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 May 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 June 17, 2002, there were 2,099,084 shares of the Registrant's $.01 par value common stock outstanding.

Title	Outstanding

Common Stock, $0.01 par value per share	Authorized 6,000,000 shares; Issued 2,099,084

 

 

 

 

 

 

 

 

ANDERSEN GROUP, INC.

FORM 10-Q

TABLE OF CONTENTS

 

Page No.

Part I - Financial Information

Item 1 - Financial Statements (unaudited):

	Consolidated Condensed Balance Sheets								

			May 31, 2002 and February 28, 2002					      3

		Consolidated Condensed Statements of Operations for the						

		Three Months Ended May 31, 2002 and 2001				      4

	Consolidated Condensed Statements of Cash Flows for the						

		     	Three Months Ended May 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				      9

     	Item 3 -  Quantitative and Qualitative Disclosures About Market Risk				    12

 

Part II - Other Information

	Item 1 - Legal Proceedings								    13

	Item 4 - Submission of Matters to a Vote of Security Holders					    13

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

 

Signatures										    	    15

 

 

 

 

 
**Part I.  Financial Information

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

Consolidated Condensed Balance Sheets

(In thousands)

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

   Cash and cash equivalents
$ 9,632
$ 1,152
   Marketable securities
      738
455
   Accounts and other receivables less  
     allowances of $31 and $96, respectively
  302
3,820
   Inventories
  -
23
   Prepaid expenses and other assets
     111
      648
   Deferred income taxes
151
-
   Net assets held for sale
           -
   6,974
     Total current assets
10,934
13,072
Property, plant and equipment, net
  3,578
3,632
Prepaid pension expense
  4,356
4,775
Investment in Moscow Broadband Communication Ltd.
  2,515
2,683
Other assets
    1,131
       913 
$22,514
$25,075   **LIABILITIES AND STOCKHOLDERS' EQUITY  *Current liabilities**:**  
   Current maturities of long-term debt
$   377
$     435
   Short-term borrowings
         -
2,366
   Accounts payable
     209
1,041
   Other current liabilities
  1,978
1,712
   Deferred income taxes
        -
     156
     Total current liabilities
  2,564
5,710   
Long-term debt, less current maturities
  2,158
2,158
Other liabilities
  980
1,842
Deferred income taxes
  1,883
   1,614   
     Total liabilities
  7,585
 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
   4,758
    3,659
     Total stockholders' equity
  14,929
  13,751
 
$22,514
$25,075
The accompanying notes are an integral part of these consolidated financial statements.

 

ANDERSEN GROUP, INC.

Consolidated Condensed Statements of Operations

(In thousands, except per share data)

(unaudited)

								                 Three months ended 

May 31, 2002	          May 31, 2001***Revenues:  
   Investment and other income 
 $196
$    290    
   196
     290   ***Costs and expenses:  *General and administrative
546
540
   Interest expense
     69
    104    
   615
    644   
Loss from continuing operations before equity in losses of Moscow 

 Broadband Communication Ltd., and income taxes 

 

(419)
(354)
Equity in losses of Moscow Broadband Communication Ltd.
  (168)
   (207)   
Net loss from continuing operations before income taxes 
(587)
(561)
Income tax benefit 
   153
    148   
Net loss from continuing operations
  (434)
   (413)   ***Discontinued operations (Note 2):  
Income from discontinued segment, net of income taxes of $80 and 

 $518, respectively
132
   797   
Gain on sale of discontinued segment, net of income taxes of $686
  1,472
        -   
Net income
1,170
384
Preferred dividends
     (71)
   (73)   
Income applicable to common shares
$1,099
$ 311   ***Earnings per common share:  
   Basic and diluted  
	Net loss from continuing operations   
$(0.24)
$(0.23)
	Income from discontinued operations
0.06
0.38
	Gain on sale of discontinued operations
  0.70
         -   
	
$0.52
$0.15   
The accompanying notes are an integral part of these consolidated financial statements.

