,251,819		$	0.11	$	0.09
Cancelled		(155,000	)	$	5.20	$	3.98
At December 31, 2007		9,686,820		$	0.76	$	0.59	7.79 years		5,355,590	$	1.29	$	1.00	6.57 years
Granted		5,185,000		$	0.04	$	0.04
Cancelled		(195,000	)	$	14.28	$	11.65
At September 30, 2008		14,676,820		$	0.33	$	0.25	8.14 years		6,628,745	$	0.65	$	0.48	6.61 years

During the three months ended September 30, 2008, 1,415,857 options vested with a weighted average exercise price of $0.11 and a weighted average fair value of $0.10 per option. During the nine months ended September 30, 2008, 1,468,155 options vested with a weighted average exercise price of $0.11 and a weighted average fair value of $0.10 per option.

Based on the September 30, 2008, fair market value of the company’s common stock of $0.09, the aggregate intrinsic value for the 14,676,820 options outstanding and 6,628,745 shares exercisable is $354,100 and $96,850, respectively.

Total compensation expense recognized related to stock option awards was $66,871 and $42,624 for the three months ended September 30, 2008 and 2007, respectively. In the accompanying consolidated statement of operations for the three months ending September 30, 2008, $52,061 of expense is included in general, administrative and selling expenses, $14,408 is included in research and development expenses and $402 is included in cost of revenues. In the accompanying consolidated statement of operations for the three months ending September 30, 2007, $32,953 of expense is included in general, administrative and selling expenses, $9,616 is included in research and development expenses and $415 is included in cost of revenues. Total compensation expense recognized related to stock option awards was $173,508 and $127,819 for the nine months ended September 30, 2008 and 2007, respectively. In the accompanying consolidated statement of operations for the nine months ending September 30, 2008, $134,836 of expense is included in general, administrative and selling expenses, $37,508 is included in research and development expenses and $1,164 is included in cost of revenues. In the accompanying consolidated statement of operations for the nine months ending September 30, 2007, $101,839 of expense is included in general, administrative and selling expenses, $24,940 is included in research and development expenses and $1,040 is included in cost of revenues.

As of September 30, 2008, there was $294,100 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 ($57,486 in 2008, $166,637 in 2009, $57,056 in 2010 and $12,921 in 2011).

Pursuant to Andrea’s compensation policy for outside directors, Andrea granted 400,000 shares of Common Stock with a fair market value of $0.05 per share in 2007 and 500,000 shares of Common Stock with a fair market value of $0.04 per share in 2008. These stock grants were fully vested on the date of grant. Compensation expense related to these awards was $7,498 and $5,834 for the three months ended September 30, 2008 and 2007, respectively. Compensation expense related to these awards was $17,500 and $15,834 for the nine months ended September 30, 2008 and 2007, respectively.

ANDREA ELECTRONICS CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

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.

The following represents selected condensed consolidated financial information for Andrea’s segments for the three-month periods ended September 30, 2008 and 2007:

2008 Three Month Segment Data	Andrea DSP Microphone and Audio Software Products		Andrea Anti- Noise Products			Total 2008 Three Month Segment Data

Net revenues from external customers	$	158,045	$	788,530		$	946,575
License Revenues		337,382		-			337,382
Income (loss) from operations		30,428		(7,170	)		23,258
Depreciation and amortization		117,803		10,767			128,570
Purchases of property and equipments		2,620		13,850			16,470
Purchases of patents and trademarks		-		538			538
Assets		3,765,725		1,942,869			5,708,594
Total long lived assets		2,509,052		229,775			2,738,827

2007 Three Month Segment Data	Andrea DSP Microphone and Audio Software Products		Andrea Anti- Noise Products			Total 2007 Three Month Segment Data

Net revenues from external customers	$	531,621	$	428,342		$	959,963
License Revenues		89,952		-			89,952
Loss from operations		134,811		61,839			196,650
Depreciation and amortization		117,082		4,718			121,800
Purchases of patents and trademarks		110		1,350			1,460

The following represents selected condensed consolidated financial information for Andrea’s segments for the nine-month periods ended September 30, 2008 and 2007:

2008 Nine Month Segment Data	Andrea DSP Microphone and Audio Software Products			Andrea Anti- Noise Products			Total 2008 Nine Month Segment Data

Net revenues from external customers	$	620,254		$	1,939,879		$	2,560,133
License Revenues		857,715			-			857,715
Loss from operations		(162,028	)		(185,732	)		(347,760	)
Depreciation and amortization		352,691			27,534			380,225
Purchases of property and equipments		8,616			26,896			35,512
Purchases of patents and trademarks		6,155			29,097			35,252

2007 Nine Month Segment Data	Andrea DSP Microphone and Audio Software Products			Andrea Anti- Noise Products			Total 2007 Nine Month Segment Data

Net revenues from external customers	$	1,327,706		$	1,799,372		$	3,127,078
License Revenues		497,853			-			497,853
Loss from operations		245,115			42,130			287,245
Depreciation and amortization		351,407			14,093			365,500
Purchases of patents and trademarks		620			7,110			7,730

ANDREA ELECTRONICS CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

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 2007

Assets		4,021,688		1,611,318		5,633,006
Total 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 September 30, 2008 and 2007, and as of each respective period-end, net revenues and accounts receivable by geographic area are as follows:

Geographic Data	September 30, 2008		September 30, 2007

Net revenues:
United States	$	1,208,992	$	596,271
Foreign (1)		74,965		453,644
	$	1,283,957	$	1,049,915

(1)

Net revenues to any one foreign country did not exceed 10% of total net revenues for the three months ended September 30, 2008. Net revenue to the People’s Republic of China and Singapore represented 17% and 4%, respectively of total net revenues for three months ended September 30, 2007.

For the nine-month periods ended September 30, 2008 and 2007, by geographic area, net revenues are as follows:

Geographic Data	September 30, 2008		September 30, 2007

Net revenues:
United States	$	2,967,763	$	2,434,017
Foreign (2)		450,085		1,190,914
	$	3,417,848	$	3,624,931

(2)

Net revenues to any one foreign country did not exceed 10% of total net revenues for the nine months ended September 30, 2008. Net revenue to the People’s Republic of China and Singapore represented 15% and 9%, respectively of total net revenues for nine months ended September 30, 2007.

As of September 30, 2008 and December 31, 2007, accounts receivable by geographic area is as follows:

Geographic Data	September 30, 2008		December 31, 2007

Accounts receivable:
United States	$	712,771	$	736,122
Foreign		14,296		258,324
	$	727,067	$	994,446

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 10-KSB 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.

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 September 30, 2008 were $1,283,957 versus $1,049,915 for the three months ended September 30, 2007. Net income for the three months ended September 30, 2008 was $25,289, or $0.00 income per share on a basic and diluted basis, versus net loss of $194,569, or $0.00 loss per share on a basic and diluted basis for the three months ended September 30, 2008. Our revenues for the nine months ended September 30, 2008 were $3,417,848 versus $3,624,931 for the nine months ended September 30, 2007. Net loss for the nine months ended September 30, 2008 was $344,874 or $.01 loss per share on a basic and diluted basis, versus net loss of $313,214, or $.01 loss per share on a basic and diluted basis for the nine months ended September 30, 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 decline we may not continue to generate positive cash flows and our operating results 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 September 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, 60,406,945 were outstanding as of November 10, 2008. The number of shares outstanding does not include an aggregate of 28,811,925 shares of common stock that are issuable. This number of issuable common shares is equal to approximately 48% of the 60,406,945 outstanding shares. These issuable common shares are comprised of: a)14,676,820 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) 101,345 shares reserved for future grants under our 2006 Stock Plan; c) 4,103,984 shares of common stock that are issuable upon conversion of the Series C Preferred Stock; d) 4,771,432 shares of common stock issuable upon conversion of the Series D Preferred Stock; and e) 5,158,344 of common stock issuable upon exercise of warrants relating to the Series D Preferred stock.

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 September 30, 2008 and 2007, net revenues to customers outside the United States accounted for approximately 6% and 43%, respectively, of our net revenues. For the nine months ended September 30, 2008 and 2007, net revenues to customers outside the United States accounted for approximately 13% and 33%, 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 September 30, 2008 compared to Quarter ended September 30, 2007

Net Revenues



	For the Three Months Ended September 30				%			For the Nine Months Ended September 30				%
		2008		2007		Change			2008		2007		Change
Andrea Anti-Noise Products net product revenues
Sales of products to an OEM customer for use with speech recognition software	$	190,143	$	-		100		$	313,243	$	139,821		124		(a)
Sales of gaming headset products to an OEM customer	$	-	$	-		-		$	-	$	183,261		(100	)	(a)
All other Andrea Anti-Noise net product revenues		598,387		428,342		40			1,626,636		1,476,290		10		(b)
Total Andrea Anti-Noise Products net product revenues	$	788,530	$	428,342		84		$	1,939,879	$	1,799,372		8

Andrea DSP Microphone and Audio Software Products revenues
Sales of array microphone products to an OEM customer		-		359,357		(100	)		107,800		731,467		(85	)	(c)
All other Andrea DSP Microphone and Audio product revenues		158,045		172,264		(8	)		512,454		596,239		(14	)	(d)
License revenues		3 37 , 382		89 , 952		275			857 , 715		497 , 853		72		(e)
Total Andrea DSP Microphone and Audio Software Products revenues		495 , 427		621 , 573		(20	)		1,477,969		1,825 , 559		(19	)

Total Revenues	$	1,2 83 , 957	$	1,0 49 , 915		22		$	3 , 417 , 848	$	3 , 624 , 931		(6	)

(a)

The significant increase of revenues of Andrea Anti-Noise Products is directly related to an Original Equipment Manufacturer (“OEM”) customer for use with speech recognition software and was a result of the OEM’s increased demand for our products associated with the timing of the launch of the OEMs updated software during the three and nine months ended September 30, 2008 as compared to the same periods in 2007. We believe that our annual revenues for 2008 and 2009 associated with this customer will be approximately $313,000 and $250,000, respectively.

(b)

The 40% and 10% increases for the nine months and three months ended September 30, 2008, respectively, of all other Andrea Anti-Noise net product revenues is associated with increased sales of products to educational customers for use with their distance learning products.

(c)

The significant decreases of revenues of microphone array products to an OEM customer for the three month and nine month periods ending September 30, 2008, relates to the decreased demand from the OEM customer. We believe that this decrease is result of the OEM deciding not to continue including a microphone array with all applicable product models. The revenues in 2007 were a result of the OEM’s introduction of the OEM’s product and the OEM customers’ need to supply all of its customers for the initial launch.

(d)

The 8% and 14% decrease in all other Andrea DSP Microphone and Audio product revenues for the three and nine month periods ended September 30, 2008, respectively, are a result of a decreased demand for our in-vehicle auto array. We believe the decline is resulting to the decline of government funding for these types of products.

(e)

The majority of the increase in licensing revenues for the three and nine month periods ended September 30, 2008 is a result of licensing revenue from two customer in the PC Audio market. The increase for the three month period was a result of these customers launch of PC’s utilizing Intel’s new platform. The increase for the nine-month period is a result of one licensing customer’s initial implementation of our technology. We expect our licensing revenues for 2008 and 2009 to be approximately $1,100,000.

