UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

x  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended August 31, 2002

OR

o  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: 0-1460
**ANDERSEN GROUP, INC.

(Exact name of Registrant as specified in its charter)
**DELAWARE				**06-0659863**	

(State or other jurisdiction of incorporation or organization)                        (I.R.S. Employer Identification No.)

	
**405 Park Avenue, New York, New York 						10022**
   (Address of principal executive offices)					          (Zip Code)
**(212) 826-8942**
(Registrant's telephone number, including area code)

 

	Indicate by check mark whether the registrant (1) has filed all reports required to be 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 ____

 

As of October 15, 2002, there were 2,099,908 shares of the Registrant's $0.01 par value common stock outstanding.

Title	Outstanding

Common Stock, $0.01 par value per share	Authorized 6,000,000 shares; Issued 2,099,908 

 

 

 

 

 

ANDERSEN GROUP, INC.

FORM 10-Q

TABLE OF CONTENTS

 

Page No.

Part I - Financial Information

Item 1 - Financial Statements:

	Consolidated Condensed Balance Sheets							

			August 31, 2002 and February 28, 2002					      3

		Consolidated Condensed Statements of Operations for the					

		Three and Six Months Ended August 31, 2002 and 2001			      4

	Consolidated Condensed Statements of Cash Flows for the					

		     	Six Months Ended August 31, 2002 and 2001				      5

	

		Notes to Consolidated Condensed Financial Statements				      6

Item 2 - Management's Discussion and Analysis of

		     	Financial Condition and Results of Operations				    10

     	Item 3 - Quantitative and Qualitative Disclosures About Market Risk				    13

	Item 4 - Controls and Procedures								    13

 

Part II - Other Information

	Item 1 - Legal Proceedings								    14

	Item 6 - Exhibits and Reports on Form 8-K							    14

Signatures										    	    16

 

 

 

 

 
**Part I.  Financial Information

Item 1.  Financial Statements**
ANDERSEN GROUP, INC.

Consolidated Condensed Balance Sheets

(In thousands)

(unaudited)
    
August 31, 2002
February 28, 2002**ASSETS  *Current assets: 

   Cash and cash equivalents
$ 8,859
$ 1,152
   Marketable securities
619
455
   Accounts and other receivables less  
     allowances of $14 and $96, respectively
83
3,820
   Inventories
-
23
   Prepaid expenses and other assets
86
      648
   Deferred income taxes
175
-
   Net assets held for sale
          -
   6,974
     Total current assets
9,822
13,072
Property, plant and equipment, net
3,519
3,632
Prepaid pension expense
4,434
4,775
Investment in Moscow Broadband Communication Ltd.
2,343
2,683
Other assets
   1,060
      913 
$21,178
$25,075   **LIABILITIES AND STOCKHOLDERS' EQUITY  *Current liabilities:  
   Current maturities of long-term debt
$     370
$     435
   Short-term borrowings
-
2,366
   Accounts payable
148
1,041
   Other current liabilities
1,547
1,712
   Deferred income taxes
          -
     156
     Total current liabilities
2,065
5,710   
Long-term debt, less current maturities
2,158
2,158
Other liabilities
901
1,842
Deferred income taxes
   1,831
   1,614   
     Total liabilities
   6,955
 11,324
Commitments and contingencies     *Stockholders' equity:  
   Cumulative convertible preferred stock
3,497
3,497
   Common stock
21
21
   Additional paid-in capital
6,653
6,574
   Retained earnings
    4,052
    3,659
     Total stockholders' equity
  14,223
  13,751 
$21,178
$25,075
The accompanying notes are an integral part of these consolidated condensed financial statements.

ANDERSEN GROUP, INC.

Consolidated Condensed Statements of Operations

(In thousands, except per share data)

(unaudited)

 
 
Three months ended
Six months ended
August 31, 2002
August 31, 2001
August 31, 2002
August 31, 2001
Revenues    
 Investment and other income
$   90
$101
$  286
$    391      
Costs and expenses:    
   Selling, general and administrative
750
321
1,296
861
   Interest expense
     67
   102
    136
      206      
   817
   423
 1,432
   1,067
Loss from continuing operations 

  before equity in losses of  unconsolidated 

  subsidiary and income taxes 
 

    (727)
 

(322)
(1,146)
 

      (676)
Equity in losses of Moscow 

  Broadband Communication Ltd.
 (172)
 (204)
   (340)
    (411)
Net loss from continuing operations before 

  income taxes
    (899)
      (526)
(1,486)       
    (1,087)
Income tax benefit 
 (263)
   (82)
  (416)
    (230)     
Net loss from continuing operations
(636)
        (444)
(1,070)
    (857)
Discontinued operations (Note 2):

  (Loss) income from discontinued segment, 

   net of income taxes (benefit) of $0; ($83); 

   $80 and $435, respectively
 

 

-
 

 

(135)
 

 