ANDERSEN GROUP, INC.

Consolidated Condensed Statements of Cash Flows

(In thousands)

(unaudited)
 
Three Months Ended 
May 31, 2002
May 31, 2001***Cash flows from operating activities:  
Net income  
$1,170
$    384   *Adjustments to reconcile net income  to net cash  *provided by (used in) operating activities:  
     Equity in losses of Moscow Broadband Communication Ltd.
168
207
     Gain on sale of JM Ney's operating assets
(1,472)
-
     Gain on settlement of retiree healthcare liability
(142)
-
     Depreciation, amortization and interest accretion
114
407
     Deferred income taxes
(66)
411
     Pension (income) expense 
(30)
24
     Net gains from marketable securities
(83)
(23)
     Purchases of marketable securities
(200)
(78)   *Changes in operating assets and liabilities, net of changes from the sale of JM Ney's net assets:  
     Accounts and other receivables
3,518
473
     Inventories
(419)
754
     Prepaid expenses and other assets
559
52
     Accounts payable
(832)
(254)
     Accrued liabilities and other long-term obligations
 (1,008)
   (263)   
     	Net cash provided by operating activities
   1,277
 2,094   ***Cash flows from investing activities:  
     Proceeds from sale of net assets of JM Ney, net of escrow
10,390
-
     Transaction expenses paid
(557)
-
     Purchases of property and equipment
        (9)
     (77)
	Net cash provided by (used in) investing activities
  9,824
     (77)   ***Cash flows from financing activities:  
     Principal payments on long-term debt 
(58)
(27)
     Repayment of secured note to officer
-
(200)
     Repayment of short-term borrowings, net
(2,366)
(1,500)
     Purchase of subsidiary warrants
(160)
-
     Stock options exercised
34
4
     Preferred dividends paid 
      (71)
       (73)   
	Net cash used in financing activities
 (2,621)
  (1,796)
     Net increase in cash and cash equivalents
8,480
221
  
     Cash and cash equivalents - beginning of period
   1,152
   1,217   
     Cash and cash equivalents - end of period
$ 9,632
$ 1,438
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 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 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 months ended May 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:

Settlement of JM Ney stock options
$275
Employee severance
575
Bonuses
175
Legal and accounting
365
Other
   150  
Total transaction expenses
$1,540

For the three month period ended May 31, 2002 and 2001, JM Ney's summarized results of operations were as follows (in thousands):

 
Three Months ended May 31, 
2002
2001
Net sales and other revenues
$1,298
$8,098
Cost of sales
(744)
(5,139)
Operating expenses
    (333)
 (1,347)   
Operating income
221
1,612
Interest expense
        (9)
   (250)   
Net income before income taxes
212
1,362
Income tax expense
      (80)
   (518)   
Net income before cumulative effect accounting adjustment
132
844
Cumulative effect accounting adjustment, net of income taxes
          -
     (47)   
Net income
$   132
$   797

The February 28, 2002 balance sheet has been reclassified to reflect the sale of net assets of JM Ney which include the following:

Inventory
$4,144
Prepaid expenses and other current assets
182
Property, plant and equipment, net
2,132
Other assets
110
Other current liabilities
   (194)   
$6,374

(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 three months ended May 31, 2002 and 2001, the Company recorded losses of $168,000 and $207,000, respectively, which represent its 25% interest in Moscow Broadband's losses of $672,000 and $829,000 for the three months ended March 31, 2002 and 2001, respectively.  These losses include Moscow Broadband's 50% equity interest in the losses of ZAO ComCor-TV ("ComCor-TV") for the same periods.