Cost of Revenues

Cost of revenues as a percentage of net revenues for the three months ended September 30, 2008 decreased to 41% from 54% for the three months ended September 30, 2007. The cost of revenues as a percentage of net revenues for the three months ended September 30, 2008 for Andrea Anti-Noise Products is 61% compared to 54% for the three months ended September 30, 2007. The cost of revenues as a percentage of net revenues for the three months ended September 30, 2008 for Andrea DSP Microphone and Audio Software Products is 10% compared to 54% for the three months ended September 30, 2007. Cost of revenues as a percentage of net revenues for the nine months ended September 30, 2008 decreased to 44% from 50% for the nine months ended September 30, 2007. The cost of revenues as a percentage of net revenues for the nine months ended September 30, 2008 for Andrea Anti-Noise Products is 62% compared to 58% for the nine months ended September 30, 2007. The cost of revenues as a percentage of net revenues for the nine months ended September 30, 2008 for Andrea DSP Microphone and Audio Software Products is 19% compared to 43% for the nine months ended September 30, 2007. The changes are primarily the result of the changes in revenue as described under “Net Revenues” above. Specifically the increase in cost of revenues as a percentage of revenues for the Andrea Anti-Noise Products is a result of high volume low margin sales to an OEM customer. The decrease in cost of revenues as a percentage of revenues for the Andrea DSP Microphone and Audio Software is the result of the increase in license revenues partially offset by the decrease in the revenues of high volume low margin microphone array products to an OEM customer.

Research and Development

Research and development expenses for the three months ended September 30, 2008 increased 3% to $179,062 from $173,895 for the three months ended September 30, 2007. This small increase primarily relates to increases in employee related benefit costs. For the three months ended September 30, 2008, the increase in research and development expenses reflects a 6% decrease in our Andrea DSP Microphone and Audio Software Technology efforts to $117,670, or 66% of total research and development expenses and a 25% increase in our Andrea Anti-Noise Headset Product efforts to $61,392, or 34% of total research and development expenses. Research and development expenses for the nine months ended September 30, 2008 increased 11% to $557,807 from $502,755 for the nine months ended September 30, 2007. This increase primarily relates to increases in employee compensation and related benefit costs. For the nine months ended September 30, 2008, the increase in research and development expenses reflects a 4% increase in our Andrea DSP Microphone and Audio Software Technology efforts to $376,240, or 67% of total research and development expenses and a 29% increase in our Andrea Anti-Noise Headset Product efforts to $181,567, or 33% 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 9% to $555,326 for the three months ended September 30, 2008 from $507,503 for the three months ended September 30, 2007. For the three months ended September 30, 2008, the increase reflects a less than 1% increase in our Andrea DSP Microphone and Audio Software Technology efforts to $298,964, or 54% of total general, administrative and selling expenses and a 23% increase in our Andrea Anti-Noise Headset Product efforts to $256,362, or 46% of total general, administrative and selling expenses. General, administrative and selling expenses increased approximately 8% to $1,721,773 for the nine months ended September 30, 2008 from $1,587,335 for the nine months ended September 30, 2007. For the nine months ended September 30, 2008, the increase reflects an 6% increase in our Andrea DSP Microphone and Audio Software Technology efforts to $980,414, or 57% of total general, administrative and selling expenses and a 12% increase in our Andrea Anti-Noise Headset Product efforts to $741,359, or 43% of total general, administrative and selling expenses. These increases relate to increases in sales and marketing efforts as well as to increases in employee compensation and related benefit costs.

Interest income, net

Interest income, net for the three months ended September 30, 2008 was $2,031 compared to $3,967 for the three months ended September 30, 2007. Interest income, net for the nine months ended September 30, 2008 was $6,602 compared to $4,371 for the nine months ended September 30, 2007.

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 income (loss)

Net income for the three months ended September 30, 2008 was $25,289 compared to a net loss of $194,569 for the three months ended September 30, 2007. Net loss for the nine months ended September 30, 2008 was $344,874 compared to a net loss of $313,214 for the nine months ended September 30, 2007. The net income (loss) for the three and nine month periods ended September 30, 2008 and the net loss for the three months and nine months ended September 30, 2007 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 September 30, 2008, we had cash and cash equivalents of $1,156,518 compared with $811,403 at December 31, 2007. The balance of cash and cash equivalents at September 30, 2008 is primarily a result of our cash provided from operations during the nine months ended September 30, 2008.

Working capital balance at September 30, 2008 was $1,993,116 compared to a working capital balance of $1,837,521 at December 31, 2007. The increase in working capital reflects an increase in total current assets of $385,049 coupled with an increase in total current liabilities of $229,454. The increase in total current assets reflects an increase in cash and cash equivalents of $345,115, a decrease in accounts receivable of $267,379, an increase in inventory of $293,581, and an increase in prepaid expenses and other current assets of $13,372. The increase in total current liabilities reflects an increase in trade accounts payable of $165,382, and an increase of $64,072 in other current liabilities. The increase in cash and cash equivalents of $345,115 reflects $415,879 of net cash provided by operating activities, and $70,764 of net cash used in investing activities.

The cash provided by operating activities of $415,879, excluding non-cash charges for the quarter ended September 30, 2008, is attributable to a $267,379 decrease in accounts receivable, a $320,103 increase in inventory, a $13,732 increase in prepaid expenses and other current assets, a $165,382 increase in accounts payable, and a $64,072 increase in other current liabilities. The changes in receivables, inventory 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 $70,764 reflects an increase in property and equipment of $35,512 and an increase in patents and trademarks of $35,252. The increase in property and equipment reflects capital expenditures associated with computer purchases and tooling for some of new products. 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 scheduled to be introduced in the second half 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 November 10, 2008, Andrea has approximately $1,200,000 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.

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 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 during the period covered by this Quarterly Report that have materially affected, or are reasonable likely to materially affect the Company’s internal controls over financial reporting.

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

On November 11, 2008, the Company entered into an employment agreement with the Chairman of the Board, President, Chief Executive Officer and Corporate Secretary of the Company, Douglas J Andrea. The effective date of the employment agreement is August 1, 2008 and expires July 31, 2010 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 $312,500 through July 31, 2009 and for the period of August 1, 2009 through July 31, 2010, Mr. Andrea’s will receive an annual base salary of $325,000. 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 August 8, 2008, the Board granted Mr. Andrea 2,000,000 stock options and 1,000,000 stock options with an aggregate fair value of $120,000 (fair value was estimated using the Black-Scholes option-pricing model). The 2,000,000 grant vests in three equal annual installments over a three year period commencing August 1, 2009. The 1,000,000 grant vests in three equal annual installments over a three year period commencing August 1, 2010. All stock options granted have an exercise price of $0.04 per share, which was fair market value at the date of grant, and a term of 10 years. Pursuant to the employment agreement and subject to the approval of the Board, the Compensation Committee will recommend a second grant of 1,000,000 stock options as soon as practical after August 1, 2009, with an exercise price equal to the per share fair market value of the Company’s common stock on the date of grant. 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.

On November 11, 2008, the Company entered into an amended and restated change in control agreement with Corisa Guiffre, Vice President, Chief Financial Officer and Assistant Corporate Secretary of the Company. The change in control agreement provides Ms. Guiffre with a severance benefit upon termination in connection with a change in control (as defined in the agreement). If Ms. Guiffre is terminated following a change in control, the Company will pay Ms. Guiffre a sum equal to three times Ms. Guiffre’s average annual compensation for the five preceding taxable years. All restrictions on any restricted stock will lapse immediately and incentive stock options and stock appreciation rights, if any, will become immediately exercisable in the event of a change in control. Upon the occurrence of a change in control followed by Ms. Guiffre’s termination of employment, the Company will cause to be continued life, medical, dental and disability coverage. Such coverage and payments shall cease upon the expiration of 36 full calendar months following the date of termination..

ITEM 6. EXHIBITS

Exhibits

	Exhibit 10.1 –	Employment Agreement, dated as of November 11, 2008, by and between Andrea Electronics Corporation and Douglas J. Andrea*
	Exhibit 10.2 –	Change in Control Agreement, dated as of November 11, 2008, by and between Andrea Electronics Corporation and Corisa L. Guiffre*
	Exhibit 31 –	Rule 13a-14(a)/15d-14(a) Certifications*
	Exhibit 32 –	Section 1350 Certifications*

	* Filed herewith

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 CORPORATION

	By:	/s/ DOUGLAS J. ANDREA
		Name: Douglas J. Andrea
		Title: Chairman of the Board, President, Chief Executive Officer and Corporate Secretary

Date: November 14, 2008

/s/ DOUGLAS J. ANDREA	Chairman of the Board, President, Chief	November 14, 2008
Douglas J. Andrea	Executive Officer and Corporate Secretary

/s/ CORISA L. GUIFFRE	Vice President, Chief Financial Officer and	November 14, 2008
Corisa L. Guiffre	Assistant Corporate Secretary

EXHIBIT 10.1

EXECUTIVE EMPLOYMENT AGREEMENT

EMPLOYMENT AGREEMENT (the "Agreement"), as of the 1st day of August, 2008 by and between ANDREA ELECTRONICS CORPORATION (the "Company"), a New York corporation, and DOUGLAS J. ANDREA (the "Executive").

WITNESSETH:

WHEREAS, the Company desires to continue the employment of the Executive and to enter into an employment agreement embodying the terms of such continued employment;

WHEREAS, the Executive desires to enter into this Agreement and to accept such employment, subject to the terms and provisions of this Agreement;

NOW, THEREFORE, in consideration of the premises and mutual covenants contained herein and for other good and valuable consideration, the receipt of which is mutually acknowledged, the Company and the Executive (individually a "Party" and together the "Parties") agree as follows:

1.	Definitions.

(a) "Base Salary" shall mean the Executive's base salary in accordance with Section 4(a) below.

(b) "Board" shall mean the Board of Directors of the Company.

(c) "Business" shall mean the design, development and manufacture of state-of-the-art microphone technologies and products for enhancing speech-based applications and audio applications software and communications that require high quality, clear voice signals primarily for the following markets: (i) personal computing (primarily for speech recognition applications and voice communication over the Internet); (ii) audio and video conferencing; (iii) in-vehicle communications (to enable untethered, hands-free communication); and (iv) call centers.

(d) "Cause" shall mean that the Board reasonably concludes, in good faith and after investigation, that: (i) the Executive engaged in conduct which is a felony under the laws of the United States or any state or political subdivision thereof; (ii) the Executive engaged in conduct constituting breach of fiduciary duty or breach of the duty of loyalty, willful misconduct relating to the Company (including acts of employment discrimination or sexual harassment), embezzlement, or fraud; (iii) the Executive breached his obligations or covenants under this Agreement in any material respect; (iv) any material violation by the Executive of any law or regulation applicable to the business of the Company or any of its affiliates; (v) the Executive substantially and willfully refused to follow a proper directive of the Board within the scope of the Executive's duties . (which shall be capable of being performed by the Executive with reasonable effort) after written notice from the Board specifying the performance required and the Executive's failure to perform within 30 days after such notice; (vi) the Executive engaged in an act or acts of dishonesty or misrepresentation that materially affects the business or the financial condition of the Company; or (vii) the Executive's abuse of alcohol or drugs that, in the Company's reasonable judgment, materially impairs his ability to perform his duties and responsibilities hereunder or endangers other individuals in the workplace.

(e) "Code" shall mean the Internal Revenue Code of 1986, as amended from time to time.

(f) "Date of Termination" shall mean the effective date of the Executive's termination of employment for any reason.

(g) "Disability" or "Disabled" shall mean the failure of the Executive due to illness, injury, or physical or mental incapacity to carry out effectively the Executive's duties with respect to the Company for a period of six (6) consecutive months or nine (9) months in any eighteen-month (18) consecutive period.

(h) "Effective Date" shall mean the date of this Agreement as first written above.

(i) "Term of Employment" shall mean the period specified in Section 2 below.

2.	Term of Employment.

The Company hereby employs the Executive, and the Executive hereby accepts such employment, for a two-year term commencing on the Effective Date and ending on July 31, 2010, subject to earlier termination as provided in Section 6 below. The Agreement shall be subject to renewal as approved by the Compensation Committee of the Board of Directors.