132
 

 

662
  Gain on sale of discontinued segment, net   

   of income taxes of $686
       -
       -
 1,472
          -     
Net (loss) income
(636)
        (579)
534
    (195)
Preferred dividends
   (70)
   (73)
   (141)
    (146)     
(Loss) income applicable to common 

 shares
$ (706)
$ (652)
$  393
$  (341)     
(Loss) earnings per common share:

Basic and diluted:    
Net loss from continuing operations
$(0.34)
$(0.25)
$(0.58)
$ (0.48)
(Loss) income from discontinued operations
-
(.06)
0.06
0.32
Gain on sale of discontinued operations
         -
         -
   0.70
          -      
$(0.34)
$(0.31)
$ 0.18
$ (0.16)     
The accompanying notes are an integral part of these condensed consolidated financial statements.

 

ANDERSEN GROUP, INC.

Consolidated Condensed Statements of Cash Flows

(In thousands)

(unaudited)

				                            				    Six months ended  
August 31, 2002
August 31, 2001***Cash flows from operating activities:  
Net income (loss)
$   534
              $  (195)*Adjustments to reconcile net (loss) income to net cash  *provided by (used in) operating activities:  
     Equity in losses of Moscow Broadband Communication Ltd.
340
                   411
     Gain on sale of JM Ney's operating assets
(1,472)
-
     Gain on settlement of retiree healthcare liability
(142)
-
     Depreciation, amortization and accretion
176
                   845
     Deferred income taxes
(142)
                   206
     Pension (income) expense 
(108)
                     48
     Net (gains) losses from marketable securities
(105)
                       7
     Purchases of marketable securities
(200)
                    (77)
     Proceeds from sales of marketable securities
141
                     19*Changes in operating assets and liabilities, net of changes from the sale of JM Ney's net assets:  
     Accounts and other receivables
3,737
  1,479
     Inventories
(419)
  4,242
     Prepaid expenses and other assets
583
      121
     Accounts payable
(893)
     (356)
     Accrued liabilities and other long-term obligations
(1,065)
     (591)
	Net cash provided by operating activities
    965
   6,159   ***Cash flows from investing activities:  
     Proceeds from sale of net assets of J.M. Ney, net of escrow
10,390
-
     Transaction expenses paid
(941)
-
     Purchases of property and equipment, net
       (9)
    (134)
	Net cash provided by (used in) investing activities
 9,440
    (134)   ***Cash flows from financing activities:  
     Principal payments on long-term debt
(65)
  (6,247)
     Repayment of short term borrowings, net
(2,366)
    (300)
     Purchase of subsidiary warrants
(160)
-
     Stock options exercised
34
       4
     Preferred dividends paid 
   (141)
    (149)   
	Net cash used in financing activities
(2,698)
 (6,692)   
     Net decrease in cash and cash equivalents
7,707
   (667)
  
     Cash and cash equivalents - beginning of period
  1,152
  1,217   
     Cash and cash equivalents - end of period
$8,859
$   550   
 

The accompanying notes are an integral part of these consolidated financial statements.

 

ANDERSEN GROUP, INC.

Notes to Consolidated Condensed Financial Statements (unaudited)

(1)	Accounting Policies
The accompanying unaudited interim condensed financial statements and related notes should be read in conjunction with the audited Consolidated Condensed Financial Statements of Andersen Group, Inc. (the "Company") and related notes as contained in the Annual Report on Form 10-K for the fiscal year ended February 28, 2002.  The interim condensed financial statements include all adjustments (consisting only of normal recurring adjustments) and accruals necessary in the judgment of management for a fair presentation of such statements.  In addition, certain reclassifications of the consolidated balance sheet as of February 28, 2002 and the consolidated statement of operations for the three and six months ended August 31, 2001 to reflect The J.M. Ney Company ("JM Ney") as a discontinued operation under Statement of Financial Accounting Standards No. 144 due to the sale of its operating assets effective March 22, 2002, have been made so that it conforms to the current period presentation.

(2)	Discontinued Operations - Sale of Assets of JM Ney
Effective March 22, 2002, the Company sold the operating assets of JM Ney to Deringer Mfg. Company ("Deringer") for which it received approximately $10,990,000, of which $600,000 was placed in an escrow account to satisfy potential claims relating to inventory and representations made by the Company to Deringer.  The Company has recorded a gain of $1,472,000 from this sale, after estimated income taxes of $686,000. The following summarizes the elements of the transaction (in thousands):

Proceeds
$10,990
Book value of net assets sold
(7,368)
Expenses of transaction
(1,540)
Curtailment gain - pension plan
         76
Income taxes
     (686)  
Net gain on sale
 $ 1,472

Transaction expenses related to the sale of JM Ney are as follows (in thousands):

Settlement of JM Ney stock options
$   275
Severance and bonuses
750
Legal and accounting
365
Other
   150  
Total transaction expenses
$1,540

