Andrea Electronics Corporation

1
Andrea Electronics Corporation Investor
Conference Call May 3, 2001
2
Conference Call Agenda I. Introduction of
Participants II. Forward Looking
Statement III. Financial Analysis IV. Overview
of Significant Q1 2001 Events V. Overview of
Post Q1 2001 Significant Event VI. Comparison of
Year-to-Date Achievements with Goals for 2001
3
I. Introduction of Participants Christopher
P. Sauvigne, President and Chief Operating
Officer Richard A. Maue, Chief Financial
Officer and Corporate Secretary
4
II. Forward Looking Statement
This presentation may contain "forward-looking
statements" within the meaning of the Private
Securities Litigation Reform Act of 1995. The
words "anticipates," "believes," "estimates,"
"expects," "intends," "plans," "seeks,"
variations of such words, and similar expressions
are intended to identify forward-looking
statements. These statements are not guarantees
of future performance and involve matters that
are subject to certain risks, uncertainties and
assumptions that are difficult to predict,
including economic, competitive, governmental,
technological and other factors, that may affect
the business and prospects of Andrea Electronics
Corporation (the "Company"). The Company
cautions investors about the following
significant factors, which, among others, have in
some cases affected the Company's actual results
and are in the future likely to affect the
Company's actual results and could cause them to
differ materially from those expressed in any
forward- looking statements the rate at which
Andrea Anti-Noise, DSDA, DFTA and other Andrea
technologies are accepted in the marketplace the
competitiveness of Andrea Anti-Noise, DSDA, DFTA
and other Andrea products in terms of technical
specifications, quality, price, reliability and
service the sufficiency of the Company's funds
for research and development, marketing and
general and administrative expenses infringement
and other disputes relating to patents and other
intellectual property rights held or licensed by
the Company or third parties and the Company's
continuing ability to enter and maintain
collaborative relationships with other
manufacturers, software authoring and publishing
companies, and distributors. No assurance can be
given that the Company will achieve any material
sales or profits from the products introduced in
this release. These and other similar factors
are 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
shareholders, and in documents subsequently filed
by the Company with the Securities and Exchange
Commission.
5
III. Financial Analysis

• Income Statement Discussion Points
• Net Revenue decreased approximately 18 over
  Q12000, and decreased 32 over Q42000
• Gross profit margin increased 1.5 of sales
  over Q12000, and decreased 2.5 of sales over
  Q42000
• Research and development expenses decreased 13
  over Q12000, and decreased 17 over Q42000
• Selling, general and administrative expenses
  increased 8 over Q12000, and decreased 11
  over Q42000

6
III. Financial Analysis (continued)
Balance Sheet Discussion Points

• Cash and cash equivalents of approximately 7.3
  million at March 31, 2001
• Current Ratio of approximately 5 to 1 at March
  31, 2001
• Working capital of approximately 13 million
• Series B Convertible Preferred Stock - no
  conversions occurred since year- end conference
  call
• Summary of Aggregate Series B Conversions to
  Date
• February 2000 - 250 Preferred Shares converted
  into 372 thousand Common Shares
• January 2001 - 152 Preferred Shares converting
  into 862 thousand Common Shares