At May 31, 2002, the carrying value of the Company's investment in Moscow Broadband was $2,515,000, and the Company's 25% equity interest in the net assets of Moscow Broadband was $2,896,000.  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 March 31, 2002 and December 31, 2001 and its results of operations for the three months ended March 31, 2002 and 2001 (in thousands):

 
 March 31,
December 31, 
        2002    
        2001      
Balance Sheet Data  
     Current assets
$  4,264
$  4,353
     Noncurrent assets
    7,483
    8,040   
     Total assets
$11,747
$12,393   
     Accounts payable and accrued liabilities
$     162
$     137
     Shareholders' equity
  11,585
  12,256   
     Total liabilities and shareholders' equity
$11,747
$12,393    
Three months ended March 31, 
2002
2001
Statement of Operations Data  
     Net loss before equity in losses of ComCor-TV
$(115)
$(203)
     Equity in losses of ComCor-TV
  (557)
  (626)   
     Net loss
$(672)
$(829)

The following presents summarized financial information for ComCor-TV as of March 31, 2002 and December 31, 2001 and for the three months ended March 31, 2002 and 2001 (in thousands):

 

 

 

 

 
March 31,

         2002
December 31,

             2001
Balance Sheet Data  
 	Current Assets
$  4,656
$  2,930
	Non-Current Assets
12,200
14,850   
	Total assets
$16,856
$17,780   
	Current liabilities
$  3,874
$  3,631
	Non-current liabilities and minority 

                interest
  2,070
  2,124
	Stockholder's equity
10,912
12,025   
              Total liabilities and shareholders' equity
$16,856
$17,780

    
Three Months Ended March 31, 
2002
2001
Statement of Operations Data  
	Revenues
$  435
$     241
	Cost of revenues, including 

 	  amortization of intangibles
(863)
(523)
	Loss from operations
(1,152)
(1,370)
	Net loss
(1,113)
(1,253)

 

(4)	ComCor-TV and Moscow Broadband Transactions
In April 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 approximately $28 million of the Company's common stock.  The number of shares to be issued to consummate this transaction will be determined based upon the average price of the Company's stock during a defined period prior to the closing of the transaction, provided the average price is between $8 and $12 per share. The agreements require COMCOR to contribute defined operating assets and additional shares of The Institute for Automated Systems ("IAS") to ComCor-TV.  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 additional sources of capital.  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. 
The agreements entered into in April 2002 pursuant to which the Company plans to increase its ownership of ComCor-TV through the issuance of shares of its common stock for the 50% of ComCor-TV presently owned by COMCOR and for the 75% of Moscow Broadband that it does not presently own, require the Company and Moscow Broadband to make cash capital contributions into ComCor-TV totaling approximately $16,700,000, of which approximately $5,000,000 was paid by Moscow Broadband in May 2002. In order to meet these payment obligations, 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. The Company may also reduce its obligation by arranging for a financing of ComCor-TV or Moscow Broadband, 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.

During the period ended May 31, 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 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 common and common equivalent shares 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 months periods ended May 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.

(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 three months ended May 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.

 
**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.

During the three months ended May 31, 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 50% 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 determination of the realization of representations and warranties.  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 - THREE MONTHS ENDED MAY 31, 2002 VS. THREE MONTHS ENDED MAY 31, 2001

For the three months ended May 31, 2002 and 2001 the Company reported net income as follows (in thousands except per share amounts):
 
May 31, 2002 
May 31, 2001 
Amount
Per Share
Amount
Per Share
Net loss from continuing operations
$ (505)
$(0.24)
$(486)
$(0.23)
Net income from discontinued operations
132
0.06
797
.38
Gain on sale of JM Ney
1,472
   0.70
        -
        -      
$1,099
$ 0.52
$ 311
$ 0.15
Continuing Operations - Revenue

For the three months ended May 31, 2002, revenues totaled $196,000 as compared to $290,000 in the comparable period in the prior fiscal year.  Significant components of revenue are as follows (in thousands):

 
May 31, 2002
May 31, 2001
Investment gains
$  83
$  23
Rental income
59
96
Interest and dividends
17
5
Ultrasonic royalties
14
134
Change in deferred compensation accounts
    23
    32    
$196
$290

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 1% to $546,000 for the three months ended May 31, 2002, from $540,000 in the comparable period in the prior fiscal year. Higher professional fees incurred in connection with the proposed acquisition of ComCor-TV, 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 three months ended May 31, 2002 decreased 34% to $69,000 from $104,000 during the comparable period in the prior fiscal year.  The 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 contributed to the decrease in this expense.