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For the three and six month periods ended August 31, 2002 and 2001, JM Ney's summarized results of operations were as follows (in thousands):
 
Three Months Ended August 31, 
Six Months Ended August 31, 
2002
2001 
2002
2001      
Net sales and other revenues
$    -
$7,408 
$1,298
$15,506
Cost of sales
-
(6,192) 
(744)
(11,331)
Operating expenses
      -
 (1,179) 
  (333)
  (2,526)      
Operating income
-
37 
221
1,649
Interest expense
      -
    (255) 
     (9)
    (505)      
Net income before income taxes
-
(218) 
212
1,144
Income tax expense
      -
      (83) 
    80
    (435)      
Net income before cumulative effect accounting adjustment
-
(135) 
132
709
Cumulative effect accounting adjustment, net of income taxes
     -
        - 
      - 
 (47)      
Net income (loss)
$   -
$ (135) 
$ 132
$ 662
The February 28, 2002 consolidated balance sheet has been reclassified to reflect the net assets of JM Ney which were held for sale, as follows (in thousands):

  
Inventory
$4,144
Prepaid expenses and other current assets
182
Property, plant and equipment, net
2,732
Other assets
110
Other current liabilities
   (194)  
Total
$6,974

(3) 	Investment in Moscow Broadband Communication Ltd.
The Company records its investment in Moscow Broadband Communication Ltd. ("Moscow Broadband") 

using the equity method of accounting.  Moscow Broadband has a December 31 year end and, as a result, the Company's equity in Moscow Broadband's results is reported on a two month lag.  For the six months ended August 31, 2002 and 2001, the Company recorded losses of $340,000 and $411,000, respectively, which represent its 25% interest in Moscow Broadband's losses of $1,361,000 and $1,644,000 for the six months ended June 30, 2002 and 2001, respectively.  These losses include Moscow Broadband's 50% equity interest in the losses of ZAO ComCor-TV ("ComCor-TV"), a Russian company which delivers cable television, high speed data transmission and Internet services to its subscribers, for the same periods.

At August 31, 2002, the carrying value of the Company's investment in Moscow Broadband was $2,343,000, and the Company's 25% equity interest in the net assets of Moscow Broadband was $2,724,000.  The $381,000 difference is attributed to a non-depreciable asset that was contributed to ComCor-TV and will not result in the Company accreting the difference into its consolidated results of operations.

The following presents summarized financial information for Moscow Broadband as of June 30, 2002 and December 31, 2001 and its results of operations for the three and six month periods ended June 30, 2002 and 2001 (in thousands):

 

 

 

 

 

 

 

 
 June 30, 2002
December 31, 2001
Balance Sheet Data  
     Current assets
$  1,350
$  4,353
     Noncurrent assets
    9,701
    8,040   
     Total assets
$11,051
$12,393   
     Accounts payable and accrued liabilities
$     155
$     137
     Stockholders' equity
  10,896
  12,256   
     Total liabilities and stockholders' equity
$11,051
$12,393
 
Three Months Ended June 30,  
Six Months Ended June 30, 
2002
2001 
2002
2001
Statement of Operations Data     
     Net loss before equity in losses of ComCor-TV
$(166)
$(184) 
$   (281)
$   (387)
     Equity in losses of ComCor-TV
(523)
(631) 
(1,080)
 (1,257)      
     Net loss
$(689)
$(815) 
$(1,361)
$(1,644)
The following presents summarized financial information for ComCor-TV as of June 30, 2002 and December 31, 2001 and for the three and six month periods ended June 30, 2002 and 2001 (in thousands):

						
 
June 30, 2002
December 31, 2001
Balance Sheet Data  
 	Current Assets
$  3,220
$  2,930
	Non-Current Assets
15,123
14,850   
	Total assets
$18,343
$17,780   
	Current liabilities
$  1,484
$  3,631
	Non-current liabilities and minority interest
  1,994
  2,124
	Stockholder's equity
14,865
12,025   
              Total liabilities and stockholders' equity
$18,343
$17,780
 
Three Months Ended June 30, 
Six Months Ended June 30, 
2002
2001 
2002
2001
Statement of Operations Data     
  Revenues
$    430
$    244 
x
$    865
$    485
  Cost of revenues, including 

    amortization of intangibles
$   (862)
$   (722)         
$(1,653)
$(1,513)
  Loss from operations
$(1,072)
$(1,331)  
$(2,224)
$(2,701)
  Net loss
$(1,047)
$(1,263)
$(2,160)
$(2,513)

 