3.	Position, Duties, and Responsibilities.

On or about the Effective Date and continuing for the remainder of the Term of Employment, the Executive shall be employed as the Chief Executive Officer of the Company. The Executive shall be nominated for election as a member of the Company's Board of Directors (the "Board"), and the Company shall defend, hold harmless, and indemnify the Executive from any cost, liability or judgment incurred by the Executive as a result of his actions or inactions as a member of the Board, so long as they are in good faith. The Executive shall serve the Company and its affiliates faithfully, conscientiously and to the best of the Executive's ability, shall promote the interests and reputation of the Company and its affiliates and shall perform his duties hereunder in accordance with the policies and procedures of the Company as in effect from time to time. Unless prevented by sickness or Disability, the Executive shall devote all of the Executive's time, attention, knowledge, energy and skills, during normal working hours, and at such other times as the Executive's duties may reasonably require, to the duties of the Executive's employment; provided, however, that this Agreement shall not be interpreted as: (a) prohibiting the Executive from, in accordance with the policies and procedures of the Company, managing his personal affairs, engaging in charitable or civic activities; or (b) subject to prior approval of the Company and any regulatory or self-regulatory process which may be required, serving as a director of any other corporation or business entity not affiliated with or in competition with the Company or its affiliates, so long as such activities do not interfere in any material respect with the performance of the Executive's duties and responsibilities hereunder.

The Executive, in carrying out his duties under this Agreement, shall report to the Board. The Executive's office shall be located at the Company's headquarters, which is currently located at 65 Orville Drive, Suite One, Bohemia, NY 11716, or within a thirty-mile radius thereof.

4.	Compensation and Benefits.

(a) Base Salary .

From the effective date through July 31, 2009, the Company shall pay the Executive an annual Base Salary ("Base Salary") of $312,500, and for the period of August 1, 2009 through July 31, 2010 the Base Salary shall be $325,000. Base Salary shall be payable in accordance with the Company's payroll practices with respect to senior executives as in effect from time to time.

(b) Bonus Payments .

The Executive shall be eligible to receive both a quarterly performance bonus and an annual performance bonus.

(1) Quarterly Bonus. The Executive shall be eligible to receive a quarterly bonus 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. For example, if the Company has quarterly net earnings equal to $60,000, the maximum quarterly bonus payable would be $8,750 (($60,000-$25,000) × 25%). Any bonus shall be payable as soon as the Company's cash flow permits.

(2) Annual Bonus. The Executive shall be eligible to receive an annual bonus equal to 10% of the Company’s annual pre-bonus net after tax earnings in excess of $300,000. For example, if the Company had annual pre-bonus net earnings equal to $450,000, the maximum annual bonus payable would be $15,000 (($450,000-$300,000) × 10%). Any bonus shall be payable as soon as the Company's cash flow permits.

All bonus determinations shall be made in the sole discretion of the Board or Compensation Committee. The Executive shall not participate in any deliberations or determinations of the Board or Compensation Committee concerning his bonus. Any bonus shall be prorated: (i) through the Date of Termination in the event that the Executive's employment is terminated for any reason by either the Company or the Executive; and/or (ii) for any leave of absence taken in the year for which the bonus is awarded to the extent permitted by law. Both the first and last quarterly bonus, if any, and the annual bonus for 2008 and 2010 shall be pro-rated to coincide with the Company’s quarterly and annual financial reporting.

Subject to the terms and conditions of the Andrea Electronics Corporation 2006 Stock Plan (the "Plan") , the Company has granted the Executive three million (3,000,000) stock options on August 8, 2008 and, subject to the approval of the Board, the Compensation Committee will recommend a second grant of one million (1,000,000) stock options as soon as practical after August 1, 2009, equal to the fair market value of the traded shares as determined on or about the date of each grant(s). For the 3,000,000 stock options on August 8, 2008, 2,000,000 of the stock options vest in equal annual installments over a 3-year period commencing on August 1, 2009 (i.e., the options vest 33.3% on each of August 1, 2009, August 1, 2010, and August 1, 2011) and 1,000,000 of the stock options vest in equal annual installments over a 3-year period commencing on August 1, 2010 (i.e., the options vest 33.3% on each of August 1, 2010, August 1, 2011, and August 1, 2012).

Notwithstanding any other provision of this Section 4(c) to the contrary: (i) upon the Executive's Termination without Cause or Resignation With the Company's Consent (defined in Section 6(d) below), the Executive's stock options will vest immediately and shall be exercisable in accordance with Section 6(d) below; (ii) upon a Change in Control (defined in Section 6(e) below) the Executive's stock options will vest immediately and shall be exercisable in accordance with Section 5(d) below; and (iii) in the event that the Executive terminates his employment for any reason other than as provided in Sections 6(d) and 6(e) below, all unvested options shall be treated in accordance with the terms and conditions of the Plan.

(d) Employee Benefit Programs .

During the Term of Employment, the Executive shall be eligible to participate in the various benefit programs, including health, medical, and accident benefits, applicable to similarly situated senior executives of the Company subject to and in accordance with the terms and conditions of such plans as are in effect from time to time. During the Term of Employment, the Company shall maintain the current life insurance policy in effect for the Executive at the Company's expense except if the Executive is terminated for Cause as defined in paragraph 3 of this Agreement.

(e) Reimbursement of Business Expenses .

During the Term of Employment, the Executive is authorized to incur reasonable business expenses in carrying out his duties and responsibilities under this Agreement, and the Company shall reimburse him for all such reasonable business expenses reasonably incurred in connection with carrying out the business of the Company, subject to and in accordance with the terms and conditions of the policies applicable to similarly situated senior executives of the Company regarding such expenses as are in effect from time to time.

(f) Vacation .

During the Term, the Executive shall be entitled to twenty (20) days of paid vacation annually. Any accrued but unused vacation days may be rolled over to the next 12-month period, provided that the number of unused vacation days for any period shall not exceed forty (40) vacation days. All vacation leave is subject to and in accordance with the vacation policies of the Company with respect to senior executives as are in effect from time to time; provided, however, that the Executive shall be entitled to payment of any accrued but unused vacation, if any, at the Date of Termination.

5.	Change in Control.

(a) For purposes hereof, a "Change in Control" shall be defined as:

(i) the acquisition by any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")) (a "Person") of beneficial ownership (within the meaning of Rule 13D-3 promulgated under the Exchange Act), directly or indirectly of 50% or more of either (a) the then outstanding shares of common stock of the Company (the "Outstanding Company Common Stock") or (b) the combined voting power of the then outstanding voting securities of the Company entitled to vote generally in the election of Directors (the "Outstanding Company Voting Securities"); provided, however, that for purposes of this subsection (1), the following acquisitions shall not constitute a Change of Control; (1) any acquisition directly from the Company, (2) any acquisition by the Company, (3) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any corporation controlled by the Company, or (4) any acquisition by any corporation pursuant to a transaction which complies with clauses (A), (B) and (C) of subsection (iii) below; or

(ii) individuals who, as of the date hereof, constitute the Board of Directors of the Company (the "Incumbent Board") cease for any reason to constitute at least a majority of the Incumbent Board, provided, however, that any individual becoming a director subsequent to the date hereof whose election or nomination for election by the Company's shareholders was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Incumbent Board; or

(iii) consummation of a reorganization, merger, consolidation, or sale or other disposition of all or substantially all of the assets of the Company (a "Business Combination"), in each case, unless, following such Business Combination, (A) all or substantially all of the individuals and entities who were the beneficial owners of the Outstanding Company Common Stock and Outstanding Company Voting securities, respectively, immediately prior to such Business Combination beneficially own, directly or indirectly, more than 60% of the then outstanding shares of common stock and the combined voting power, respectively, of the then outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the corporation resulting from such Business Combination (including, without limitation, a corporation which as a result of such transaction owns the Company or all or substantially all of the Company's assets either directly or through one or more subsidiaries) in substantially the same proportions as their ownership, immediately prior to such Business Combination of the Outstanding Company Common Stock and Outstanding Company Voting Securities, as the case may be, (B) no Person (excluding any employee benefit plan (or related trust) of the Company or such corporation resulting from such Business Combination) beneficially owns, directly or indirectly, 20% or more of, respectively, the then outstanding shares of common stock of the corporation resulting from such Business Combination or the combined voting power of the then outstanding voting securities of such corporation except to the extent that such ownership existed prior to the Business Combination, and (C) at least a majority of the members of the board of directors of the corporation resulting from such Business Combination were members of the Incumbent Board at the time of the execution of the initial agreement, or of the action of the Incumbent Board, providing for such Business Combination; or

(iv) approval by the shareholders of the Company of a complete liquidation or dissolution of the Company.

(b) All restrictions on the restricted stock then held by the Executive will lapse immediately, all stock options and stock appreciation rights then held by the Executive will become immediately vested and exercisable and any performance shares or units then held by the Executive will vest immediately, in full, in the event of a Change in Control and shall remain exercisable as provided in the grants and under the Plan.

6.	Termination of Employment.

(a) Termination of Employment Due to Death . In the event of the Executive's death during the Term of Employment, the Term of Employment shall end as of the date of the Executive's death and his estate and/or beneficiaries, as the case may be, shall thereupon be entitled to the following:

(i) Base Salary earned but not paid prior to the date of his death;

(ii) Any annual and quarterly bonuses under Section 4(b) with respect to any year prior to the year of his death which have not yet been paid, together with the prorated portion through the date of his death of the Executive's annual and quarterly bonuses earned but unpaid for the year of his death;

(iii) any amounts earned, accrued, or owing to the Executive but not yet paid under Section 4(d)-(f) above, subject to the terms and conditions of the applicable benefit plans and programs;

(iv) such other or additional benefits, if any, as are provided under applicable plans, programs and/or arrangements of the Company; and

(v) any unexercised or unvested stock options shall remain exercisable or vest upon the Executive's death only to the extent provided in the applicable option plan and option agreements.

(b) Termination of Employment Due to Disability . Either the Company or the Executive may terminate the Executive's employment due to Disability during the Term of Employment upon written notice to the other Party in accordance with Section 20 below. The Term of Employment shall end as of the Date of Termination specified in the notice, and the Executive shall thereupon be entitled to the following (in addition to the benefits due him under the then current disability programs of the Company, if any):

(i) Base Salary earned but not paid prior to the Date of Termination;

(ii) any annual and quarterly bonuses under Section 4(b) with respect to any year prior to the year of the Date of Termination which have not yet been paid together with the prorated portion through the Date of Termination of the Executive's annual and quarterly bonuses earned but unpaid for the year of his Termination;

(iii) any amounts earned, accrued or owing to the Executive but not yet paid under Section 4(d)-(f) above, subject to the terms and conditions of the applicable benefit plans and programs;

(iv) such other or additional benefits, if any, as are provided under applicable plans, programs and/or arrangements of the Company; and

(v) any unexercised or unvested stock options shall remain exercisable or vest upon the Executive's termination only to the extent provided in the applicable option plan and option agreements.

(c) Termination of Employment by the Company for Cause . The Company may terminate the Executive's employment for Cause during the Term of Employment following prior written notice to the Executive which will be effective ten (10) calendar days after the delivery of such notice to the Executive. If the Executive's employment is so terminated by the Company, the Term of Employment shall end as of the effective date of the notice and the Executive shall thereupon be entitled to the following:

(i) Base Salary earned but not paid prior to the Date of Termination;

(ii) any annual and quarterly bonuses under Section 4(b) with respect to any year prior to the year of the Date of Termination which have not yet been paid, together with the prorated portion through the Date of Termination of the Executive's quarterly bonus;

(iii) any amounts earned, accrued or owing to the Executive but not yet paid under Section 4(d)-(f) above, subject to the terms and conditions of the applicable benefit plans and programs;

(iv) such other or additional benefits, if any, as are provided under applicable plans, programs and/or arrangements of the Company; and

(v) any unexercised or unvested stock options shall remain exercisable or vest upon the Executive's termination only to the extent provided in the applicable option plan and option agreements.

