r 1998 
20% Sequential Growth in Revenues Marks Significant Improvement in Sales 
LONG ISLAND CITY, N.Y., Oct. 30 /PRNewswire/ -- Andrea Electronics
Corporation (Amex: AND) today announced revenues for the three months ended
September 30, 1998 of $5.3 million, compared to revenues of $7.2 million in
the same period last year.  For the three months ended September 30, 1998, the
Company reported a net loss of $1.68 million, or $0.15 per share, compared to
net income of $1.6 million or $0.17 per share on a diluted basis in the same
period last year.  For the nine months ended September 30, 1998, the Company
reported revenues of $14.2 million, compared to revenues of $18.7 million in
the first nine months of 1997.  For the nine months ended September 30, 1998,
the Company reported a net loss of $3.1 million, or $0.31 per share, compared
to net income of $2.8 million or $0.33 per share on a diluted basis over the
same period in 1997 . 
As reported earlier in the month by management, the principal factors that
contributed to the $1.68 million loss for the third quarter of 1998 included
higher volume, lower price/lower margin sales to the Company's OEM customers,
continued significant investments in research and development, increases in
promotional/advertising activities, significant goodwill amortization expense
associated with the acquisition of Lamar Signal Processing, Ltd. and
significant operating expenses relative to the Company's efforts in marketing
its Digital Super Directional Array (DSDA(TM)) technology. 
"We are encouraged by our success in growing sequential revenues following
two flat quarters," said Patrick D. Pilch, Executive Vice President & Chief
Financial Officer at Andrea Electronics Corporation. 
Specifically, headset unit shipments increased approximately 39% and 7%
over the second quarter 1998 and third quarter 1997, respectively.  Also, the
Company experienced an approximate 360% increase in retail sales for the third
quarter 1998 over the second quarter 1998, primarily representing initial
demand among retailers for the holiday season. 
"Andrea continues to seek to diversify its OEM and retail customer base,
introducing new products to the market to meet growing demand and penetrating
the business-to-business channel with higher margin products.  We are also
committed to continued investments in research and development to maintain a
leading competitive stance in the marketplace." 
Concerning product development, during the third quarter and first nine
months of 1998, research and development expenses increased approximately 95%
and 215% over the third quarter and first nine months of 1997, respectively.
These increases are a result of the Company's continuing efforts in developing
its digital signal processing technology, coupled with efforts in
computer/telephony headset technologies, which resulted in six new products
during the third quarter of 1998.  In addition, during 1998, Andrea Digital
Technologies ("ADT") was formed specifically for research efforts focused on
the pursuit of commercializing a natural language-driven, human/machine
interface.  ADT is developing an optimal far-field microphone solution for
various voice-driven applications, incorporating the DSDA(TM) technology
obtained through the acquisition of Lamar in early May of this year.  The
DSDA(TM) technology strengthens the Company's position in digital signal
processing by broadening Andrea's exposure to other industries including the
consumer electronics and professional audio markets, among others. Considering
all of the foregoing, through the third quarter of 1998, total research and
development expenses approximate 123% of the entire research and development
expense for fiscal 1997.  Management anticipates continued significant
spending in research and development during the fourth quarter of 1998. 

    -- Extending its existing relationship with IBM Corporation (NYSE: IBM),
       Andrea announced an agreement with IBM to package its headsets with
       IBM's flagship speech recognition software product, ViaVoice 98(TM),
       in addition to a separate agreement to provide IBM with headsets to
       be sold with certain of its Aptiva Personal Computers.
    -- Increasing its market presence on the Internet, Andrea announced an
       agreement with Conversational Computing to jointly package and sell
       its Conversa Web(TM) voice-enabled Internet browser software with
       Andrea's Active Noise Cancellation (ANC) headsets to retail stores
    -- Extending its push into the retail channel, Andrea announced that
       Office Max Superstores (NYSE: OMX) selected three of Andrea's retail
       products to be sold in its 700 stores nationwide.
    -- Tapping the business-to-business market for the first time, Andrea
       Electronics announced agreements with S.P. Richards and CommuniTech,
       Inc. to sell Andrea's higher-end products offering productivity
       solutions for the computer telephony integration (CTI), small
       office/home office (SOHO) and call center markets.
    -- In July 1998, Andrea Electronics announced that it had issued and
       sold, in a private placement, $10,753,000 aggregate principal amount
       of 6% Convertible Notes ("Notes") due June 10, 2000.  The Company is
       using the proceeds from the issuance of the Notes for technology
       acquisition and development, tooling costs, relocation costs, a new
       management information system and working capital requirements.
    -- Increasing its patent portfolio, Andrea Electronics announced that
       the U.S. Patent and Trademark Office issued the Company a Notice of
       Allowance of patent claims directed to its Digital Super Directional
       Array (DSDA(TM)) microphone technology of Lamar Signal Processing,
       Ltd., a wholly owned subsidiary of Andrea Electronics Corporation.