(4)	ComCor-TV and Moscow Broadband Transactions
In April 2002, as amended in September 2002, the Company entered into agreements, subject to shareholder and regulatory approvals, pursuant to which the Company will acquire the 50% equity ownership of ComCor-TV presently owned by Moscow Telecommunications Company ("COMCOR") in exchange for 4,000,000 shares of the Company's common stock. The agreements require COMCOR to contribute defined operating assets and additional shares of The Institute for Automated Systems ("IAS") to ComCor-TV which occurred in July 2002.  In order to complete this transaction, the Company is required to acquire substantially all of the outstanding shares of Moscow Broadband that it currently does not own and to contribute Moscow Broadband's remaining shares of IAS and approximately $16.7 million of cash to ComCor-TV, of which $5 million was contributed by Moscow Broadband in May 2002. ComCor-TV is currently dependent upon outside sources of capital.  Without the capital to be provided by COMCOR, Moscow Broadband and the Company pursuant to the acquisition agreements, ComCor-TV may not be able to continue as a going concern, which could otherwise have a significant adverse affect on the reported value of the Company's investment in Moscow Broadband.  As further discussed in Note 11, the Company's board of directors has recommended that the Company close on these proposed transactions only if prior to closing that the Company or Moscow Broadband shall have received commitments of $4 million or more of new capital.
The agreements entered into in April 2002, as amended, pursuant to which the Company plans to increase its ownership of ComCor-TV require the Company and Moscow Broadband to make cash capital contributions to ComCor-TV totaling approximately $16,7 million, of which approximately $5 million was paid by Moscow Broadband in May 2002. In order to meet these payment obligations, the Company expects to raise funds by (i) obtaining a loan secured by JM Ney's real estate, (ii) selling certain short term investments, or (iii) issuing shares of its stock or debt in a public or private offering, subject to the limitations contained in the acquisition agreements. The Company may also arrange for ComCor-TV or Moscow Broadband to raise funds through the issuance of equity securities, which, if successful, would result in the dilution of the Company's ownership of ComCor-TV.  However, depending on market conditions, such sources of cash may still be inadequate to meet the scheduled payments into ComCor-TV and still provide the Company with sufficient liquidity to meet its administrative expenses and debt service obligations.

(5)	Prepaid Pension Expense and Other liabilities
As a result of the sale of JM Ney's assets as discussed in Note 2, and the resultant decrease in work force, the Company recorded a curtailment gain of $76,000 relating to previously unrecognized prior service costs.  In addition, an actuarial gain of approximately $1,431,000 due to the reduction in the expected future pension benefits for plan participants has been recorded as an offset against previously unrecognized actuarial losses of the plan and, as a result, has not directly impacted the reported gain on sale.

In April 2002, the Company's defined benefit pension plan was amended to provide enhanced pension benefits to a group of retirees who previously had been receiving post-retirement health benefits from the Company.  The implementation of this plan amendment resulted in a net gain of $142,000 from the settlement of the post-retirement health liability and has been recorded as a reduction of general and administrative expenses in the Company's consolidated condensed statement of operations.

(6)	Income Taxes
Income tax expense represents an estimate of the effective income tax rate for the current fiscal year after considering valuation allowances with respect to the Company's ability to realize a tax benefit from its equity in the losses of Moscow Broadband.

(7)	Earnings  (Loss) Per Share
Earnings (loss) per share are computed based on the weighted average number of shares of common stock and common stock equivalents outstanding.  Diluted earnings per share assumes full conversion of all convertible securities into common stock at the later of the beginning of the year or date of issuance, unless antidilutive.   For the three and six month periods ended August 31, 2002 and 2001 the effect of the assumed conversion of the Company's dilutive securities had an antidilutive effect on the Company's per share results from continuing operations.

(8)	Business Segments and Export Sales
	

As discussed in Note 2, effective March 22, 2002, the Company sold the operating assets of JM Ney to Deringer.  The operations of JM Ney had comprised the Company's electronics segment.  As a result of the sale of these assets, the Company currently operates in one segment comprised of corporate, administrative and investment activities.

(9)	Litigation
The Company is involved in various legal proceedings generally incidental to its business.  The outcome of any litigation or regulatory issues contains an element of uncertainty.  Given the legal and factual issues that remain outstanding related to the Company's litigation, the Company currently has no basis to ascertain the range of loss, should any occur, with respect to an outcome that may be considered unfavorable.

 

(10)	Supplemental Disclosure of Cash Flow Information
During the six months ended August 31, 2001, the Company issued 11,323 shares of its common stock from the 

conversion of 5,825 shares of its cumulative convertible preferred stock.

(11)	Subsequent Event
On September 26, 2002, the Company filed a preliminary proxy statement on Schedule 14A with the Securities and Exchange Commission in which the Company's board of directors recommended the Company's purchase of the shares of ComCor-TV only if prior to the closing of the acquisition, the Company or Moscow Broadband shall receive commitments of $4 million or more of new capital. This $4 million capital commitment contingency represents the board's reassessment of the future capital requirements of the Company and its subsidiaries from the board of directors' original assessment of $5 million of additional capital disclosed in the Company's Current Report on Form 8-K filed on July 22, 2002.
** 

Item. 2  Management's Discussion and Analysis of Financial Condition and Results of Operations**
The accompanying Management's Discussion and Analysis of Financial Condition and Results of Operations ("MD&A") should be read in conjunction with the MD&A in the Company's Report on Form 10-K for the year ended February 28, 2002.