(d) Termination Of Employment By The Company Without Cause Or Resignation With The Company's Consent . The Company may terminate the Executive's employment without Cause during the Term of Employment following prior written notice to the Executive which will be effective no less than thirty (30) calendar days after the delivery of such notice to the Executive or the Executive may resign with the Company's consent. The Term of Employment shall end as of the Date of Termination specified in the notice. If the Executive's employment is so terminated by the Company without Cause or he resigns with the Company's consent, other than due to death or Disability or Termination by the Company for Cause or as provided in Section 6(e) below, the Executive shall thereupon be entitled to the following:

(i) Base Salary earned but not paid prior to the Date of Termination;

(iii) any amounts earned, accrued or owing to the Executive but not yet paid under Section 4(d)-(f) above, subject to the terms and conditions of the applicable benefit plans and programs;

(iv) such other or additional benefits, if any, as are provided under applicable plans, programs and/or arrangements of the Company;

(v) all granted but unvested stock options shall immediately vest in full and shall be exercisable in accordance with the terms and conditions of the Plan; and

(vi) provided that the Executive executes a separation agreement and general release in the form annexed as Exhibit A and in accordance with the time frames and conditions set forth therein, the Company shall also pay the Executive: (1) a severance payment equal to six (6) months of the Executive's most recent Base Salary plus the six (6) months prorated portion of the Executive's most recent annual and quarterly bonuses, payable in equal amounts over a period of six (6) months in accordance with the Company's normal payroll practices as are in effect from time to time; and (2) in addition, the Company shall arrange and pay for continuation of health insurance coverage for the Executive, and his spouse and dependents for a period of twelve (12) months from the Date of Termination and shall, for a period of eighteen (18) months from the expiration of such six month period, provide COBRA continuation coverage to the Executive.

(e) Termination Following a Change in Control . If, during the Term of Employment, the Company shall, for its convenience, terminate the Executive's employment within the later of the remaining term of the agreement or six (6) months following a Change in Control, then the Company shall provide the Executive, or in the event of his subsequent death, his beneficiary or beneficiaries, or his estate, as the case may be:

(i) Those payments and benefits described in Section 6(d)(i), (ii), (iii), and (iv), which shall be immediately due and payable;

(ii) a sum equal to two (2) years of the Executive's most recent Base Salary plus a pro rated portion of the Executive's most recent annual and four quarterly bonuses paid immediately preceding the Change of Control. Such payments shall be paid in equal monthly installments during the twenty-four (24) month period following the Executive's termination; and

(iii) continuation for two (2) years of health and medical benefits coverage substantially equivalent to the coverage maintained by the Company for the Executive prior to his termination, except to the extent such coverage may be changed in its application to all Company employees on a nondiscriminatory basis, and shall, for a period of eighteen (18) months from the expiration of such two (2) year period, provide COBRA continuation coverage, if available, to the Executive. Notwithstanding the foregoing, such coverage shall cease in the event that the Executive becomes covered by comparable coverage from another employer. In no event is the Executive entitled to receive cash consideration in lieu of the continued coverage provided by this subparagraph 6(e)(iii).

All stock options, whether then vested or unvested, shall vest and/or become exercisable in accordance with Section 5(b).

(f) Termination of Employment by the Executive . The Executive may voluntarily terminate his employment during the Term of Employment (other than for death or Disability) by giving at least 30 days prior written notice to the Company in accordance with Section 20 below. The Executive's employment shall terminate upon the date specified in his notice of termination. Thereafter, the Executive shall thereupon be entitled to the same payments and benefits as provided in Section 6(c)(i)-(iv) above. All unexercised or unvested options shall be subject to the terms and conditions of their grant and the Plan.

(g) Non-renewal . In the event this Agreement is not renewed, the Executive's employment shall terminate at the expiration of the Term of Employment, and the Executive shall thereupon be entitled to through the date of termination those sums described in Section 6(c)(i)-(iv) above, which shall be immediately due and payable. All benefits shall cease in accordance with the terms of the applicable Company policies or plans, and any unexercised or unvested stock options shall remain exercisable or vest only to the extent provided in the applicable option plan and option agreements. In no event shall the Executive be entitled to any severance payments or other compensation other than those described in Section 6(c) above.

(h) Upon termination of the Executive's employment for any reason or if the Agreement is not renewed, whichever is earlier, the Executive agrees to immediately resign all director and officer positions with the Company effective as of the Date of Termination, or expiration of the Term, as applicable. The Board may, in its discretion, accept Executive's resignation or invite Executive to remain on the Board.

7.	Confidentiality; Assignment of Rights.

(a) The Executive acknowledges that during the Term of Employment, the Company will disclose to and entrust to him trade secrets, and other confidential and proprietary information, including, but not limited to: (i) information disclosed to it by third parties (whether pursuant to a confidentiality agreement or otherwise); (ii) knowledge of certain proprietary information and trade secrets concerning the past, present, and future strategies, plans, business activities, finances, methods, operations, customers, accounts, service, product information, and employees of the Company and its customers, including, but not limited to: certain technical know-how and specifications, copyrights, training, software source and object codes, technology, research, market information and data, formulas, processes, methods, machines, manufacturers, products, compositions, developments, discoveries, plans, customer lists, customers, partners, pricing, business planning, vendors, costs, pricing, other activities of the Company and its customers, and information ( e.g. , customer or client lists, names, addresses, telephone numbers, identity of contact persons, and financial information) with respect to individuals and entities who have entered into, or have been solicited to enter into, relationships with the Company; and (iii) other non-public, proprietary or confidential information of the Company, its affiliates or their respective customers or clients (collectively "Business Information"). The Executive acknowledges and agrees that all Business Information is and shall remain the sole property of the Company.

(b) Except as required by law, the Executive will not, whether during or after the termination or cessation of his employment hereunder, reveal to any person, association or company any of the trade secrets or confidential information concerning the organization, business, or finances of the Company so far as they have come or may come to his knowledge, except as may be required in the ordinary course of performing his duties as an employee of the Company or except as may be in the public domain through no fault of the Executive or as required to be disclosed by law or court order, and the Executive shall keep secret all matters entrusted to him and shall not use or attempt to use any such information in any manner which may injure or cause loss or may be calculated to injure or cause loss whether directly or indirectly to the Company.

(c) The Executive acknowledges and agrees that during his employment hereunder he shall not make, use, or permit to be used any notes, memoranda, drawings, specifications, programs, data, or other materials of any nature relating to any matter within the scope of the business of the Company or concerning any of its dealings or affairs otherwise than for the benefit of the Company. The Executive further acknowledges and agrees that he shall not, after the termination or cessation of his employment hereunder, use or permit to be used any such notes, memoranda, drawings, specifications, programs, data, other materials, or Business Information it being agreed that any of the foregoing shall be and remain the sole and exclusive property of the Company and that immediately upon the termination or cessation of his employment he shall deliver all of the foregoing, and all copies thereof, to the Company, at its main office.

(d) If at any time or times during his employment hereunder, the Executive shall (either alone or with others) make, conceive, discover, reduce to practice, or become possessed of any invention, modification, discovery, design, development, improvement, process, formula, data, technique, know-how, secret, or intellectual property right whatsoever or any interest therein (whether or not patentable or registrable under copyright or similar statutes or subject to analogous protection) (herein called "Inventions") that relates to the business of the Company or any of the products or services being developed, manufactured, marketed, sold, or otherwise provided by the Company or which may conveniently be used in relation therewith, or results from tasks assigned to him by the Company or results from the use of premises or equipment owned, leased, or contracted for by the Company, such Inventions and the benefits thereof shall immediately become the sole and absolute property of the Company, and the Executive shall promptly disclose to the Company (or any persons designated by it) each such Invention and hereby assign any nights he may have or acquire in the inventions. and benefits and/or rights resulting therefrom to the Company without compensation and shall communicate, without cost or delay, and without publishing the same, all available information relating thereto (with all necessary plans and models) to the Company. The Executive hereby further represents and acknowledges that any and all such Inventions made, conceived, discovered, or reduced to practice prior to the date hereof, whether or not he is the named inventor; are owned solely by the Company, and that he has no right, title, or interest therein, and he agrees that upon the request of the Company, and without any compensation to him, he will take such action and execute such documents as the Company may request to evidence and perfect the Company's ownership of the such Inventions.

(e) The Executive will also promptly disclose to the Company, and the Company hereby agrees to receive all such disclosures in confidence, any other invention, modification, discovery, design, development, improvement, process, formula, data, technique, know-how, secret, or intellectual property right whatsoever or any interest therein (whether or not patentable or registrable under copyright or similar statutes or subject to analogous protection) made, conceived, discovered, reduced to practice, or possessed by him (either alone or with others) at any time or times during his employment for the purpose of determining whether they constitute Inventions.

(f) With respect to all Inventions, the Executive will, at the request and cost of the Company (including reasonable compensation to the Executive if the request is made following the termination of his employment), sign, execute, make, and do all such deeds, documents, acts, and things as the Company and its duly authorized agents may reasonably require:

(i) to apply for, obtain, and vest in the name of the Company alone (unless the Company otherwise directs) letters patent, copyrights, or other analogous protection in any country throughout the world and when so obtained or vested to renew and restore the same; and

(ii) to defend any opposition proceedings in respect of such applications and any opposition proceedings or petitions or applications for revocation of such letters patent, copyright, or other analogous protection.

(g) In the event the Company is unable, after reasonable effort, to secure the Executive's signature on any letters patent, copyright, or other analogous protection relating to an Invention, whether because of his physical or mental incapacity or for any other reason whatsoever, the Executive hereby irrevocably designates and appoints the Company and its duly authorized officers and agents as his agent and attorney-in-fact, to act for and in his behalf and stead to execute and file any such application or applications and to do all other lawfully permitted acts to further the prosecution and issuance of letters patent, copyright, or other analogous protection thereon with the same legal force and effect as if executed by him.

8.	Prohibited Activity.

The Executive acknowledges that he has and will have access to trade secrets and other confidential and proprietary information of the business of the Company, including confidential client lists. Accordingly, as a condition of continued employment, the Executive voluntarily enters into the following covenants to provide the Company with reasonable protection of those interests. For purposes of this Section 8, the term "Company" shall be deemed to include any successor entity to the Company.

(a) Non-Competition : The Executive covenants and agrees that (1) during the Term of Employment, and (2) if his employment hereunder is terminated or ended under Section 6(c), 6(f) or 6(g) above, during the period ending twelve (12) months after the Date of Termination, he shall not in any capacity, without the prior written consent of the Board, either alone or as an owner, partner, officer, director, trustee, joint venturer, employee, consultant, agent, independent contractor, lender, advisor, or shareholder (other than as permitted by Section 8(d) below) of any person, firm, company, business organization, or other entity, directly or indirectly:

(i) engage in any "Competitive Activity." As used herein, "Competitive Activity" means: (1) conducting or preparing to conduct a business substantially similar to and competitive with the Business conducted by the Company or its affiliates during the Executive's employment; or (2) providing or supporting, or preparing to provide or support, a product or service substantially similar to and competitive with that being developed, manufactured, marketed, sold, or otherwise provided by the Company or its affiliates in connection with the Business;

(ii) interfere with any business relationship between the Company or its affiliates, and the customers, suppliers, vendors, partners, consultants, service providers, advisors, or investors of either; or

(iii) perform any action, activity, or course of conduct that is substantially detrimental to the business of the Company or any of its affiliates or business reputation of the Company or any of its affiliates.