Equity in Losses of Moscow Broadband

The Company's equity in the losses of Moscow Broadband decreased 23% to $168,000 in the three months ended May 31, 2002 from $207,000 in the comparable period of 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 three month period ended May 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, a gain of $1,300,000 from the reduction of inventory levels contributed to JM Ney's profits, which produced net income of $797,000 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 May 31, 2002 consolidated cash and marketable securities totaled $10,370,000 as compared to $1,607,000 as of February 28, 2002.  The increase of $8,763,000 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 $8,096,000 as of May 31, 2002.

In April 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 approximately $28 million of the Company's common stock.  The number of shares to be issued to consummate this transaction will be determined based upon the average price of the Company's stock during a defined period prior to the closing of the transaction, provided the average price is between $8 and $12 per share.  If the average share price does not fall within the specified range, either party to the proposed transaction has the option to terminate the agreements.  The agreements require COMCOR to contribute defined operating assets and additional shares of IAS to ComCor-TV.  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 additional sources of capital.  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 FY03 and beyond, the Company is dependent upon its existing cash and short term investments, as well as the net proceeds of the sale of JM Ney's assets, the collection of JM Ney's receivables and the realization into cash of certain precious metal and current asset balances, 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 may be 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 pursuant to which the Company plans to increase its ownership of ComCor-TV through the issuance of shares of its common stock for the 50% of ComCor-TV presently owned by COMCOR and for the 75% of Moscow Broadband that it does not presently own, require the Company and Moscow Broadband to make cash capital contributions into ComCor-TV totaling approximately $16,700,000, of which approximately $5,000,000 was paid by Moscow Broadband in May 2002. In order to meet these payment obligations, 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. The Company may also reduce its obligation by arranging for a financing of ComCor-TV or Moscow Broadband, 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.

 
** 

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

During the three months ended May 31, 2002, the Company subscribed for $200,000 of the common stock of two savings bank institutions in connection with their conversion from a mutual savings bank to a publicly traded company.  Accordingly, with changes in the value of its portfolio, at May 31, 2002, the Company has equity risk with respect to $733,000 of investments in publicly traded financial institutions.  The Company also has an equity investment in a Ukraine based utility company with a carrying value of $5,000.

The Company also has equity risk with respect to the share price of its common stock as it relates to its agreement to acquire the 50% of ComCor-TV presently held by COMCOR.  If the average price of the Company's common stock during the defined period prior to the closing of the proposed transaction falls outside the range of $8 to $12, each of the Company and Asino Commercial Limited, the anticipated owner of the shares at the closing of the proposed transaction, has the right to terminate the agreements.

FOREIGN INVESTMENT RISK

The Company has an investment in Moscow Broadband with a carrying value of $2,515,000.  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, the Company entered into agreements which, subject to shareholder 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.

 

 

COMMODITY RATE RISK

In connection with the sale of JM Ney's net assets, most precious metals inventories were sold and all remaining derivative instruments or short term borrowings tied to precious metals were settled.  Subsequent to the sale, the Company also settled most precious metal balances not sold to Deringer.  At May 31, 2002, the Company estimates that it has less than $50,000 of remaining exposure to fluctuations in precious metals prices.

INTEREST RATE RISK

The Company currently has no variable rate obligations and its borrowing costs are not exposed to changes in interest rates.
**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.