Overview

From February 1991 through March 22, 2002, the Company owned JM Ney as its primary operating subsidiary.  The operating assets of JM Ney were sold effective March 22, 2002, and from that date the Company has begun to liquidate JM Ney's net current assets that were not sold, including accounts receivable and certain inventory balances.

The Company holds a 25% ownership interest in Moscow Broadband which in turn, holds a 50% equity interest in ComCor-TV, a Russian company which delivers cable television, high-speed data transmission and Internet services to its subscribers.  ComCor-TV is a start-up venture which is currently expanding its network and increasing its customer base to those homes and businesses to which it presently has access.

In April 2002, as amended in September 2002, the Company entered into agreements which, subject to shareholder and regulatory approvals, will result in ComCor-TV being substantially wholly-owned by the Company through the purchase of the shares of ComCor-TV not presently owned by Moscow Broadband, and from the proposed purchase of substantially all of the shares of Moscow Broadband that the Company does not presently own.

Based upon the foregoing, the following discussion and analysis of the results of operations and the financial condition of the Company is not expected to be indicative of the Company's expectations of its future results of operations.

Critical Accounting Policies and Estimates

The MD&A discusses the Company's consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States.  The preparation of these financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.  On an on-going basis, management evaluates its estimates and judgments, including those related to product returns, bad debts, inventories, investments, income taxes, financing operations, retirement benefits, and contingencies and litigation.  Management bases its estimates and judgments on historical experience and on various other factors 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.  Actual results may differ from these estimates under different assumptions or conditions.

Management believes the following critical accounting policies, among others, affect its more significant judgments and estimates used in the preparation of its consolidated financial statements:  

 

Discontinued Operations

Under terms of the sale of JM Ney's operating assets, the Company remains exposed to losses from its inability to collect accounts receivable balances from returns of products shipped prior to the effective date of the sale of JM Ney's assets and from claims against the portion of the proceeds which are being held in escrow pending the satisfactory resolution of potential claims relating to certain inventories and representations made by the Company to Deringer.  The Company believes its reserves are adequate to meet these contingencies, but there can be no assurances until these matters have been fully resolved.

Deferred Tax Assets

The Company records a valuation allowance to reduce its deferred tax assets to the amount that it believes is more likely than not to be realized. The Company considers future taxable income and ongoing prudent and feasible tax planning strategies in assessing the need for the valuation allowance.  When the Company determines that it may not be able to realize all or part of its net deferred tax assets, a valuation allowance to reduce the deferred tax assets to estimated recoverable amounts is charged to income in the period such determination is made.  Likewise, should the Company determine that it would be able to realize its deferred tax assets in the future in excess of its net recorded amount, a reduction in the valuation allowance would increase income in the period such determination is made. 

Investment in Moscow Broadband

The Company records its investment in Moscow Broadband using the equity method which also requires that the carrying value of the investment be evaluated for impairment.   If ComCor-TV does not receive the planned increases to its equity capital or other sources of financing, the Company's carrying value of Moscow Broadband could be adversely impacted.

RESULTS OF OPERATIONS - SIX MONTHS ENDED AUGUST 31, 2002 VS. SIX MONTHS ENDED AUGUST 31, 2001

For the six months ended August 31, 2002 and 2001 the Company reported net (loss) income as follows (in thousands except per share amounts):
 
August 31, 2002 
August 31, 2001 
Amount
Per Share
Amount
Per Share
Net loss from continuing operations
$(1,211)
$(0.58)
$(1,003)
$(0.48)
Net income from discontinued operations
132
0.06
662
.32
Gain on sale of JM Ney
  1,472
   0.70
          -
        -       
$    393
$ 0.18
$    (341)
$(0.16)
Continuing Operations - Revenue

For the six months ended August 31, 2002, revenues totaled $286,000 as compared to $391,000 in the comparable period in the prior fiscal year.  Significant components of revenue are as follows (in thousands):

 
August 31, 2002
August 31, 2001
Investment gains
$105  
$  30
Rental income
136
178
Interest and dividends
69
14
Ultrasonic royalties
24
223
Change in deferred compensation accounts
    (48)
    (54)   
Total
$286
$391

Current year rental income was earned from the lease of JM Ney's former manufacturing facility effective March 23, 2002, while the prior year's rental income relates to a property which the Company sold in December 2001.