(iv) an exemption to this non-competition is expressly and specifically granted in relation to the Executive and a certain patent granted with the United States Patent office dated October 11, 1994, number 5,355,183 named Sealed Adjustable Polarized Sunglasses. Whereas in recognition that the Executive developed this patent on his own time with his own funds and it does not appear to compete directly with the companies purpose, the Company disavows any claims or rights to this patent under this provision and the Company agrees and acknowledges that it shall have no rights with respect to this patent under Section 7 f this Agreement..

(b) Non-Solicitation : The Executive also covenants and agrees that during the Term of Employment and for a period of twelve (12) months after the termination or cessation of his employment for any reason, he shall not in any capacity, without the prior written consent of the Board, either alone or as an owner, partner, officer, director, trustee, joint venturer, employee, consultant, agent, independent contractor, lender, advisor, or as a shareholder (other than as permitted by Section 8(d) below) of any person, firm, company, business organization, or other entity, directly or indirectly:

(i) solicit or contact any Customer of the Company in connection with, or in furtherance of, a Competitive Activity wherever located; or

(ii) solicit or attempt to persuade any employee of the Company to terminate his or her employment with the Company in order to enter into any employment relationship with, or perform services in any capacity for any other individual or business entity, whether or not such individual or entity is engaged in a Competitive Activity.

(c) If the Executive’s employment is terminated or ended under Section 6(e), the period of the restrictions under this Section 8(a) and 8(b) shall be twenty-four (24) months.

(d) For purposes of this Agreement, "Customer" shall mean: (i) any business or client account in which the Executive has participated or in any way been active prior to the termination of his employment; (ii) any customer with whom the Executive had substantial contact during the Term of Employment; (iii) any customer of the Company with respect to whom the Executive acquired or had access to trade secrets or other confidential or proprietary information relating to such customer as a result of his employment, or (iv) all customers of the Company's Melville, New York office in the twelve (12) months preceding the termination of the Executive's employment.

(e) Notwithstanding anything to the contrary contained in this Section 8, the Company hereby agrees that the foregoing restrictive covenants shall not be deemed breached by the Executive as a result of the record or beneficial ownership by such Executive of less than an aggregate of 1% of any class of stock of a corporation engaged, directly or indirectly, in a Competitive Activity; provided that such stock is listed on a national securities exchange or is quoted on the NASDAQ National Market System and that the Executive is not an officer, director, or employee of any such corporation.

(f) The Executive agrees that the foregoing restrictions are reasonable and justified in light of the nature of the Company's nationwide business and customers due to; (1) the confidential and proprietary information to which he has and will have exposure and access during the course of his employment by the Company; and (2) the need for the adequate protection of the business and the goodwill of the Company. In the event any such restriction is deemed to be unreasonable by any court of competent jurisdiction, the Executive agrees to the reduction of such restriction to such period or scope which such court shall deem reasonable and enforceable.

(g) Non-Disparagement : The Executive agrees that, during the Term of Employment and following the termination or cessation of his employment with the Company for any reason, he will not make any statements or representations, or otherwise communicate, directly or indirectly, in writing, orally, or otherwise, or take any action which may, directly or indirectly, disparage the Company or any of its affiliates or their respective products, officers, directors, employees, advisors, representatives, agents, businesses, or reputations. Notwithstanding the foregoing, nothing in this Agreement shall preclude the Executive from making truthful statements that are required by applicable law or legal process.

Remedies.

The Executive's obligations under Sections 7 and 8 shall survive the termination or cessation of the Executive's employment for any reason. The Executive agrees that any breach or threatened breach of his obligations under Sections 7 or 8 would subject or threaten to subject the Company to immediate, substantial, and irreparable harm and that the Company shall not have an adequate remedy at law. Accordingly, in the event of an actual or threatened breach of Section 7 or 8 above, the Company shall have, in addition to any and all remedies available at law, the right to an injunction, specific performance, or other equitable relief to prevent the violation of the Executive's obligations hereunder. The Company and Executive hereby submit to the jurisdiction of the courts of the State of New York for the purpose of any actions or proceedings instituted by the Company to obtain such relief and further agrees that the successful party shall be entitled to an award of costs and attorneys' fees incurred in any legal action to defend or enforce its respective rights or obligations under Sections 7 and/or 8 of this Agreement.

10.	Withholding .

The payment of any amount pursuant to this Agreement shall be subject to applicable withholding and payroll taxes, and such other taxes or deductions as may be required under law or as authorized by the Executive.

11.	Assignability; Binding Nature.

This Agreement shall be binding upon and inure to the benefit of the Parties and their respective successors, heirs (in the case of the Executive), and assigns. The Company shall have the right to assign this Agreement to its successors and assigns without the Executive's consent. The Executive shall not assign any rights or obligations under this Agreement without the express written consent of the Chairman of the Board.

12.	Representation.

The Company represents and warrants that it is fully authorized and empowered to enter into this Agreement and that the performance of its obligations under this Agreement will not violate any agreement between it and any other person, firm, or organization. The Executive represents and warrants that the execution of this Agreement and the performance of his obligations hereunder will not breach or be in conflict with any covenants against competition or other restrictive covenants, or any other agreement to which the Executive is a party.

13.	Entire Agreement.

This Agreement contains the entire understanding and agreement between the Parties concerning the subject matter hereof and supersedes all prior agreements, understandings, discussions, negotiations and undertakings, whether written or oral, between the Parties with respect thereto.

14.	Amendment or Waiver.

No provision in this Agreement may be amended unless such amendment is agreed to in writing and signed by the Executive and the full Board of Directors. No waiver by any Party of any breach by another Party of any condition or provision contained in this Agreement to be performed by such other Party shall be deemed a waiver of a similar or dissimilar condition or provision at the same or any prior or subsequent time. Any waiver must be in writing and signed by the Executive and the full Board of Directors.

15.	Severability.

In the event that any provision or portion of this Agreement shall be determined to be invalid or unenforceable for any reason, in whole or in part, the remaining provisions of this Agreement shall be unaffected thereby and shall remain in full force and effect to the fullest extent permitted by law.

16.	Survivorship.

The respective rights and obligations of the Parties hereunder shall survive any termination of the Executive's employment to the extent necessary to the intended preservation of such rights and obligations. Without limiting the generality of the foregoing, the Executive's obligations under Sections 7 and 8 of this Agreement shall survive the termination or cessation of his employment regardless of the manner of such termination or cessation and shall be binding upon his heirs, executors, and administrators.

17.	Beneficiaries/References.

The Executive shall be entitled, to the extent permitted under any applicable law and under the terms of any applicable plan or program, to select and change a beneficiary or beneficiaries to receive any compensation or benefit payable hereunder following the Executive's death by giving the Company written notice thereof. In the event of the Executive's death or a judicial determination of his incompetence, reference in this Agreement to the Executive shall be deemed, where appropriate, to refer to his beneficiary, estate, or other legal representative.

18.	Governing Law/Jurisdiction.

This Agreement shall be governed by and construed and interpreted in accordance with the laws of the State of New York without reference to principles of conflict or choice of laws thereof.

19.	Resolution of Disputes/ Arbitration.

(a) With the sole exception of any action brought by the Company seeking equitable relief and/or damages for a claimed violation by the Executive of his obligations under Sections 7 and S hereof, the Parties agree to use final and binding arbitration to resolve any controversy, claim, dispute, or question arising out of, relating to, or in connection with the validity, interpretation, or effect of this Agreement, or any alleged breaches or violations of it (hereinafter "Arbitrable Dispute").

(b) The Arbitration : The arbitration shall take place before the American Arbitration Association ("AAA") under its Employment Dispute Resolution Rules or any superceding rules except as otherwise set forth below. The arbitration shall be held in Suffolk County, New York before an experienced employment arbitrator licensed to practice law in New York who has been selected in accordance with the applicable Rules. Such arbitration shall be mandatory and binding on both Parties. The arbitrator may not modify or change this Agreement in any way, or make an award or impose a remedy that is not available to a court of general jurisdiction sitting in New York, and the jurisdiction of the arbitrator is limited accordingly. The arbitrator shall not be authorized to grant punitive damages, except where punitive damages are expressly allowed by statute.

The arbitrator shall apply New York substantive law, including any applicable statutes of limitation. Adequate discovery shall be permitted by the arbitrator consistent with applicable law and the objectives of arbitration. The award of the arbitrator, which shall be in writing and summarize the basis for the decision, shall be final and binding upon the Parties (subject only to limited review as required by law) and may be entered as a judgment in any New York court of competent jurisdiction, and the Parties hereby consent to the jurisdiction of the courts of the State of New York.

(c) Fees and Expenses : All fees and costs of the arbitration, including the filing fee, fees and costs of the arbitrator and the arbitration forum, cost of any record or transcript of the arbitration, and administrative fees, shall be paid in equal shares by the Company and the Executive, subject to an award of such costs and fees made by the arbitrator. Each Party shall pay its own attorneys' fees, witness expenses, and any other expenses that Party incurs in connection with the arbitration, except that the arbitrator may award the successful party its attorneys' fees, costs and expenses.

(d) Exclusive Remedy : Arbitration in this manner shall be the exclusive remedy for any Arbitrable Dispute. Should either Party attempt to resolve an Arbitrable Dispute by any method other than arbitration pursuant to this Section, the responding Party will be entitled to recover from the initiating Party all damages, expenses, and attorneys' fees incurred as a result of that breach, except as otherwise prohibited by law.

20.

Notices.

All notices or communications hereunder shall be in writing and be delivered either by hand; registered or certified mail, postage prepaid, return receipt requested; or Federal Express or other nationally recognized method of prepaid overnight courier delivery, and addressed as follows (or to such other address as shall be specified by notice to the other Party delivered in accordance with this Section 20):

If to the Company:

Mr. Jonathan Spaet

500 East 77 th Street

Apartment 1215

New York, NY 10162

If to the Executive:

Douglas J. Andrea

Andrea Electronics Corporation

65 Orville Drive

Suite One

Bohemia, NY 11716

Notices delivered by hand shall be deemed received on the date delivered; notices by registered or certified mail shall be deemed received on the third (3rd) day after mailing; notices by Federal Express or other overnight courier delivery shall be deemed received one (1) day after mailing.

21.	Confidentiality of Terms.

The Company shall cause its officers, directors, employees, representatives, agents, and affiliates, and the Executive shall cause his representatives, agents, and affiliates, to keep confidential the existence and terms of this Agreement, except as required by applicable law, regulation, or legal process, and only after adequate notice is given to the non-disclosing party so that it may seek an appropriate remedy or waive compliance with the terms of this Section 21.

22.

Headings.

The headings of the sections contained in this Agreement are for convenience only and shall not be deemed to control or affect the meaning or construction of any provision of this Agreement.

23.	Counterparts.

This Agreement may be executed in counterparts, each of which shall be deemed an original, and all of which, when taken together, shall constitute one and the same instrument.

24.	Section 409A of the Code.

(a) This Agreement is intended to comply with the requirements of Section 409A of the Internal Revenue Code (the “Code”), and specifically, with the “short-term deferral exception” under Treasury Regulation Section 1.409A-1(b)(4) and the “separation pay exception:” under Treasury Regulation Section 1.409(A)-1(b)(9)(iii), and shall in all respects be administered in accordance with Section 409A of the Code. If any payment or benefit hereunder cannot be provided or made at the time specified herein without incurring sanctions on Employee under Section 409A of the Code, then such payment or benefit shall be provided in full at the earliest time thereafter when such sanctions will not be imposed. For purposes of Section 409A of the Code, all payments to be made upon termination of employment under this Agreement may only be made upon a “separation from service” (within the meaning of such term under Section 409A of the Code), each payment made under this Agreement shall be treated as a separate payment, the right to a series of installment payments under this Agreement (if any) is to be treated as a right to a series of separate payments, and if a payment is not made by the designated payment date under this Agreement, the payment shall be made by December 31 of the calendar year in which the designated date occurs. To the extent that any payment provided for hereunder would be subject to additional tax under Section 409A of the Code, or would cause the administration of this Agreement to fail to satisfy the requirements of Section 409A of the Code, such provision shall be deemed null and void to the extent permitted by applicable law, and any such amount shall be payable in accordance with (b) below. In no event shall Employee, directly or indirectly, designate the calendar year of payment.