7
IV. Overview of Significant Q1 2001
Events New Revenue-Generating Strategic
Alliances - Far-Field Digital Audio
Technologies Clever Devices Ltd. selects
Andreas Microphone Array Technology for its
SpeakEasy II Mass Transit Base
Communications System Technology
Developments - Andrea Introduces
Second-Generation Digital Auto Array
Microphone at 2001 International CES - Andrea
Announces Patent for its Digital
Super Directional Array Technology
(DSDA?) - Andrea Announces Patent Issued for
its Direction Finding and Tracking Array
Technology (DFTA ?)
8
V. Overview of Post Q1 2001 Significant
Event Andrea Engages Dain Rauscher Wessels
(DRW) as its Financial Advisor to Assist in
Execution of its Strategy and to Maximize
Shareholder Value
9
VI. Comparison of Year-to-Date Achievements
with Goals for 2001 A. Minimize Need for
External Capital B. Execute Revenue Generating
Digital Audio Technology Strategic
Alliances C. Other Goals D. Investment
Highlights / Conclusions
10
VI. Comparison of Year-to-Date Achievements
with Goals for 2001 (continued) A. Minimize
Need for External Capital Sources 1. Goal
15-25 Predictable Top-Line Revenue
Growth Strategy Refocus on Brick and
Mortar Businesses Year-to-Date Results
Short of Goal Annual Goal Remains Observatio
ns Revenue in first half of year is
typically lower than second half of
year Backlog in aircraft communications is
strong Recently re-awarded the majority of
the IBM business 2. Goal Cost
Reduction Program - Reduce Operating
Expenses by 4 million annually Strate
gy Reduction in Force Detailed Review
of Operating Expenses Reduction in
Executive Compensation Year-to-Date Results
3 Million of annualized savings
11
VI. Comparison of Year-to-Date Achievements
with Goals for 2001 (continued) B. Execute
Revenue Generating Phase Digital Audio Technology
Strategic Alliances
TOTALS
Phase I Strategic Alliance Pipeline as of March,
2001
17
Phase I Strategic Alliance Pipeline as of May,
2001
15
NET CHANGE
0
-1 (Dormant)
-1 (Dormant)
Moved to Phase II
2
Phase I - Assessment
12
VI. Comparison of Year-to-Date Achievements
with Goals for 2001 (continued) B. Execute
Revenue Generating Digital Audio Technology
Strategic Alliances
TOTALS
Phase II Strategic Alliance Pipeline as of
March, 2001
7
Phase II Strategic Alliance Pipeline as of May,
2001
8
NET CHANGE
2
-1
Clever Devices
Phase II - Integration / Business Relationship
13
VI. Comparison of Year-to-Date Achievements
with Goals for 2001 (continued) B. Execute
Revenue Generating Digital Audio Technology
Strategic Alliances
Status of Phase II Strategic Alliances as of May,
2001
POTENTIAL ANNOUNCEMENT MARKET DESCRIPTION DATE
Automotive OEM/ Integrated DSDA Solution. Q3 /
Q4 2001 Tier One Supplier Electrical / Acoustic
testing completed. Preproduction units in
process. Discussions in process. Automotive OEM
/ Integrated DSDA solutions for two specific
platforms. Q4 2001 Tier One Supplier Multiple
prototypes being built. Additional testing
continues. Automotive OEM/ Integrated DSDA
Solution for model year Q3 1/2. In Q2 / Q3 2001
Tier One Supplier evaluation process.
14
VI. Comparison of Year-to-Date Achievements
with Goals for 2001 (continued) B. Execute
Revenue Generating Digital Audio Technology
Strategic Alliances (continued)
Status of Phase II Strategic Alliances as of May,
2001
POTENTIAL ANNOUNCEMENT MARKET DESCRIPTION DATE
PDA PDA front-end of large system aimed at the
medical Q4 2001 / 2002 market, pending
strategic channel partner Chip
Manufacturer License of specific algorithms.
Contracts exchanged. Q4 2001 / 2002 Royalty
negotiations protracted. May never reach
agreement. Aircraft Continued evaluation of
Digital Audio Technologies Q4 2001 /
2002 Internet Telephony Significant interest in
EchoStop?. Preliminary terms Q3 / Q4 2001
negotiated. Contract negotiations
continue. Hardware Manufacturer Sale of newly
designed far-field microphone for use with a
specific OEM laptop Q3 2001
15
VI. Comparison of Year-to-Date Achievements
with Goals for 2001 (continued)
C. Other Goals Goal Engage Investment Bank
by Q1 2001 to evaluate all alternatives to
maximize shareholder value. - Engaged Dain
Rauscher Wessels, April, 2001
16
VI. Comparison of Year-to-Date Achievements
with Goals for 2001 (continued)
D. Investment Highlights/Conclusions Institut
ional Ownership Insider Buying/Selling - No
sales by insiders - Purchases by John Andrea,
Chris Sauvigne and Gary Jones. High level of
interest and steady advancement of Digital Audio
Technologies in multiple markets, primarily
automotive telematics. Consummation of
Revenue Generating Strategic Alliances Involving
Digital Audio Technologies Companys
stock is trading near historic 5-year
low CONCLUSION Company is Undervalued.