Continuing Operations - General and Administrative Expenses

General and administrative expenses from continuing operations increased 50.5% to $1,296,000 for the six months ended August 31, 2002, from $861,000 in the comparable period in the prior fiscal year. For the three months ended August 31, 2002, these expenses totaled $750,000, which was 133% more than the $321,000 of general and administrative expenses incurred in the comparable three-month period in the prior fiscal year.  Higher professional fees incurred in connection with the proposed acquisition of ComCor-TV and the preparation of regulatory reports in connection therewith, and depreciation expense on the JM Ney building which, prior to the sale of JM Ney's assets had been classified within cost of sales, were offset by a $142,000 gain from the settlement of retiree health care obligations through an amendment to the Company's deferred benefit pension plan.

Continuing Operations - Interest Expense

Interest expense from continuing operations for the six months ended August 31, 2002 decreased 34% to $136,000 from $206,000 during the comparable period in the prior fiscal year.  For the three months ended August 31, 2002, interest expense totaled $67,000, which represents a 34% decrease from the $102,000 of interest expense incurred in the comparable three-month period in the prior fiscal year.  The prior year's annual sinking fund payment of the Company's 10 1/2% convertible subordinated debenture and the repayment in the prior fiscal year of a note payable to the Company's president lowered average debt levels which resulted in the decrease in this expense.

Equity in Losses of Moscow Broadband

The Company's equity in the losses of Moscow Broadband decreased 17% to $340,000 in the six months ended August 31, 2002 from $411,000 in the comparable period of the prior fiscal year.  For the three months ended August 31, 2002, the Company's equity in Moscow Broadband's losses was $172,000, as compared to $204,000 equity in such losses for the comparable three-month period in the prior fiscal year.  Lower net operating costs at Moscow Broadband and lower losses at ComCor-TV contributed to lowering the level of losses.

Income Tax Expense

Income taxes have been accrued based upon estimated effective tax rates for the fiscal year, after considering valuation allowances related to the Company's ability to realize a tax benefit from its equity in the losses of Moscow Broadband.

Income from Discontinued Operations

During the six month period ended August 31, 2002, the Company owned JM Ney for only 22 days until its sale effective March 22, 2002.  JM Ney's results for that period produced net income of $132,000 after income taxes.  During the comparable period in the prior fiscal year, JM Ney's operations produced net income of $662,000 after income taxes.

Gain on Sale of JM Ney

The sale of JM Ney's net assets in March 2002 produced a gain of $1,472,000 after a provision for income taxes of $686,000.  The components of the selling price resulted in proceeds which were higher than book value for inventory and fixed assets, which were partially offset by expenses of the transaction.

 
**LIQUIDITY AND CAPITAL RESOURCES**
At August 31, 2002 consolidated cash and marketable securities totaled $9,475,000 as compared to $1,607,000 as of February 28, 2002.  The increase of $7,868,000 is primarily attributable to the receipt of proceeds from the sale of JM Ney's operating assets, and to the subsequent realization of much of JM Ney's net current assets that were not sold to the buyer of its operating assets. The Company's consolidated net current assets increased from $4,520,000 at February 28, 2002 to $7,757,000 as of August 31, 2002.

In April 2002, as amended in September 2002, the Company entered into agreements, subject to shareholder and regulatory approvals, under which the Company will acquire the 50% equity ownership of ComCor-TV presently owned by COMCOR in exchange for 4,000,000 shares of the Company's common stock.  The agreements require COMCOR to contribute defined operating assets and additional shares of IAS to ComCor-TV which occurred in July 2002.  In order to complete this transaction, the Company is required to acquire substantially all of the outstanding shares of Moscow Broadband that it currently does not own and to contribute additional cash and Moscow Broadband's remaining shares of IAS to ComCor-TV.  ComCor-TV is currently dependent upon sources of capital from third parties.  Without the capital to be provided by COMCOR, Moscow Broadband and the Company pursuant to the agreements, ComCor-TV may not be able to continue as a going concern, which could otherwise have a significant adverse affect on the reported value of the Company's investment in Moscow Broadband. 
For the balance of the current year and beyond, the Company is dependent upon its existing cash and short term investments and rental income from Deringer from the lease of JM Ney's manufacturing facility, to meet its operating expense, preferred dividend and debt service requirements. To the extent that such cash is used to fund additional investment activities of the Company, including, but not limited to investment in ComCor-TV, the Company will have fewer financial resources to meet such obligations.

The agreements entered into in April 2002, as amended, pursuant to which the Company plans to increase its ownership of ComCor-TV require the Company and Moscow Broadband to make cash capital contributions to ComCor-TV totaling approximately $16.7 million. Approximately $5 million of this amount was paid by Moscow Broadband in May 2002. The Company's board of directors has recommended that the Company close on the acquisition agreements only if prior to such closing of the acquisition the Company or Moscow Broadband shall have received commitments of $4 million or more of new capital.  In order to meet the payment obligations contained in the acquisition agreements and its own operating requirements, the Company expects to raise funds by obtaining a loan collateralized by JM Ney's real estate, by selling certain short term investments, or by issuing shares of its stock in a public or private offering, subject to the limitations contained in the acquisition agreements. The Company may also arrange for ComCor-TV or Moscow Broadband to raise funds, which, if successful, could result in the dilution of the Company's ownership of ComCor-TV.  However, depending on market conditions, such sources of cash may still be inadequate to meet the scheduled payments into ComCor-TV and still provide the Company with sufficient liquidity to meet its administrative expenses and debt service obligations.
**Item 3.  Quantitative and Qualitative Disclosures About Market Risk**
The Company is exposed to market risk from changes in equity security prices, certain commodity prices, interest rates and from factors that impact equity investments in Russia, as discussed in the Company's Annual Report on Form 10-K for the year ended February 28, 2002.  The following information is presented to update the status of the identified risks.