(b) If when separation from service occurs Employee is a “specified employee” within the meaning of Section 409A of the Code and if the cash severance payment under the Agreement would be considered deferred compensation under Section 409A of the Code, and, finally, if an exemption from the 6-month delay requirement of Section 409A(a)(2)(B)(i) of the Code is not available, the Company will make the severance payment under this Agreement to Employee in a single lump sum without interest of the first payroll date that occurs after the date that is six (6) months after the date on which Employee separate from service.

(c) If (x) under the terms of the applicable policy or policies for the insurance or other benefits specified in this Agreement it is not possible to continue coverage for Employee and his dependents, or (y) when a separation from service occurs Employee is a “specified employee” within the meaning of Section 409A of the Code, and if any of the continued insurance coverage or other benefits specified in this Agreement would be considered deferred compensation under Section 409A of the Code, and, finally, if an exemption from the six-month delay requirement of Section 409A(a)(2)(B)(i) of the Code is not available for that particular insurance or other benefit, the Company shall pay to Employee in a single lump sum an amount in cash equal to the present value of the Company’s projected cost to maintain that particular insurance benefit (and associated income tax gross-up benefit, if applicable) had Employee’s employment not terminated, assuming continued coverage for 36 months. The lump-sum payment shall be made thirty (30) days after employment termination or, if provision b of this section applies, on the first payroll date that occurs after the date that is six (6) months after the date on which Employee separates from service.

(d) Reference in this Agreement to Section 409A of the Code include rules, regulations, and guidance of general application issued by the Department of the Treasury under Internal Revenue Section 409A.

IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the date first written above.

	ANDREA ELECTRONICS CORPORATION



	By:		/s/ Jonathan Spaet
	Jonathan Spaet
	Chairman of the Compensation Committee of the Board of Directors, Andrea Electronics Corporation



			/s/ Douglas J. Andrdea
	Douglas J. Andrea

EXHIBIT A

SEPARATION AGREEMENT AND GENERAL RELEASE

SEPARATION AGREEMENT AND GENERAL RELEASE (the "Agreement") entered into as of the ___ day of _____, 200_, by and between I, Douglas J. Andrea, and Andrea Electronics Corporation (the "Company").

Section 1 - Recitals

My last day of employment with the Company will be __________ ___, 200_. I hereby submit my written resignation from all positions as director or officer of the Company and its affiliates without requirement of further consideration and in the form annexed hereto as Exhibit l.

Section 2 - Benefits

(a) In General : Except as otherwise provided in this Section, the Company will pay me the amounts or benefits set forth in this Section within thirty (30) calendar days after I sign this Agreement, but only if I do not revoke this Agreement, which I may do within seven (7) calendar days after I sign it. I acknowledge that the Company is not otherwise required to pay or provide to me the amounts or benefits described in Section 2(b) and that these payments are more than the Company or any of its affiliated or related companies are required to pay me under the Company's normal policies and procedures.

(b) Cash Payment : In consideration for my acceptance of the terms of this Agreement, the Company agrees to pay me:

(i) severance compensation in the amount of ____________________ dollars ($______.00), less withholding for taxes and any other deductions the Company is required by law to make from wage payments to employees, payable in equal amounts over a period of six (6) months in accordance with the Company's regular payroll practices with respect to senior executives. This amount represents six (6) months' base salary;

(ii) payment in the amount of _______________________________ dollars ($___________ ) less withholding for taxes and other deductions the Company is required to make from wage payments to employees representing six months of the Executive's most recent annual and quarterly bonuses payable over six months; and

(iii) payment in the amount of __________________________ dollars ($_________.00), payable in equal amounts over a period of six (6) months. This amount represents the equivalent of six months of the premium cost for COBRA continuation coverage for me, and my spouse and dependents who are eligible for COBRA continuation coverage and, in addition, COBRA coverage for a period of eighteen (18) months from the expiration of the six month period referred to above.

(c) Compensation and Benefit Plans : Except as otherwise provided in my employment agreement dated August 1, 2008 (the "Employment Agreement"), I will cease to be eligible to participate under any stock option, bonus, incentive compensation, commission, medical, dental, life insurance, retirement, and other compensation or benefit plans of the Company following the termination of my employment on , 200, except as otherwise provided herein. Thereafter, I will have no rights under any of those plans, except as follows:

(i) I will have the right to COBRA continuation coverage as to any company-provided medical, dental, or vision plan in which I participated which means that I will be entitled to buy continued health plan coverage under the normal COBRA health care continuation rules.

(ii) I will retain my vested benefits in all qualified retirement plans of the Company and all rights associated with such plans as determined under the official terms of those plans.

Section 3 - Complete Release

(a) In General : I irrevocably and unconditionally release all the Claims described in Sections 3(b) and (c) that I may now have against the Released Parties listed in Section 3(d). However, I am not releasing: (1) my right to enforce this Agreement; (2) any rights or claims under the Age Discrimination in Employment Act or other laws that arise after I sign. this Agreement; (3) my right, if any, to government-provided unemployment benefits; and (4) any claims which by law cannot be waived, including the right to file a charge with or participate in an investigation conducted by certain government agencies; provided however, that I am waiving my right to any monetary recovery should any government agency or other person pursue any such claims.

(b) Claims Released : Subject only to the exceptions just noted, I am releasing all known and unknown claims, promises, causes of action, or similar rights of any type ("Claims") that I may have with respect to any Released Party listed in Section 3(d). These include, but are not limited to, Claims that in any way relate to: (1) my Employment Agreement, my employment with the Company, or the termination of that employment, such as Claims for compensation, deferred Compensation, bonuses, commissions, lost wages, unused accrued vacation, or sick pay; (2) the design or administration of any employee benefit program; (3) any rights I may have to severance or similar benefits or to post-employment health or group insurance benefits; or (4) any Claims to attorneys' fees or other indemnities. I understand that the Claims I am releasing might arise under many different laws,, including the following:

Anti-discrimination statutes , such as the Age Discrimination in Employment Act and Executive Order 11141, which prohibit age discrimination in employment; Title VII of the Civil Rights Act of 1964, Section 1981 of the Civil Rights Act of 1866, and Executive Order 11246, which prohibit discrimination based on race, color, national origin, religion, or sex; the Equal Pay Act, which prohibits paying men and women unequal pay for equal work; the Americans With Disabilities Act and Sections 503 and 504 of the Rehabilitation Act of 1973, which prohibit discrimination against the disabled; and any other federal, state, or local law prohibiting employment discrimination such as the New York State and City Human Rights Laws.

Federal employment statutes , such as the WARN Act, which requires that advance notice be given of certain workforce reductions; the Employee Retirement Income Security Act of 1974, which, among other things, protects employee benefits; the Fair Labor Standards Act of 1938, which regulates wage and hour matters; the Family and Medical Leave Act of 1993, which requires employers to provide leaves of absence under certain circumstances; and any other federal laws relating to employment, such as veterans' reemployment rights laws.

Other laws , such as any federal, state, or local law restricting an employer's right to terminate employees, or otherwise regulating employment; any federal, state, or local law enforcing express or implied employment contracts or requiring an employer to deal with employees fairly or in good faith; any other federal, state, or local law providing recourse for alleged wrongful discharge, physical or personal injury, emotional distress, fraud, negligent misrepresentations, defamation, and similar or related claims.

The laws referred to in this subsection include statutes, regulations, other administrative guidance, and common law doctrines.

(c) Unknown Claims : I understand that I am releasing Claims that I may not know about. That is my knowing and voluntary intent, even though I recognize that someday I might learn that some or all of the facts I currently believe to be true are untrue and even though I might then regret having signed this Agreement. Nevertheless, I am assuming that risk and I agree that this Agreement shall remain effective in all respects in any such case. I expressly waive all rights I might have under any law that is intended to protect me from waiving unknown claims. I understand the significance of doing so.

(d) Released Parties : The Released Parties are the Company, all related entities, parents, subsidiaries, affiliates, partnerships, or joint ventures, and, with respect to each of them, their predecessors and successors; and, with respect to each such entity, all of its past and present employees, officers, partners, directors, stockholders, owners, representatives, assigns, attorneys, agents, insurers, employee benefit programs (and the trustees, administrators, fiduciaries, and insurers of such programs), and any other persons acting by; through, under, or in concert with any of the persons or entities listed in this subsection.

Section 4 - Promises

(a) Employment Termination: I agree that my employment with the Company and its affiliates ended forever on _____________, 200__.

(b) Pursuit of Released Claims: I have not filed, initiated, or caused to be filed any lawsuit, complaint, claim, or charge with respect to any Claim I am releasing in this Agreement, nor has any lawsuit, complaint, claim, or charge been initiated or filed on my behalf. Except as otherwise prohibited by the Age Discrimination in Employment Act or other applicable law, I promise: (i) never to file or prosecute a lawsuit, complaint, claim, or charge based on the Claims released by this Agreement; (ii) to request any government agency or other body assuming jurisdiction of any such action or proceeding to withdraw from the matter or dismiss the matter with prejudice; and (iii) not to accept any monetary relief or recovery from any such action or proceeding filed on my behalf.

(c) Company Property: I have returned to the Company all files, memoranda, documents, records, diaries, copies of the foregoing, credit cards, keys, and any other property of the Company or its affiliates in my possession. I have not taken or destroyed any Company property, including without limitation any financial data, records, or proprietary or confidential information.

(d) Taxes: I am responsible for paying any taxes on amounts I receive because I signed this Agreement. I agree that the Company is to withhold all taxes it determines it is legally required to withhold. I further agree not to make any claim against the Company or any other person based on how the Company reports amounts paid under this Agreement to tax authorities or if an adverse determination is made as to the tax treatment of any amounts payable under this Agreement. In addition, I understand and agree that the Company has no duty to try to prevent such an adverse determination.

(e) Ownership of Claims: I have not assigned or transferred any Claim I am releasing, nor have I purported to do so.

(f) Age Acknowledgement: I acknowledge that I was over forty (40) years of age at the time I signed this Agreement.

(g) Non-admission of Liability: I agree not to assert that this Agreement is an admission of guilt or wrongdoing because the Released Parties do not believe or admit that any of them has done anything wrong.. I acknowledge and agree that I have not suffered any discrimination on account of my age and that my age has never been an adverse factor used against me by the Company.

(h) No Disparagement or Harm: I agree not to make any critical, disparaging, or derogatory remarks, comments, or statements about any Released Party, including, but not limited to, the Company's business, policies, practices, decisions, officers, members, managing directors, directors, or shareholders. I will not, directly or indirectly, publish, write, lecture, or otherwise disseminate disparaging information about any Released Party except in response to legal process or as otherwise required by law.

(i) Implementation: I agree to sign any documents and do anything else that is necessary in the future to implement this Agreement.

(j) This Agreement to be Kept Confidential: I agree not to disclose the terms, amount, or existence of this Agreement to anyone other than a member of my immediate family, attorney, or other professional advisor and, even as to such a person, only if the person agrees to honor this confidentiality requirement. This subsection does not prohibit my disclosure of the terms, amount, or existence of this Agreement to the extent necessary legally to enforce this Agreement, nor does it prohibit disclosures to the extent otherwise legally required (but only if I notify the Company of a disclosure obligation or request within three (3) days after I learn of it and permit the Company to take all steps it deems to be appropriate to prevent or limit the required disclosure). I acknowledge that the Company would be irreparably harmed if this subsection were violated.