Since the close of the third quarter 1998, other key announcements made by
the Company include: 

    -- The Company announced the opening of its new headquarters in Melville,
       Long Island.
    -- Andrea Electronics announced patents issued for its Digital Super
       Directional Array (DSDA(TM)) technology and for its Active Noise
       Reduction (ANR) technologies covering open and closed loop systems.
    -- Andrea announced an agreement with IBM, Lernout & Hauspie Speech
       Products ("L&H") (Nasdaq: LHSPF)(Easdaq: LHSP-ED) and Lotus Development
       Corporation ("Lotus") to include Andrea's NC-60 series headsets to be
       sold with each software publisher's high-end continuous speech
       recognition software.
    -- The Company announced its first online distribution agreement with
       Wal-Mart Online, the e-commerce division of Wal-Mart Stores Inc.
       This agreement is one of many steps which Andrea has taken to expand
       its channels of distribution, targeting customers seeking a high-end
       audio computing solution and bringing the Company's cost-effective
       and innovative office productivity solutions to a broader range of
       users, particularly on the Internet.
    -- The Company announced an agreement with Hi-Val, Inc. for its headsets
       to be used in conjunction with IBM's speech recognition software,
       distributed by Hi-Val, a high-tech company offering a wide range of
       multimedia solutions.
    -- Andrea also announced an agreement to supply Andrea's PC
       Headsets/Microphones to be included with International Microcomputer
       Software's (IMSI) Voice-Activated Software to Provide Major Value-Add
       for Consumers.

"Andrea's success in creating the most innovative voice-driven microphone
technologies is a result of its commitment to investing in research and
development," said John N. Andrea, Co-president of Andrea Electronics
Corporation.  "Our development of products that incorporate the DSDA(TM)
technology will be one of the most significant achievements during the coming
months for the Company.  We anticipate that we will be the first to introduce
a far-field digital array microphone product, which optimizes various voice
interface applications, opening the door to many new emerging communication
opportunities.  We are excited about the future and look forward to achieving
our full potential as a leading voice technology innovator." 
Andrea Electronics Corporation designs, develops and manufactures audio
technologies and equipment for applications incorporating natural language
interfaces.  The Company's patented Active Noise Reduction (ANR) earphone,
Active Noise Cancellation (ANC) near-field and Digital Super Directional Array
DSDA(TM) far-field microphone technologies are incorporated into a wide range
of audio products to eliminate background noise and ensure the optimum
performance of voice applications.  Applications for the Company's
technologies include: speech recognition programs, Internet telephony,
video/audio conferencing, automobile PCs, home automation systems, hand-held
devices and multiplayer online games, among others.  Key OEM and software
publisher customers and strategic partners who have endorsed Andrea
Electronics' technologies and products include:  Microsoft Corporation, IBM
Corporation, Lernout & Hauspie Speech Products, Lotus Development Corporation,
Dragon Systems, NEC, Mpath, Multitude, IDT, HyperGraphics, ILINC and ViAInc.,
among others. 
To receive Andrea Electronics' latest news release and other corporate
documents via FAX -- no cost -- please dial 1-800-PRO-INFO and input the
Company's symbol AND.  Or visit Andrea Electronics' website at 
This press release contains "forward-looking statements" within the
meaning of the Private Securities Litigation Reform Act of 1995.  Such
forward-looking statements involve known and unknown risks, uncertainties or
other factors that could cause actual results, performance or achievements of
the Company to be materially different from any future results, performance or
achievements expressed or implied by such forward-looking statements.  Factors
that might cause such a difference include, but are not limited to, those
discussed under the heading "Cautionary Statement Regarding Forward-Looking
Statements" included in the Management's Discussion and Analysis of Financial
Condition and Results of Operations in the Company's Annual Report on Form
10-K and in the Company's Annual Report to Stockholders, and in documents
subsequently filed by the Company with the Securities and Exchange Commission. 
"Andrea Anti-Noise" is a registered trademark, and "AndreaVoiceSolutions"
and "Andrea QuietWare" are trademarks of Andrea Electronics Corporation. 