EQUITY SECURITY RISK

At August 31, 2002, the Company has equity risk with respect to $614,000 of investments in publicly traded financial institutions, and it also has an equity investment in a Ukraine based utility company with a reported value of $5,000.

FOREIGN INVESTMENT RISK

The Company has an investment in Moscow Broadband with a carrying value of $2,343,000.  Moscow Broadband's primary asset is an investment in ComCor-TV, a Moscow, Russia-based broadband cable operator licensed to provide video, Internet and telephony to up to 1.5 million homes and businesses in Moscow. All such investments bear the specific economic, currency and political risks of this region.

In April 2002, as amended September 2002, the Company entered into agreements which, subject to stockholder and regulatory approvals, will result in ComCor-TV being substantially wholly-owned by the Company.   The consummation of these transactions will increase the concentration of both foreign investment risk and the venture capital risk associated with a start-up company which is experiencing operating losses and requires the commitment of funds to meet the capital expenditure needs of its business plan.  Such transactions are also expected to significantly reduce the Company's liquidity as discussed in the Liquidity and Capital Resource section of Item 2 of this report.

INTEREST RATE RISK

The Company currently has no variable rate obligations and its borrowing costs are not exposed to changes in interest rates.
**Item 4.  Controls and Procedures**
As required by Rule 13a-15 under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), within the 90 days prior to the filing date of this report, the Company carried out an evaluation of the effectiveness of the design and operation of the Company's disclosure controls and procedures. This evaluation was carried out under the supervision and with the participation of the Company's management, including the Company's President and Chief Executive Officer along with the Company's Chief Financial Officer. Based upon that evaluation, the Company's President and Chief Executive Officer along with the Company's Chief Financial Officer concluded that the Company's disclosure controls and procedures are effective. There have been no significant changes in the Company's internal controls, or in other factors, which could significantly affect internal controls subsequent to the date the Company carried out its evaluation. 

Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in Company reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in Company reports filed under the Exchange Act is accumulated and communicated to management, including the Company's Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

 

 
**Part II.  Other Information****Item 1.  Legal Proceedings***Morton International, Inc. v. A.E. Staley Mfg. Co. et al. and Velsicol Chemical Corp. v. A.E. Staley Mfg. Co. et al*
As originally reported in the Company's Form 10-K for the year ended February 28, 1997, in July 1996, two companion lawsuits were filed in the United States District Court for the District of New Jersey, by various owners and operators of the Ventron-Velsicol Superfund Site ("Site").  The lawsuits, which were subsequently consolidated, were filed under the Comprehensive Environmental Resource Compensation and Liability Act ("CERCLA"), the Resource Conservation and Recovery Act, the New Jersey Spill Act and New Jersey common law, alleging that the defendants (over 100 companies, including JM Ney) were generators of certain wastes allegedly processed at the Site.  The lawsuits seek recovery of costs incurred and a declaration of future liability for costs to be incurred by the owners and operators in studying and remediating the Site. 

As further reported in the Company's Form 10-Q for the period ended November 30, 2001, this case was dismissed without prejudice and the plaintiffs' ability to reinstate their claims were limited for a minimum of three years.  If the plaintiffs reinstate the case, given the legal and factual issues that remain outstanding, the Company currently has no basis to ascertain the range of loss, should any occur, with respect to an outcome that may be considered unfavorable.  This contingent liability was not assumed by the buyer of JM Ney's net assets.

 
**Item 6.  Exhibits and Reports on Form 8-K**- Exhibits required by Item 601 of Regulation S-K:

Exhibit 		Description
Exhibit 11		Statement re: Computation of Per Share Earnings.

 

Exhibit 99.1	Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

Exhibit 99.2	Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
Reports on Form 8-K:  During the three months ended August 31, 2002, the Company filed the following reports on Form 8-K:
On June 25, 2002, the Company reported Regulation FD disclosure information relating to a presentation by the Company at which the Company discussed the status of its acquisition relating to CCTV's services and projected information relating to the Company and CCTV.

On July 3, 2002, the Company reported that it will offer 150 shares of its common stock for each share of Moscow Broadband stock it does not own, which could result in the issuance of 2,250,000 shares of its common stock.