(k) Encouragement of Claims : I agree that under no circumstances will I induce, encourage, or solicit any person or entity to file or pursue any proceeding of any kind against any person or entity released by me under this Agreement. This Agreement does not prohibit me from cooperating with an investigation conducted by any federal, state, or local government agency or giving any statement or testimony pursuant to legal process or as otherwise required by law.

(l) Reasonableness of Restrictions: I acknowledge and agree that the restrictions contained in Sections 8(a) and 8(b) of my Employment Agreement survive the termination of my employment and are reasonable and justified in light of the nature of the Company's nationwide business and customers, and in further light of the confidential information to which I had exposure and access during the course of my employment by the Company. I acknowledge and agree further that the restrictions referred to in Sections 8(a) and 8(b) of the Employment Agreement are appropriate and that any lesser geographic restriction would be inadequate because the Company will be injured by virtue of any solicitation/or servicing of such customers irrespective of where such solicitation originates or occurs. I further acknowledge that the temporal duration of the said restrictions is reasonable in light of the nature of the Company's trade secrets and confidential information and the difficulty of my engaging in the restricted activities without, even inadvertently, using the Company's confidential information, during this period and the time required for me or servicing to establish a relationship with those customers.

(m) Cooperation: I agree to cooperate fully, in good faith, and to the best of my ability with the Company in connection with any and all pending, potential, or future claims, investigations, or actions which directly or indirectly relate to any action, event, or activity about which I may have knowledge in connection with the Company. Such cooperation shall include all assistance that the Company, its counsel, or its representatives may reasonably request, including but not limited to, reviewing documents, meeting with counsel, providing factual information and material, and appearing or testifying as a witness; provided, however, that the Company shall reimburse me for all reasonable expenses incurred by me in fulfilling my obligations hereunder. I agree to use my best efforts to assure a smooth transition of my internal work for the Company.

(n) Consequences of Violating Promises: Except as otherwise prohibited by law, I agree to pay the reasonable attorneys' fees and any damages any Released Party may incur if any representation I made in this Agreement was false when made. I further agree that the Company would be irreparably harmed by any actual or threatened violation of Sections 4 and 5 that involves the disclosure of the existence, terms, or amount payable under this Agreement, or disclosure or use of confidential information or trade secrets, or solicitation of employees or customers, and that the Company shall have, in addition to any and all remedies of law, the right to an injunction, specific performance, or other equitable relief to prevent the violation of my obligations hereunder.

Section 5 - Confidential Information

(a) I acknowledge that during my employment with the Company, I had access to, and possession of, trade secrets, confidential business information, and proprietary information of the Company and its past, present, and potential clients.

(b) By signing this Agreement, I acknowledge that all confidential and proprietary information that concerns the operations of, and methods and technology used by, the Company, including, without limitation, its ideas, strategies, business plans and methods, financial information, product cost data, proposals, manuals, procedures and guidelines, programs, software, know-how and specifications, copyrights, trade secrets, market information, and data, as well as information ( e.g. , client lists, names, addresses, telephone numbers, identity of contact persons, and financial investment information) with respect to individuals and entities who have entered into, or who have been solicited to enter into, relationships with the Company (collectively "Business Information"), is and shall remain the sole property of the Company.

(c) I agree that I shall keep confidential all Business Information received directly or indirectly from the Company. Except as required by law, I will not reveal to any person, association or company any of the Business Information concerning the organization, business, or finances of the Company so far as they have come or may come in to my knowledge, except as may be in the public domain through no fault of my own or as required to be disclosed by law or court order. I shall keep secret all matters entrusted to me and shall not use or attempt to use any such information in any manner which may injure or cause loss or may be calculated to injure or cause loss whether directly or indirectly to the Company.

(d) The restrictions in this Section 5 apply to the transmittal of Business Information by every manner or means of disclosure, transfer, or exchange of information, whether orally, in writing, face to face, by telephone, by mail, by personal delivery, by inter or intranet, by telex of facsimile, by electronic mail, recording, or otherwise.

(e) I acknowledge that the Company will be irreparably harmed if my obligations under this Section 5 are not specifically enforced and that the Company would not have an adequate remedy at the event of an actual or threatened violation by me of my obligations. Therefore, I agree that the Company shall be entitled to an injunction or specific performance for any violations or breaches by me, my employees, or my agents without the necessity of the Company showing that monetary damages would not afford an adequate remedy.

(f) I represent and warrant that I have not, directly or indirectly, taken any action prior to the effective date of this Agreement which if taken by me would be a breach of this Section 5.

Section 6 - Consideration of Release

(a) I acknowledge that, before signing this Agreement, I was given a period of at least twenty-one (21) calendar days to consider the Agreement, including the release provision contained herein. I expressly waive any right I might have to additional time beyond this consideration period within which to consider this Agreement.

(b) I further acknowledge that: (i) I took advantage of this period to consider this Agreement before signing it, (ii) I carefully read this Agreement; (iii) I fully understand it; and (iv) I am entering into it voluntarily.

(c) I further acknowledge that the Company strongly encouraged me to discuss this Agreement with an attorney (at my own expense) before signing it and that I did so to the extent I deemed appropriate.

(d) Acceptance must be made by delivering a signed copy of this Agreement to Joseph J. Migliozzi, 11 Toddville Lane, Cortlandt Manor, New York, NY 10567-4314. For such acceptance to be effective, the signed Agreement must be received by Mr. Migliozzi or his designee no later than the close of business on the twenty-first (21st) calendar day after my attorney or I receive this Agreement.

(e) I HAVE BEEN ADVISED THAT I MAY REVOKE THIS AGREEMENT WITHIN SEVEN (7) CALENDAR DAYS OF SIGNING IT. REVOCATION MUST BE MADE BY DELIVERING A WRITTEN NOTICE OF REVOCATION TO THE INDIVIDUAL NAMED IN THE PRECEDING SENTENCE. FOR SUCH REVOCATION TO BE EFFECTIVE, WRITTEN NOTICE MUST BE RECEIVED BY DOUGLAS ANDREA NO LATER THAN THE CLOSE OF BUSINESS ON THE SEVENTH (7TH) CALENDAR DAY AFTER I SIGN THIS AGREEMENT. IF I REVOKE THIS AGREEMENT, IT SHALL NOT BE EFFECTIVE OR ENFORCEABLE AND I WILL NOT RECEIVE THE BENEFITS DESCRIBED IN SECTION 2(b) OF THIS AGREEMENT.

(f) I understand that this Agreement may be withdrawn if not executed and returned within the consideration period.

Section 7 - Miscellaneous

(a) Confidentiality Agreements : I acknowledge that my Employment Agreement sets forth various restrictions that survive the termination of my employment with the Company. This Agreement does not supersede or in any way affect my obligations under the Employment Agreement or any other confidentiality agreement or non-disclosure agreement that I may have signed during my employment with the Company.

(b) Entire Agreement: This is the entire agreement between the Company and me. This Agreement may not be modified or cancelled in any manner except by a writing signed by both me and an authorized Company official. I acknowledge that the Company has made no representations or promises to me (such as that my former position will remain vacant), other than those in this Agreement. If any provision in this Agreement is found to be unenforceable, all other provisions will remain fully enforceable.

(c) Successors: This Agreement binds my heirs, administrators, representatives, executors, successors, and assigns, and will inure to the benefit of all Released Parties and their respective heirs, administrators, representatives, executors, successors, and assigns.

(d) Interpretation: This Agreement shall be construed as a whole according to its fair meaning. It shall not be construed strictly for or against any Released Party or me. Unless the context indicates otherwise, the term "or" shall be deemed to include the term "and" and the singular or plural number shall be deemed to include the other. Captions are intended solely for convenience of reference and shall not be used in the interpretation of this Agreement. This Agreement shall be governed by the statutes and common law of the State of New York, excluding its choice of laws principles.

Section 8 - Arbitration of Disputes

(a) Arbitrable Disputes : With the sole exception of any action brought by the Company seeking equitable relief and/or damages for a claimed violation by me of my obligations under Sections 4(j), 4(l), and 5 hereof or Sections 7 or 8 of my Employment Agreement, the Company and I (individually a "Party" and collectively the "Parties") agree to use final and binding arbitration to resolve any dispute ("Arbitrable Dispute") between me and any Released Party. This arbitration agreement applies to, among others, any controversy, claim, dispute, or question arising out of, relating to, or in connection with the validity, interpretation, or effect of this Agreement, or any alleged breaches or violations of it or other statutory violations or claims.

(b) The Arbitration: Arbitration shall take place before the American Arbitration Association ("AAA") under its Employment Dispute Resolution Rules or any superceding rules except as otherwise set forth below. The arbitration shall be held in Suffolk County, New York before an experienced employment arbitrator licensed to practice law in New York who has been selected in accordance with the applicable Rules: Such arbitration shall be mandatory and binding on both Parties. The arbitrator may not modify or change this Agreement in any way, or make an award or impose a remedy that is not available to a court of general jurisdiction sitting in Suffolk County, and the jurisdiction of the arbitrator is limited accordingly. The arbitrator shall not be authorized to grant punitive damages, except where punitive damages are expressly allowed by statute.

(c) Fees and Expenses: All fees and costs of arbitration, including filing fees, fees and costs of the arbitrator and the arbitration forum, cost of any record or transcript of the arbitration, and administrative fees, shall be paid in equal shares by the Company and me, subject to an award of costs and fees made by the arbitrator. Each Party shall pay its own attorneys' fees, witness expenses, and any other expenses that Party incurs in connection with the arbitration, except that the arbitrator may award the successful party its attorneys' fees, costs and expenses.

(d) Exclusive Remedy: Arbitration in this manner shall be the exclusive remedy for any Arbitrable Dispute. Should I or the Company attempt to resolve an Arbitrable Dispute by any method other than arbitration pursuant to this Section, the responding Party will be entitled to recover from the initiating Party all damages, expenses, and attorneys' fees incurred as a result of that breach, except as otherwise prohibited by law.

TAKE THIS RELEASE HOME, READ IT, AND CAREFULLY CONSIDER ALL OF ITS PROVISIONS BEFORE SIGNING IT: IT INCLUDES A RELEASE OF KNOWN AND UNKNOWN CLAIMS. IF YOU WISH, YOU SHOULD TAKE ADVANTAGE OF THE FULL CONSIDERATION PERIOD AFFORDED BY SECTION 6 AND YOU SHOULD CONSULT YOUR ATTORNEY.

Executed at ________, __________________, this ____ day of _________, _____.

Douglas J. Andrea

Executed at ________, __________________, this ____ day of _________, _____.

	ANDREA ELECTRONICS CORPORATION



	By:
	Name:
	Title:

EXHIBIT 1

__________________ ___ 200_

[Name]

[Company Name]

[Address]

Re: Resignation as Officer and Director

Dear ________:

I hereby irrevocably resign as an officer and director of Andrea Electronics Corporation effective as of the date of this letter.

Very truly yours,

Douglas J. Andrea

ANDREA ELECTRONICS CORPORATION

AMENDED AND RESTATED

CHANGE IN CONTROL AGREEMENT

The Board of Directors (the “Board”) of Andrea Electronics Corporation (the “Company”), a New York corporation, desires to assure the Company of the continued services of Corisa L. Guiffre (the “Employee”) for the benefit of the Company, particularly in the face of a take over attempt.

This Change in Control agreement (“Agreement”) therefore sets forth those benefits which the Company will provide to Employee in the event Employee’s employment with the Company is terminated after a “Change in Control of the Company” (as defined in paragraph 2) under the circumstances described below.

If a Change in Control of the Company should occur while Employee is still an employee of the Company, then this Agreement shall continue in effect from the date of such Change in Control of the Company for so long as Employee remains an employee of the Company, but in no event for more than three full calendar years following a Change in Control of the Company; provided, however, that the expiration of the term of this Agreement shall not adversely affect Employee’s rights under this Agreement which have accrued prior to such expiration. If no Change in Control of the Company occurs before Employee’s status as an employee of the Company is terminated, this Agreement shall expire on such date.