Based on preliminary disclosure of information relating to the claims made by plaintiffs and defendants, JM Ney, which produced and refined precious metals used in dental amalgams, is one of the smaller parties to have had any transactions with one of the plaintiff's predecessors in interest.  However, under both CERCLA and the New Jersey Spill Act, a party is jointly and severally liable, unless there is a basis for divisibility.  At this time, there is insufficient information to determine the appropriate allocation of costs as between or among the defendant group, if liability to the generator defendants is ultimately proven.  Moreover, because of the incomplete status of discovery, the Company is unable to predict the probable outcome of the lawsuit, whether favorable or unfavorable, and has no basis to ascertain a range of loss, should any occur, with respect to an outcome that might be characterized as unfavorable.

The Company continues to investigate whether any liability, which may accrue at some future date, may be subject to reimbursement in whole or in part from insurance proceeds. The Company intends to continue to vigorously defend the lawsuit.

 
**Item 4.  Submission of Matters to a Vote of Security Holders**
 On February 25, 2002, the Company filed a Notice of Combined Special Meeting of Stockholders for a meeting which was held on March 20, 2002 to consider and vote upon the sale to Deringer of substantially all of the inventory, manufacturing equipment, office furniture and intellectual property of the Company's wholly-owned subsidiary, JM Ney; and to elect a Board of Directors.

At the Combined Meeting held on March 20, 2002 the sale of JM Ney's assets was approved, with 1,388,209 votes in favor of the sale, 2,267 votes against the sale and 6,948 abstentions. 

In addition, the existing Board of Directors was re-elected as follows:

 
    FOR     
   %   
WITHHOLD
   %        
Oliver R. Grace, Jr.
1,369,384
98.0
28,040
2.0
Francis E. Baker
1,369,098
98.0
28,326
2.0
Peter N. Bennett
1,396,784
100.0
640
0.0
John S. Grace
1,369,384
98.0
28,040
2.0
Louis A. Lubrano
1,396,784
100.0
640
0.0
Thomas McPartland
1,396,784
100.0
640
0.0
James J. Pinto
1,396,784
100.0
640
0.0
Yuri I. Pripachkin
1,396,784
100.0
640
0.0

Subsequent to the vote, the Board received and accepted the resignation of Yuri I. Pripachkin dated March 13, 2002.  There were no disagreements with the Company cited in Mr. Pripachkin's resignation.

 
**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.

 

(b)  Reports on Form 8-K On April 5, 2002, the Company filed a Form 8-K to disclose that it had closed on the sale of the operating assets of The J.M. Ney Company to Deringer Mfg. Company.

On May 2, 2002, the Company filed a Form 8-K to report that it had entered into a Stock Subscription Agreement under which, subject to shareholder and regulatory approvals, it would acquire the 67,341 shares of ZAO ComCor-TV (ComCor-TV), currently held by Moscow Telecommunications Corporation, which equals a 50% equity interest in ComCor-TV in exchange for approximately $28 million of the Company's common stock.

.

	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:	June 24, 2002

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

	Chief Financial Officer

	

Date:	June 24, 2002

Exhibit 11

ANDERSEN GROUP, INC.

Statement Re:  Computation of Per Share Earnings 

(In thousands, except per share data)

 
 
Three Months Ended
Three Months Ended
 

Calculation of basic earnings
May 31, 2002

May 31, 2001

   per share:  
Numerator for basic and diluted earnings per share:     
Net income
$1,099
$  311   
Denominator for basic earnings per share:  
Weighted average number of shares outstanding during

   the period
2,097
2,072
Effect of dilutive securities (a)
       -
       -   
Denominator for diluted earnings per share
2,097
2,072   
Basic earnings per share
$0.52
$0.15   
Diluted earnings per share
$0.52
$0.15
 

 

(a)  For each the three month periods ended May 31, 2002 and 2001, the effects of outstanding stock options or the assumed conversions of subordinated convertible notes or cumulative convertible preferred stock were antidilutive, based upon the effects that the inclusion of the common stock equivalents would have had on the Company's reported results from continued operations.************************************