On July 22, 2002, the Company reported that subject to the closing conditions being met, offer for shares of Moscow Broadband to include any shares issued by Moscow Broadband that may be issued pursuant to a MBC Rights Offering which was being conducted with the objective of raising up to $5,000,000 at $800 per share.

The Company also reported that its Board had stated that the completion of the purchase of the 50% of CCTV not held by Moscow Broadband would be contingent upon approximately $5,000,000 of additional capital being raised, including any amounts that may be raised pursuant to the MBC Rights Offering.
On July 24, 2002 the Company disclosed certain information which was presented on the present state and the future of broadcast communications in Moscow, including information specific to CCTV's plans and projections.

On August 2, 2002, the Company reported that it has agreed to extend its Exchange Offer to new shares that may be issued pursuant to the revised terms of the MBC Rights Offering in which up to 6,667 shares of MBC stock may be issued at $750 per share.

The Company also disclosed certain projections regarding the financial operating plan of CCTV.
	Subsequent 8-K filing:
On September 4, 2002, the Company reported that it had reached agreement to amend the terms of its planned acquisition of 50% of the outstanding stock of ComCor-TV for a fixed number of shares.  Pursuant to the amendment, the provision that the Company would issue $28 million of its common stock for the COMCOR  shares has been replaced with 4,000,000 shares. 

 

 

 

 

	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.

 

ANDERSEN GROUP, INC.

By:	/s/ Oliver R. Grace, Jr.
	Oliver R. Grace, Jr.

	President and Chief Executive Officer

Date:	October 15, 2002

 

 

By:	/s/ Andrew M. O'Shea
	Andrew M. O'Shea

	Chief Financial Officer

	

Date:	October 15, 2002
**CERTIFICATIONS**
I, Oliver R. Grace, Jr., President and Chief Executive Officer of Andersen Group, Inc., certify that:
I have reviewed this quarterly report on Form 10-Q of Andersen Group, Inc.;

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 quarterly report;

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 quarterly report;

The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

designed such disclosure controls and procedures 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 quarterly report is being prepared;

evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and 

presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

The registrant's other certifying officer and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function):

all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and 

any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and

The registrant's other certifying officer and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

 

 

Date: October 15, 2002

						/s/ Oliver R. Grace, Jr.		
						Oliver R. Grace, Jr., 

						President and Chief Executive Officer 

I, Andrew M. O'Shea, Chief Financial Officer of Andersen Group, Inc., certify that:
I have reviewed this quarterly report on Form 10-Q of Andersen Group, Inc.;

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 quarterly report;

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 quarterly report;

The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

designed such disclosure controls and procedures 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 quarterly report is being prepared;

evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and 

presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

The registrant's other certifying officer and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function):

all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and 

any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and

The registrant's other certifying officer and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

 

 

Date: October 15, 2002

						/s/ Andrew M. O'Shea		
						Andrew M. O'Shea, 

						Chief Financial Officer 

 

 

 

Exhibit 11

ANDERSEN GROUP, INC.

Statement Re: Computation of Per Share Earnings 

(In thousands, except per share data)

 

 

 

Calculation of basic earnings
Three Months Ended August 31, 2002
Three Months Ended

August 31, 2001
Six Months Ended August 31, 2002
Six Months Ended  August 31, 2001
   per share:    
Numerator for basic and diluted earnings 

   per share:         
Net (loss) income
$(706)
$ (652)
$393
$(341)     
Denominator for basic earnings per share:    
Weighted average number of shares      

   Outstanding during the period
2,100
2,078
2,100
2,075
    
Effect of dilutive securities 
        - (a)
        -   (a)
       - (a)
        -  (a)     
Denominator for diluted earnings per share
2,100
  2,078
2,100
 2,075     
Basic earnings per share
$(0.34)
$(0.31)
$0.18 
$(0.16)     
Diluted earnings per share
$(0.34)
$(0.31)
$0.18
$(0.16)
 

 

 

 

(a)	For each of the three and six month periods ended August 31, 2002 and 2001, the effect of outstanding stock options, or the assumed conversion of subordinated convertible notes or cumulative preferred stock, were anti-dilutive based upon the effects that the inclusion of the common stock equivalents would have had on the Company's reported results from continuing operations.

 

Exhibit 99.1
**CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002**
 

In connection with the Quarterly Report of Andersen Group, Inc. (the "Company") on Form 10-Q for the period ended August 31, 2002 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Oliver R. Grace, Jr., President and Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

October 15, 2002					

	/s/  Oliver R. Grace, Jr.
			Oliver R. Grace, Jr.

								President and Chief Executive Officer

 

Exhibit 99.2
**CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002**
 

In connection with the Quarterly Report of Andersen Group, Inc. (the "Company") on Form 10-Q for the period ended August 31, 2002 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I Andrew M. O'Shea, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

October 15, 2002							/s/ Andrew M. O'Shea

							Andrew M. O'Shea 

								Chief Financial Officer***********************