2)	CHANGE IN CONTROL

a)	For purposes hereof, a “change in control” shall be defined as:

The acquisition by any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) (a “Person”) of beneficial ownership (within the meaning of Rule 13D-3 promulgated under the Exchange Act) of 20% or more of either (A) the then outstanding shares of common stock of the Company (the “Outstanding Company Common Stock”) or (B) the combined voting power of the then outstanding voting securities of the Company entitled to vote generally in the election of Directors (the “Outstanding Company Voting Securities”); provided, however, that for purposes of this subsection (I), the following acquisitions shall not constitute a Change of Control: (i) any acquisition directly from the Company, (ii) any acquisition by the Company, (iii) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any corporation controlled by the Company or (iv) any acquisition by any corporation pursuant to a transaction which complies with clauses (A), (B) and (C) of subsection (iii) below: or

ii)

Individuals who, as of the date hereof, constitute the Committee (the “Incumbent Board”) cease for any reason to constitute at least a majority of the Committee, provided, however, that any individual becoming a director subsequent to the date hereof whose election or nomination for election by the Company’s shareholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Committee; or

iii)

Consummation of a reorganization, merger, consolidation or sale or other disposition of all or substantially all of the assets of the Company (a “Business Combination”), in each case, unless, following such Business Combination, (A) all or substantially all of the individuals and entities who were the beneficial owners, respectively, of the Outstanding Company Common Stock and Outstanding Company Voting Securities immediately prior to such Business Combination beneficially own, directly or indirectly, more than 60% or, respectively, the then outstanding shares of common stock and the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the corporation resulting from such Business Combination (including, without limitation, a corporation which as a result of such transaction owns the Company or all or substantially all of the Company’s assets either directly or through one or more subsidiaries) in substantially the same proportions as their ownership, immediately prior to such Business Combination of the Outstanding Company Common Stock and Outstanding Company Voting Securities, as the case may be, (B) no Person (excluding any employee benefit plan (or related trust) of the Company or such corporation resulting from such Business Combination) beneficially owns, directly or indirectly, 20% or more of, respectively, the then outstanding shares of common stock of the corporation resulting from such Business Combination or the combined voting power of the then outstanding voting securities of such corporation except to the extent that such ownership existed prior to the Business Combination and (C) at least a majority of the members of the board of directors of the corporation resulting from such Business Combination were members of the incumbent Board at the time of the execution of the initial agreement, or of the action of the Committee, providing for such Business Combination; or

iv)	Approval by the shareholders of the Company of a complete liquidation or dissolution of the Company.

b)	For purposes hereof, “Termination” shall be defined as: involuntary termination or a “voluntary” termination following an event of “Good Reason.” For the purposes of the this Agreement “Good Reason” shall mean the occurrence of any of the following events without the Employee’s consent::

i)	The assignment to Employee of duties that constitute a material diminution of her authority, duties, or responsibilities (including reporting requirements);

ii)	A material diminution in Employee’s base salary;

iii)	Relocation of Employee to a location outside a radius of 15 miles of the Company’s main office; or

iv)	Any other action or inaction by the Company that constitutes a material breach of this Agreement;

provided, that within ninety (90) days after the initial existence of such event, the Company shall be given notice and a opportunity, not less than thirty (30) days, to effectuate a cure for such asserted “Good Reason” by Employee. Employee’s resignation hereunder for Good Reason shall not occur later than one hundred fifty (150) days following the initial date of which the event Employee claims constitutes Good Reason occurred.

Upon the occurrence of a Change in Control followed by the Employee’s Termination of employment, the Company shall pay Employee, or in the event of her subsequent death, her beneficiary or beneficiaries, or her estate, as the case may be, a sum equal to three (3) times Employee’s average annual compensation for the five (5) preceding taxable years. Such annual compensation shall include bonuses, pension and profit sharing plan benefits, severance payments, retirement benefits and fringe benefits paid or to be paid to the Employee during such years. Such annual compensation shall not include any commissions. Payments will be made, at the Company’s election, in a lump sum or paid in equal thirty (30) monthly installments following the Employee’s Termination.

d)	All restrictions on the restricted stock will lapse immediately, incentive stock options and stock appreciation rights will become immediately exercisable, and Performance Shares/Units will vest immediately, in full, in the event of a Change in Control.

Upon the occurrence of a Change in Control, Employee will be entitled to receive benefits due her under or contributed by the Company on her behalf pursuant to any retirement, incentive, profit sharing, bonus, performance, disability or other employee benefit plan maintained by the Company on Employee’s behalf to the extent such benefits are not otherwise paid to Employee under a separate provision of this Agreement.

Upon the occurrence of a Change in Control followed by the Employee’s Termination of employment, the Company will cause to be continued life, medical, dental and disability coverage substantially identical to the coverage maintained by the Company for Employee prior to her severance, except to the extent that such coverage may be changed in its application for all Company employees on a nondiscriminatory basis. Such coverage and payments shall cease upon the expiration of thirty-six (36) full calendar months following the date of Termination.

Any and all payments to be made to the Employee under this Agreement or otherwise as a result of a Change in Control (hereinafter referred to as “Change in Control Payments”), shall be made free and clear of, and without deduction or withholding for or on account of, any tax which may be payable under Section 4999 of the Code, now or hereafter imposed, levied, withheld or assessed (such amounts being hereinafter referred to as the “Excise Taxes”). If, notwithstanding the foregoing provision, any Excise Taxes are withheld from any Change in Control Payments made or to be made to Employee, the amounts so payable to the Employee shall be increased to the extent necessary to yield to the Employee (after payment of any tax which may be payable under Section 4999 of the Code) the full amount which he is entitled to receive pursuant to the terms of this Agreement or otherwise without regard to liability for any Excise Taxes and any other Federal, State, FICA/Medicare and unemployment taxes thereon. In the event any Excise Taxes are now or hereafter imposed, levied, assessed, paid or collected with respect to the Change of Control Payments made or to be made to the Employee, Excise Taxes and any other Federal, State and unemployment taxes thereon shall be paid by the Company or, if paid by the Employee, shall be reimbursed to the Employee by the Company upon its receipt of satisfactory evidence of such payment having been made.

h)	Section 409A of the Code.

This Agreement is intended to comply with the requirements of Section 409A of the Internal Revenue Code (the “Code”), and specifically, with the “short-term deferral exception” under Treasury Regulation Section 1.409A-1(b)(4) and the “separation pay exception:” under Treasury Regulation Section 1.409(A)-1(b)(9)(iii), and shall in all respects be administered in accordance with Section 409A of the Code. If any payment or benefit hereunder cannot be provided or made at the time specified herein without incurring sanctions on Employee under Section 409A of the Code, then such payment or benefit shall be provided in full at the earliest time thereafter when such sanctions will not be imposed. For purposes of Section 409A of the Code, all payments to be made upon termination of employment under this Agreement may only be made upon a “separation from service” (within the meaning of such term under Section 409A of the Code), each payment made under this Agreement shall be treated as a separate payment, the right to a series of installment payments under this Agreement (if any) is to be treated as a right to a series of separate payments, and if a payment is not made by the designated payment date under this Agreement, the payment shall be made by December 31 of the calendar year in which the designated date occurs. To the extent that any payment provided for hereunder would be subject to additional tax under Section 409A of the Code, or would cause the administration of this Agreement to fail to satisfy the requirements of Section 409A of the Code, such provision shall be deemed null and void to the extent permitted by applicable law, and any such amount shall be payable in accordance with (ii) below. In no event shall Employee, directly or indirectly, designate the calendar year of payment.

ii)

If when separation from service occurs Employee is a “specified employee” within the meaning of Section 409A of the Code and if the cash severance payment under this Agreement would be considered deferred compensation under Section 409A of the Code, and, finally, if an exemption from the 6-month delay requirement of Section 409A(a)(2)(B)(i) of the Code is not available, the Company will make the severance payment under the Agreement to Employee in a single lump sum without interest of the first payroll date that occurs after the date that is six (6) months after the date on which Employee separate from service.

iii)

If (x) under the terms of the applicable policy or policies for the insurance or other benefits specified in this Agreement it is not possible to continue coverage for Employee and her dependents, or (y) when a separation from service occurs Employee is a “specified employee” within the meaning of Section 409A of the Code, and if any of the continued insurance coverage or other benefits specified in this Agreement would be considered deferred compensation under Section 409A of the Code, and, finally, if an exemption from the six-month delay requirement of Section 409A(a)(2)(B)(i) of the Code is not available for that particular insurance or other benefit, the Company shall pay to Employee in a single lump sum an amount in cash equal to the present value of the Company’s projected cost to maintain that particular insurance benefit (and associated income tax gross-up benefit, if applicable) had Employee’s employment not terminated, assuming continued coverage for 36 months. The lump-sum payment shall be made thirty (30) days after employment termination or, if provision (ii) of this section applies, on the first payroll date that occurs after the date that is six (6) months after the date on which Employee separates from service.

iv)	Reference in this Agreement to Section 409A of the Code include rules, regulations, and guidance of general application issued by the Department of the Treasury under Internal Revenue Section 409A.Any payments are to intended to comply with Section 409A of the Code. Section 409A of the Code….

IN WITNESS WHEREOF, Andrea Electronics Corporation has caused this Agreement to be executed and its seal to be affixed hereunto by its duly authorized officer and its directors, and Employee has signed this Agreement, on the 11 th day of November, 2008.

ANDREA ELECTRONICS CORPORATION

By: /s/ Jonathan Spaet _________________________

Chairman of the Compensation Committee of the Board of Directors, Andrea Electronics Corporation

/s/ Corisa L. Guiffre ________________________

Vice President, Chief Financial Officer and Assistant Corporate Secretary

RULE 13a-14(a)/15d-14(a)

CHIEF EXECUTIVE OFFICER CERTIFICATION

I, Douglas J. Andrea, certify that:

1.	I have reviewed this quarterly report on Form 10-Q of Andrea Electronics Corporation;

Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d – 15(f)) for the registrant and have:

(a)

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)

Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)

Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.	The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: November 14, 2008				/s/ DOUGLAS J. ANDREA
				Douglas J. Andrea Chairman of the Board, President, Chief Executive Officer and Corporate Secretary

RULE 13a-14(a)/15d-14(a)

CHIEF FINANCIAL OFFICER CERTIFICATION

I, Corisa L. Guiffre, certify that:

1.	I have reviewed this quarterly report on Form 10-Q of Andrea Electronics Corporation;

3.	Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

(a)

(b)

(c)

Evaluated the effectiveness of the small business issuer’s disclosure controls and procedures and presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this quarterly report based on such evaluation; and

(d)

5.	The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: November 14, 2008				/s/ CORISA L. GUIFFRE
				Corisa L. Guiffre Vice President, Chief Financial Officer and Assistant Corporate Secretary

SECTION 1350 CERTIFICATIONS

In connection with the Quarterly Report of Andrea Electronics Corporation (the “Company”) on Form 10-Q for the quarter ended September 30, 2008 as filed with the Securities and Exchange Commission (the “Report”), the undersigned certify, pursuant to 18 U.S.C. Section 1350, as added by Section 906 of the Sarbanes-Oxley Act of 2002, that:

1.	The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities and Exchange Act of 1934; and

2.	The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company as of and for the period covered by the Report.

Date: November 14, 2008			/s/ DOULGAS J. ANDREA
			Douglas J. Andrea Chairman of the Board, President, Chief Executive Officer and Corporate Secretary

			/s/ CORISA L. GUIFFRE
			Corisa L. Guiffre Vice President, Chief Financial Officer and Assistant Corporate Secretary