    "DSDA" is a trademark of Andrea Electronics Corporation.
               Andrea Electronics Corporation And Subsidiaries
                         Consolidated Balance Sheets
    ASSETS                      September 30, 1998   December 31, 1997
                                        (unaudited)       (audited)
      Cash and cash equivalents         $8,155,496       $2,059,338
      Marketable securities                      -          102,717
      Accounts receivable, net           4,289,676        4,568,433
      Inventories, net                   8,017,441        5,766,927
      Deferred income taxes                909,569          909,569
      Prepaid expenses and
        other current assets             1,548,697        1,023,661
          Total current assets          22,920,879       14,430,645
    PROPERTY, PLANT AND EQUIPMENT, net   1,177,659        1,022,342
    DEFERRED INCOME TAXES                  897,046          897,046
    OTHER ASSETS                         2,049,818        1,439,151
    INTANGIBLE ASSET                    26,845,616                -
       Total assets                    $53,891,018      $17,789,184
      Trade accounts payable            $1,527,209         $966,783
      Current portion of long term debt  1,051,518                -
      Other current liabilities          2,202,725          483,731
      Convertible notes current portion          -        1,193,472
        Total current liabilities        4,781,452        2,643,986
    CONVERTIBLE NOTES, net              10,116,088                -
    LONG TERM DEBT                       1,104,457                -
    OTHER LIABILITIES                            -           38,500
        Total liabilities               16,001,997        2,682,486
      Common stock, $.50 par value;
        authorized: 15,000,000 shares;
        issued and outstanding:
        11,105,730 and 8,706,692 shares,
        respectively                     5,552,865        4,353,346
      Additional paid-in capital        34,595,924        9,881,915
      Retained earnings (deficit)       (2,259,768)         871,437
        Total shareholders' equity      37,889,021       15,106,698
        Total liabilities and
          shareholders' equity         $53,891,018      $17,789,184
                                    For the Three           For the Nine
                                   Months Ended             Months Ended
                                    September 30,           September 30
                                  1998      1997         1998        1997
    SALES                     $5,341,719 $7,210,911  $14,187,148 $18,676,055
    COST OF SALES              3,466,280  4,247,121    9,040,435  11,022,262
        Gross Profit           1,875,439  2,963,790    5,146,713   7,653,793
     EXPENSES                    369,806    189,798    1,359,905     431,431
      AND SELLING EXPENSES     3,302,466  1,679,168    8,592,915   4,478,410
      Income (loss) from
       operations             (1,796,833) 1,094,824   (4,806,107)  2,743,952
      Interest income            113,554     10,889      186,870      52,173
      Interest expense          (326,816)   (71,314)    (436,935)   (198,221)
      Rent and miscellaneous
        income                         -     62,940    1,924,967     178,723
                                (213,262)     2,515    1,674,902      32,675
      INCOME TAX BENEFIT      (2,010,095) 1,097,339   (3,131,205)  2,776,627
      BENEFIT                   (329,043)   471,000            -      76,189
    NET INCOME (LOSS)        $(1,681,052)$1,568,339  $(3,131,205) $2,852,816
    NET INCOME (LOSS) PER SHARE    $(.15)      $.17        $(.31)       $.33
     SHARES OUTSTANDING       11,105,730  9,244,113   10,130,198   8,708,335

SOURCE  Andrea Electronics 
-0-                             10/30/98 
/CONTACT:  Patrick D. Pilch, EVP & CFO, or Molly M. Jahncke and Carolynne
O'Grady, both of Corporate Communications, 800-442-7787, all of Andrea
Electronics; or General Info, Paula Schwartz, or Analyst Info, Elisa Mailman,
or Media Info, Judith Sylk-Siegel, 212-661-8030, all of The Financial
Relations Board/ 
/Web site: 


CO:  Andrea Electronics; Microsoft Corporation; IBM Corporation;
     Lernout & Hauspie Speech Products; Lotus Development Corporation;

 Dragon Systems; NEC; Mpath; Multitude; IDT; HyperGraphics; ILINC; ViAInc.
ST:  New York
-0- Oct/30/1998    8:56
EOS   (PRN)    Oct/30/98    08:56      86
-0- (PRN) Oct/30/1998    9:11
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